Reminder: Economics Is a Science of Human Nature


Need a little Monday morning uplift?  It may only be a sliver of silver around the edges, but Michael Munger gives us a reason to think that “Millennials Can’t Just ‘Reject’ Capitalism.”  Why not?  Because capitalism works and makes sense to us as human beings, and it therefore pops up wherever it isn’t violently suppressed (and even there).  Consider:

The notion of profit and loss, explained beautifully by Ludwig von Mises, is what drives capitalism. The usual definition of “private ownership of the means of production,” is a diversion. The point is that producers get paid if—but only if—they produce more value for consumers than the production uses up in resources. Everyone gets a benefit:

  • Labor, owners of machines, and sellers of other inputs all get paid.
  • Consumers only buy if the price is less than what they as individuals value the product (Subjective value, anyone?).

Only if there is something left over does the producer get paid.  It’s a pretty terrific system, and it happens without anyone telling anyone else what to do. In fact, it always happens, even in countries where the government tries to prohibit it.

This is necessarily an abbreviated description of the beautiful balancing that occurs naturally in the process.  After all, producers won’t long undertake a task for which they aren’t able to be paid, which not only causes them to seek ways to provide the product more cheaply, but also leads consumers constantly to readjust the relative values of everything that is on offer.

Therein we find, also, an explanation of the problem with socialism.  Bernie Sanders and the broader culture of deluded socialists who have misled Millennials claim that they want to squeeze greed from the economy in order to provide everybody with necessities, but what they’re really after is the raw power to tell people what to value.


Here’s an illustrative thought related to an area of major expense, in our society, that has always mystified me: sports.  I mean, playing games, with no tangible product, makes people conspicuously wealthy.  Surely, if we were to centrally plan our economy, we could find a better use for those billions.

But the value of sports mainly comes in the large number of people for whom the entertainment is worth a relatively small amount of time and money.  Obviously, if sporting events are going to fulfill their role, those who make it to the top of the pyramid have to be really, really good, which means the payoff has to be out-sized so as to draw a huge pool of candidates to the opportunity.

Money is not the only factor, though; many people play sports purely out of fun and passion.  Even attempting to redistribute the riches incrementally from the stars to the long-shots would disrupt the system, because at the low end, it would displace those with passion with those who see it as an easy way to make more money than their talent is worth.