Sunday, July 5, 2015

The Problem With Bailouts

Summary of Mises' Human Action:

"Mises stresses the importance of entrepreneurship because only entrepreneurs actually do monetary calculation. This fact puts entrepreneurs at the center of all progress (and failure). Entrepreneurs who estimate costs more correctly than their rivals earn high profits while also serving consumers. Such men rise to top positions in industry. Entrepreneurs who err seriously in their calculations experience financial losses and cease to direct production. Mises described this market test of entrepreneurial skills as the only process of trial and error that really matters."
The problem with bailouts is that the nitwits that made mortgages to deadbeats, or who invested in Greece, never cease to direct production!

1 comment:

High Plateau Drifter said...

Economic enterprises with real political power have no need for accurate cost calculations. A political system that grants such power is itself weak as it becomes overburdened with economic leeches, having taken on the burden of the multiple miscalculations of its politically powerful constituents. It is only at the point of systemic economic crisis that cost calculations matter once again.