Maybe? Again, a departure from my usual economics. Continue reading
A major criticism of free market capitalism is that it breeds a “me first” mentality. Nothing, and I mean nothing, could be further from the truth. In a free market, the only way for a person or firm to succeed is to serve their fellow man. All market transactions must be voluntary, otherwise the transaction will not occur (this is a definition I keep harping on because it is often forgotten). Therefore, both parties must offer something the other wants for a price the other finds acceptable.
Free market capitalism thrives on servitude to each other. It requires it. Socialism, communism, and crony capitalism, on the other hand, do not. Those system thrive on classes, the many working for the benefit of the few.
Over at Carpe Diem, Mark Perry has an interesting piece on perception vs reality. It turns out, the average person in a Reason-Rupe poll believe the average corporation enjoys a profit margin of approximately 36% (in other words, for every dollar they take in, the corporation keeps $0.36). The reality is different, however: the average corporation enjoys a profit margin of about 7.5% (the median is 6.5%). Some firms, such as Wal-Mart, enjoy even less, at about 3.1%. Wholesalers and restaurants often operate at less than 1%.
Why is this important? Economics is, after all, a dismal science. This is important because activists call upon government to make policy based on their false assumptions. They argue from ignorance and demand government do something based upon their ignorance. This ignorance is why we end up with such harmful economic policies like minimum wage, protectionism, high taxes, and burdensome regulations. No one would ask a man off the street to perform brain surgery, and yet economic policy is debated and determined in exactly that way.
It is no crime to be ignorant of economics, but to hold an unwavering and demanding opinion while remaining in a state of ignorance is just downright irresponsible.