John S. Wolfe

One of my favorite classes at ASU was Managerial Economics, taught by the incredible Bill Boyes.

A self-proclaimed libertarian, Professor Boyes projects a “free market” paradigm on every issue, asking students to consider “what if” the usual “solutions” — i.e. government involvement — weren’t in place. One can list items like national defense, environmental protection, support for the elderly and less fortunate, roads and traffic, and health care.

His point was to challenge the thinking that government can solve every issue, that a central authority knows best and can be fair and judicious in determining who gets what and who doesn’t (i.e. declare winners and losers). Many citizens look to the government because of the idea it will be “fair.” The alternative is to rely on free-market solutions, which of course can be seen as “unfair” because some people get ahead, and some fall behind.

Yet, as the professor pointed out, relying on government is to perpetuate the status quo. Nothing changes over time. Departments aren’t eliminated, subsidies aren’t lowered, services aren’t amended, even if progress calls for it. Monthly support payments only allow the poor stay poor, while the rich remain rich. Encouragement of and opportunities for advancement are limited.

The alternative — the free market — allows for “creative destruction,” in which new products and services can be introduced, often at the expense of another individual’s or company’s products and services. Think Kodak film getting wiped out by digital photography. Government — and some companies — resist change because it will create victims and hardship, yet those will occur regardless.

Among Professor Boyes’ many insights was another timely one: that capital doesn’t like uncertainty. Capital is money, trade, investment, spending. Those who have it — from the richest Americans to the poorest — are less inclined to put it to productive use if they are unsure of the future. So they wait, in a holding pattern, for some optimism.

This is key to understanding why the country seems to still be in a rut. Those with capital — not the government — just don’t know what the rules will be. Businesses can’t hire, or invest, or confidently launch new services when they don’t know what the government will do to their bottom line.

Will there be new taxes or fees for offering or not offering health care to employees? Will there be “cap and trade” taxes for the business’s contribution to global warming? Will there be higher business taxes to “make the rich pay their fair share”? Will businesses be expected to contribute more to unemployment funds? Given this situation, one can understand why commerce isn’t picking up. Would you invest right now? Or would you wait?

The answer’s pretty apparent, which is why the leaders in Washington need to end the uncertainty and stop exploring “actions” to take.

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