Thursday, October 13, 2016

Inchorent Economics With Barack Obama

By Robert Wenzel

The current issue of the magazine The Economist contains an essay by President Obama.

It is the damned laziest most incoherent piece of writing I have come across in a very long time.

In addition to nonsequiturs throughout the piece, there are just the oddest errors I have ever come across from a piece by a sitting president with a staff of full-time writers.

There is this for example:
This can happen through the tendency towards monopoly and rent-seeking that this newspaper has documented...
Do he and his staff not know that The Economist is a magazine and not a newspaper?

Then there is this:
Economists have listed many causes for the rise of inequality: technology, education, globalisation, declining unions and a falling minimum wage.
Falling minimum wage?  Does he mean a falling real minimum wage?

Sloppy at best.

As for the point Obama tries to get across, there is this:
Globalisation and automation have weakened the position of workers and their ability to secure a decent wage. 
Which means like many he fails to understand that automation raises the standard of living for workers in a nation.

He goes on to blame rent seeking on the free markets:
The profit motive can be a powerful force for the common good, driving businesses to create products that consumers rave about or motivating banks to lend to growing businesses. But, by itself, this will not lead to broadly shared prosperity and growth. Economists have long recognised that markets, left to their own devices, can fail. This can happen through the tendency towards monopoly and rent-seeking...

Say what? Rent seeking is when a corporation seeks a  privilege granted by government. It is the opposite of free markets.

From the Concise Encyclopedia of Economics (my emphasis):
Rent seeking” is one of the most important insights in the last fifty years of economics... The idea is simple but powerful. People are said to seek rents when they try to obtain benefits for themselves through the political arena. They typically do so by getting a subsidy for a good they produce or for being in a particular class of people, by getting a tariff on a good they produce, or by getting a special regulation that hampers their competitors.
Most of the rest of the essay champions capitalism, in name, but then offers interventionist solutionsacross the board.

The essay is a complete piece of junk.

Robert Wenzel is Editor & Publisher of and Target Liberty. He also writes EPJ Daily Alert and is author of The Fed Flunks: My Speech at the New York Federal Reserve Bank. Follow him on twitter:@wenzeleconomics and on LinkedIn.

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