Frame of Reference - Index

V Practical Considerations

Vicesimus Stele


1) As with Physics and Chemistry, Economics is something that happens among unskilled and ignorant savages even though they don't understand what they are doing. It is often the case in modern times that skilled and educated people conduct economic activity in an inept and ignorant fashion, so not much has changed in 4,000 years of human development. Against this mild recrimination, it must be noted that our knowledge of economic technology has increased mightily just in the last 50 years. But, since much of Economic Theory is counter intuitive, it is difficult to understand, let alone remember, as anyone who has taken a final exam in a challenging Economics class can attest.

Take, for example, the simple concept of scarcity. This is often the first lesson in economic texts. When we see all the abundance of food, clothing and autos in the stores, how can we speak of these as scarce? Now we know, even water and clean air are scarce and come with a price tag attached. Economics is a mystical discipline because we are expected to imagine that this abundance, called supply, is less than our needs and wants, demand, and the tension between the two transcends into 'value' (or price) created by some 'invisible hand,' and creates markets. Later in the lesson we learn that if society cannot create enough demand by its own longings, the government must step in to subsidize both purchasing power and manufacturers, thus artificially stimulating demand, creating industry and jobs and trickling down the income which will allow us to buy the surpluses in the show-rooms of huge multi-national corporations.

Does the fact that it works, make it true? or more comprehensible? If you think you understand Economics, try predicting the changes in the stock market and see how far you get. What good is a science if it cannot reliably predict the results of its own experiments?

2) Economists are famous for creating theories, and their intention is to simplify what is actually going on so that it can be discussed efficiently. The more data we have about some event, say the price of lettuce in the grocery store, the more essential it would be to abstract from this data, to explain the principles behind how this price is determined and why it changes, often radically. No mind can comprehend all the relevant facts, so we idealize, set up simple hypotheses that conform to the facts, and learn by experience. Every theory oversimplifies, but if it is a good theory it will predict properly and point you in the right direction for a more detailed explanation.

So, what about the price of lettuce? That comes from markets which are mostly historical, but also the interaction of expected and actual supply with expected and actual demand. The 'theory of supply and demand' -- the marketplace -- gives a consistent insight into how our economy works. From this we can readily see its failings which are often gross. The market is not an intelligent, self-replicating event, thus not as sophisticated as a simple amoeba. It has no virtue or truth; it is more like a historical document than a preacher and even fails as a signal of consumer opinion. It most certainly fails as a mechanism to distribute food and necessities to starving, humiliated, poverty stricken people all around the world. So we should use markets and recognize these for what they are and are not, and compensate otherwise for the latter.

3) In economics, what is true for one person, may not be true for all taken together. If a farmer works harder, he should get ahead, right? But if all the farmers work harder and nature cooperates and creates a bumper crop, they produce too much, the price will fall, even below the cost of production, and the total income for all farmers will be lower than needed to keep most of them in business. This is an expression of the fallacy of composition, to suppose that what is true for one farmer today, is true for all farmers. Many such examples can be found in the curious world of economics. There is a lesson here for many situations in life where individuals must act alone.

4) "Before animal domestication, the sole means of transporting goods and people by land was on the backs of humans. Large mammals changed that: for the first time in human history, it became possible to move heavy goods in large quantities, as well as people, rapidly overland for long distances. The domestic animals that were ridden were the horse, donkey, yak, reindeer, and Arabian and Bactrian camels... The transformation of warfare by horses began with their domestication around 4000 BC in the steppes north of the Black Sea... Only with the introduction of trucks and tanks in World War I did horses finally become supplanted as the main assault vehicle and means of fast transport in war... [some 6,000 years after their introduction.]" Still in China today, people are key to the local logistical system. I saw peasants harvesting coarse grass by hand and pulling cartloads up the hill to a 'modern' confinement dairy.

5) "...the adoption of food production exemplifies what is termed an autocatalytic process -- one that catalyzes itself in a positive feedback cycle, going faster and faster once it has started. A gradual rise in population densities impelled people to obtain more food, by rewarding those who unconsciously took steps toward producing it. Once people began to produce food and became sedentary, they could shorten the birth spacing and produce still more people, requiring still more food... while increasing the quantity of edible calories per acre, left the food producers less well nourished than the hunter-gatherers whom they succeeded... human population densities rose slightly more steeply than did the availability of food." (Jared Diamond, Guns, Germs, and Steel, 1997)

After all these years of civilization, transporting excess food to starving people (along with population control) remains one of the most insidious failings of enlightenment. We can produce more than we need in total, we just can't distribute it adequately for so many economic reasons.

