Wednesday, March 29, 2006

Microeconomics 101 by Our Dear Leader



Via Holden Caulfield of the blog First Draft, I learned of this fascinating summary of the free markets by George Bush:

The other big opportunity for democracy, of course, is China. President Hu Jintao is coming to our country, as you know. I will continue to remind him ours is a complex relationship and that we would hope that he would not fear a free society, just like it doesn't appear that he's fearing a free market. I happen to believe free markets eventually yield free societies. One of the most -- one of the most pure forms of democracy is the marketplace, where demand causes something to happen. Excess demand causes prices to -- the supply causes prices to go up, and vice versa. That stands in contrast to governments that felt like they could set price and control demand.

Where to begin? I'd need to do those dreaded supply-and-demand graphs to explain the mistakes thoroughly, but it is well known that nothing empties a blog as fast as seeing those scissor blades of the markets appear. Perhaps it's sufficient to point out that there is nothing inherently democratic about the marketplace of, say, crude oil, and that demand is not the only thing in the markets that causes something to happen. The sentence about excess demand started promisingly, but then at the double dashes something happened and supply astonishingly got mixed up with it. Whether this mess stands in contrast to governments who feel like they can set prices and control demand is an interesting and deep question. But the fact of the matter (as a troll always states it) is that prices are set in many markets by the supply side, albeit within the constraints of the demand conditions. Not that different from what governments do when they control prices.

What did they teach in that Harvard MBA degree George has got?