An Economy Is Made of People
I have a big qualm with people who treat "the economy" as some kind of instrument and not what it is, an aggregation of the actions of individuals. Most guilty are the power elite their ivory towers. Friend x subscribes to this type of thinking; what these people don't understand is that an economy is made up of people. The state proposes policies they say are in our best interest; whether that is true is very debatable. However noble their intentions, the state never pays heed to the possibility that their aims will not be achieved. If a certain policy were to fail who suffers? Most people would say the administration and its pundits because they will be voted out of office next term. The truth is most people forget who advocated a certain policy after two or four years. The main negative externalities suffered are by the groups of people affected by the policies. Not necessarily the groups that we can see; but the groups who are often forgotten, the ones not visible to the public eye. The main point is when a policy is successful or not, some group suffers at the expense of others. The suffering is by people; mothers, fathers, grandmothers and etc; meanwhile the administrators continue in their position and salary, uninterrupted. This is the zero sum game.
Resources Are Scarce
In the past century the standard of living has increased by leaps and bounds ( I admittedly try to avoid terms like "standard of living" but I am using it here for expediency). Think of the luxuries that a medium income family can afford - even poor families can afford televisions, washer and dryer among other things. But despite the astonishing increase in capital accumulation and wealth that has been brought about by capitalism, resources cannot cease to be scarce. If somehow resources were no longer scarce economics would be useless. A good is scarce in an economic sense when it is not available in infinite supply and/or cannot be used by more than one person simultaneously.
Now that we have identified our assumptions, the scarcity of resources, we may methodically deduce some meaningful conclusions. Following from the assumption, we can digress back to the cash for clunkers programs. If resources are scarce, how can destroying functioning cars make anyone better off? How can extraordinary increases in government expenditures make people better off? Any money government spends must inexorably come from taxes; a government does not produce, it only consumes and reallocates wealth. This all seems very elementary and can be seen by very obvious causal relationships.
Now back to friend x, she has a problem much the same as many others do - they don't believe that resources are scarce. If people want new, better cars why can't the government give them what they want? If we want healthcare for everybody, why not? If we simply use common sense it is very easy to see that these resources must invariably come from somewhere. Even more impressive, during our current "recession" while people are losing their jobs and having to cut back, governments believe they are an exception - in fact, the opposite is true, they think now is the perfect time to deliver us the garden of eden. Their record has been subpar thus far and I still don't see any chance of success.
The Mechanistic Problem
An economy cannot be fine tuned. No amount of complicated formulas and largely meaningless graphs can predict human actions. The human mind is not omniscient and therefore we have no way to predict what others will do; often time we don't know what we ourselves will do. But ask any academic economist or member of the establishment and you will hear a very different answer. The Federal Reserve has an interest rate target, a GDP growth rate target and et cetera. Not even to go into the measurement problems and limitations of statistics, the actions of all players in the market making their own decisions to buy or sell cannot be derived by any calculus or econometric measurement no matter how brilliant the mathematician. It is simply implausible for any formula to take all variables into account when dealing with human action. See Mises here.
The Utilitarians
Friend x also brought up the utilitarian argument in favor of the "Cash For Clunkers" program. In Friend x's opinion the goal of the program wasn't "economic," but rather it was designed to increase the number of fuel efficient cars on the roads, making the environment and therefore society better off.
Utilitarians can be said to be in favor of policies that increase overall wealth or utility. I typically enjoy when people attempt to justify anything on a utilitarian basis. The utilitarian argument is bankrupt and can be exploded with ease. I will even concede to the global warming ideology despite the lack of proof that has somehow been overlooked.
So, we are making the pretentious assumption that despite whatever principled problems that arise from a program such as "Cash For Clunkers," the end result outweighs the costs and makes everyone better off. Even if this were true, problems still arise from trying to justify any policy on this basis. Most statistics on crime rates will show that the demographic of black males ages 14-25 is responsible for a majority of all crime. It then follows that killing all black males between the ages of 14 and 25 would presumably decrease crime by an enormous amount. On aggregate everyone would be better off, not the black males murdered, but then again the abstraction that is society is more important. Another example, if a man very desperate for sex raped a prostitute, he would presumably gain more of a benefit than the loss suffered by the prostitute. Both instances would be deemed unethical and draconian by most but they are logically consistent with a utilitarian approach.
Qui Bono?
Lastly, there is the problem of vested interests. We have shown that everyone does not benefit from policies such as "Cash For Clunkers." So who benefits? See Rothbard here.
The car companies, mostly the big three, have spent wanton amounts of money on lobbying and campaign donations in the past two decades. I would venture to say that they viewed this as an investment to be repaid over time; for once they did calculate correctly. Once dig through all the propaganda it becomes very obvious that the car companies were the main beneficiaries of "Cash for Clunkers." They were able to sell many more cars than would otherwise have been possible. For every car that qualified, car companies automatically got $4,500 from the government; from taxpayers, to be more accurate. It was nothing but a wealth transfer. Nothing was created, more and more wealth that would have stayed in the hands of consumers to be allocated efficiently will have to be taxed away. Franz Oppenheimer identified this type of occurrence a long time ago. In The State, Oppenheimer wrote:
There are two fundamentally opposed means whereby man, requiring sustenance, is impelled to obtain the necessary means for satisfying his desires. These are work and robbery, one's own labor and the forcible appropriation of the labor of others. Robbery! Forcible appropriation! These words convey to us ideas of crime and the penitentiary, since we are the contemporaries of a developed civilization, specifically based on the inviolability of property. And this tang is not lost when we are convinced that land and sea robbery is the primitive relation of life, just as the warrior's trade - which also for a long time is only organized mass robbery - constitutes the most respected of occupations. Both because of this, and also on account of the need of having, in the further development of this study, terse, clear, sharply opposing terms for these very important contrasts, I propose i. the following discussion to call one's own labor and the equivalent exchange of one's own labor for the labor of others, the 'economic means' for the satisfaction of needs, while the unrequited appropriation of the labor of others will be called the 'political means.'
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