6) Imagine the wealth that would have accrued to Johann Gutenberg (circa 1395-1468) if he had lived in an era when he could have profited by his invention the way the developers of Microsoft have. In 1448 Gutenberg had perfected the concepts of his printing press, he had worked through the research and development stage of his invention and persuaded a venture capitalist to back the development of his revolutionary concept. In Mainz he persuaded Johann Fust, a goldsmith and lawyer (dangerous combination), to invest heavily in his new printing shop. It took several years, until 1455, before he went public at the Frankfurt Trade Fair, not with an IPO [Initial Public Offering], but with a sample of his work only. The incomplete Bible with two columns of print, 42 lines of printed letters on each page were not exactly the sensation of the show, but significant enough to have been noticed. The completed book appeared about a year later.

Unbeknownst to Gutenberg, printing from movable type had already been developed in Asia, but thousands of ideograms made the widespread use of the technique impractical. Gutenberg was the beneficiary of not only an inventive mind, but also pre-existing language algorithms, and a phonetic alphabet that could be easily mass produced and widely adopted. A legend suggests Gutenberg may have benefited from the work of an obscure Dutch functionary living in the city of Haarlem, The Netherlands. He is said to have invented and made movable type as early as 1430. Laurens Janzoom Koster allegedly carved letters for his grandchildren, then progressed to develop usable ink and printing. The legend suggests that his employee Johannes Faust stole his type and materials, absconding to Mainz to set up shop in 1441. Great innovators always have their detractors, and this story about Koster, the caretaker of the local church, did not surface until Hadriannus Junius recorded a word of mouth account in 1568, 130 years after the presumed events. There is no other documentation.

Before Gutenberg released his first completed Bible, he was foreclosed on by Fust. He turned over his shop and some of his equipment to Fust who carried on the work, alone at first, and later with the assistance of his son-in-law, Peter Schoffer. There was no way to enforce their original right to this technology and pirated and improved versions of their printing press were active all over Europe within a few years. By 1500, an estimated 30,000 titles had been published, scant few of these provided remuneration to Gutenberg. Everything was right for this capitalist innovation except the era predated economic organization. (The essential elements of modern capitalism were missing.) Even the lawyer Fust couldn't control the cash stream from printing.

7) The most significant result of printing was the dissemination of classic works of Greek and Roman authors. This led to the revival of knowledge known as the Renaissance. Printed religious texts put the scriptures into many hands and gave Luther and others the public support they needed to create the Protestant Reformation. Once books became available, literacy increased and so did the idea of social mobility and the French concepts of equality, fraternity and freedom. Printing facilitated the greatest expansion of human consciousness and gave birth to the information age, now 500 years old.

The egalitarian World Wide Web is the successor to Gutenburg's inspiration.

8) "The ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed the world is ruled by little else. Practical men, who believe themselves to be quite exempt from any intellectual influences, are usually the slaves of some defunct economist... I am sure that the power of the vested interests is vastly exaggerated compared with the gradual encroachment of ideas. Not, indeed, immediately, but after a certain interval; for in the field of economic and political philosophy there are not many who are influenced by new theories after they are twenty-five or thirty years of age, so that the ideas which civil servants and politicians and even agitators apply to current events are not likely to be the newest. But, soon or late, it is ideas, not vested interests, which are dangerous for good or evil." (John M. Keynes, The General Theory of Employment, Interest and Money, 1936)

9) Wealth creation and prosperity are modern economic concepts that have rather tenuous origins and are still disputed by many modern ascetics and humanitarians. It is not certain if the profit motive is an instinct or a learned response, the conflict of nature vs. nurture has a fertile field to plow in this socio-economic debate. It might be that ambition, greed and/or testosterone incline Men to seek any possible way to achieve and control, whether it be advancement through politics, labor unions, organized crime, tribal warfare, religious hierarchies, bureaucracies, bigotry or economic activity. Thus it is not fair to attack the profit motive exclusively, as some modern liberals do, without attacking the other possible and equivalent expressions of negative human potential.

10) In primitive cultures it is not uncommon for food to be traded directly for services, weapons or aid in the construction of shelter or clearing a field. Even in our modern, sophisticated, credit card economy, there is a lot of bartering that goes on between friends and neighbors. We hear about the 'underground economy,' cottage industry, bartering and the black market. These aspects of economic life are found in the most primitive societies and in the most modern. That's just the way life works, and of course the way life works is the subject of Economic study.

