The 2016 election is over. But the lessons of the Democrats’ primary clash between Hillary Clinton and Bernie Sanders still matters.
Why Bernie vs Hillary Matters More Than People Think by Benjamin Studebaker is a rehash of Leftist economic thinking long established, oriented toward another attack on income inequality. However, Studebaker is on to something important in highlighting the 2016 Clinton/Sanders Democratic presidential primary clash. I’ll get to that later. First, I want to wade into Studebaker’s economics.
I completely reject Studebaker’s two main premises: the idea that consumption drives the economy, and the idea that economic inequality is in and of itself a harmful economic phenomena. The first premise ignores the fact that production comes before consumption. The second is based on two interrelated fallacies: One is the idea that the economy is a wealth “pie” of fixed quantity in which one person’s gain necessitates another person’s loss. The other is that money is wealth.
Studebaker uses a common trick to sneak in those false premises—macroeconomics. Macroeconomics was pioneered by Keynes, and consists essentially of the idea that the thing we call “the economy” is an entity in and of itself, apart from the actions of the individuals that comprise it. Statistics is a common tool of macroeconomics. Studebaker focuses strictly on the macro view, and thus statistics, while steering away from actual individual activity, where “the rubber meets the road” (where theory meets practice). Studebaker is explicit about this. He wants to deliberately turn our attention away from the human connection; We “focus too much on individuals and personal narratives,” he says.
But you can’t understand the economy, or candidates’ economic policies, without remembering that the economy is about “individuals and personal narratives,” and nothing else. “The economy” is not some mystical entity above and apart from individuals. Nor is wealth a fixed quantity, where one person gains only at the expense of another (or others). Studebaker would like us to believe both fantasies. People who want to put something over on others always resort to collectivism, which is a specie of mysticism—i.e. an escape from reality. Individuals—you, me, anyone who works, spends, saves, trades—are the economy, each to the extend of his work and trade. The economy is nothing more than the sum of these individual activities. To say we should not focus on individual narratives is to ignore the real economy.
It’s not that a macro view is of no use. I use statistics myself sometimes. It’s that the macro (big picture) view is useless without the validation of individual connection. That’s where the evidence is. Statistics are not evidence. They are correlations, not causality. No wonder Studebaker steers away from that connection to reality. That paves the way for statistics, from which he is free to draw arbitrary conclusions. Without those two false premises, Studebaker’s whole article collapses. Nothing new there. It is a hodge-podge of fallacies, omissions, and non sequiturs, intended not to educate but to obfuscate. In my next few posts, I’ll give my thoughts on each in turn.
Production versus Consumption—George Reisman
Copernican Revolution Coming to Economics—Steve Forbes
My Objective Standard review of The Forgotten Depression—1921: The Crash That Cured Itself, by James Grant
Equal Is Unfair: America's Misguided Fight Against Income Inequality—Yaron Brook and Don Watkins