Saturday, August 4, 2012

Milton Friedman, free lunches, and tooth fairies

We don’t know what your reading habits are, or how familiar you are with various economists and economic theories.  That said (to borrow a cliché) it seems to us, given our own concerns and interests, that there has never been a better or more important time in our history to read and absorb the fundamental economic principles that apply to the American system and the government we elect to protect it.

For our money, legends like Walter Williams, Thomas Sowell, and Milton Friedman serve up the most sensible and understandable treatises on the ‘dismal science,’ which is at it’s core the study of how people make choices.  Or so they say.  The first two are still alive; Friedman passed away in 2006.

We recently came across a commentary by Stephen Moore on Friedman in the pages of the Wall Street Journal.  In it, he points out that Friedman is best known for illuminating the connection between liberty and capitalism, especially as it relates to free markets.  He also points out that Friedman originated the axiom that there is no such thing as a free lunch; we have often cited it, but had no idea it came from him.

You can read the column here.  A few salient passages:

Small in stature but a giant intellect, he was the economist who saved capitalism by dismembering the ideas of central planning when most of academia was mesmerized by the creed of government as savior.

Friedman stood unfailingly and heroically with the little guy against the state. He used to marvel that the intellectual left, which claims to espouse "power to the people," so often cheers as states suppress individual rights.

As long as we’ve got your attention, we’d like to tell you about a conundrum that slaps us in the face nearly every day as we listen to reporting on the ‘positive recovery’ from the ‘great recession’ of recent years.  We can’t make all the pieces fit together, but perhaps our readers can show us the way.

The Federal Government reports monthly on jobs created and the unemployment rate.  It reports weekly on first time applications for unemployment insurance.

For as long as we can remember, the latter figure has been in the range of 350,000 or more per week.  A few days ago, we were told that 160,000 plus new jobs were created in the month of July, and that the unemployment rate had increased from 8.2% to 8.3% at the same time.  You may have noticed the President bubbling over with optimism that the new jobs figure shows we are ‘making progress.’

We’re aware that ‘fuzzy math’ is a field of study, yet we are at a loss to make sense of all this.

If 1.5 million or so new applications for unemployment insurance are being filed per month, with 160,000 new jobs created in the same month, don’t we have a jobs deficit, or employment decline of 1.4 million in the same month?  How can this be seen as making progress?

Doesn’t this amount to reporting on population change by citing the number of births in the past month, while ignoring the number of deaths in the same month?  Or trumpeting the new businesses that have opened in recent months, while neglecting to mention how many have shut down?

The fact is, we don’t get the facts we need to really know what’s going on, do we?

We’re open to explanations that would prove otherwise.  Knock yourself out; we can’t wait to post them here.

Along those lines, would you believe the hair growing on our ears is reversing our baldness?

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