Bartering is a great improvement over each of us meeting all our own needs. The most primitive nomadic peoples traded when they met. But we can do better, and the use of money has advanced the pace and efficiency of life and economic activity enormously. Early money for the American Indians was 'wampum.' Most often this was a specific hollow, long sea-shell used in bead-work. This shell was common along the coast of the Pacific Northwest, but seldom found today. On the East coast these shell beads were manufactured by hand.

11) The use of paper money traces to China of the 12th century AD. The central government of the Song Dynasty created the printed currency, which was later backed with gold and silver for use throughout the empire. The money was numbered in serial and showed a warning: "Counterfeiters will be decapitated." Chinese justice has always been swift and decisive, so much for due process. This also illustrates the close connection between justice and economic activity, the success in the latter often being suggestive of the existence of the former. The relative equal distribution of wealth and economic success, conveniently measured by the distribution of currency, is somehow construed to be a measure of social justice, often most vigorously championed by those who forswear the profit motive which is the primary impetus to economic success.

12) In the 14th century Zhu Yuanzhang (1328-1398) became the first emperor of the Ming Dynasty in China, after overcoming very humble origins. He was orphaned, homeless, his face was scarred by disease, and Zhu survived countless intrigues and dangers to become the leading warlord who chased out the descendants of Gehghis Khan. Because of his origins, it is said, he decreed that peasants could not venture far from the villages of their birth. That captured specialization of labor produced an agricultural and light industrial bonanza for China. Food surpluses were traded and the resulting purchasing power created demand for textiles, porcelain and other manufactured goods that developed in productive centers and attracted world attention. Spain used much of the wealth extracted from South America to purchase luxuries from China and by the 16th century, ordinary Chinese were, for a time, the most prosperous of people, due to the inadvertent economic policy of Zhu Yuanzhang.

13) How do we get value in money or gold? It's not so hard to understand how gold might get value because as a commodity, quite apart from its role as currency, it is used for jewelry, art, dentistry and for manufacture of scientific instruments. But how does paper money get value as currency? By agreement, by the confidence of the public that they can always change the currency for something perceived as equal in value, anytime and anywhere they need to. Value is a social convention and we acknowledge this by following rules accordingly. Beyond that we often ask, how is it that water which is so essential, is so cheap, and diamonds which are used primarily for adornment, are so expensive? This is the paradox of value, that when answered shows how intriguing discussions about economics can be. The utility of the last unit of water, economists call this the marginal utility, determines not only the price of that unit, but the value of all the water in current transactions. Because every unit of water is the same, and there is only one price in a competitive market where goods exchange freely, every unit will sell for the same price as the least useful unit, during the same period, at the same location. The same holds true for diamonds only at their much higher unit value, and much higher perceived marginal utility. If this explanation does not suffice to make the point clear or convincing, at least it should go a little way to suggest that there is a rational explanation which can be obtained by the serious student by further study. The price is independent of the cost of manufacture in the short run, but if producers receive too little, they will obviously reduce the supply over a longer period of transactions and the price will increase (because the marginal utility will have been higher for each unit transacted.)

14) Religious affiliation is something like full employment. During even the most prosperous periods of economic activity in the USA, there is 4 to 5% unemployment, people looking for work, either entering the workforce or transitioning from one job to the other. There is always a percentage of the population in neither category of 'employed' or 'unemployed' because they are too old to work (in some cases we call that voluntary retirement), too young to work because of the restrictive child labor laws and school attendance, not interested in working for whatever reason, unable to work because of mental or debilitating physical handicaps and a few who are independently wealthy who choose not to work. Did I miss you? (I count full time care givers and 'mothers' taking care of children as employed.) Ignoring other categories such as the under-employed, people doing work below their capability, which is most of the work force, because these are balanced by the 'over-employed,' those who have moved into management and prove the "Peter Principle" by being promoted beyond their level of competence. The percentage of people who fall into each of these categories is always changing, but only slightly. And a similar distribution of enthusiasm and/or commitment to religion can be developed with probably similar results. (Although counting these distributions is usually the work of sociologists not economists.)

