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What If All Reality Were Optional?

Summary:
A majority of politicians and pundits believe that economic reality is optional. Of course, they don’t express this belief in any manner so direct. But one can logically infer this belief from their policy proposals. Take, for example, support for rent control. Having the state keep the monetary prices of rental units below the values that would arise in free markets is believed by many pols and pundits – and by nearly all “Progressives” – to effectively keep the actual market values of rental units at whatever low prices the state sets. In this reality-is-optional world, when the state pushes down nominal rental prices, the quantity of rental units supplied not only does not fall, it increases to match the increase in the quantity of rental units demanded. Want more housing for folks

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A majority of politicians and pundits believe that economic reality is optional. Of course, they don’t express this belief in any manner so direct. But one can logically infer this belief from their policy proposals.

Take, for example, support for rent control. Having the state keep the monetary prices of rental units below the values that would arise in free markets is believed by many pols and pundits – and by nearly all “Progressives” – to effectively keep the actual market values of rental units at whatever low prices the state sets. In this reality-is-optional world, when the state pushes down nominal rental prices, the quantity of rental units supplied not only does not fall, it increases to match the increase in the quantity of rental units demanded.

Want more housing for folks with modest incomes? No problem! We’ll just push the rental prices lower to increase ordinary folks’ access to housing. See, the world is such a simple place!

Similar reality-is-optional ‘solutions’ are minimum-wage statutes (for increasing the pay of low-skilled workers) and mandated paid-leave (for increasing the welfare of all workers).

Pondering this strange notion that the state can make market values be whatever the state wants them to be merely by dictating changes in the names of market values – that is, changes in nominal prices – I wondered what the world would be like if miracles more broadly could be worked merely by changing nominal designations.

Here are some examples of what this reality-is-optional world would look like:

– Jane is brutally murdered by her suspicious husband, Joe. The state then orders detectives from the police department to report that Joe only raised his voice at Jane and never harmed her physically. Poof! Jane is alive, and she and Joe are attending marriage counseling.

– Joe, in fact, had good reason for suspecting that his wife had been unfaithful to him, for she in fact had been unfaithful to him. But the state orders the marriage counselor to inform Joe that his wife had never cheated on him. Poof! Jane’s history is erased; she had never cheated on Joe. The marriage is saved!

– A fire erupts in a high-rise apartment building, killing two dozen people. The state then orders newspapers to report that the only fire that occurred in the building was a small one in the oven of unit 1901. Poof! Twenty-four people who had died are now alive, and the building shows no sign of any fire damage.

– Janice Doe, M.D., has diagnosed her patient, Richard Roe: Mr. Roe, after having smoked three packs of cigarettes daily for 20 years, has stage four lung cancer. He has, at most, only a few months left to live. The state, however, orders Dr. Doe to tell Mr. Roe that his only ailment is a sore throat caused by cheering too loudly at the previous day’s baseball game. Dr. Doe is further commanded to assure Mr. Roe that smoking not only is not bad for his health, but that it’s positively beneficial to it. Poof! Upon Dr. Doe delivering to Mr. Roe the state-ordered information, Mr. Roe is cancer free and eager to improve his health even further by increasing his frequency of smoking from three to four packs daily.

…..

Of course, all such scenarios are ludicrous. Reality isn’t changed merely by reporting that reality is other than what it is. In fact, reality is made worse by false reports because, unable to learn the truth about reality, people act in ways that are inconsistent with reality, thus worsening their situations.

Yes – but why, then, do so many people believe that economic reality is optional? Why do so many people believe that economic reality can be made to be whatever the state wants it to be merely by having the state order that reports of economic reality lie about that reality? All state-imposed price controls – rent control, minimum wages, you name it – are state-dictated lies about reality.

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Don Boudreaux
He is a professor of economics at George Mason University in Fairfax, Virginia. Previously, he was president of the Foundation for Economic Education.

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