Government Intervention

I would like to address the idea of an economy and how the Government contributes to that economy. It has always baffled me this idea of an economy. What is an economy and how can we study it and ultimately cause change? It seems much more gray than black and white.

I have learned through Austrian Economics, Neo-classical economists treat an Economy is treated like its own entity. The Government constantly refers to the economy as if it functions on its own. The economy is not a tangible thing that functions on its own. The decisions people make and the exchanges they partake in are this economy we study. So how is the Government really contributing? I wonder if the government has a mostly positive effect or a negative one.  We can see clearly that intervention from the Government only benefits the Government. Let us take a social program for example. Our paychecks are taxed in order to fund programs like social security, or welfare. If we did not have these social programs would we really have more elderly without the ability to support themselves? Or would private companies ban together to create a way of life for elderly people who do not have retirement savings or the capability to work.

The mistake we, and the government, make is we cannot decide what other people want. We don’t know each other’s preferences. What if Joe Bob didn’t want to have money locked up when he was 65? Who is anyone else to decide he needs an income supplement? If the government stopped funding all of the things they do, they would lose control. I do not think the government would handle that very well.

Something else the government likes to do is make up statistics to show how the economy is performing. When the “economy” is growing too fast the government must step in and adjust inflation. The government doesn’t seem to be able to wrap their heads around the idea people have individual behaviors and actions so why does government need to step in? Can you imagine the job creation and economic stimulus that would come from the addition of private companies who do everything the government tries to do? I feel like the possibilities are endless for what people are capable of doing. Entrepreneurial activity would skyrocket and maybe we could end the need for minimum wages because these new businesses would have to hire the people who are unemployed. I can actually picture a world with more jobs than there are people. My overall observation is the government contributes too much to the “economy.” We need to address individual action rather than the action of everyone as a whole.

Source: http://mises.org/library/how-macroeconomic-data-encourages-government-intervention