Barack Obama versus Ludwig von Mises

by Robert Wenzel
Economic Policy Journal

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President Obama has an Op-Ed in today's WSJ calling for a review of all government regulations. In his commentary surrounding this review, the views of the president and those of the great economist Ludwig von Mises could not be in greater contrast.

President Obama begins his Op-Ed by writing:

For two centuries, America's free market has not only been the source of dazzling ideas and path-breaking products, it has also been the greatest force for prosperity the world has ever known. That vibrant entrepreneurialism is the key to our continued global leadership and the success of our people.

But throughout our history, one of the reasons the free market has worked is that we have sought the proper balance. We have preserved freedom of commerce while applying those rules and regulations necessary to protect the public against threats to our health and safety and to safeguard people and businesses from abuse.

From child labor laws to the Clean Air Act to our most recent strictures against hidden fees and penalties by credit card companies, we have, from time to time, embraced common sense rules of the road that strengthen our country without unduly interfering with the pursuit of progress and the growth of our economy.

This "balance" that the President speaks of can be viewed as a "middle-of-the-road" policy. It is not unbridled free markets, but free markets with restraints. This is what Professor Mises said about such a middle-of-the-road policy:

There is simply no other choice than this: either to abstain from interference in the free play of the market, or to delegate the entire management of production and distribution to the government. Either capitalism or socialism: there exists no middle way.

Mises' view may appear at first harsh, but upon reflection it can be understood that he is making a very important point. Mises is saying that any intervention in the economy leads to other interventions, until the full economy is engulfed in a sea of regulation, which we can not call anything but socialism. Indeed, President Obama, in a way, is acknowledging Mises view, when he calls for a review of regulations.
The President writes:

Sometimes, those rules have gotten out of balance, placing unreasonable burdens on business – burdens that have stifled innovation and have had a chilling effect on growth and jobs

But how can it be any other way, when we attempt a middle-of-the-road policy? Consider an obvious situation, price controls. Once price controls are placed on an economy shortages will develop. The regulation won't stop there. The government then generally steps in to relieve the shortages by rationing goods, but the price controls and rationing leads to black markets, which results in a police force formed to "protect" against the black market. To be effective, the police force must expand surveillance of citizens to catch the black marketeers. The black marketeers counter by using even more clever ways of operating, which leads to even more loss of privacy, as the police use ever more intrusive methods to attempt to catch them. Interventionism never stops at the first regulation. Indeed, every new regulation is like a starter gun being shot off, signaling for more regulations.

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January 19, 2011

©2011 Economic Policy Journal

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