Opinion | Morgan Liddick: Millenials, meet Adam Smith
On your right
Woe betide Juan Hernandez, who cannot afford to buy a home. And woe to all who want to “do something” for him. And those they will force to pay the bill.
Mr. Hernandez, whose story appeared courtesy of the Associated Press, moved from Chicago to New Haven, Connecticut to attend Trinity college. After achieving a master’s degree, he decided that he liked New Haven so much he would remain there. But rents are expensive, and, since he works as an aide for a city council member, he doubts he can qualify for a loan.
Nor is he alone. According to the narrative, millennials are burdened not only with college loan debt, but also “a difficult job market, weak wage growth and a less affordable housing market than their parents.” One wonders how this situation coexists with the fabulous economy Democrats talk about, but never mind. The fact is that across the country, governments are poised to spring into action and address this problem with all manner of giveaways: down-payment assistance, rent subsidies, “urban homesteading,” student-loan reimbursement and so on. The result will be a bad situation made worse.
A true market economy provides goods, services and information about the real value of both with simplicity and efficiency. Petroleum geologists and structural engineers usually make more than poets and barristas because the former are rarer, have more training and because society has decided their products are worth more. A penthouse apartment on the Loop in Chicago costs more than a home in suburban Cicero because people will pay more for it. Both situations illustrate Adam Smith’s formula: “Give me what I want, and you shall have that which you want.”
Progressives regard this process as “unfair,” since they see themselves as better and wiser than the people whose actions together comprise a market. So they strive to make the world comport with their ideas of justice and equity. In major cities, rents are controlled by government fiat, so that apartments are affordable. In Maryland, students who have $25,000 in debt receive state grants and assistance to cover a reduced mortgage rate and a down payment. And in Connecticut, 3.5 percent of Juan Hernandez’s first home purchase will come from the state. Which means that Connecticut’s taxpayers must postpose their dreams that Mr. Hernandez may realize his.
There are other consequences. The wait for a rent-controlled apartment often exceeds the projected lifespan of the applicant. Maryland’s program is bankrupt after two months. Connecticut encourages leveraged purchases by people ill-equipped to deal with economic adversity and demands taxpayers foot the bill. Sound familiar?
Finally, there is the problem of what might be considered “moral hazard.” Let’s say I’d like to live in an old Lumber Mansion on Seattle’s Capitol Hill or a nice corner penthouse on Central Park West. If I save, invest much and wisely, work hard at remunerative jobs in which I also train to keep myself at the top of my field, I have a chance of doing so. I benefit and so does the economy, courtesy of my self-interest. But if I can force others through the largess of the government to pay the bill for my home, why should I do any of that? The economy languishes because I have no reason to be as productive as I could be.
This is central to understanding the problem: In a market economy, one is paid what one’s efforts are worth, and one has what one can afford. Some may have more than others — some few, very much, and fewer, almost nothing. But these are the results of individual qualities: innate ability, education, effort, nature, personal habit. Rewarding the best of these will produce more.
A Progressive economy favors “planning,” political calculation, cronyism and outright corruption. Taking the fruits of the productive and goal-oriented, the frugal and energetic to reward those who are less so, such an economy gets less of the former and more of the latter until – nearly inevitably – it collapses. The former Workers’ Paradise and its satellite states are perfect examples.
This is not to say that those unable to fend for themselves should expect nothing. A great nation cares for its incapable. But people must choose: burden the productive for succeeding to give the less so what they desire or, capabilities being equal, allow the market to speak to the latter about what they must do for themselves.
Mr. Hernandez may have to seek his better life in Cleveland or San Antonio rather than remain in New Haven. He may not like it, but it will be simpler and less expensive for everyone … and for our nation, whose capacity for writing IOUs may be nearing its end.
Morgan Liddick writes a weekly column for the Summit Daily.
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