Foldvary: An Editorial About Nothing
|November 19, 2002||Posted by Fred Foldvary under Progress Report, The Progress Report|
An Editorial About Nothing
by Fred E. Foldvary, Senior Editor
“Nothing” is the absence of anything. “Nothing” is relative, because in this universe, there is no absolute nothing. There is everywhere space and time, and stuff even if only radiation.
One of the fundamental principles of the universe is the Law of Nothing, that “nothing comes from nothing.” If there is something, it must have come from something else. Therefore, stuff cannot be created out of nothing. Matter and energy can be transformed, but as a whole, they are conserved, neither created nor destroyed.
In economics too, nothing comes from nothing. Real wealth, meaning goods and services, can only come from production, not from fiat decree. There is no free lunch, no economic magic, no wand that can create goods out of nothing. We do not create economic growth by creating more fiat money. More fiat money distorts and raises prices, hurting not helping production.
Some folks think we can wave a magic economic wand and increase wages. The government legislates a minimum wage. Poof, higher wages for the poor! Not so. The money for the higher wage must come from somewhere. It comes out of profits or out of higher prices. With higher labor costs, some workers will not be employed that would have been. Higher wages for those not working comes from higher taxes to aid the unemployed.
Since something always comes from something else, this implies the fundamental law of science: everything happens for a reason. The most basic law of science is the law of cause and effect. Too often students, journalists, and even scholars write as though something can come from nothing. They make unwarranted assertions, with no reason or justification, no warrants from logic and evidence. They think they say something, but their empty statements lack meaning and substance, so really they say nothing.
Many government laws violate the Law of Nothing. In the USA, as in many countries, all laws should flow from the Constitution. If not, they are not true law, nothing but fiat commands.
Consider, for example, US federal laws prohibiting marijuana. There is no US Constitutional authority for such federal law. The Constitution says the federal government only has that power specifically granted it. Nowhere in the US Constitution does it say the federal government may dictate to people what they can eat, drink, smoke, or otherwise ingest. So the federal law criminalizing marijuana comes from nothing.
The U.S. federal income tax also comes from nothing. Economically, it is a direct tax on income. But the Constitution says all direct taxes must be apportioned by population. The income tax is not. The U.S. Supreme Court excused the income tax by saying it is really an indirect tax, an excise tax, a tax not really on the income, but on the activity of earning income. This is nonsense, so we have a fiat tax based on nothing.
Governments tax income, sales, value added, enterprise, and produced property as though the Law of Nothing did not exist. Since taxes must come out of something, such taxes add to the cost of goods. These taxes come out of productivity and growth, destroying it.
Land rent comes from the difference in the productivity of various lands. The extra typical productivity caused by nature or by civic goods is rent. So long as that productivity is not destroyed, the rent cannot be destroyed. Yet governments think they can destroy rent. The pass fiat rent control. The tenant pays less rent to the landlord. But the rent is still there. That portion not paid to the landlord is kept by the tenant. Rent control may create more rent takers, but the landless still end up with nothing. Some dwelling seekers too end up with nothing.
Because the rent is not destroyed by taking it, rent can be used for public finance without destroying production. Because rent was created by nature and by civic goods, it is equitable to use it for public benefits. Instead, governments tax the human mind and the human muscle. The law of cause and effect tells us that as we destroy mind and body, there will be less human effort. Nothing comes from nothing, so as we destroy the source, we destroy the product.
The best economic policy for government is to do nothing to promote growth. When rent is used for public revenue, growth takes care of itself, because there is nothing to hold it back, and because rent seekers are no longer taking something for nothing at the expense of others.
Maybe God can create something out of nothing, but human beings cannot.
Copyright 2002 by Fred E. Foldvary. All rights reserved. No part of this material may be reproduced or transmitted in any form or by any means, electronic or mechanical, which includes but is not limited to facsimile transmission, photocopying, recording, rekeying, or using any information storage or retrieval system, without giving full credit to Fred Foldvary and The Progress Report.
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