Wednesday, September 13, 2006

Attack on Supply

I was listening to my favorite link for podcasts, Mises.Org, when I heard Joseph Salerno's lecture on June 15, 2006 upon Price Control: Case Studies. What I am getting to is a very interesting perspective he had brought to my attention through simple economics. He was pointing out how blockades and embargos never accomplish what they are sent out to do. They are meant to decrease the amount of goods a nation, or any land mass, can receive. By keeping resources such as fuels or food the nation will crumble, yet what the embargo really causes is an increase in price. Thus, as Joseph Salerno pointed out there will be heroic entrepreneurs who try their hand at smuggling the goods in to receive the reward of the high price. This has occurred time and again throughout history. Think of our history when alcohol was illegal...

This is a fascinating point for why do we attack the supply side of an economic equation? Does supply cause demand or is it because there is a demand for something that we find ways in supplying it? The second is proven by the black market smuggling of goods that are in demand yet unlawful to sell, yet we still find government's waging war against drug lords. Drug Lords are only there because there is a high demand. Terrorists rise and are supported because there is a demand. We attack supply which only decreases the supply of the good for a point which causes a higher price as there is no change in demand. This just gives an incentive to someone else to rise; causing a never ending war upon supply which we can claim to be inefficient as it never leads anywhere. As I heard from a wise Economist (credit to to Prof Caplan at even though he passes it to Bastiat), it is like the ancient myth of Sisyphus who is forever tortured in full employment as he is forced to roll a giant boulder to the top of a hill but right before he reaches the top, the boulder rolls away back down the hill where he must push it up once again. He is forever working but his effort is pointless as it leads to no gain. Are we to believe that the war on Poverty, war on Terrorism, and war on Drugs are to be any different? Of course, what other actions do we have?

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