The Seven Deadly Fallacies of Bad Economics; J. K. Williams

384 The Seven Deadly Fallacies of Bad Econontics by John K. Williams I n the sixth century of the Christian era Pope Gregory I, remembered by history as Gregory the Great, listed what became known as the "Seven Deadly Sins." Gregory's listing soon became as popular as the vices listed, and by the Middle Ages any preacher worth his salt had in his traveling bag a sermon, or a series of sermons, expounding the nature and detailing the perils of those Seven Deadly Sins. It may seem somewhat extravagant to liken bad economic thinking to attitudes and actions which allegedly condemned the soul to hell. Yet economic errors are not to betaken lightly. The errors I call the "seven deadly fallacies of bad economics" can lead and have led to unspeak ably destructive consequences. Their serious ness cannot be overstated. The Fallacy of Forgotten Costs The first fallacy to be considered might be called "the fallacy of forgotten costs." This fallacy is admirably discussed by Frederic Bas tiat in a pamphlet he penned in 1850 entitled, "What Is Seen and What Is Not Seen." Writes Bastiat: "Nothing is more natural than that a nation, after making sure that a great enterprise The Reverend Doctor John K. Williams has been a teacher and is a freelance writer and lecturer in North Melbourne, Victoria, Australia. He was resident scholar at FEE this past summer.

will profit the community, should have such an enterprise carried out with funds collected from the citizenry. But I lose patience completely . . . when I hear alleged in support of such a resolution this economic fallacy: 'Besides, it is a way of creating jobs for the workers.' " Continues Bastiat: "The state opens a road, builds a palace, repairs a street, digs a canal: with these projects it gives jobs to certain work ers. That is what is seen. But it deprives other workers of employment. That is what is not seen . . . In noting what the state is going to do with the millions of francs voted, do not neglect to note also what the taxpayers would have done-and can nb longer do-with these same millions. " These words, written over a century ago, could have been penned yesterday! Today's pol iticians are still prone to justify their high tax ing, high spending policies by pointing to the employment opportunities they thereby create-indeed, Lord Keynes provided such politicians with an entire volume of incantations they can mutter when perpetrating what Bastiat called this "ruinous hoax." Strip away the new terminology, and the old fallacy so castigated by Bastiat is revealed-the deadly fallacy of the forgotten cost..

The full import of this fallacy is concealed if we think of "costs" simply in terms of "prices." A price is merely a cost expressed in monetary terms. It is extremely useful so to express a cost, relative money prices being the key to economic calculation. In truth, however, the "cost" of a good a per son acquires or of a service a person enjoys or of an activity in which a person engages signi fies whatever that person has spent, surren dered, or forgone in acquiring the good, in availing himself of the service, or in engaging in the activity. The cost to me of purchasing a book may be not acquiring a theater ticket. The cost to me of spending a day in a park may be my not acquiring the income I could have earned from writing. The cost to me of using some land I own to grow wheat may be not us ing that land to run cattle or grow vegetables. Simply, in considering the cost of acquiring some good or using some service or engaging in some activity, one must consider every thing, activity, and state of affairs surrendered or for gone in opting for one of two or more alterna tives. Factors such as comfort, time, ease, an ticipated future satisfactions, and the approval of other people may well be involved; indeed, any thing, activity, or state of affairs a person values can enter that person's calculation of costs.

Some extremely significant implications for sound economic thinking follow from this in sight. The primary point Bastiat makes, how ever, should be crystal clear. The good a person chooses is seen and felt and enjoyed; the money surrendered to acquire that good, and alterna tive uses to which that money could have been put, are by definition not seen and felt and en joyed, and hence are easily forgotten. Politicians, to take but one example, can tri umphantly point to the jobs they have saved in, say, the textile and clothing industries by the imposition of tariffs. Not so obvious, however, are the costs these tariffs involve. In the ab sence of the tariffs, men and women may well have preferred to purchase relatively cheap im ported clothing for themselves and their chil dren. They would thus have possessed addi tional cash to spend on goods and services they value, but rank in importance below a certain amount of clothing.

