And Yet Another Open Letter to Oren Cass
Oren Cass, Chief Economist
American Compass
Oren:
Your criticism of Phil Gramm’s and Mike Solon’s 2019 Wall Street Journal piece on “It’s a Wonderful Life” misses the point (“The Movie’s Not Called ‘It’s A Wonderful Life Of Economic Freedom,’” December 20). A key part of Messrs. Gramm’s and Solon’s argument is that the standard of living of ordinary people rose spectacularly for the first time in history beginning only a few centuries ago, and did so only where, because, and insofar as people embraced free, open, and entrepreneurial markets – markets that work their wonders because participants in them are incented to produce for their fellow citizens as much value as possible out of any given stock of resources. Yet you insist that this point “is a different movie” – a theme that’s not, contra Messrs. Gramm and Solon, in “It’s a Wonderful Life.”
You reach this mistaken conclusion by insisting that Jimmy Stewart’s character, George Bailey, really doesn’t embody the spirit of free-market capitalism – of what you derisively label “market fundamentalism.” Because Bailey’s humanity at running his building-and-loan company enables people to escape the cruel policies of the bank owned by the grasping Henry Potter, you bizarrely conclude that the true embodiment of the free market is Potter.
The likes of Bernie Sanders, Alexandria Ocasio-Cortez, and Michael Moore applaud you, but – for at least three related reasons – serious people don’t.
First, no thoughtful person believes that entrepreneurial success within markets is achieved by narrow-minded, penny-pinching indifference to the welfare of customers and suppliers. Your suggestion that the cartoonishly evil Henry Potter is the epitome of a free-market business executive, and that George Bailey isn’t, is sophomoric.
Second, as implied by Messrs. Gramm and Solon, Bailey’s company would not have survived to be of any help to the citizens of Bedford Falls if he didn’t watch his nickels and dimes. Failure to run his business profitably would have reduced the value he created for his fellow citizens. An important lesson that economically informed people detect in the film is that profit is typically enhanced over the long run by not maximizing it in the short-run – a reality understood by George Bailey and his father, but not by Henry Potter and you. Only in the mind of a Marxist, or perhaps also a NatCon, is the best business model in a free market one of greed, grasping, heartlessness, and myopically maximizing-profits-at-every-moment.
Third, the free market is a forum of economic competition in which different business models compete against each other, with the different offerings tested and graded by people spending their own money. In Bedford Falls, Bailey Brothers Building and Loan competed successfully against Potter’s company. Market competition drains resources away from those businesses and practices that fail to satisfy consumers, as it directs resources toward those businesses and practices that best satisfy consumers.
Given your wish to use tariffs and other industrial-policy interventions to shield particular producers from competition – given your desire to indulge their greedy quest to be excused from the need to compete fairly for consumers’ dollars – this third lesson is one to which you should be especially more attentive.
Happy Holidays,
Don
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