Econ 101

Milton Friedman had some thoughts on basic economics.

The most important single central fact about a free market is that no exchange takes place unless both parties benefit.

There is all the difference in the world…between two kinds of assistance through government that seem superficially similar: first, 90 percent of us agreeing to impose taxes on ourselves in order to help the bottom 10 percent, and second, 80 percent voting to impose taxes on the top 10 percent to help the bottom 10 percent….  The first may be wise or unwise, an effective or ineffective way to help the disadvantaged—but it is consistent with belief in both equality of opportunity and liberty.  The second seeks equality of outcome and is entirely antithetical to liberty.

Nobody spends somebody else’s money as carefully as he spends his own. Nobody uses somebody else’s resources as carefully as he uses his own.  So if you want efficiency and effectiveness, if you want knowledge to be properly utilized, you have to do it through the means of private property.

And [emphasis added]

The economic miracle that has been the United States was not produced by socialized enterprises, by government-union-industry cartels or by centralized economic planning.  It was produced by private enterprises in a profit-and-loss system.  And losses were at least as important in weeding out failures, as profits in fostering successes.  Let government succor failures, and we shall be headed for stagnation and decline.

Stated Differently™, bailing out losing firms assures us of mediocre economic growth.  Winston Churchill also had a thought on this matter.

When losses are made, under the present system these losses are borne by the individuals who sustained them and took the risk and judged things wrongly, whereas under State management all losses are quartered upon the taxpayers and the community as a whole.  The elimination of the profit motive and of self-interest as a practical guide in the myriad transactions of daily life will restrict, paralyze and destroy British ingenuity, thrift, contrivance and good housekeeping at every stage in our life and production, and will reduce all our industries from a profit-making to a loss-making process.

 

™Judge Andrew Napolitano

 

h/t Power Line

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