Walter Williams: The Power of Profit

Walter is great as always. He is still my favourite Rush guest host.

All the best Walter,
JP.

So how do I fire those rural conservative welfare bum parasitical freeloading farmers who steal from my and every other honest paycheck??

That video is so logical it hurt. The pain came from wondering why anyone with a IQ of more than 60 can find fault in it, yet about half the population would disagree with the premise that less taxation and profit is what drives the economy. A little for government and the rest to spend as we choose rather than the other way around. Democracy started out with that concept and bit by bit we lost it. Still losing it.

Walter Williams is a voice of sanity.

Your right the left cannot understand this. Its why they introduced collective farms, that soon became collective prisons.

Backphil

Why do you insist on coming around here to spew the exact same invective every single time? Why don't you start your own blog?

At the risk of attracting Kate's ire I have to say I'm sick of yer one-horse narrative that most times is only tangelically related to the topic at hand.

Bring something relevant or STFU. Please.

You are correct RD,but it's too late in Ontario.
Used to own and operate a very nice farm in Niagara.Now I only operate it.There are nice people from Queens Park and Guelph who rule me now.

Speaking of George Mason University, Russ Roberts has an outstanding podcast called Econtalk - http://www.econtalk.org/
Yay Economics and Liberty.

JohnR, so did we until we moved to Saskatchewan and grain farmed until retirement. Our 8 acre fruit farm was on Line 6 near the old Railroad Street, not far from Queenston. We were happy to leave the Ontario government's increasing interference on the farm, even in the early 1970s.

syncrodox, I second that motion.

Walter William's site at George Mason Uni is here... a variety of economic sense can be found.

http://econfaculty.gmu.edu/wew/

He's too reasoning to be a White House Tzar.

"So how do I fire those rural conservative welfare bum parasitical freeloading farmers who steal from my and every other honest paycheck?I highly doubt yours is an "honest" paycheck.

"So how do I fire those rural conservative welfare bum parasitical freeloading farmers who steal from my and every other honest paycheck?I highly doubt yours is an "honest" paycheck.

Very good. But the very best - the one video every eight year old should have the chance to watch is this from Milton friedman - the lesson of the pencil

http://www.youtube.com/watch?v=4ERbC7JyCfU&feature=youtube_gdata_player

Genius delivered with a smile - guaranteed to make a socialists head explode.

What people also don't get is that capitalism allows people to live out their dreams. This might sound silly but imagine if you had a great invention or made super-wonderful cupcakes or wanted to own your own restaurant. The dreams, skills and livelihood of these entrepreneurs all go down the tubes under socialism, the antithesis of progression.

Just my thoughts.

Can't wait to email this to Premier Brad Wall. He must have forgot these fundamental lessons as he STILL has yet to keep his promise and put SWEEP in its place and restore balance to free market ewaste recycling.

I'm sorry but that's embarrassing. I love Dennis Prager but the fact that you feel the need to post this; the fact that there exists a clutch of morons out there who don't grasp this simple concept is too far beyond me. This isn't beyond most people's ken...and if it is, I am very old and the future is in very serious trouble.

It's more than a clutch, and they would probably consider this video a form of hate speech.

Phil, how do you "fire [pejorative-laden description] farmers"? First, choose what you buy more carefully. Research where your food actually comes from and only buy that which is produced from non-[pejorative-laden description] farmers. Second, petition your government to do away with the "welfare" for farmers. But be careful how you do that, because as Professor Williams points out, if you do away with the farmers' ability to create profits they will have no motive to produce food - and then where will you be? Hungry, Phil, *very* hungry.

Gord Tulk - thanks for the link; Friedman's pencil example is excellent.
I'd like to add another aspect to these two outlines by Williams and Friedman.

Williams was explaining that profit is a result of self-interest; the production of goods and services, whether its meat or potatoes, is a result only of self-interested work. Much of that work is hard, difficult and no-one would do it except for self-interest gain.

Friedman was talking about the results of a free market, where the production of single products, such as wood, steel, iron ore, carbon, rubber are all done by separate peoples, isolate and different from each other, combine by virtue of the free market of exchange, to result in: a pencil.

I'd add something else to the above: the results of profit. Both Williams and Friedman were focused on the Production of goods and servies. The economic triad of: Investment, Production, Consumption requires profit to enable Investment and Production.

