Economics for Fun and (not much) Profit

I am a terrible teacher. I am “teaching” my youngest brother a pre-college crash-course in English Comp, as his high-school transcript was a few credits short, and home-schooling in the South is laissez-faire like that. My approach? Give the boy the book that turned me into an adequately readable writer, and act like the hard-nosed Professor who finished the book’s job. No lectures, no exams, none of that boring crap: just writing, doing exercises, and more writing. Most of his course-work is emailed, as I am a lazy man and prefer not to have paper. In fact, he is to submit all his questions via email. I’m totally 21^st Century in my methods. I am teaching him comparably to a college-level course, and my grading system is harsh. I charge a letter-grade for each comma splice, run-on, or sentence fragment; 5 points for breaking the sacred rules of capitalization and other cruel penalties for obscure rules relevant only to formal essays. Rules I break every time I write a short story, work on my novel(s), or write posts for ANF. Like most comp students, he hasn’t yet learned to appreciate the insane complexities of formal English, and how little real writers use it. Oh, I can’t wait for his research paper.

I’m a horrible teacher, but I’ll give this a whack. Most Americans don’t realize that economics is not a hard-science. There are so many different theories it isn’t funny, and the “laws” are often just glorified hypotheses. It’s sad but true, especially for those of us who are utterly fascinated by the subject. It’s a hotly debated soft-science which is more bullshit than empiricism. Well, most theories are, but most theories only pay lip-service to the fact that economics is an integral part of human nature, subject to all the whims and fallacies of being human. People are not “rational actors,” we don’t have access to “unlimited information,” and most of what people think they know is wrong. The phrase “ceteris paribus” is meaningless. You can’t separate humanity from the human and put one important aspect of human interaction in a vacuum chamber to see what happens. Freud tried that—thank God most reputable shrinks are past that nonsense (while pop-culture is not.)

There is only one theory of economics which takes psychology into account beyond the usual lip-service, and even it makes a few false-assumptions. It’s unpopular, obscure, originated in Austria, and is supported by people like Ron Paul.  That theory doesn’t have all the answers, but it’s unpopular because it requires politicians to do nothing and let problems run their course, and politicians always have to “solve” everything (and in the process, make it worse) and then say that their solutions weren’t actually enough, and more would have worked.  Their solution, of course, is to throw money at everything and create bubbles and market distortions and other nastiness.

It is, of course, impossible to give you an adequate understanding of Economics itself in one lesson. But it is possible for me to distill the solutions our leaders in Washington wish to impose on us into a moralistic tale of woe and glory.

Anyway, let’s back up a bit, what do I mean by “economics?” Basically, it’s a nice polysyllabic word for “trade” that takes into account the many ways in which humans exchange one thing for another that may or may not seem like trade until we scratch off the surface. Economics (attempts) to add up all those little trades in all the various ways we trade and tries to answer one question: why does this work? Here’s a good example, and I will bold-type important economic terms and phrases for your convenience:

Bob has a supply of five dollars and a demand for a six-pack of Bud and a massive buzz. the 7-11 has an ample supply of Bud Lite, and a demand for more dollars. A six-pack of Bud Lite costs $6.53 after tax, unfortunately. But Bob can get three singles and some change, or a six-pack of Colt 45. As Bob wishes to get wasted because his wife Connie just divorced him because of his obsession with “the internet pr0nz” (as quoted from the court-transcript), Bob decides to set aside his demand for Bud in favor of demand for a massive hangover, so he buys the Colt 45 instead. (This principle is called “opportunity cost,” whereby Bob decides the marginal-utility of a six-pack of Colt 45 is greater than the marginal utility of three Bud Lites, and foregoes the purchase of Bud in favor of Colt.) When Bob gets home, he tastes the Colt 45 and regrets his purchase because he, and I quote, “forgot how bad that horse-piss tasted.” Thus we can say, Bob forgot to do “due diligence” and is now suffering “buyer’s remorse.”

That is what economics is about: Bob, supply, demand, dollars, or, pr0nz, hangover, opportunity cost, marginal utility, forgoing, purchasing, horse piss, due diligence, and buyer’s remorse. There are a lot more words that’ll come up, too, but learn these for the Sadlibs section of your exam. Yes, there is an exam. It’s open-book, so don’t worry.

Economists take Bob’s scenario, then Tom’s scenario, Dick’s scenario, Harry’s scenario, and any other person’s scenario and put them all together. Then they make statistics based on these scenarios and add up all the numbers and do all sorts of mathematical voodoo to try to make sense of why Bob, Tom, Dick, and Harry all act the way they do. Then these voodoo-priests get together and have massive séances and try to figure out how to make it so Bob can get his six-pack of Bud next time he visits the 7-11. The more ambitious voodoo priests might even try to find a way to upgrade him to Michelob.