15) The Koryak of Siberia, distant relatives of the Eskimo, were advanced herdsmen of reindeer. They had one peculiarity based on their religion. Each year they destroyed all of their dogs, which would appear to conflict with the demands of their hunting and herding tradition. Each new year they purchased dogs from neighboring tribes who breed dogs and were happy to receive meat and furs from the Koryaks in exchange. If the Koryak halted their annual dog-kill, then the neighbors would be faced with a seriously eroded dog market, and would be forced to compete with the Koryak for game. This specialization of labor, albeit based on religious superstitions, was nevertheless an early development of trade and specialization in a very remote part of the world.

16) Wife exchange existed in all Eskimo groups that have been studied. One possible explanation is that such an exchange was a way to formalize an economic partnership or social alliance. With so few opportunities existing to create bonds among these primitive nomadic people, the Eskimo used ingenuity, and one of the accepted methods was exchanging sexual rights. This was a pragmatic social etiquette that functioned to unify small groups. Wife lending was a wise investment for the future, because the lender knew that eventually he may be a borrower. Polyandry and polygyny were common practice because a lone Eskimo could not survive. He or she must become attached to some family.

Wife exchange usually was an essential ritual in the formation of an economic partnership between hunters. When two men agreed to become partners, they have symbolically extended the bonds of kinship to each other. They become, in effect, related by marriage when they then exchange wives for a while. In northern Alaska in particular, wives were exchanged as a sort of attestation to the formation of a partnership. Because of the serious risks associated with hunting, the bonded wives were better assured of having at least one living spouse at the end of the day.

17) "Now, I saw in my dream that Christian and Hopeful forsook him [By-ends, of Fair-speech], and kept their distance before him; they [three men] came up with him, he made them a very low conge', and they also gave him a compliment. The men's names were Mr. Hold-the-world, Mr. Money-love, and Mr. Save-all; their minority they were schoolfellows, and taught by one Mr. Gripe-man, a schoolmaster in Love-gain, which is a market town in the county of Coveting, in the North. This schoolmaster taught them the art of getting, either by violence, cozenage, flattery, lying, or by putting on a guise of religion; and they could each of them have kept such a school themselves.

"...Mr. Money-love said to Mr. By-ends, 'Who are they upon the road before us?' for Christian and Hopeful were yet within view.

Mr. By-ends said, "They are a couple of far countrymen, that, after their mode, are going on pilgrimage.

Mr. Money said, "Alas! Why did they not stay, that we might have had their good company? For they, and we, and you, sir, I hope, are all going on pilgrimage.

Mr. By-ends said, "We are so, indeed; but the men before us are so rigid, and love so much their own notions, and do also so lightly esteem the opinions of others, that, let a man be ever so godly, yet, if he jumps not with them in all things, they thrust him quite out of their company.

Mr. Save-all said, "That is bad; but we read of some that are righteous overmuch, and such men's rigidness prevails with them to judge and condemn all but themselves. But, I pray, what and how many were the things wherein you differed?

My. Byends said, "Why, they, after their headstrong manner, conclude that it is their duty to rush on their journey all weathers; and I am for waiting for wind and tide. They are for hazarding all for God at a clap; and I am for taking all advantages to secure my life and estate. They are for holding their notions, though all other men be against them; but I am for religion in what and so far as, the times and my safety will bear it. They are for Religion when in rags and contempt; but I am for him when he walks in his golden slippers, in the sunshine, and with applause." (John Bunyan, The Pilgrim's Progress, 1678)

18) Perfect competition is a technical term suggesting a marketplace that has specific, essential characteristics. No one can influence the price, neither supplier nor buyer, all the participants have the same and sufficient information, and the goods in question are of equal and interchangeable quality. This set of circumstances is seldom achieved in the real world. In reality we have a mixture of power groups in the economy, large buyers or sellers that control, or attempt to control prices, they advertise to differentiate their products and struggle for power to control their destiny, and the marketplace.

The concept of the "invisible hand" was identified by Adam Smith in 1776. Each individual, pursuing his particular satisfaction is led to seek profit, and thus all these economic actors are led by an "invisible hand" to achieve the best good for all. History has taught us, to the contrary, that the virtues claimed for free enterprise are only derived when adequate checks and balances exist, or where 'perfect competition' can work unimpeded. This, however, is only a rare event. The challenge is to work out the laws and customs that help to improve the working of our less-than-perfect competitive system, protect consumers, stabilize business cycles, encourage investment and employment and limit the interference of government to reasonable levels. No one said it was easy to create a functional, stable economy.

19) "In the United States the original concept of laissez faire brought over from Europe has changed, especially in the last 50 years [since 1933]. Most economists agree that it is best to describe the US economy today as a mixed economic system. The mixture is one of individual private enterprise, government activity at many levels, cooperatives, big [stock] businesses, public utilities, mutual companies, labor unionism, consumerism and non-profit associations, to name just a few.

