When I labeled the economic stimulus measures of the current administration "Keynesian," a Republican friend of mine got angry. Not at me-he got angry at his own party's leaders for sacrificing their principles in the face of hardship. He realized the similarities between the year 2008 and the Republican follies of the early 1930s and 1970s. And he expressed his disgust by staying home on November 4.
Now Democrats get offended when I call their president-elect's philosophy "socialistic." They take a narrow "dictionary" definition of socialism-i.e., socializing the means of production. Of course, we are very far from the full blown Marxist socialism of Pol Pot. What we have is creeping socialism. And it is irresponsible not to explore the nature and unintended consequences of the proposed "solutions" to our economic woes.
Thirty years ago economist Milton Friedman explained in his tremendously influential TV series "Free to Choose" the role of prices in the free market. Prices coordinate billions of daily economic actions of people all over the world. This seems chaotic, untrustworthy, and even dangerous. We are naturally uncomfortable letting impersonal forces direct our personal affairs. That is until one considers the bureaucratic alternative.
How lucky for us as consumers that most productive resources are in private hands. We depend on a profit-seeking entrepreneur knowing that his success is determined by how well he responds to our needs. Self-interest and private property makes us serve each other. It leads to good stewardship. In the alternative arrangement the total output will depend on experts getting it right as they make those billions of economic choices for us every day. And then each consumer will depend on the largesse of appointed "distributors."
Prices, as Friedman pointed out, answer three fundamental questions: what to produce, how to produce it, and who gets what. Americans love their freedoms enough to let market forces perform two-thirds of these functions. The age of prosperity, however, makes it harder and harder to accept the existence of the poor in our midst. But if we delegate to government our charitable duties, if what we get no longer bears relation to what we do-i.e., if we forcefully socialize the fruits of our labor-then self-interest can only lead to economic ruin and mutual oppression.