Now, let’s say Bob is actually shorthand for The Government. There are three theories of economics today that are relevant enough for Bob’s consideration.

*

Bob’s friend John Maynard Keynes is distraught by Bob’s lack of Bud Lite and regrettable purchase of Colt 45. Bob is now broke. Furthermore, John has learned that the 7-11 is probably going out of business, so if Bob can buy lots of Bud, he can keep them open, that way he won’t have to drive across town to that smelly truck stop with the intimidating Beer Cave.

But John has a plan: John walks up to Bob and says, “Bob, I know a great way you can afford Bud Lite. Talk to the Law and try to get Alimony from Connie, since she had that amazing job and you don’t have a job anymore.” (For our purposes this “get Alimony” is a nice way of saying “raise taxes.” Bob’s unemployment is analogous to the havoc wreaked by the Bush Administration.) “Anyway, Bob, get that money taken from Connie and buy lots and lots of Bud, that way you can keep getting wasted on the good stuff and the 7-11 won’t close.”

“The 7-11 is closing? I have to go to court then! 7-11 is too big to fail!” Bob exclaims.

Before Bob runs off to see his lawyer, Bob’s friends Friedman and Reagan overhear and rush in. Reagan grabs him and Milton says, “Bob, don’t listen to John, remember what that scheme did to Jill and Steve? Taking money from Connie isn’t the right idea; in fact, Connie deserves more money because she’s rich and can start a business and give jobs to people, but don’t worry about her anyway. We know a guy at the bank, his name is Bernanke, he has lots of money and he’s dying to lend it. Bob, you can borrow as much money as you want from Ben, but the best part is, he knows another guy at another bank who will lend you even more money to pay off the interest. You have great credit, and it’s a great scheme, you can’t lose. Borrow the money, buy your Bud, and keep the 7-11 open that way! And if you borrow too much? Borrow more from someone else to pay off the last lender. It’s impossible to lose.” Reagan concurs with Friedman, adding that it paid off for him and he spent tons of money at the gun store to keep his neighbor Mikhail from robbing his house.

“Yeah, old Mikhail tried to buy more guns than I did, and he went bankrupt. Damn commies, but Mikey’s a good guy at heart,” says Reagan with that wink only he can wink.

Bob sees the wisdom in this and reconsiders John’s idea in light of the Ponzi-scheme laid out before him by Friedman and Reagan. He can borrow money and buy lots of Bud and bail-out the 7-11 and never pay a dime out of his own pocket for the lawyer.

Two elderly men from the next apartment over come out and tell the “whippersnappers” to cut out the racket.

“What do you know, old man?” Bob asks. “I’m suffering a crisis here, and I’ve got to do something. I’m having a massive depression here, and the 7-11 is going out of business! I don’t want to buy my beer from the truck stop across town! I have to do something.”

The elderly men laugh back and forth to each other knowingly. “And now you’re listening to little John and Milton? Ludwig, why don’t you set these boys straight? You were doing this when I was in diapers.” The skinny, sort of doddering man asks.

“Vith pleasure, Dr. Paul,” says Ludwig in a thick, Austrian accent. “Bob, ze 7-11 is going out of business because zey suck. The Truck Stop Beer Cave is the wave of the future. In any case, you are out of money. You should get a job and save your money, because zis depression isn’t going anywhere for quite some time. Save your money, buy your beer only when you can afford it. You can’t bail out the 7-11, they’re a failing model. Depressions happen. Recessions happen. Booms and busts happen, and there’s not a damn thing you can do about it. It’s best to save your pennies and ride it out, cut back on the Bud unless you have hard-money.”

“But—I want my Bud Lite two blocks away, not two miles! I have to buy Bud, lots of it! If it means buying those nasty hot-dogs to save my 7-11, I will!”

“Let the Market decide where your Bud should be sold,” says Ludwig.

Bob scratches his head. All of his friends are staring at him. The old men laugh and say, “we’re going to go now, you won’t listen to us anyway. You’re only going to make things worse for yourself.”

“Kids these days,” Dr. Paul observes with a chuckle.

What does Bob do? Well, of course, Bob gives into peer pressure. Eventually he runs up massive debts with Bernanke and the other bankers, and then just before the statute of limitations, he takes John’s advice and sues for alimony (which has to be embarrassing for a dude) but it’s too late: the state of Bob’s union is not strong, and he ends up beerless and penniless, all his alimony seized to pay his massive and crushing debts. He sits staring into the dim window of his once-beloved 7-11, while the truck-stop with its Beer Cave is booming. Bob has heard rumors that they renovated the place and it doesn’t stink anymore. (Psst. The truck stop is China.)

