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And Then a Miracle Occurs

Mises Daily: Wednesday, November 16, 2005 by

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When I was an undergraduate math major, one of my classes tried to get the professor to show us his PhD dissertation, since many of us could not imagine what that entailed. Since the class involved lots of proofs, and his dissertation largely involved supplying a missing link in a proof, he showed us the condensed version of how he managed to connect the dots between reasoning forward from the premises and backward from the conclusion on a particular problem.

Years later, I was reminded of that when I saw a particular single-panel cartoon.* It showed a professor-scientist type up at a blackboard, working at the successive stages of a proof. But he gets stuck. After much thinking, he writes the next step as "Then a miracle occurs…" after which his proof can continue.

Since then, as an economics professor (some would say a mathematician gone bad), I have been impressed by how often the same thing happens in the public policy arena. Someone desperate to demonstrate their position, but stymied by a gap in their argument, invokes a "then a miracle occurs" step, from which their supposed "proof" can continue.

Such miracle steps, upon which the validity of the arguments depend, sneak in logical errors, or invoking them would not have been necessary. Of course, few people (especially those already committed to the same position) pay enough attention to recognize and expose these flaws, which are usually further covered by the misdirection of focusing most of the discussion on the steps that can actually be defended (and ad hominem attacks on those who dare to notice and object).

One example that I have been struck by over and over, is the "proof" offered by unions for why they deserve the credit for raising all workers' wages. The critical step, between the facts that unions often raise the incomes of their members and the general growth in real incomes over time, is that by raising incomes in union jobs, unions force other employers to offer higher wages to keep their workers from those better-paying alternatives.

That step could only hold if higher paying union jobs were actually available to non-union workers, since employers need not outbid non-existent options to retain employees. Unfortunately, the opposite happens, reversing the conclusions of the argument. By artificially forcing up the cost of hiring their workers, unions reduce rather than increase the number of jobs offered by their employers, reflecting the reduced volume of output consumers will buy at the higher costs and prices that result. Therefore, the real alternatives of non-union workers do not improve, as they cannot actually get those good jobs. Instead, their alternatives worsen, as the displaced workers are forced into non-union occupations, pushing down wages there.

The false leap from higher union wages to higher wages in general is, however, quickly skipped past, and unions proceed on with their "proof" of their responsibility for others' higher wages as if it were true. But otherwise logical arguments do not create true conclusions from false premises, regardless of how frequently or confidently they are repeated.

Similar miracle steps are assumed in virtually all arguments for price controls, as illustrated by those for rent control and minimum (or living) wages.

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Economics in One Lesson by Henry Hazlitt $10
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Pro-rent control arguments take the facts that the controls lower the officially allowable rents and that renters would benefit from being able to pay less for apartments, and conclude that rent controls connect them. However, lowering the rents allowable (assuming that all the evasion mechanisms can be controlled) does not mean renters will be able to find the housing they desire at those prices. That would be a miracle, because lowered prices will lead to landlords to offer fewer rental units than before, not the larger number renters want at below-market prices. But that fact, which overturns the conclusions of rent control proponents, is finessed by their "analysis."

Minimum wage advocates take a similar approach. They take the facts that such laws raise the legal hourly pay of some people and that, other things equal, low-skill workers would benefit from being paid more for their efforts, and conclude that higher minimum wages connect them. However, raising the lowest wage officially allowable (assuming all the evasion mechanisms can be controlled) does not mean they will be able to find the jobs they desire at those wages. That would be a miracle, because higher wages will lead employers to offer fewer jobs than before, not the larger number workers want at above-market wages. But that fact, which overturns the conclusions of minimum (as well as living) wage proponents, is also finessed by their "analysis."

The almost unlimited variety of protectionist proposals also depends on miracle steps. Somehow, the higher prices for domestic industries and higher wages for their workers allegedly provide both direct benefits and multiplier effects, but those resources appear miraculously out of nowhere, since the analysis ignores their origins in inefficiencies and greater costs to consumers.

What links these and many more "then a miracle occurs" arguments for government meddling is that they assume that the unavoidable economic fact of scarcity or its consequences (e.g., the laws of supply, demand, and comparative advantage) will just this once be reversed, simply because proponents want them to be.

Further, it seems that, because their proponents are so committed to their policy conclusions, they go to great lengths to avoid careful thinking (by either themselves or others) about the false miracles their arguments require. But commitment to one's own position, even with good intentions, does not create miracles where there are none to be had. And policies that cannot work without miracles simply cannot work, however many times someone claims they will.


Gary M. Galles is a professor of economics at Pepperdine University. Send him MAIL, and see his Mises.org Daily Articles Archive. Discuss this article on the blog.

* From What's so Funny About Science? by Sidney Harris (1977).