Workers would have been employed to pro vide these goods and services. Other workers would have been employed to produce what ever goods the overseas suppliers of textiles di385 rectly or indirectly accept in exchange for those textiles. Jobs in the textile industry are pro tected, but at considerable cost: The additional goods and services consumers could have en joyed had they been able to purchase relatively cheap clothing, and the jobs in the production of these additional goods and services for home-consumption and the goods exchanged, directly or indirectly, for the imported textiles. Add to that the even more intangible factor of forgone competition, and the forgone innova tions and technological improvements that may well have characterized a threatened industry's response to competition. Throw in the reality of the forgone liberty of individuals to exchange goods with whomsoever they please and for gone bonds of interdependence forged between nations. It may be that what is surrendered and forgone is valued by many individuals less than what is realized by the imposition of tariffs, but that is not at the moment the point. The point simply is that what is forgone and surrendered is less visible than what is realized. Thus the ease with which men and women fall for the fallacy of the forgotten cost.

The truth is simple. It is summarized in the proposition, "There's no such thing as a free lunch." Every economic choice we make or politicians make for us has a cost. The cost is not obvious, being the valued opportunities for gone. The beginning of economic wisdom, however, is to keep an eye open for what is not obvious, and thereby avoid the deadly eco nomic fallacy of forgotten costs. The Fallacy of Misplaced Value In Canterbury Tales, Chaucer's Parson states that the Seven Deadly Sins are "all leashed to gether." So, it might be suggested, with the seven deadly fallacies of bad economics. They merge and overlap. It could well be claimed that the second fallacy in my list-"the fallacy of misplaced value" -and the first fallacy "the fallacy of forgotten costs" -belong to gether. Yet it is useful, I think, to distinguish them. Many medieval ethicists concerned them selves with what they called "the just price." In so speaking, they were suggesting that the money prices of economic goods should reflect 386 THE FREEMAN • OCTOBER 1986 the "real" or "objective" value of these goods and services. This "real" value of an economic good was perceived as no less a quality of that good, than, say, the good's weight.

As economic thought developed, a distinction was drawn between the "use value" of a good-the good's usefulness to human beings and the "exchange value" of the good-the al ternative goods and services for which the good might be exchanged. Attention focused, how ever, upon the "exchange value." What, peo ple asked, determines this value? The most promising answer seemed to be that it derived from the productive resources used in its manu facture, labor being the most significant. Thus Adam Smith in his Wealth of Nations wrote that, "If among a nation of hunters ... it usu ally costs twice the labor to kill a beaver which it costs to kill a deer, one beaver should ex change for or be worth two deer." David Ri cardo built on this foundation, and later Karl Marx, greatly indebted to Ricardo, developed his version-some would say versions-of the labor theory of value. The value of an economic good derived, insisted Marx, from only one of the productive resources embodied in that good: the "socially necessary labor time" its produc tion involved.

In 1871, however, a radical challenge to this way of thinking appeared in the form of Carl Menger's Principles of Economics. Menger in sisted that the idea of "value" was crucial in economics, but he went on to argue that the value of an economic good was not a mysteri ous quality inhering in the good. Rather, when speaking of economic value one is referring to the relationship between an appraising mind and an object appraised. Value is invariably "value to someone." Value, in other words, is subjective, varying from person to person, from time to time, and from situation to situation. Locating that value in a good rather than in the mind appraising that good is what I signify by "the fallacy of misplaced value. " One distinction must be noted. In determin ing the value to me of, say, a book, I am rank ing the book in relation to other goods on my own value scale. I rank it, let us say, above a theater ticket, and thus acquire the book at the cost of a forgone opportunity to acquire a the ater ticket. I might also, however, appraise the purchasing power of a good-that is, estimate how much that good could be sold for. On this matter I can be correct or incorrect. Something "objective" is involved. Yet appraised purchas ing power itself rests upon the countless subjec tive evaluations of my fellow market partici pants. It is from these hundreds of thousands of subjective evaluations that changing relative money prices in the. market are born.

Elaborating how market prices-including the prices of the factors of production-derive from the subjective evaluations of market par ticipants is a fascinating exercise. Linking the subjectivity of value to an understanding of costs in terms of forgone opportunities leads to some extraordinarily significant conclusions. We are forced, for example, to assert that the cost of an economic choice-be it that of pur chasing a book at the cost of the forgone oppor tunity to procure a theater ticket, or of produc ing jump ropes at the cost of the forgone opportunity of using the same productive re sources in producing clotheslines-is known only to the person or group of people making the choice. We are further forced to insist that an objective measure of cost is simply not avail able, the individual's evaluation of a forgone opportunity being by its very nature subjective. If this be granted, talk of "social costs" be comes suspect, to put it gently.

