Monthly Archives: February 2014

Why the Left is Wrong About Everything: Part 1, The Economic Pie Fallacy

“Value does not come out of the workshop, but out of the wants which goods satisfy”

Eugen Bohm von Bawerk

I was watching Question Time on iPlayer today when a typically smug Left wing commenter managed to inadvertently sum up the core foundational fallacy which popular Socialist economics rests upon.

Wowing his fellow audience members with his biting (and not at all rehearsed) “wit”, the fellow sought to entertain and inform with a gag:

 “A banker, a Daily Mail reader and a single mum on benefits sat down to have a packet of a dozen biscuits. The banker took eleven biscuits and whispered to the Daily Mail reader, “Watch out for her she’s trying to nick your biscuits”.”

 The “Daily Mail reader” gag has become ubiquitous amongst the bien pensant; it is this decade’s equivalent of the “George Bush is stupid” quip. The beauty of this canard is that it allows one to appear to be politically informed and edgy whilst absolving one of the requirement of knowing anything about politics or being edgy in anyway at all. Combining this with a swipe at the wanton acquisitiveness of usurers is, of course, manna from heaven for socialists of a Nationalist or Internationalist flavour alike.

Anyway, I digress: The central implication of the chap’s stilted attempt at humour was that an economy contains a fixed amount of wealth – the dozen biscuits – which is being fought over by competing class interests: the standard, misanthropic, schoolboy-Marxist drivel basically. This belief stems from a total ignorance of what economics is, namely the study of the distribution of scarce resources. Left-Socialists routinely conflate the scarcity of physical resources with the existence of a constant amount of wealth; we often hear laments about the “economic pie” and how “the rich” are “taking” more than “their fair share”. This is wrong “on so many levels”, as we say.

In reality wealth is not a simple function of the ability to command resources (capital), it is in fact a highly subjective concept. This should be immediately obvious to everyone, and since food themed arguments seem to be popular I will continue the trend:

 Ed likes salt and vinegar flavour crisps (S&V), but dislikes cheese and onion (C&O). Jen likes C&O but dislikes S&V. Either is willing to pay 50p for a pack of crisps of their preferred flavour, but will not purchase a disliked flavour. Notice that, regardless of their flavour, potato snacks contain (more or less) the same amount of scare physical resources.

Ed is willing to voluntarily transact at a rate of 50p for S&V, hence when he does so wealth is created; he has a need (want) for salty snacks and the salty snack manufacturer has a surplus of them, so when they are sold the total wealth in the economy is increased as both parties to the trade are enriched. Even so  the amount of any given scarce resource has not changed.

Subsequently a company, or “evil” corporation for the Lefties, (let’s call them Walkers for the sake of argument), notices this diversity in personal taste preferences and ruthlessly attempts to exploit the downtrodden proles by marketing “variety packs” of its savoury snacks to an unwitting public with the sole intention of increasing profits. Notice that Ed and Jen can now collectively purchase their preferred flavours at reduced prices due to economies of scale, whilst the evil-doers at the corporation accrue disgustingly immoral levels of wealth due to increased sales.

This phenomenon, writ large, is what we right wing lunatics call “the market”. It is a spontaneously emergent phenomenon whose sole function is to satisfy the needs and desires of consumers.

There is no economic pie.