Tuesday, February 10, 2015

Fred Explains Economics

About all I know about economics I've learned from Tom Sowell and a few other libertarian/conservative sources.  And the big thing I've figured out for myself, sort of, is that while economics is essential, it's not everything. That is, if you can make an economic argument that A is good, that doesn't mean that A is good. It just means that A is good in economic terms.  And, given that economics is pretty complicated, it being a description of human economic activity, after, all A might not be good even in economic terms, when you trace all its effects. For example, it's an economic good thing for Employer B to hire illegal, illiterate immigrant C to sweep up, because C will do it really cheap, so B makes more money. That's good for B. But for D, E, and all the other taxpayers, it's not that good. Oh, they may buy B's goods at a slightly cheaper cost, because B has saved a lot from C's cheap work. But taxpayers have to pay more because C qualifies for food stamps and all kinds of other goodies. They have to pay more taxes to educate, or at least warehouse, C's kids. And they pay in quality of life if enough C's and relatives of C show up to make the streets a bit more dangerous. And all this is economics, although it might not seem like it.  The last, quality of life, is usually ignored by economists, because they're mostly employed by the government, and it's their mission in life to explain why everything the government does is good and wise, including letting illegal immigrants in.

But I'm ranting now. Fred explains about economics in general, and unlike the government-employed economists, he doesn't have groovy solutions to all the problems.  This is from:

Economics Compacted
John Kenneth Fredbraith Speaks
This column contains everything there is to know about economics. Hereafter it will be possible to shut down university deprtments and stop talking about Keynes and the Austrian School, to the great relief of mankind. In gratitude you can send me your childrens’college funds.
In 1850 people all lived on farms and grew food, which they ate. Eating was really important to them. They liked eating. There was in 1850 tremendous demand for refrigerators and cars, but people didn’t know they wanted these things because they hadn’t been invented. Anyway, they didn’t have any money to buy them with.
Yet the demand was there, crouched to spring. Much demand for almost everything, but little supply.
Then farming automated and people all went to cities to work in factories to make refrigerators and cars, which had been invented. These weren’t as important as food, but they were pretty important. People had a little money now, and bought them. You don’t need advertising to sell what people actually want.
There was lots of demand and getting to be pretty good supply.
Soon the factories were spitting out more than anyone could use of everything that anyone could reasonably want. A family needs only so many refrigerators. Here we encounter the first crucial problem of the modern economy: too much supply and not enough demand.
Yet the factories had to make stuff so people would have jobs, and the people had to buy the stuff so they could keep having factories. Economics is thus the study of the squirrel wheel.
To keep people working and buying, the economy began making things that nobody really needed or would think to want, such as nail salons, electronic gadgets, and designer jeans. To get people to buy these things, the supply of demand had to increase. Advertising came about to manufacture demand for things that, without advertising, no one would buy. Consequently society now depends for existence on pop-ups, singing commercials at twenty minutes to the hour on television, billboards, and Google ads. Advertising thus became more important to the economy than anything it advertised.
Read the rest here:
Quibcag:Holding up one finger to illustrate the concept of 'first' is Marii Buratei of Joshiraku (じょしらく),


  1. Trying to play cute, Fred gets it wrong. So (to some extent) does Dr. Sowell.

    The first law of economics was stated by Dorothy Parker a few decades ago: "Hell is other people."

    The species most inimical to human life is Homo sapiens sapiens, as H. sap keeps gaudily proving every day. So what brings the human being into the company of his fellow naked killer apes "out of the state of nature" not only to put himself at risk of getting murdered but to suffer the other liabilities involved in dealing with Ms. Parker's "other people"?

    The answer to that is simply division of labor, whence we get the notion that the individual's material condition can be improved by putting up with the stupidity, cupidity, and other noxious characteristics of his fellow human beings by exchanging goods and services with them in a condition of wary (and always armed, one way or another, and always conditional) trust.

    Thence commeth what's commonly called "economics." I prefer Dr. Ludwig von Mises' more embracing term for the study of such purposeful human action in concert with other folks - praxeology - but then I'm one of them high-I.Q. types who always kicked ass on the "vocabulary" sections of standardized tests.

    1. If we're going for cute, my favorite def. of economists is: "An economist is an expert who will know tomorrow why the things he predicted yesterday didn’t happen today."

      — Laurence J. Peter
      That is assuming neither of us know an economist personally. .. ;) .. -_-