Your Teacher Said What?! (9 page)

Even a decade before
The Wealth of Nations
(in which he wrote, “The property which every man has in his own labour, as it is the original foundation of all other property, so it is the most sacred and inviolable”), Smith was on record as arguing that the first priority of government “is to prevent the members of a society from incroaching on one another's property.” But Smith's great insight was that the two conditions needed for the maximum amount of national wealth were perfect competition (or as close as possible to perfect) and complete freedom of buyers to substitute one commodity for another (or as close as possible to complete). This is how Smith's famous “invisible hand” forces
prices
and
profit
to their lowest possible level.

Though Smith didn't realize it, he was living in the first human era in which wealth, profit, and competition all started to grow over time. What he
did
realize is that the invisible hand is a much better tool for creating wealth than the visible hand—that without direction, control, or even goodwill, human self-interest is by far the most powerful force for human prosperity.

Stimulus, fiscal.
Noun. An increase in government spending or decrease in taxes taken to limit the damage of an economic recession.

Of all the things that define economic Progressivism, maybe the most dangerous is its belief in the ability of government to do things more effectively than the marketplace. One example of this “we know what's best” arrogance is the enthusiasm with which Progressives support stimulating the economy by increasing spending—
always
with borrowed money—to minimize the damage of economic crises. While a case can be made for this (there are some places government spends money that can, theoretically, make a nation richer, as with roads and dams), it's not especially strong. Even if all the stimulus spending went toward improving infrastructure, the choices made about where to build bridges, harbors, and power-generating stations are always political and by definition less efficient, as with the $400 million bridge to Alaska's Gravina Island—one of the best-known “bridges to nowhere” but by no means the only one.

For reasons only they understand, Progressives always prefer spending a dollar as a stimulus rather than cutting a dollar in taxes, even though the two actions are mathematically identical. This is because they get hives at the idea that individuals know better than bureaucrats how to spend money.

Supply and demand.
Noun. A way of comparing the two components by which markets determine prices.

The “law” of supply and demand is not exactly what a physicist would recognize as either a law or a theory. Actually, it's a picture: a graph.

The vertical measurement here is price, the horizontal one quantity. The black curve represents supply, the gray demand. The point where they intersect is where the price and supply are in equilibrium. Clear, right?

Okay, try it this way. This supply curve says that, as the price of widgets goes up, widget manufacturers make more of them. As the price goes down, widget buyers buy more. The process stops when the two lines cross. However, if something happens to increase demand—widgets are discovered to clear up acne, eliminate belly fat, and remove those embarrassing wrinkles—the price
and
the supply will increase. If, on the other hand, something happens to increase the supply of widgets (a new manufacturing process or discovery of a new source of widget raw material), the price will fall.

Governments that ignore this basic relationship do so at their peril but don't always understand why. Progressives in general, and the current administration in particular, are always eager to find a commodity for which supply and demand are out of balance and blame that imbalance on too little regulation. The most upside-down version of this is probably health care, for which there is essentially infinite demand but also finite supply and a price that isn't paid by the consumer; anywhere buyers can't communicate their demand (by the price they're willing to pay) the result is chaos.

 

“Dad?”

“Yes, Blake?”

“You know all those words we've been writing down?”

“Sure I do.”

“Well, I get it that some of them are things everyone agrees about, like ‘interest' and ‘price' . . . but lots of people disagree about the other stuff, right?”

“Yes, Blake. They do.”

“So it's not like a dictionary that tells everyone the right meaning?”

That was a tough one. Do you admit to your daughter that lots of her parents' ideas are different from—for example—her teachers? Did I want her thinking it was all just a matter of opinion?

 

“Think of it this way, Blake. When people talk about profit, or regulation, the things they say depend on what they think is most important. If you think that the most important thing is keeping anybody from getting more than anyone else, then you think one thing. If you think the most important thing is letting everybody be as free as possible, you think another.”

“And we believe in freedom, right?”

“Yup. We do.”

