Diamonds for 50 cents

Even if all the people of this world were to agree now to trade diamonds for the price of a newspaper, say 1$ per karat, it would still be impossible to do so. Diamonds actually cost more than a dollar to make. The geologist’s knowledge and the diamond cutter’s skills do not exist in a person at birth. It’s acquisition and exercise requires time which even an individual on a deserted island could use for doing other things.

No amount laws and restrictions preventing people from making “exorbitant amount of money” by selling diamonds can ever bring the prices of diamonds down. This true even if diamonds were a basic necessity of life like food. This is true if we consider medicine, milk or microprocessors instead of diamonds.

The only way to bring prices down is through research into better methods of production and distribution.

Unfortunately people in democracies today believe the will of the majority is omnipotent. They believe it can even change the laws of the universe and that it can be a substitute for scientific research and development. No amount of voting, or political compromises can make the irrational possible.

So how do welfare programs seem to work and bring prices down? They do so by sacrificing production in other areas.

Consider a boy who goes around breaking windows, doesn’t he contribute to a growth in the glass industry? Yes, but only at the cost recession in other industries. People who would have otherwise caused growth in say the textile industry by buying clothes are forced to spend those resources in the glass industry because of the boy. Similarly welfare programs like a government housing project does improve the construction industry by taking resources off other industry.

Politicians (liberal or conservative) sacrifice the strong industries to weak so as to get reelected by pointing to growth in those weak sectors at the cost of recession in stronger sectors.

This type of equalized sacrifices will in the long run be dramatically detrimental to the growth of our species as a technological civilization.

In the short run excessive use of such policies will delay recovery from a global recession.


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