Imagine if a politician campaigned on changing the laws of physics. Imagine if he went in front of a crowd of supporters and promised to reduce the force of gravity, saying, â€œWe will not take the injustice that Earth has handed us; we will reduce the level of gravity from 9.81 m/s2 to 4 m/s2. Obese people shall suffer no more and things should be easier to lift.â€ What would people think of this politician, other than ridicule and dismiss him for being a delusional clown? I for one would ask him to test the efficacy of his legislation by jumping off a tall building.
Economics is fundamentally different from physics, but it shares the commonality of having laws which canâ€™t be bent either. Despite popular support for politicians to enact legislation (such as minimum wage, unemployment benefits, subsidies, price control and what not) in an attempt to curb the workings of the market, the laws of economics continue to be at play and will always result in unintended consequences.
Minimum wages, for example, donâ€™t actually guarantee a minimum wage for a worker or force an employer to hire a worker at that wage. What they do is they prohibit employers from employing workers below a certain wage. But remember, employers are always free not to hire workers in the first place and in cases in which this minimum wage is higher than their productivity, theyâ€™re better off not hiring them at all. So while the intention was to guarantee workers a minimum wage, the actual effect is to make it impossible for workers with lower productivity than the minimum wage to get employed, thereby causing unemployment. If minimum wage laws really work, why not enact a law which says that everyone should earn a minimum of $1,000 per hour and eradicate poverty in a blink?
The same applies to laws that, for example, supposedly â€œprotectâ€ pregnant women by forcing their employer to pay them while on maternity leave and in some cases replace them only temporarily until theyâ€™re able to work again. Well, the actual result is again very much the opposite: because this isnâ€™t a good deal for employers (they have to pay someone for not working and keep their job intact while their skills rust at home) theyâ€™re better off not hiring them at all. So instead of protecting pregnant women, this sort of legislation makes it more costly to hire them and thus drives employers away.
So on and so on, there are endless examples of legislation which attempt to circumvent the laws of economics by promising the unachievable, just as legislation on gravity will never reduce its force no matter how draconically it is imposed by the State.
One common retort is to say that if only the â€œrightâ€ laws could be enacted, these problems wouldnâ€™t exist. But imagine making such a comment regarding legislation which seeks to change the laws of physics. We know that laws of physics canâ€™t change, or at least not due to human intervention, so the kind of legislation we enact is purely irrelevant. This is not a question of kind; it is a questionÂ of the categorical impossibility of denying or opposing the workings of nature, or in the case of economics, of the self-motivated and rational human mind.
Stop to think for a moment and ask yourself: if improving peopleâ€™s well-being is all but a hostage of enacting new legislation or regulations on top of thousands that already exist, then how come poverty still exists? If we can magically write away the worldâ€™s problems by the stroke of a pen, whatâ€™s holding us back? To ask this question is to answer it.
The tragedy of economics is, as the great legal theorist David D. Friedman perceptively put it, â€œprobably the fact the people already think they know it.â€ It is easy for even the most uninformed person to arrogantly call for the State to do this and that, to enact legislation which â€œsupportsâ€ or â€œprotectsâ€ this or that group. But itâ€™s far more difficult for them to make statements on physics, mathematics, or chemistry simply because these sciences command much more respect and rigor.
Time is past due for economics to join the rank of sciences whose laws can be studied and discovered, rather than circumvented and distorted at great cost.