No less fascinating is the study of the at tempts of many economists to avoid these con clusions, perhaps the most significant of these being Alfred Marshall's tortuous synthesis, which featured a productive resource theory of cost on the supply side and a subjectivist analy sis of cost on the demand side. Suffice, however, that we be aware of the fal lacy of misplaced value. When we hear Marx ists darkly muttering of the "surplus value" ex propriated by capitalists, or other economists speaking as though they could objectively com pare the "value" of one distribution of eco nomic goods to that of an alternative distribu tion, we should become suspicious. The realization that all economic choices in volve costs can lead, by a faulty leap of logic, to two further deadly economic fallacies that typically come together: "the fallacy of static wealth" and "the fallacy of the zero-sum game."

THE SEVEN DEADLY FALLACIES OF BAD ECONOMICS 387 The Fallacy of Static Wealth and the Fallacy of the Zero-Sum Game These twin fallacies take the form of a sort of picture dominating the thinking of many peo ple. Economic activity is depicted in terms of a poker game. One player's chips are observed to have increased. Immediately one concludes that some other player has lost chips. Poker is, as they say, a zero-sum game: Gains enjoyed by one party must be balanced by losses suffered by another. So it is, people embracing the falla cies of "static wealth" and "the zero-sum game" insist, with economic exchanges. "Winners" must be balanced by corresponding "losers." Such was the "picture" held by advocates of the socio-economic system known as mercantil ism, the system Adam Smith so vigorously at tacked. Perhaps the word "system" is some what misleading, for, as Thomas Sowell has noted, "[mercantilism] is a sweeping label cov ering a wide range of writings, laws, and poli cies beginning in various European nation states in the seventeenth century, still pervasive in the eighteenth century, and never completely extinguished till the present day." ("Adam Smith in Theory and Practice," in Adam Smith and Modern Political Economy, edited by Gerald P. O'Driscoll [Ames, Iowa: The Iowa State University Press, 1979] pp. 3-18) Yet cru cial to the thinking of "the motley collection of businessmen, pamphleteers, and politicians"

described as "mercantilists" was the perception of wealth as something static and of economies as zero-sum games. According to the mercantilists, wealth was a constant, a given-like the chips in a poker game. If one community-and typically the mercantilists thought in terms of communities-improved its overall economic situation, another community must have lost out. That losing community, so it was claimed, must have bought more goods from the winning community than it had sold to that community, the difference having been made up in gold. As the seventeenth-century writer Thomas Mun expressed it, only "the treasure which is brought to the realm by the ballance [sic] of our foreign trade . . . [constitutes the amount] by which we are enriched" (England's Treasure by Forraign Trade [1664; New York: Kelley, 1965] p. 21). To achieve an export surplus, mercantilist nations were characterized by gov ernmental controls of a magnitude and scope which, as Sowell puts is, "probably exceeded anything seen in the twentieth century, either in capitalist economies or in most socialist econo mies" (ibid., p. 4).

What Adam Smith perceived, essentially, was first that "wealth" was not something static and given like gold, or, indeed, poker chips, but rather consisted of goods and ser vices that could be created, and second that both parties to an economic exchange could im prove their respective situations. This second perception is sharpened if we take seriously the truth ignored by those committing the fallacy of misplaced cost, namely, that the value of an economic good is not a mysterious quality somehow residing in the good but a relationship between an appraising mind and some object appraised. If, in the absence of coercion, two individuals exchange goods or services, it can be only be cause each party to the exchange values, at least at the time of the exchange, what is .obtained more than what is surrendered. Each anticipates enjoying a more valued situation by making the exchange than obtained before making the ex change. There are two winners, not one. This is a positive-sum, rather than a zero-sum game.

Given that Adam Smith in 1776 exposed the twin fallacies-the fallacy of static wealth and the fallacy of the zero-sum game-and given the clinching of this exposure by the insistence of economists following the lead of Cad Menger that the "value" of a good or service signifies the value of that good or service to someone, one might have thought that the two fallacies could be exorcised from people's thinking. But not so. Consider the following statement, taken from the published sermons of a· cleric with whom I am fighting a somewhat protracted battle: "Think of an economic system in terms of some castaways on a desert island. The casta ways have brought with them some fresh water, and they find a supply of bananas and coconuts on the island. Some of the castaways have 388 THE FREEMAN • OCTOBER 1986 greedily claimed that they own the water and the supply of food. They feast, but their fellow castaways starve. Some suffer, simply because others are selfish."

