ECONOMICS FOR DUMMIES

Not saying anyone reading this is a ‘dummy’. Just that I am going to try to keep this simple.

In my opinion, and many students of economics would agree, there have historically been two major economic minds; John Keynes, and Adam Smith.

First Keynes. Easy to explain, and to be honest, I think he was a moron.

There are 10 people in the world, and they all want a car.

One guy makes cars, and owns 10 cars. No one else can afford to buy a car. So a committee is formed, they confiscate 9 of his cars, and give one to everyone. Now all are happy, except one single person, but face it, he can only drive one car at a time anyway. As a bonus, you have a 90% ‘Happiness’ factor in the world. Darned successful results.

Now apply that same logic to everything, including money, TV’s etc.

That is an overly simplified explanation, but pretty accurate.

Smiths’ thought was the opposite, and it is many times referred to as “Invisible Hand”, free market economics.

In a nutshell (though he would hate this comment) the whole thing is based on greed.

Greed is a MAJOR motivator, and is not always a negative thing. Self-preservation IS a slight amount of selfishness. Wanting to be efficient and prudent in planning for the future, is a low degree of greed.

A society cannot exist, if there is an absolute void of selfishness, and greed. We would simply give everything we have to each other, while never consuming ANY of it. Then while it traveled in a circle, we would all starve to death.

If there had not been enough greed and selfishness for example, Henry Ford would have never went into the car business.

He wanted an easier way to travel, and saw a potential to make, and then sell them for a profit. Notice, that is only a potential. He had some money, borrowed some money from family etc, and gambled it all on what everyone said was an insane idea (“Horseless carriage indeed – it will NEVER last!”).

But it did last, he did win the gamble, and make a profit.

Humans being what they are, others saw his success, and jumped on the bandwagon due to their own greed, and he had competition. Each of them, tried to sell as many cars as they could, by selling for less than the others. The publics’ greed, then bought what was believed to be the least expensive (balance of price, efficiency, dependability, and product life).

So Corporate greed gave two things to the public; cheap cars, and a place to work.

Apply that to all the goods and services in the world, and you have it. That is how Capitalism is supposed to work.

The problem we have now, is that public greed, overran the ‘gamblers’ greed, and the corporations are not making profits.

I’ll get into it more later, but simplistically, mob mentality applied Keynesian theory, in a Smith styled economy.

Look at it this way. Ten people in the world, two of them have 10 cars each. One wagers all the cars, in a coin toss. One wins and has all 20 cars. The committee gets formed, and they give 2 cars to everyone. Happiness is at 85%, since one guy went from 10 cars to 2, but hey – he had lost all he had in the coin toss!