 

When economic writers use the term “building blocks” (for example, “property rights are one of the building blocks of free markets”), they're being metaphorical. In the Kernen household, we're more literal, as in “put those building blocks away . . . now!” It's not as if Blake doesn't have a strong sense of property rights. Or at least property. Our basement is so full of stuffed animals, plastic toys, fish tanks, and discarded electronics that you cannot see from one end to the other. And the sole reason that it isn't even more packed is that Blake has been filling it “only” for the last seven years. There's no problem explaining to her that things with value can be property.

On the other hand, they can also be not-property. Lots of things with value aren't property of any kind: You can't, for example, buy a child's hug, no matter how many commercials for Disney World suggest that you can. There's a long list of things that you can—sort of—buy, like better health, without being able to own them. You can buy a plane ticket to Hawaii, but that doesn't make a Hawaiian sunset into property.

So while we know that the fact that something has value, even monetary value, doesn't necessarily turn that something into property, we also know that a dining room table (or more to Blake's liking, an electric guitar) is property. There's something intuitive about at least some of the core ideas of property, something so basic that a fifth grader knows them without being told. If you possess something and no one else can use it without your permission—if you can, to put it in fifth-grader terms, tell your little brother to keep away from it—and you can buy it, sell it, or give it away, it's your property.

But an understanding of
property
isn't the same as understanding property
rights
, and explaining property rights to a ten-year-old turns out to be, well, challenging.

The Socratic method, for example, has its limits:

 

“Blake?”

“Yes, Dad?”

“Is that your game cartridge?”

“Uh-huh.”

“What makes it yours?”

“Do you want me to put it away?”

“No. I want you to tell me why you think it's yours.”

“You bought it for me.”

“Whose was it before that?”

“GameStop's.”

“And before that?”

“I'll put it away if you want.”

The idea that a thing can be first the property of one person, then the property of another, seems like a good place to start. But do you have the same
right
to that property no matter how you came to possess it?

 

“Blake?”

“Yes, Dad?”

“If you had found the game cartridge lying on the street, would it still be yours?”

“I guess so.”

“But not as much as if Mommy or I gave it to you?”

“Well, if someone was throwing it away, it'd be okay to take it. But if it was just lost, then maybe not.”

“How about if you bought it with money you earned selling lemonade?”

“Then it would be mine, for sure.”

“What would you call someone who took it away from you?”

“A thief, of course.”

 

Out of the mouths of you-know-what.

For most of history, ownership was a might-makes-right concept. If you had something of value, and I took it because I was stronger than you, it was mine—at least unless someone even stronger made me give it back. The “someone” could be a tribal leader or a feudal lord or a modern state, but ownership was just possession with the permission of the biggest bully in the neighborhood.

Some people say—loudly—that nothing has really changed: that the government (usually, though not always, the federal government) is just the latest version of the biggest bully in the neighborhood. The press has taken to calling these people “conservative,” but they're really not. There is a huge difference between a legitimate government restrained by the rule of law and a king restrained by nothing at all, and real conservatives understand that difference. The thing that separates liberals from free-market conservatives is not
whether
there should be some government-enforced rules about private property but
which
ones.

This turns out to be not so simple to figure out, much less explain to a ten-year-old. Possession, for example, which seems to be the simplest of all aspects of property, gets pretty blurry the closer you get to it: If our house is sitting on a piece of land for which we have a lease running ninety-nine years (which is more common than you'd think), who is the owner? Even if the owner of the land today is old Mr. Smithers, he is certainly not going to be in possession during his lifetime, nor will young Mr. Smithers.

So is the key element the ability to
use
the property? “Usufruct,” a fine crossword-puzzle word meaning the use and enjoyment of the property of someone else, is a historically important right, but is a long way short of what we mean by “
property
rights.” Closer is the right to transfer ownership: If you can legally sell something, it's awfully hard to argue that it isn't property; but there are so many ways we restrict the right to sell some forms of property—you can sell your blood but not your kidney—that it isn't especially helpful as a complete definition.

So I decided to try to let Blake figure out what sorts of things
should
be property and which shouldn't.

 

“Blake?”

“Yes, Dad?”

“Let's make a list.”

 

I asked Blake to divide a piece of paper into two columns, with “things that we should be able to own” on the left, and “things we shouldn't be able to own” on the right. Here's what we came up with: