Economics


Problems with economic theory

Economics is not seen as a science but it should like physics. We say there are truths in Physics, but not economics.
Economic analysis is currently seen more as a toolbox.
The old joke is, if you get 3 economists in a room, you will end up with 10 opinions.

Economics summary

Action

People act to improve their conditions. To achieve ends. (This is to avoid some kind of uneasiness they have)
They must be able to conceive of a better future.
They must be able to conceive of a way to improve their condition
Otherwise they do not act.

Scarcity

There are not enough means to satisfy all human wants.
When a technology is discovered it is not scarce
time is scarce, so people prefer to achieve a goal sooner rather than later
Because you are acting now, you are pulling some goal closer and therefore showing a time preference
We do not create anything, we only transform resources

Choice

Because you cannot achieve all of your goals you must chose.
We do not know the future, we must forecast. It involves error.

Value

Subjective measure a ranking of goals
Satisfaction cannot be measured because we do not have the units to do this. They can only be ranked.
Cost is the next most valuable alternative on our value scale
Marginal utility explains why some goods that are luxury’s cost more than necessities.
More is better than less (at least more is not worse than less) 6 sacks are better than 5
The more money you have , the less its value is in relation to other goods.

Exchange

Every single action is an exchange
Can be aggressive or voluntary
All exchange is exploitation, as you are getting value from someone else’s need

Economic attributes

Relies on

  • Voluntary cooperation
  • Exchange among legal equals

 Capitalist culture celebrates

  • The entrepreneur
  • The scientist
  • The risk-taker
  • The innovator
  • The creator

Derided as

  • Materialistic by some

Capitalism is at its core

  • Spiritual and cultural enterprise. 
As Joyce Appleby noted in her recent book The Relentless Revolution: A History of Capitalism, “Because capitalism is a cultural system and not simply an economic one, it cannot be explained by material factors alone.” Far from being an amoral arena for the clash of interests, capitalist interaction is highly structured by ethical norms and rules. Capitalism rests on a rejection of the ethics of loot and grab, the means by which most wealth enjoyed by the wealthy is acquired in other economic and political systems. For much of human history, those who were rich were rich because they took from others, and especially because they used their power to gain monopolies and to confiscate the produce of others through taxes. It’s only under conditions of capitalism that people commonly become wealthy without being criminals.

Capitalism is 

  • Uniquely powerful
  • Uniquely liberating system
  • Legal system( decentralised innovation)
  • Social system( decentralised innovation)
  • Economic system( decentralised innovation)
  • Cultural system( decentralised innovation)
  • Creative destruction(Joseph Schumpeter)

Capitalism is about

  • Creating value, not merely working hard, or making sacrifices, or being busy

In many countries, if someone is rich, there is a very good chance that he (rarely she) holds political power or is a close relative, friend or supporter – in a word, a crony – of those who do hold power, and that his wealth came not from being a producer of valued goods and services but from enjoying the privileges that the state can confer on some at the expense of others.

Table 016

Crony capitalism


Under American crony-ism  the many are bought off with subsidised home loans, the economy generates a huge bubble, the financial system crashes and the powerful get bailouts, only to be followed by more bailouts, easier money and another cycle.


I-Pencil


Reference

http://www.cityam.com/forum/home-and-abroad-we-all-need-be-reminded-the-moral-virtues-capitalism