Power & Market

Robert Reich is Wrong, and Dangerous

Robert Reich has embarked on an intellectual journey- he intends to debunk 10 economic myths. The first of these 10 supposed myths is the idea that economics is a value free objective science. Reich offers a brief history lesson, in which he describes how Adam Smith developed economics as a branch of moral philosophy . Patrick Carroll has pointed out that Reich’s argument entails a fallacious appeal to tradition. Reich’s reference to Adam Smith is also argument by authority. Adam Smith did play a large role in developing economics, but his economics was flawed and should not be merely accepted.

Reich also commits the moralistic fallacy. The moralistic fallacy is the idea that if something is “good” or morally desirable it must also be natural or at least feasible. According to Reich economics is intertwined with politics and morality, and you can’t understand economics without also understanding real politics and moral values . Reich believes that society has the ability to make its own rules, to decide how much inequality is acceptable, how much wealth one can inherit, to set a minimum wage, and this is where his argument goes completely off the rails.

Scientific economic analysis aims at establishing economic laws.1 Economic laws explain how people react to perceived incentives in alternate economic institutions. People react to incentives according to our preferences and innate human nature. Neither Adam Smith nor modern economists wanted to impose preferences or recreate human nature. Modern economists have used logical and empirical tests to establish true economic laws, beginning with the law of demand.

Ideologues like Reich Are good at dreaming up idealistic utopian visions for society. Yet we must remember that the pursuit of idealistic utopias during the 20th century all lead to the creation of Orwellian terror states. The most notable utopian visionary of the 19th century was Karl Marx. Marx conjured up a utopian vision of a classless stateless workers’ paradise. There are obvious practical problems to achieving real progress in a Socialist Society. Marx evaded questions as to how socialism could function as a coherent system, given the selfishness of human nature. According to Marx human nature would change in the future socialist society. The exact details as to how human nature, and economic laws, would change is unpredictable.

Marx’s whole proposal for social reform really consisted of nothing more than a series of empty assertions. The same is true for what Robert Reich is saying right now. Reich wants an living minimum wage, but he doesn’t understand how the law of demand applies to labor markets. Minimum wages have applied to labor markets for decades, and we have had elevated unemployment rates for teenagers, for decades. There are many other examples of how well-intended policies backfire.

Socialists believe that they are fighting for equality and justice, but they are really at war with human nature. The only way to overcome human nature is through coercion. Modern regulatory states are the most effective means of coercing us to act against our natural impulses. Reich may have the best of intentions, but the idea that good intentions naturally lead to good results is also fallacious. In reality, the people who are most adept at acquiring and retaining political power are the most ruthless and unprincipled people. Good natured people have trouble winning political fights. Consequently, ideological movements at aim at an imagined utopia don’t just fail to achieve heaven on Earth. Ideological movements that are at odds with human nature always end up coercing people, and the power to coerce always ends up in the hands of the worst people.

Reich and his comrades can’t achieve their goals for greater equality, or social justice. Robert Reich is a foolish man. There are many foolish people who cling to unrealistic beliefs, but are harmless. Reich promotes dangerous ideas, and this is not conjecture. Lenin, Trotsky, Stalin, and Mao All thought that they could override human nature and recreate society. These Marxists and their comrades ended up murdering over 200 million people. Is Reich as dangerous as the Marxist leaders of the 20th century? No, but that isn’t saying much. Reich and his comrades have already imposed significant costs with their bad policies. We can reverse the trend towards costly policies of our welfare regulatory state only by educating the public and proper economic science, and factually correct history.

 Originally published at “On the Other Hand...”

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    See Newman on this issue here https://mises.org/mises-wire/debunking-robert-reichs-debunking

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