That is, profit, what's left over after you've paid for the raw resources, the labour, the shipping, etc..is vital in an economy. It enables you to Invest to Produce more goods.

So, if you live in a one car repair shop town, which only can repair one car at a time, profit will enable that owner to buy more equipment and hire another worker to repair two cars at a time.

Or, enable someone else to set up a competitive shop and you'll see how you've been ripped off for years for your car repairs.

Profit enables someone to purchase some land and plant more wheat and corn, buy more equipment, hire more workers and feed more people.

It's all about Investment. And investment enables Production.
The only economies that don't Invest don't Produce more. They are Steady-State or No-Growth and all of these can only maintain a population that is not increasing or is decreasing. We no longer live in such economies - ie, hunting and gathering or pre-industrial horticulture and local village agriculture. Our populations grow; we have to Invest in order to Produce more to Consume.

I have always believed in the power of fairy tales. Through out my life, I have felt like the "little red hen" with her grain of wheat and doing something with it. This comment thread is about the fairy tale of the shoemaker who only had enough leather to make one pair of shoes/boots - which he then sold to make money to buy leather for two pairs of boots, which he then sold to make money for leather for 4 pairs of boots. If I remember correctly, there was also some tarra diddle about elves coming in at night to finish the boots for him. Perhaps it is time for me to brush on my Mother Goose stories again.

Great interview. A real sign of intelligence when someone can explain a complex concept in easy-to-understand terms.

Thanks for posting.

The real beauty of capitalism IMO is the concept of "economic profits' where an entepreneur gains a larger share of the market due to barriers to entry, difficulty of duplicating technology, and so on. If an entepreneur captures an oligarchical share of the market and makes excess or economic profits, this a signal for other entepreneurs to enter the market and compete.

Notice that this doesn't always happen. Bill Gate's Word program for example is inferior, some argue, to Word Perfect, but Microsoft enjoys market power and continues to make economic profits. This is good for MS shareholders but not so great for consumers; but overall the capitalist system produces the best results.

Governments are the worst offenders who distort capitalism and, in their quest to pick "winners", get elected and fulfil their political goals, distort the crap out of the market, also known as market failure. Socialists have no problem with this type of market failure but set their hair on fire if Bill Gates makes "too much."

That is why governments must be severely constrained in their economic activity (Dr. William's point that you can't fire government bureaucrats, at least directly, is the crux of the problem with "public enterprise"). If government is not limited it tends to follow its goals and priorities often with disastrous economic results.

Crony capitalism, which is not capitalism at all because it removes the crucial risk element, is the worst form of government interference in the economy, because it undermines hard work and innovation. As someone stated, governments are poor at picking winners but losers are good at picking government.

Once the incentive to take risks and work hard are removed, innovation and progress are slowed and even stopped, and staganation inevitably follows.

Yes there is a role for government in the economy - to undertake "desired" activities, also known as "public goods", because, in a very few cases, profit is not possible for them, examples being defence, firefighting and policing. Public goods by definition are non-rivalrous and non-excludable, meaning if you consume something, another is not depirived (eg national defence) and if you don't pay for something you still receive it (firefighting).

There are very few public goods - not health care (one doctor can't perform two surgeries at once), not marketing boards, and certainly not the vast majority of crown corporations, and most certainly not bailouts. Public goods are improperly defined and utilized for politicians trying to enhance their "good" rather than the public's.

To paraphrase Winston Churchill - capitalism is the worst economic system available, except for ALL its alternatives.

Phil, how do you "fire [pejorative-laden description] farmers"?
MikeM_inMD
You don't. Because you can't. You can't "take your business elsewhere." Even if you are gluten intolerant, you are compelled to subsidize the freeloading kulak wheat farmer. Even if you are a vegan, you are coerced into putting your hard earned tax dollars into the greedy, parasitic pockets of the freeloading kulak beef farmer. This is the very antithesis of the market economy the Williams is advocating.

Why do you insist on coming around here to spew the exact same invective every single time?

Think of it as a humanitarian gesture. You and your ilk are the most egregious of hypocrites. And while the truth may hurt, it will also set you free. That you can't grasp that truth is hardly my fault.