"The government in the United States (which directly controls nearly 40% of the economic activity at different levels, and has a great deal of deliberate influence on the balance) plays a major role in people's lives. Government at the federal, state, county and city levels makes a concerted effort to care for those who have very little to contribute to society. Those who have limited economic opportunity, or who by circumstances or inclination give very little effort to the productive process, can receive welfare, food stamps and other transfer payments, 'entitlements.' This is a long distance from the fundamental ideological concept in the early pioneer days of the United States of letting the fittest survive and prosper, and the rest be damned.

"In the United States there is no longer a system of naked Capitalism. The stark reality of human nature -- that a small percentage of people with freedom to act will abuse their privilege -- is indisputable. There are those who have taken advantage of the meekness and impotence of others for their own advantage, and the government has over the years stepped in to set rules and boundaries. There is a continuing movement toward a stronger social conscience, and consequently greater central control over much of the economic life of the nation." (IJ, The New Trojan Horse, 1989)

20) "The Soviet Union [now Russia] has a system of wages and has gradually adopted a system of salary incentives. Individual compensation is relatively uniform and organized compared to the extremes and randomness of US income distribution. Regional industries offer incentive bonuses to encourage relocation of labor to remote areas, and production incentives have become commonplace. The Soviets do not claim to have created Communism [although for many that remains an esteemed goal]. The guiding principle is the socialist ethic: 'From each according to his ability, to each according to his work [formerly need].' Compensation in the Soviet Union takes forms other than cash, including vacation privileges, [medical care] and influence in such things as education of children...

"The underlying philosophy of Marxist Communism sleeps restlessly under these practical decisions in the Soviet Union. The Soviet nations are moving rapidly toward the status of consumer societies... The Soviet economy, if enough details were made public, could equally well be characterized as a mixed economic system, albeit with a different mix than what prevails in the Unites States. Any similarity to the original rationale of dialectical materialism is only coincidental. The theory is used only to support the political rhetoric.

"The reality of both [USA and Soviet] economic environments is characterized by evolution in the way each country meets the similar needs of the diverse populations." (IJ, The New Trojan Horse, 1989)

21) "According to me the economic constitution of India and for that matter of the world, should be such that no one under it should suffer from want of food and clothing. In other words everybody should be able to get sufficient work to enable him to make the two ends meet. And this ideal can be universally realized only if the means of production of the elementary necessaries of life remain in the control of the masses. These should be freely available to all as God's air and water are or ought to be; they should not be made a vehicle of traffic for the exploitation of others. Their monopolization by any country, nation or group of persons would be unjust. The neglect of this simple principle is the cause of the destitution that we witness today not only in this unhappy land but in other parts of the world too." (M. K. Gandhi, All Men Are Brothers, 1960)

This is the call for a right to work, not for the entitlement of charity for those who cannot organize work and income for themselves in a predatory, laissez faire economic system. Gandhi ventures beyond populism, however, introducing the concept of "control of the masses" thus into communism, which is economically naive. The real "cause of destitution" in India and elsewhere is partially explained in Septimus Decimus Stele: Morals, verse 11.

22) The early 19th century was a period ripe with Utopian ideals. One ambitious effort was led by Robert Owen in New Harmony, Indiana.

"The famous English philanthropist had been offered a fortune, ironically enough by the Grand Duke Nicholas, to start his socialistic enterprise in Russia, but Owen preferred America as a field for social reform. In 1825 he bought Harmony, Indiana, from George Rapp for $100,000, and with tremendous fanfare organized New Harmony with 900 members, 30,000 acres, and $150,000 capital. Owen-inspired communities immediately mushroomed all over the country.

"Owen was permitted to preach communism before a joint session of Congress, with the President and the Supreme Court in attendance... by [1829] New Harmony was dismally disintegrating..." [Possibly if Grand Duke Nicholas had been successful at demonstrating the futility of Utopian Communism, the history of Russia might have been different.]

"Joseph Smith set up an economic order [the United Order of Enoch] in his church [in Kirtland, Ohio] which followed with certain fidelity the life history of the typical communistic society of his time... The spirit of true Marxian communism -- 'from each according to his ability, to each according to his need'-- was implicit in the whole system." (Fawn M. Brodie, No Man Knows My History, 1973) Thus communism was certainly not original to Karl Marx, as much as we might decry him for it.

