Lately, this blog has strayed from economics. The reason for the straying is difficult to explain because the reasoning behind it is uncommon knowledge. Economics is not simply about money, it is about people.
Economics is the study of free markets (or Marx's derogatory term "Capitalism"). Economics does not explain communism or socialism or centralized control because such would be the study of power hungry princes, in other words, politics. The study of free markets boils down to the description of rational behavior in free individuals.
Adam Smith, widely considered the father of economics, wrote two seminal works:
The Theory of Moral Sentiments (1759) and
An Inquiry into the Nature and Causes of the Wealth of Nations (1776). You can read both from the links given.
Smith addresses
virtue in The Theory of Moral Sentiments
VI.I.1
When we consider the character of any individual, we naturally view it under two different aspects; first, as it may affect his own happiness; and secondly, as it may affect that of other people.
This seems reasonable to those with Judeo-Christian values. This section outlines the virtue of "do unto others..."
The cornerstone of Smith's work is individuality, a uniqueness which you might describe as "personality" or "soul." His concern is with virtue and morality, as he was a moral philosopher at the University of Glasgow. Today, we consider Adam Smith a founding economist but he did not considered himself an "economist." His work defined the field.*
Smith explained why moral behavior is superior to immoral behavior. His frame of reference was Christianity. So, he explained as scientifically as he could, Judeo-Christian virtue. Smith described the "soul" in action through humanity.
Paraphrased, free markets are based upon the belief that individuals have a unique perspective in life and can use that to provide value to others. Your unique person-hood, your soul, is the basis of your value to yourself and to others.
Gross Domestic Product
Many human cultures do not believe in the concept of a unique soul. For humanity in general, gross domestic product is a function of population. The more people, the more a society can produce. Like an ant colony, more ants under the control of a single queen is superior to fewer ants. This is the logical basis of human collectivism, detachment from individuality.
Free societies value the individual. Production is a function of freedom. Freedom is sustained by virtue.
Virtue is acquired through faith and wisdom. Faith and wisdom require freedom. This is known as the golden triangle of freedom.
It is all very puritanical, but was revolutionary is the late 1700's. This explains why America's founding fathers embraced the concept.
Through the last three hundred years, production from the world's free people has far exceeded the production of the collectivists. Innovation is a product of freedom, the wisdom of virtues, and the faith to persevere. Without freedom, no amount of determination, ability or faith can be focused upon that which the individual is exactly suited to pursue.
In a collectivist society the human being is guided by a collective will, of which no individual has complete perspective, knowledge, ability or accountability. The collective is critically detached from individual humanity. The focus of effort degenerates into what empowers those "in power" instead of what is productive.
For example, a state run health system might invent "pill based abortions" to protect politicians' sexual improprieties. Systems with all power collected by elites might allocate immense resources to building monumental ant hills to honor themselves.
Instances where innovation for the collective also benefits the whole of humanity exist. Such instances are rare. Innovation without individual freedom is slowed, distorted and misallocated.
A powerful colony of human "ants" may steal innovation and riches by conquest. Collectivist empires may spread stolen innovation through their kingdom, but they also destroy innovation which they do not value. It would be astonishing to find an aggregate human benefit from all the inventions by all the worlds' collectivist governments. Yet, a single free nation led humanity from horses and plows to landing upon the moon.
The collective misallocation of resources is a key reason that periods of human enlightenment coincide with flashes of increased freedom and then end when virtue fails. The struggle to maintain a free society is actually an interpersonal struggle within the members of the society. It is a struggle between the virtues of freedom and comfort of entitlement.
Today we see America, the most productive nation on earth, slip as Americans turn toward the security of the collective. Fellow
SLOBs site
The Liberator Today:
The new normal is revealed in two graphs. The first graph is the employment ratio comparing number employed to the total population.
Next is the labor force participation rate, the number of persons who are employed in some way or seeking employment.
Socialism, a How To
From a colder, more scientific point of view, one might argue that the struggle is between the cumulative knowledge and the collective memory of humanity. Fundamentally, knowledge inspires imagination and creation. Memory is suited to incremental improvement and can resent opposing points of view.
Both knowledge and memory are imperfect so individuals rely upon a balance. Collectivist leaders must be portrayed as perfect to maintain power. The surer path is the critical detachment of collected memory. Inspirational leadership is rare and valuable, but unpredictable.
All leaders are tempted by the easier, "more pragmatic" collectivist path. They are tempted by the proven path of tyranny over the individual.
Dividing individuals from freedom is simple. Use either force or deception.
Where free people are more powerful than the government, interrupt the golden triangle with wild promises and temptations.
Free health care, security, guaranteed food, shelter and income are proven temptations to humanity. Replace virtue with meaningless "feel-good" goals to misdirect productive efforts and then claim freedom has failed. Where virtue does not exist, free people ruin themselves, so emphasize the short-comings of those with faith. Discourage faith while diminishing the accomplishments of the risk-takers.
As more people ruin themselves, present yourself as a savior. Offer entitlement in place of self-reliance. Substitute freedom with dependence. Finally, teach fear and isolation with pseudo-wisdom like, "a man must accept his fate or be destroyed by it." Put the people in their place, below, ignorant of their own value.
A broken people is an unproductive people. So promise a reward for their allegiance. Faith promises a heaven for good works. So, promise a heaven on earth, utopia. Promise a reward in the end. Promise retirement.
You may be surprised to hear,
there is no Hebrew word for retirement, at least not in the familiar sense. The closest biblical usage is
re-vocationed.
Instead of doing the work in the Temple, they were to assist and provide their wisdom for the next generation of Levites.
Older, wiser people might impart virtues to young hearts yearning for freedom. Use the powerful promise of Utopian retirement. Sequester the retired away from the young. Promote division between young and old. Promote the ideal retirement as freedom from obligation. Finally, redistribute the collected wealth of the retired to further dependence upon the state.
Collectivism is simple. Entitlement requires the comfort of dependence. Dependence requires ignorance of opportunity. Ignorance requires the security of entitlement. Collectivism is
subjugation.
(An example of people control in America: http://www.youtube.com/embed/9RABZq5IoaQ?feature=player_embedded )
Conclusion
Humanity's greatest attribute is adaptability We thrive in tribal societies, agrarian societies, empires, dark ages, ice ages, and more. We adapt to the environment and society. This is our greatest strength, but also our greatest weakness.
Slaves learn to survive enslaved. Masters learn to oppress. Free people must learn virtues and the faith to forge their own risky path. These are conflicting human fates separated by courage.
Leaders require character and courage to resist the temptation of tyranny, "character matters." Over time, our leaders have grown less courageous and less comfortable with citizens who are more wise and knowledgeable than the government. They have turned toward tyranny because they fear their rivals will exploit doubt in the minds of the people.
A proven way to erase questioning and doubt is by promoting dependence, entitlement and ignorance. Instead of building us up, they tear us down to enable their lust for power. This is the triangle of tyranny. This is the path of the socialist. This is why socialism is a euphemism for evil.
...and this is why economics is not about money.
notes:
* Due to input from avid readers on economics, we changed some of the wording of this section in respect for the great works of philosophers before and along side Adam Smith. Richard Cantillon's
Essay on the Nature of Trade in General (1730?), predates Smith's work but was lost for hundreds of years.
Where as most crypto currencies have little value, Bitcoin is essentially the gold of cryptos. Litecoin is the silver of crypto currency. You can see this relationship in the markets, with Litecoin slightly above the value of silver and Bitcoin slightly below the value of gold. It is a safe bet that many people are diversifying away from precious metals into cryptos due to recent market manipulation by central banks.