The key phrase in this: "Think of an eco nomic system as . . ." The speaker is describ ing a static situation: an island with a given sup ply of food and water. And that is precisely how not to think of an economic system! If an economic system is to be compared to an island, let it be a large island inhabited by active people. Some people have devised a way of distilling fresh water from sea water. Some have established banana and coconut planta tions. Some have become skilled at fishing. Some have bred wild goats. Some have learned to extract iron. Even the simplest are contribut ing to the process of wealth creation, say by tending a fire used for the distilling of water. The moment one starts thinking not in terms of goods simply provided like manna in the wil derness, but of men and women using the skills and imagination they possess and the raw mate rials at their disposal to create the goods and services they want, one is beginning to ap proach the reality of an economic system. And one has escaped from the deadly economic fal lacy of finite wealth.

Consider another quotation from the same source: "One does not have to be a genius to realize that, if some citizens in western nations are get ting richer, then other citizens of these nations-or perhaps men, women and children of the Third World-are getting poorer. One does not have to enjoy a university education to realize that, behind newspaper headlines report ing company profits, are the many helpless little people who have been forced to endure losses. If Peter prospers, somewhere there's a Paul Pe ter has robbed." Frankly, one does not have to be the posses sor of a university education to realize that the author of these passages is peddling the discred ited economic nostrums of yesteryear. He has embraced, and is luring his listeners and readers to embrace, the twin fallacies under consider ation: the fallacy of static wealth and the fallacy of the zero-sum game. In all fairness, I should add one qualifier. The fallacy of the zero-sum game is only a fallacy if the exchanges made by people are not coerced.

The moment coercion enters the picture-be that coercion exercised by individuals who have discovered that improving their well-being by plunder is more congenial than doing so by pro duction and voluntary exchange, or by govern ments using their coercive power for purposes other than the protection of citizens from such individually initiated coercion-then zero-and indeed negative-sum games abound. Sadly, however, few of those depicting economic ac tivity in terms of zero-sum games are advocat ing the only economic system which avoids such "games" -the free market. The Fallacy of False Collectives The fifth deadly economic fallacy I .would bring to your attention is the fallacy of false col lectives. All of us are familiar with collective nouns: "the community," "the state," "a soci ety, " "the working class," "aggregate de mand," and even "the market." These terms can be extremely useful, functioning as a sort of shorthand whereby we refer to numerous indi vidual human beings and particular relation ships between them. Problems are created, however, when we start speaking and thinking as though these terms signify "thing-like," ex isting entities distinct from these individuals and relationships.

There may be some value, for example, in occasionally using such terms as "aggregate demand" and "aggregate supply." Mischief is afoot, however, when the real world that eco nomics seeks to understand-the world of peo ple seeking to improve their situations by using what they have to acquire what they want-is supplanted by a purely imaginary world, a sort of ballet called "the economy" starring the two dancers "aggregate demand" and "aggregate supply." Lost in that imaginary world one is tempted to get into the act, so to speak. Why not play choreographer? Why not im prove the performance by stimulating "aggre gate demand"? There is nothing wrong with this fantasy if fantasy it remains, but when the real world of economic activity is subjected to governmental activities described as "stimulat ing aggregate demand," disaster can result. Indeed, there are dangers inherent in aggreTHE SEVEN DEADLY FALLACIES OF BAD ECONOMICS 389 gates even if one avoids the fallacy of treating these aggregates as concrete "things." As Madsen Pirie observes in The LogicofEconom ics (London: The Adam Smith Institute, 1982), "When we use numbers we lose information."

A study of "apples" dictates indifference to in formation about the particular weight, shape, taste, and so on of each component apple; a study of "fruit" dictates indifference to further detailed information. Yet in economics, as is the case elsewhere, truth often lies in the de tails. Suppose we are thinking of the phenomenon of involuntary unemployment. We are wonder ing if the phenomenon is related to wage rates. We do our homework. We reach a fairly general conclusion: If men and women are to use what they have to acquire what they want, they must direct their productive efforts in a way that takes account of the changing tastes and prefer ences of their fellows, the changing skills and technologies available to a community, the changing relative scarcities of raw materials distributed globally, and so on. We further con clude that information about such realities is available only when 'it is encoded in changing relative money prices in a free market.

We note, for example, that a rise in the price of one product relative to others tells both con sumers and producers what they must do to im prove their situations, and constitutes an incen tive for these people to act. We finally conclude that changes in the prices for various forms of labor in various activities encode the best infor mation available in a large and complex society for what we might call the "distribution" of la bor. A downward move in the wage level avail able for people of certain skills in a particular industry, and an upward move in the wage level available for people of different skills in another industry, "informs" people as to what skills it is desirable to acquire and in what industry it is desirable to seek employment. We thus con clude, perhaps, that politically determined or sanctioned measures preventing wage rates from moving downward in certain industries or arbitrarily forcing them upward in other indus tries deprive people of the information they need if some sort of correspondence is to obtain between the distribution of various forms and quantities of labor and the distribution of de mand for these forms and quantities of labor.