23) The entrepreneurial spirit is often celebrated in the US press, when it is not being otherwise decried as a greedy, money-grubbing disease. For most of those who have amassed large fortunes, money was usually secondary to simply winning, because most of the truly wealthy have also been extraordinary givers, philanthropists. Madame C. J. Walker as she was known, Sarah Breedlove Walker to her friends, was an extraordinary example of successful entrepreneurial spirit. In 1905, Walker invented a new method of straightening the naturally curly hair inherited by most African-American women. She properly controlled her invention and with exceptional skill managed to turn this invention into a multi-million dollar enterprise. Before her death in 1919 she had 2,000 agents selling an expanding line of Walker products and demonstrating the "Walker System" of hair straightening. During her brief period of wealth, she donated large sums to charity and to educational institutions, including to an academy for girls in West Africa.

24) "Some have suggested that the debt and deficit [in the US economy] are a principal cause of the current American recession and that they should be eliminated. Contrary to public thought, having a government debt provides an essential function to the American economy... [1] Debt is fundamental in government's Open Market Operations, which is the buying and selling of government bonds and securities for the purpose of controlling the interest rate and the money supply -- important [short-term] controls of the economy... [2] The debt also has a general effect on the entire interest rate level, through the supply and demand mechanism [for money]... [3] The government debt also serves as a safe haven for individual citizens... People can invest in the government through a variety of indirect or direct means... very low risk... [4] Private banks and insurance companies depend on their investments in the government debt... Banks of all sizes like to have all of their money invested... government debt in the form of bonds and securities [counts as reserves]. [5] The government consistently has a surplus in the Social Security fund which it must invest... there are government pension funds which must be invested... It would be a political nightmare if the US government were to directly invest in the private sector." (Benjamin Jacob, EC 1, 12-10-92)

(6) Much of the US national debt is held by foreign investors, and this is a source of capital influx into the US economy to weight against a negative balance of payments in the trade account. (7) The deficit spending (which creates the debt) of the federal government has stimulated huge investment in the US economy and certainly in public safety. (8) The infrastructure, roads, parks, bridges, airports, waterways, research, and education provided by the government, stimulates many improvements in the life style for Americans. (9) Who would deny the need for the military at some level and a wide variety of police and security forces (Home Land Security?).

25) "Every man has an equal right to the necessaries of life even as birds and beasts have. And since every right carries with it a corresponding duty and corresponding remedy for resisting any attack upon it, it is merely a matter of finding out the corresponding duties and remedies to vindicate [establish] the elementary fundamental equality. The corresponding duty is to labour with my limbs and the corresponding remedy is to non-co-operate with him who deprives me of the fruit of my labour. And if I would recognize the fundamental equality, as I must, of the capitalist and the labourer, I must not aim at his destruction. I must strive for his conversion. My non-co-operation with him will open his eyes to the wrong he may be doing." (M. K. Gandhi, All Men Are Brothers, 1960) Certainly 'capitalism' has been mightily restrained by government controls and by taxation -- until, now it would not be recognizable, thank goodness, by the Adam Smith of 1776.

26) "It seemed empirically obvious that each man should participate in a functioning society according to the talents he had... There didn't need to be any higher purpose such as an inexplicable god connected to infinite wisdom or fictitious after-life as an answer to the question 'Why?' The problem of life was much simpler. All the superstitions associated with religion were now irrelevant. Life [and economics] could and must go on because it existed. That was reason enough. Ontological necessity: it was there so it would continue even without explanations and Jack could participate in it according to his talents...

"Living a successful, productive and healthy life could be its own reward without some supernatural afterlife. Only now was this obvious, and it seemed supremely simple. His duty was implicit in the functioning of nature and society all around him... Now he realized he didn't need myths to tell him what to do...

"As society evolved it regenerated itself and became, by trial, error and inspiration, more capable of providing the needs of all people. That seemed to be the testimony given by the American social [and economic] system. There was plurality of views, countervailing power centers, mobility of excellence and democracy of culture. It was a winning combination.

"Economic activity evolved as well. An economy, not of capitalism, not of communism, but of pluralism, solved the fundamental problems identified by economists in the best possible way. Wherever there was an economic need it could be filled by someone seeking a profit. If not, it would be satisfied by government intervention, non-profit organizations, co-ops, public utilities or private individuals once the need became clear enough, i.e. rural electrification.

