A BIT MORE ON KEYNES AND SMITH

OK, so Keynes was an easy topic. You take from the rich (who are few) and give to the poor (which are many), and you are popular for a few years. Of course, as Ayn Rand alluded to in “Atlas Shrugged”, eventually the rich leave the taxing area, and then no one has money. But by then, the ones that started the problem are dead, and someone else has to try to fix it.

Smith is more complex (but it works).

If there is a need, then human greed will create it, so it can be sold for a profit.

If you are making a profit, someone will try to get ‘in on it’ by producing it and selling it cheaper; ergo prices are controlled.

If there is competition, quality will become an issue, so employers will offer slightly higher wages for talented people, Wages are controlled.

As prices and wages are controlled, efficiency increases to enhance profits. Innovation is encouraged.

As innovation increases, efficiency goes up, allowing competition to reduce prices slightly, and increase wages slightly, to increase profits. The “Market” is working.


Now enter Government. They see a need to regulate and tax, which increases costs, thereby increasing prices, resulting in lowering demand, that forces producers to lower prices by reducing costs to get sales. This means no more research for innovation, and reduced wages to produce the product in an affordable manner.

Reduced wages, is a part of a reduced work force. Since these people are now out of work, the government again steps in to ‘help’ them, by giving benefits, with money they don’t have. To get the money, they increase taxes, which increases costs to producers, etc, etc, etc.

Smith had a simple idea.

Economics is a natural evolution of human nature. Leave it alone, and it will work.

Intervene and it will fail.

Next I will mention some of the ‘Interventions’ the government has had in the past. The list is long and bloody.