DURING THE 2004 PRESIDENTIAL campaign, one candidate decried, “Two Americas: One privileged, the other burdened. One America that does the work, another that reaps the reward. One America that pays the taxes, another America that gets the tax breaks.”1

ENVISION WHAT COMES TO mind when we hear, as stated that evening at my dinner party, that companies fire workers just to increase profits. The statement invites us to picture poor workers and their families living at the mercy of a greedy employer. And now, jobless, those workers will no longer be able to maintain even the meager standard of living to which they have become accustomed.

A COMMON ECONOMIC ERROR when assessing the effect of a social event or a proposed action is the failure to account for all effects—current and future, obvious and not-so-obvious. In a small setting, it is easy to envision all the effects of an action, thereby giving a proposal a more accurate evaluation. Reasoning and common sense (intuition) can be valuable tools when predicting the outcome of a proposed policy or event within a small group. However, such tools become far less reliable when assessing outcomes in larger groups.

If you think health care is expensive now, wait until it’s free.

- P.J. O’Rourke

If wishes were horses, beggars would ride.

-Proverb

It is a poor mind that will think with the multitude because it is a multitude: truth is not altered by the opinions of the vulgar or the confirmation of the many. It is more blessed to be wise in truth in face of opinion than to be wise in opinion in face of truth.1

-Giordano Bruno (1548–1600)

THOSE WHO EARN WEALTH by producing goods and services that others choose to purchase have freed multitudes from the miseries that nature would have otherwise bestowed upon them.

SINCE ALL OF THE propositions at that eventful dinner relate to money, let’s look at what money really is. Today, governments monopolize money, but this was not always the case. Money emerged as a medium of exchange to facilitate the trading of goods when the division of labor replaced self-sufficiency and bartering became impractical because of the increasing variety of available goods and services. Various forms of money evolved that sellers were willing to accept in lieu of someone else’s goods or services.

WHILE MONEY INCREASES THE efficiency of trading goods and services, money in itself does not create prosperity. Prosperity is created by producing goods and services that people value. If the U.S. government printed and distributed $1 million to every household in the country (approximately $100 trillion), would we all live better lives? If the answer is “yes,” why not do even better by having the government print and hand out $1 billion per household? You probably sense something is wrong with that suggestion, but what is it?

THE NEWS TODAY INUNDATES us with misleading statements and statistics. What does the oft-stated claim “The poor are getting poorer and the rich are getting richer” imply? Does the statement imply that the poor are becoming poorer than they were previously, while the rich are becoming richer than they were previously? If so, data will refute that notion.

SOME CLAIM THAT, WHILE free markets produce an abundance of wealth, it is still inhuman and unjust that some receive more than others. They claim that free markets create great injustices by exacerbating the inequities of wealth. Furthermore, these people believe that such injustices require the intervention of those with humanitarian sentiments to reallocate wealth more equitably. While egalitarians use numerous schemes to equalize wealth, their goal is, in the end, unattainable, irrespective of their efforts.