Economics: three insidious teachings

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economics-three-insidious-teachings

Last year in an excellent essay, the formidable Anthony de Jasay set out what he considered to be the three insidious mistakes that were taught to secondary school children in Europe. These were the distribution-independence, the worker-defence and the property "rights" theses.

In regards to the distribution independence thesis, “high school textbooks teach that capitalism, leaving as it does the distribution of income to the free play (or, as some will say, the caprice) of the market, generates inequality. It goes without saying that inequality is bad both because it is "socially" unjust and because it reduces the aggregate "utility" derived from aggregate income." This of course rests on the supposition that income is independent of its distribution, which is of course patently absurd.
 
The worker-defence thesis relies on the idea that employers would abuse workers if "workers' rights" were not defined, extended and bolstered by legislation. Of course, in truth the dominant effect of this legislation is to “create excess supply in the labour market by making employers shun the increased risk of hiring." As a result the bargaining power of workers is weakened.
 
The property “rights" thesis is the idea that property is a social construction, granted by society (read government). In reality property is “generated by contracts and matched by the corresponding contractual obligations. Lending and borrowing, mortgages, leases, partnerships, insurance policies, options and other derivatives represent property "rights." They are derivatives of property, and are offset by the corresponding obligations of counter-parties as assets are offset by liabilities." Thus, property is not the governments to give “rights" to.
 
Mr Jasay was inspired to write this essay by the growing concerns expressed in German and French business circles about the type of economics taught in secondary schools. I have rarely heard of such concern from business people in the UK; in fact most businesses (as part of their corporate social responsibility function) are positively complicit with such views, giving money to charities that vilify the work of business, the freedom of markets and the foundations of capitalism itself.