"The successful economic system could serve as an analogy for the ideal functioning of society. Not a communist system with central control, not anarchy, not a Libertarian order; society works when many enlightened people did their best to make a contribution wherever it was needed. That wasn't communism it was an enlightened Populism. People working to help themselves thus helping others. [capitalism]

"It could be said just in reverse and describe the same phenomenon. People working to help others and incidentally satisfying their own needs. [socialism] The result for society was identical..." (IJ, Jack and Lucky, 1993) It takes people with both points of view, as it turns out, paradoxically, to make an economy run effectively. An economy that is made up solely of one point of view or the other, enforced by government, doesn't work in the long run.

26) "By the hearing process... this realization of the presence of the Lord in the temple is made possible. As such, the first process in the routine work of devotional service -- hearing -- is the essential point... The common man who is puffed up with his material position and does not bow down before the Deity of the Lord in the temple, or who defies temple worship without any knowledge of the science, must know that his so-called turban or crown will only succeed in further drowning him in the water of the ocean of material existence... A foolish, puffed-up man defies the science of God and says that God has no meaning for him, but when he is in the grip of God's law and is caught by some disease like cerebral thrombosis, that godless man sinks into the ocean of nescience by the weight of his material acquisition. Advancement of material science without God consciousness is a heavy load on the head of human society, and so one must take heed of this great warning." (A. C. Bhaktivedanta Swami Prabhupada, Srimad-Bjagavata,. Canto 2, Ch. 3, Text 21) As we listen to the lessons of economics we must also hear the needs of humanity and find ways to achieve and balance these often conflicting goals.

27) What is a market? Many attributes are credited to 'markets' that are both imaginary and misguided. Because most markets, the labor market for example, are so complex we tend to think that it will take care of itself, that most people looking for work will find work most of the time, and that is just the way this market operates. Some think that job creation happens and none of us need to concern ourselves about the aggregate or how many new jobs are being created to take care of the 1% annual increase in population. The prices in the market are set by competition, but only in the most theoretical way. In reality the process of wage rate setting is confoundingly complex, with labor unions, minimum wage rates, fringe benefits, bonus formulas, profit sharing, overtime, expense accounts, stock options, retirement benefits, disability insurance, medical insurance, and piece work fees. Whatever the result, is the market always right?

Does the marketplace offer a quasi-divine sense of how to operate with so many players competing to seek their individual best interests? The answer to all these questions, is 'no,' the market is dumb, it is a historical document, influenced only slightly by a bias for future expectations, that records what transpired today, positively (that is without any emotion or virtue). The market is not about being right, it is about being the afterthought, reflecting the reality, of what many people do in a complex economy, at many different levels. We cannot depend on the market for guidance, if we do we are always fighting 'yesterday's war' so to speak. The market does reflect value transactions, like the value of money is determined by the confidence of those who exchange goods for currency, Man exchanges labor for money with the confidence that he can have it automatically deposited in his checking account and spend it in advance with his multiple credit cards. So when you hear the market did this, or the marketplace proves that..., or everything in the market is valid, take it with a grain of salt, you are hearing another fable, not unlike the myths incorporated into religions.

28) "I am a firm believer in the principle of free and compulsory primary education for India. I also hold that we shall realize this only by teaching the children a useful vocation and utilizing it as a means for cultivating their mental, physical and spiritual faculties. Let no one consider these enonomic calculations in the connexion with education as sordid or out of place. There is nothing essentially sordid about economic calculations. True economics never militates against the highest ethical standard, just as true ethics to be worth its name must, at the same time, be also good economics." (M. K. Gandhi, All Men Are Brothers, 1960) Education is the begining of economic development, just as the guilds of old created the journymen, knowledge is passed on from generation to generation. So our free public schools sort the scholars from the educated working class, and give everybody a fighting chance, notwithstanding how imperfect the public schools may be. This is what puts democracy in society, (rather than just in politics) when you have the fair opportunity for economic mobility you create expectations and in turn political stability.

29) "The difference between what the worker produced and what he was paid, Marx and Engels termed surplus-value. In their eyes the capitalists' lust for more and more surplus-value was insatiable, constituting a drive for ceaseless accumulation of capital, which permitted no real stability. From this simple mechanism of 'robbery' and increasing capital accumulation, Marx and Engels drew far-reaching conclusions..." not the least of which was that laborers would rise up against this unfair economic system. In this Marx and Engels were wrong twice.