Suppose, however, that we attempted to tackle the problem, thinking only of some ab straction called the "unemployment rate" and the "average wage level." There is no way that, so thinking, we would find ourselyes look ing askance at measures interfering with changes in relative wage rates. Inevitably, eco nomic theorists and politicians embracing the fallacy of false collectives are destined to lead men and women to economic disaster. The Fallacy of Centralized Planning The sixth deadly economic fa1lacy I have called "the fallacy of centralized planning. ' , The defining economic question can, per haps, be expressed thus: "How are men and women to use what they have-skills, raw ma terials, information, and time-peacefully to acquire what they want?" Some components of an answer are reason ably apparent. For example, the adverb' 'peace fully," which precludes an answer to the ques tion in terms of the oldest labor-saving device known to humanity-the use of violence to ex propriate desired goods from men and women creating these goods-demands, I suggest, some adopted practices or accepted institutions protecting people from coercive violence. Any response to the question which goes beyond the most primitive will involve, I submit, at least a rudimentary division of labor. But the activity I particularly wish to focus upon is that of coordi nation.

Historically, human beings have discovered but three ways to coordinate their productive ef forts so that they more or less successfully use what they have to acquire what they want: coor dination by tradition, coordination by political edict, and coordination by "the market" -and I am aware, incidentally, that this term "the mar ket" is itself an abstraction or collective of sorts, pointing to individual men and women enjoying private property rights and voluntarily engaging in transactions chosen and negotiated by themselves. Tradition is a satisfactory means of economic coordination-' 'planning" if you like-only for 390 THE FREEMAN • OCTOBER 1986 the most primitive and static of societies. The two options today deemed viable for large and complex societies are those of coordination by political edict and coordination by the market the "command economy" and the "market economy." The f~lacy of centralized planning has it that while in simpler times it may have been possi ble to coordinate the economic activities of men and women by the market, the complexity and rapid technological changes of today' s world make such a·means of coordination impossible.

It is claimed that we thus require expert plan ners working in conjunction with politicians. I submit that this claim is a fallacy reversing the reality. Only the market can coordinate the economic activities of hundreds of millions of men and women in a rapidly changing world. Consider, for a moment, a simple tribal soci ety. Assume that the wants of its members are limited, the skills possessed by the "tribe-as-a whole" are relatively few, and the raw materi als available to the tribe remain more or less the same from year to year. In such a situation we can imagine tribal elders, or even the tribe as a whole, meeting and planning the tribe's eco nomic activities by reference to this readily available information about what the tribe "has" and what tribe members want. Now consider, in contrast, a large and com plex society. A vast menu of possible wants is available, individuals opting for widely differ ent "lists" of wants and diverse rank orderings of these wants. Skills are highly specialized and are diffused through millions of people, and constantly change as new technologies become available. Resources are distributed globally, and are marked by constantly changing relative scarcities. It is literally impossible for political planners, however good and wise, to collate, synthesize, and make economic decisions by reference to this totality of information.

Yet as already noted, this information is available, in an appropriately distilled form, in a market economy. Changing relative money prices, which are determined by the interactions of millions of individuals seeking to improve their situations through what they produce and the voluntary exchanges they make, "encode" this data. There is planning and coordination, but it is the planning of countless individuals doing what they can to acquire what they want, and the coordination of these plans by what Carl Menger called the "organic phenomenon" of the market or what Friedrich Hayek called the "spontaneous order" of the market. The very complexity of modern societies, and the dif fused, changing, and essentially private nature of much of the information which coordinated economic activity must utilize, combine to make central planning impossible. It is tempting to suggest that this sixth deadly fallacy of bad economics is rooted in the first of the old Seven Deadly Sins: the sin of pride. It is humbling to acknowledge that the peaceful ac tivities of the many can coordinate an economy with a subtlety and flexibility the deliberative planning of a super intelligent few could never realize. Perhaps it is this very pride that makes the deadly fallacy of centralized planning so at tractive.

