Government Demand and Vote Buying

I listened to a discussion this morning where people were discussing the cost of sending their kids to school. I noticed another article in a magazine this morning about college costs. Here is another one in the Washington Post. College is expensive and getting more so. Why?

Prices of all things move in order to equalize supply and demand. If lots of people want something, and they have the means to buy it, prices will rise. If they don't rise, for any reason, there will be a shortage. An increase in price is the only way to avoid the shortage.

When government "visionaries" or what libertarians call "central planners" decide to promote something that they consider to be in the best interest of society, they alter its price structure. In the college issue, politicians searching for votes see a large vote base among the "disadvantaged" youth who may not be able to afford college. In their thinking, its only right that government should help out these youngsters who cannot afford college.

Unfortunately, government assistance only shifts the group who cannot afford college from one disadvantaged group to a different disadvantaged group. You see, when government provides funds for a given purchase, there now exists in the marketplace buyers who previously could not afford that product - an increase in demand. Thus, the price increases to bring demand into equilibrium with supply.

There are only so many "seats" out there in colleges at a given moment in time. When government funds one group in order to help them buy those seats, the price of each seat goes up; therefore a new group is going to find them unaffordable. Now, a politician rather than the fairness of the market is determining who gets to go to college. That of course, is just the way the politicians like it!

When I say "fairness" of the market, I mean it in this respect: those who are able to buy are those who have acquired the means to buy via service to the marketplace. Politicians love to celebrate the "virtues" of the poor. As much as I feel sorry for the difficulties that a poor person faces, they are poor because they have not brought their abilities to the market and used their time, talent, and energy to improve the lives of others. We might be able to blame their decision not to participate in the free market on many factors, but the end result is that they don't serve humanity like a rich person does. Rich people are rich because they do something that others find valuable enough to spend their money on. (This conclusion could obviously provoke debate. Let me clarify by saying a lot of the system is corrupted already. In a true free market, with a government functioning as it should to preserve liberty, our wealth would be a product of our service alone.)

The fairness of the market allows those who serve their fellow man to buy goods and services from their fellow man. Government intrusion into the market alters this moral principle. The government takes from one group and gives it to another. Since the group that gets it didn't earn it, and yet they have access to goods and services from the market that they otherwise wouldn't have had, we must recognize that an injustice has occurred.

So in our college example: since prices have risen and a new group that otherwise could have afforded college now cannot, we must recognize that in their case, an injustice has occurred. Government demand drove prices up to help a favored group at the expense of 2 other groups - 1) the group that paid taxes for services they didn't receive and 2) the group that can't afford education because the price is now too high.

Of course, the problem here is not limited to college tuition. The same injustices occur wherever politicians venture. Take for example farm subsidies. When the government supports a crop, the price rises above its natural price making it less affordable for buyers and removing the ability for other suppliers to compete effectively - thus keeping the price high since competition is suppressed. The same thing happens to the price of medical services with government subsidized health care such as Medicaid.

Many might agree with the governments choice of groups to favor. Unfortunately, any favored group creates injustice. Again this is an example of the impact of vote buying at the expense of the liberty and at the expense of fairness.

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1 comment:

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