Consummate dilettantism!

Saturday, April 25, 2009

The Middleman Fallacy

Obama said he wants to eliminate the "middle men" lenders that he says add inefficiency to the system — "that's a premium we cannot afford, not when we could be reinvesting that same money in our students, in our economy and in our country."
This is what I call the middleman fallacy, which has led again and again to the persecution and murder of such economically successful groups as the Jews and the Armenians. People resent success, but more than that, they resent those individuals that serve as middlemen. As the argument goes, these people are barriers to direct exchange, and they hike prices to take a cut off the top, becoming fabulously wealthy by doing no real work at all. Of course, it's complete nonsense; the role of middlemen is critical in any modern society. Experts at getting goods from place to place and identifying demand and supply (the efficient allocation of resources), they free producers from worrying about efficiently transporting items and consumers from seeking out distant sources. In short, they reduce costs for both parties involved.

But the argument is not just wrong, it's dangerously wrong, and it's a shame to hear it from Obama.

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