Tyrants and Human Nature

by Walter E. Williams

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The agendas of liberals, progressives and assorted tyrants desperately depend on the aspects of human nature they often condemn, such as acquisitiveness, profit motive, self-interestedness and greed. This crossed my mind while reading "How Departures From Economic Freedom Can Affect Freedom In General," by Dr. John Taylor, a Hoover Institution scholar. Taylor tells how former Wells Fargo CEO Dick Kovacevich was forced to take Troubled Asset Relief Program funds even though Wells Fargo did not need or want the funds. Kovacevich was threatened that if he did not accept TARP money, regulators would declare his bank capital-deficient even though Wells Fargo had a triple-A rating. At the time, October 2008, Wells Fargo was in the process of acquiring Wachovia, and to be declared capital-deficient would have killed the deal. U.S. Treasury Secretary Hank Paulson and Fed Chairman Ben Bernanke could rely on acquisitiveness, profit motive and self-interestedness to bully Wells Fargo into accepting TARP money. They also knew that Wells Fargo's competitors would go after Wachovia. If all sound banks had refused TARP money, Paulson and Bernanke's tyrannical threats would have failed.

Imagine a person was ordered by the U.S. Fish and Wildlife Service not to harvest timber on land that he owned because it threatened the habitat of the red-cockaded woodpecker. What would the average agency tyrant propose in order to make him obey? If you said levy a fine, you'd be absolutely right. If he were to continue to disobey the order, he'd face the imposition of a higher fine. The agency tyrant's behavior simply acknowledges the first fundamental law of demand, which correctly predicts that the higher the cost of doing something the less people will do it. Conversely, the lower its cost the more people will do it. There are no known exceptions to the reality of the law of demand.

Though the law of demand is not rocket science, liberals and progressives sometimes pretend it doesn't exist. Suppose one wants to reduce the number of rapes, robberies and homicides. Should we raise or lower the cost of committing such acts? Though the death penalty exacts a high cost for a homicide conviction, most liberals and progressives are against it. Some liberals and progressives don't hold criminals responsible, because they believe that poverty and discrimination are the cause of crime and that it's society that must be cured. Others think that soft sentences and rehabilitation programs reduce criminal behavior. Both visions lower the cost to criminals of committing a crime.

An excellent example of how liberals and progressives – and even some respected economists – deny the law of demand is their support for increases in the minimum wage. The effect of mandated wage increases is to raise the cost of labor. The entrepreneurial response to higher labor costs is to use less of it by finding substitutes, and examples abound. Back in the 1930s, '40s and '50s, when you pulled into a gasoline station, there was a kid to pump the gas, wipe your windshield and check the oil. Today virtually all gasoline stations are self-serve, and it's not because today's Americans like smelling gas fumes. The minimum wage has destroyed that kind of job. Other responses to higher mandated wages include automation and relocation of production facilities to places with cheaper wages.

Though a few liberals and progressives acknowledge the minimum wage law's negative effects on low-skilled workers, none acknowledges the law's racially discriminatory effects. If an employer must pay a minimum of $7.35 an hour to everyone he hires, the costs to discriminate in the employment of people whom he doesn't like are less. The minimum wage is so effective at promoting racial discrimination in employment that it was a major tool in the arsenal of South Africa's racists during its apartheid era. Racist unions were the country's major supporters of minimum wages for blacks.

Liberals, progressives and tyrants acknowledge the reality of human nature when it fits their agenda and ignore it when it doesn't.

July 18, 2012

Walter E. Williams is the John M. Olin distinguished professor of economics at George Mason University, and a nationally syndicated columnist. To find out more about Walter E. Williams and read features by other Creators Syndicate columnists and cartoonists, visit the Creators Syndicate web page.

Copyright © 2012 Creators Syndicate, Inc.

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