The moral of the story: we don’t know if Bob wouldn’t have ended up penniless or beerless if he took the advice of Ludwig von Mises, but at least he wouldn’t owe the bankers 11 trillion dollars.

*

That is a simplistic, slightly amusing and overly-moralistic tale of the Keynesian, Supply-side, and Austrian economics models of government-intervention, but it serves to show the sheer absurdity of the nostrums prescribed by the Left and Right wing voodooists. The Leftists follow Keynes, the Rightists follow Friedman. The only difference between some schmuck named Bob and an entire nation is the fact that the nation is an aggregate of a lot of schmucks named Bob (and other interesting names). A nation shouldn’t be run like a business or a socialist paradise: it should be run like a very large household. The first two models don’t really apply to reality. There are all sorts of “laws” and other magical things that say what is true for Bob is not true for an aggregate of many Bobs, but ignore these. It’s all sound and fury because the voodooists want to keep their jobs as much as you do. The third model is grandfatherly wisdom, which is about all the Austrian school is good for: it’s common-sense economics rather than elaborate theories with money-multipliers and other superstitions.

Former President Bush (I’m SO glad to write “former”) was a Supply-Sider. He’s being followed by a Keynesian. Just like what Bob did. Companies are shutting their doors already. We’re boned, and nothing the government intends to do will help. It will only make it worse. Things would be much better if they’d either tax us to poverty or borrow us into poverty. But no, we’ve just gone on a borrowing-spree under Bush (one of the largest spenders in U.S. history), and now we’ll have a taxing spree—it’s inevitable, we have to. Well, we don’t have to when what we really need is to make a lot of overpaid, over-privileged, underworked government employees unemployed, cut a bunch of programs, end our wars, downsize our military, and give those who are currently unemployed in the lower and middle classes jobs at the unemployment office, giving unemployment checks to the newly-unemployed former government employees. Sadly, this is a pipe dream. Instead, people like Ron Paul, Peter Schiff, Lew Rockwell, and others of the Austrian mindset (maybe even myself) will continue making eerie predictions of the future which, shockingly, come true when all the voodoo is proven wrong again and again (and yet, those proofs are ignored in favor of more voodoo), and the horrific consequences of the Keynesians and Supply-Siders take hold on America and crush us in the Epic Depression. All while China deregulates and divests itself of U.S. Treasuries so it’ll come out on top.

But that’s another lesson for another day. Now, it’s Exam Time! Instead of letter-grades, we use the “smily/frown” system. For each correct answer, give yourself a smiley. For each incorrect answer, give yourself a frown or sad-face. Because I’m just that modern.

Multiple Choice:

1) Bob is synonymous with:

A) Teddy Roosevelt.

B) J.R. “Bob” Dobbs

C) The U.S. Government

2) Connie is:

A) Synonymous with the American Taxpayer.

B) A foxy lady who was pretty smart for dumping Bob.

C) Not a fan of teh internet pr0nz.

D) All of the above.

3) The story was:

A) Incomprehensible.

B) Dull and uninspired.

C) Way uncool, Ian.

Z) As fun as Third-World Dental Surgery.

E) All of the above.

T/F:

1) Economics is so easy, even a marmoset can understand it.

2) Colt 45 Malt Liquor is tastier than Bud Lite.

3) Ian is a good teacher.

4) Bob didn’t want to go to the truck stop because he had a fight with the manager.

Fill in the Blanks (AKA, the Sadlib* Section) –STUDENT: Fill in the blank with the best possible entry. Some words are supplied that may or may not have appeared in the previous text. Omit incorrect words.

Word Bank:

Nouns: Bob, supply, demand, dollars, pr0nz, hangover, opportunity cost, marginal utility, horse piss, due diligence, buyer’s remorse, candy, genie(s), rabid putbull(s), hobos, small children with knives.

Verbs: forgoing, purchasing, having unlawful carnal knowledge with, angering, eviscerating, verbalizing, organizing.

(USE ANY NAME YOU WISH) _______ had a bad case of (a/an) (noun) ________. S/he was terribly upset by the (n) _____ and (n) _____ graph s/he received about (n) _______ investments. S/he decided s/he was not (v) _________ (n) ________ for the time being. Next time, s/he would buy (n) _______ so s/he wouldn’t have such a bad (n) ____________. It was for the best that she was not (v) ______ (n)________ as well.

*I’d rather not besmirch Mad-Libs with my wrongness. Wesley’s fill-in-the-blank images inspired me, so, enjoy that. Anyway, when I was a kid I used to think of all fill-in-the-blank answers as “Sadlibs” because they required the same skills, only they weren’t fun at all. I was an odd child.