How much of our oil consumption do we ‘own’?
How much of the goods we buy do we own the materials and means of production?
“How much of the goods we buy do we own the materials and means of production?”
I didn’t write that we (meaning Americans) have to own the means of production of the goods we buy. I wrote that for the price system to do its job of rationing natural resources in such a way that they don’t disappear — so that they become a “renewable flow” — there must be private ownership of the means of production and a sound monetary system. I didn’t specify WHO should own the means of production; only that the means of production ought to be privately owned and subject to market forces.
Government ownership leads either to wasteful production with the eventual disappearance of the product, or to artificial restriction of production with mandated shortages. Government enterprises can never strike the right balance because they are, essentially, not “in” the market at all. They are all “extra-market” (i.e., lying outside of the market) activities. They are immune from competition (which always has the effect of lowering prices and raising quality), and immune from the flow of information represented by prices in the market.
The protectionist notion that Americans must be “self-sufficient” by owning the specific means of production of the specific goods they buy and sell — oil, coal, wheat, shoes, etc. — is a fallacy, exploded long ago by the great David Ricardo, which he summed up as the “Law of Comparative Advantage.” Ludwig von Mises restated Ricardo’s insight regarding free trade, but renamed it the “Law of Association.”
In essence, it says this:
If you’re a brain surgeon, and I’m a janitor, more value — more wealth — is created for both of us if we follow a strict division of labor by having you do nothing but brain surgeries and hiring me to do nothing but sweep your floors, than if you do fewer brain surgeries and sweep your own floors. Yes, you are certainly capable of sweeping your own floors (while I, the janitor, am incapable of performing surgeries), and you might even be better at sweeping floors than I am. But the time spent on performing lower value work such as sweeping floors subtracts from your time spent doing higher value work such as neurosurgery. So even though you COULD do everything yourself, it’s better not to. It’s better, from the standpoint of creating wealth, to TRADE part of your wealth-creating ability (surgery) for part of my wealth-creating ability (sweeping), even though my skills are inferior to yours.
The Law of Comparative Advantage is a very compelling argument for free trade and is routinely ignored by leftist-socialists and rightist-protectionists alike.
I hope the above example was at least intuitively convincing that Ricardo and Mises were right. I’d be happy to post mathematical examples proving that more wealth is created through free exchange than through “self-sufficiency.”