The Fallacy of Market Mastery The seventh and final deadly economic fal lacy to which I would draw your attention I have called "the fallacy of market mastery." This is the fallacy of those who claim that the market is a means whereby some people exer cise power over others. Consider, for example, this frequently heard statement about labor unions: "Were it not for unions, employers could set whatever wages they wished. Their economic power would be absolute!" The model is clear. Capitalists allegedly en joy power over those with only their labor to sell. The whim of employers would determine wages were it not for the bargaining power of unionsa power dependent upon the capacity of unions to prevent workers from accepting a wage lower than the "union wage." This claim could well lead us into an exami nation of a range of theories explaining how wages are determined: the subsistence theory of Malthus and Ricardo, the wage-fund theory of John Stuart Mill, and so on. Let us content our selves, however, with briefly returning for a moment to the days of mercantilism-in partic ular, mercantilist France.

Unions as such did not exist. The government actually imposed maximum wage laws. Any THE SEVEN DEADLY FALLACIES OF BAD ECONOMICS 391 employer who paid wages above a legally de fined ceiling was charged with an economic crime, tried, and if found guilty, may well have been sent off to be chained to an oar in one of France's sea-going galleys. The shocker is that numerous employers defied these maximum wage laws! Why? The selfishness of employers, and the forces of even a grotesquely fettered market, led them to engage in their law-defying activi ties. Suppose, for example, I am a factory owner in mercantilist France. By taking on an addi tional worker I can increase the hourly output of my factory by goods I can sell for $40. The money costs of the raw materials involved in producing these additional goods, and the money costs of the additional wear and tear on my machinery, come, let us say, to $20. The maximum wage rate the government allows me to pay each worker is $1. Each additional worker I can put on thus yields me an additional $19 an hour!

Now for the purposes of our discussion, let us assume the same figures apply in all industries. Each additional worker an employer takes on represents an additional $19 in the employer's pocket. But to acquire my additional worker, I have to attract him from his present employ ment. To do that, I must content myself with, say, an extra $18.50 an hour I can pocket, offer ing him not $1 an hour but $1.50 an hour. Simply stated, employers must bid for a worker's services. In this hypothetical situa tion, the critical figure is $20 an hour. At any wage rate below that figure, employers benefit by adding employees. At any wage rate above that figure, it doesn't pay to add an additional employee-hence the damage caused by mini mum wage laws. Wage rates tend toward the money value of the productive output of labor, and that is increased as the capital invested per worker increases. The economic system in mercantilist France was anything but a free market. Yet such rudi mentary and fettered aspects of the market as did exist were sufficient to generate what we might call "the mystery of the inexplicably generous employers." Simply put, the market itself-the self-directed productive and ex change activities of individual market participants-determines wage rates, just as it determines all prices. Indeed, in an unfettered market economy, the profits of the entrepre neur, the interest accruing to the owners of capi tal and land, and the wages of workers, are all determined in this sort of way. They reflect the relative contributions of the entrepreneur, of the owners of capital and land, and of those selling their labor, to the productive process. That is the genius and, indeed, the beauty of the mar ket.

For our purposes, however, it is sufficient to stress that given a market economy-and that entails the rule of general principles of conduct equally applicable to all proscribing the use of violence or threatened violence by any-the price for which individuals can sell their labor is set by the same process all prices are set, a pro cess of competitive bidding for scarce resources and goods. No person or group of people exer cises mastery over the market or is in a position arbitrarily to control the price of anything. All that anyone can do is to offer to exchange goods and services with his or her fellows. Conclusion Men and women once took the Seven Deadly Sins with desperate seriousness. Pride, envy, anger, sloth, covetousness, gluttony, lust: the list was familiar. Preachers, and writers such as Chaucer and Dante, depicted in considerable detail the dire consequences of actions in formed by these realities.

I have referred to seven fallacies. The fallacy of the forgotten cost. The fallacy of misplaced value. The fallacy of finite wealth. The fallacy of the zero-sum game. The fallacy of false col lectives. The fallacy of centralized planning. The fallacy of market mastery. There is no need for me to depict the dire consequences of actions informed by these fallacies. They are familiar to all who contemplate human history, both ancient and contemporary. Familiar also, however, are the consequences for a people who seek to use what they have to acquire what they want in ways rooted and grounded not in these fallacies but in economic truth. May the liberty and the plenty that such truth alone makes possible be enjoyed by ourselves, by our children, and by our children's children! 0 392 Freedom and Failure by Dwight R. Lee D uring good times and bad, the eco ...• nomic landscape seems always littered with firms that have failed, workers who have become unemployed, farmers who have lost their land, and the residue of entire industries in the process of withering away. The natural tendency is to see these failures, and the genuine human hardships that result, as a flaw of the economic system that produces them.