First: the concept of 'surplus value' is a myth. Value is created, in the case of all manufactured and agricultural products by the interaction of supply and demand setting prices. Where Marx and Engels saw many examples of new industrial products that were in high demand, thus initially very profitable to manufacture, they failed to note that eventually because of competition, production would catch-up to and exceed demand, prices would fall and business would begin to lose money and eventually go broke. For a time, products would have 'negative value' until all the equity or 'capital' was eaten by the reverse of fortune. This is the process that repeats itself in a capitalist society, not the creation of 'surplus-value.'

And Secondly: that government would step in to change the rules of the economy, limit the discretion of capitalists, set minimum levels for wages and worker safety, tax profits to provide for the general welfare and public safety, limit the duration of monopolies with patent laws (18-20 years), and develop consumer safety regulations (and numerous other restraints on naked capitalism). Exploitation by 'robber barons' did occur but such monopolistic power is always suppressed in a democratic economy by 'countervailing forces' of which labor is only one, government and consumer unions being two additional and powerful forces, acting through duly constituted legislatures. Of course Marx and Engels did not anticipate this direction of 'synthesis.' This has a tendency to validate the 'dialectic' theory if one trys hard enough to rationalize it. (see Tertius Decimus Stele: Social Orders, verse 24) Many of these changes had occurred by the 1840's in England, child labor laws for example, but most of the major laws protecting labor were written after that time, and then only after serious public protest.

30) How will the economy of the future be different than what we have today? The new adventure with hydrogen fuel will certainly gain momentum every year during the 21st century. Discoveries in medicine will place new demands both on those who work to support the retired communities and on those who wish to benefit from these new technologies but cannot afford to pay. The service industry continues to grow. Does this predict the institutionalization of a new underclass, or will socio-economic mobility continue to blurr the boundaries of class distinctions? Being wealthy and unpretentious seems ever more in vogue, competing as a mantra with the Yuppie social ethic for political correctness.

How about this new frontier? "Subsurface environments become as important as those on the surface..." (according to Dr. Huntress of NASA and The National Science Foundation). These frontiers have always been the engines of economic growth, change and discovery. The vast space under the deep oceans and even under Earth's land surfaces will be increasingly a source of economic resources. "Diving in deep waters off the Galapagos Islands in 1977, they stumbled on a lush ecosystem whose otherworldy fauna included giant clams and fields of tube worms topped by bright red plumes... powered by a volcanic rift in the seabed... Today, more than a hundred dark oases have been found in the sea's depths, along the volcanic rifts... The total mass of this hidden biosphere might rival or exceed that of all surface life... Such life may be widely disseminated in the universe..." This according to Dr. Thomas Gold of Cornell University: "...embraced the possibility of life on the Moon; Mars; the large asteriods Ceres, Pallas, and Vesta; Europa and Ganymede, two moons of Jupiter; Titan, a moon of Saturn; Triton, a moon of Neptune; and Pluto, the solar system's outermost planet. All these rocky [deathly cold] bodies might have enough interior heat by virtue of radioactive decay and other forces to melt ice into water and sustain a jungle of inner life." (John Noble Wilford, ed., The New York Times Reports on Astronomy and Cosmology, 2001)

31) As the resources that serve the "haves" grow, those who are among the "have nots" grow in proportion and in both severity of destitution and number. Part of this is because of the difficulty educating people to the old technology, let alone to the new technologies. The text of an advertisement paid for by the American Speech-Language-Hearing Association dramatizes this paradoxical problem. "Catch speech, language and hearing problems early, and it can mean the difference between a child learning a sentence and serving one. [Jail] When a child has a communication disorder, the feeling of isolation alone can be overwhelming. Making friends and succeeding in school can be next to impossible. More troubling, research shows that as many as 84% of incarcerated youths have problems communicating, and 70% of adult prisoners score in the lowest literacy levels. Fortunately, those same statistics show that with early identification and support, many children with communication disorders go on to develop the learning and literacy skills needed to succeed in school and in life. So be sure your child has the speech, language and hearing abilities to learn and keep up in class."

In what way is this an issue of economics? As technology grows and changes the ways we communicate, it means more people will fall into the category of naturally deficient in capacity to learn. It means education will become a larger part of our social costs or else more people will be left out for a variety of reasons presently unkown. Economic analysis is best when applied to real data of past markets and enterprises. Predicting the future is not so easy for economists nor for any social or physical scientists. The simple concepts of trade, specialization, competition... which dominate economic discussions have become dysfunctional when trying to plan for the future of our economy. Can plan as we go work? Do we have a choice?

On to Vicesimus Unus Stele