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Jewish World Review /Jan. 20, 1999 /3 Shevat, 5759

Walter Williams

Economics 101

(JWR) ---- (http://www.jewishworldreview.com) MOST PEOPLE THINK THAT ECONOMICS IS DIFFICULT, but it's really simple. More than anything else, economics is a way of thinking. Knowing just a little bit of economics can save us from the tricks of political hustlers.

At the heart of economics are a few simple and easy-to-comprehend rules -- it's not rocket science. Our first rule is there's a cost to everything. To obtain more of one thing requires the sacrifice of something else. Nothing is free.

You say: "Hold it, Williams. Aren't there free public libraries and schools, and free medical care?" Consumers of these services might enjoy them at a zero price, but that doesn't mean they're free. If expenditures weren't made for public libraries, schools and medical services, those resources would be available for something else.

That "something else" sacrificed is the cost of public libraries, schools and medical services. The main issue about so-called free services is which Americans are going to be forced to pay for them. The moral or Christian principle says the person who enjoys them should pay. But if we accept the standards of thieves, we don't care who pays as long as we enjoy it.

Another basic rule of economics is the law of demand. That's just an observation about human behavior, namely: The higher the price (cost) of something, the less we take of it. The lower the price (cost), the more we take of it.

For example, if nothing else changes and the price of oil falls, we can expect to see greater use. People might travel more, purchase more gas-guzzler cars and be less motivated to insulate their homes. When oil prices rise, they do just the opposite.

When interest rates fall, people invest more and purchase more homes. When rates rise, they do the opposite. There are no known exceptions to the law of demand, even though political hustlers want us to believe there are. For instance, politicians want us to believe that when higher minimum wages are enacted, employers will hire the same or more low-skilled labor in response. They want us to believe that when they raise taxes, people will be just as honest in reporting income as they were before.

Psycho-babblers want us to believe executing murderers, sending more criminals away for a longer time and concealed-carry laws had nothing to do with today's reduction in crime. Criminals also respond to the law of demand. When crime's cost to criminals rises, they'll do less crime.

If it weren't for the fact of scarcity, there'd be no economic issues. Scarcity simply means we all want more of something, but there are not enough resources on Earth to satisfy every want. That means we must find a way to determine who is going to get what's available.

For example, even if Rolls Royce built 100,000 cars a year, I'm betting that of the Earth's 6 billion people more than 100,000 of them would like to have one. That means there must be a way to decide who gets the cars. We could compete through violence, but the preferred method has turned out to be the market mechanism --- whomever's willing to bid the highest price.

Some people piously announce there shouldn't be any competition. That'd be nice, but scarcity requires a mechanism to decide who gets what. That applies to everything. For instance, there's only one Williams. Mrs. Williams had to compete with other women for my hand in marriage. She triumphed at the expense of other women, who were forced to do without.