Economic Vocabulary: Part IV – ???

    Having written one explanation of the factor of production for which our economic system was named and the misconceptions of various economic thinkers regarding the importance, it was only natural to write an explanation of the other factors of production.  The question then becomes how to end the series in an effective roundup.

    And that is where I ran into a roadblock, not exactly writers block because it was not a lack of things to write about, but rather too many possibilities and directions to go.  Is it worthwhile to pursue the effect of such productive factors upon the markets (a pursuit of many topical articles and television shows), or the wealth of the nations (as elucidated by Adam Smith in the outset of the field of study), or the impact upon the wealth of the individual (a not unrelated topic), or the misconceptions of other economic terminology such as money, prices, supply, or demand?

    The reality is that the basis of economic terminology, just like learning the vocabulary of any field of endeavor, is the foundation of any serious discussion, debate, or inquiry into whatever topic is the focus thereof.  As John Locke pointed out in his “An Essay Concerning Human Understanding”, the root of most misunderstandings between men is a lack of clear, precise, common, and agreed upon definitions of the very words they are using which they take for granted that the other individual shares their personal definition and understanding which is invariably a mistaken assumption.

    If Karl Marx’s entire philosophy of Socialist economics can be based upon the misconception of the meaning of the word “capital”, then it is of little surprise that John Maynard Keynes dismissal of future consequences for immediate expediency undermines the very purpose of the economic conversation with any adherent to his philosophy, never mind the perversion of Capitalist philosophy by Mercantilists pretending to be Capitalists.  Add into this debate minefield someone like Milton Friedman who for all intents and purposes appeared to be a closet classical economist while justifying his conclusions with Monetarist rhetoric mimicking the reasoning of Keynesian spending manipulations substituting monetary manipulations, or that his son Stephen Friedman and others actually took the Monetarist rhetoric seriously turning it into just a variant of Keynesian manipulative political policies.

    Let me be the last person to tritely ascribe that what was set forth was mere expression of a “balanced” approach to understanding economic production, rather it was an attempt to begin to open the readers’ eyes to the complexity of economic philosophy by a simple explanation of the basic vocabulary to avoid such foolish and shallow errors which have engulfed the minds of those previously mentioned.  You are better than that.

    True economic understanding is not to see philosophy as a meager collection of various parts into some type of machine, rather to see the wider implications of interactions alternately competitive and cooperative in dynamic interplay, to borrow an analogy “economics makes strange bedfellows”.

    It is a natural desire for people to strive to achieve wealth, however a person who tries to own everything makes an enemy of everyone.  It is no less true of economics than it is of politics.  In fact, economics very much parallels politics.  They both also parallel basic social interactions and even abstract philosophies.

    Discuss economics and people accuse you of “bringing politics” into the discussion, or reducing human interactions into a coarse, cynical view of buying, selling, and trading emotions and feelings, commercializing Christmas and so forth.  Yet, the truth is that because such things are invariably similar the understanding of one field easily translates into another and people generally speak in those terms of the topics with which they are most familiar and comfortable.

    Or, as is more often the case particularly in public discussions such as on the internet, people draw up intractable lines, paint their opponents as caricatures, offer platitudes, and assert the correctness of their perspective and the glaring error of others’.

    But the understanding of any issue touching upon economics begins with the understanding of how any particular issue affects the various participants and not merely how it may impact the speaker.  Before we can pick winners and losers, we first have to be capable of identifying how exactly people are affected.  (Then we can get to the bigger picture of whether picking winners and losers is itself a wise or foolish idea.)

    For example, in discussing one of those factors:  labor, such issues as immigration, regardless of legal or illegal, has certain economically predictable impacts.  For those immigrating it is an unquestioned benefit, they would not immigrate if it was not better than the alternative of not.  They will be earning more in the new country than they could have in the old.

    It increases the competition for the revenues of labor, i.e. wages.  That is to say that the more workers competing for the same jobs decreases the wages of all workers in that field, viewed from the domestic wage rates.  On the other hand, lower wages is a bargain for the people purchasing labor, the employers who will see more profits and rents from the cheaper labor.

    So which is better for the nation what is better for the workers or what is better for the employers?  Immediately that economic question has become a political question with two different sides to the issue because there are differing benefits to any policy decision.

    Some businesses will be in a position to take advantage of this type of labor, but other will not, depending on how such immigration is handled and in what industries such workers compete.  Some workers may even benefit from the increased number of customers while other workers suffer from the hit to their paychecks.

    One seemingly simple question regarding only one of those factors of production generates far reaching economic as well as political ramifications throughout the reaches of society.

    Yet, the political machines of every nation strive to continually alter rules touching upon a multitude of economic factors every year with little to no understanding of the long term or far reaching impacts of their decisions, much less to even question whether such rule making is even within the scope of their assigned political employment.

    So we could discuss the concepts of real production, wealth, debt, money, and such, but in the end it all comes back to everything which is consumed must ultimately be produced, and the true wealth of any nation, of any person, is in their own abilities.

    Imagine a world wide cataclysm.  Not this overblown flu we are currently experiencing, but an earthshaking natural disaster of global scale.  Now imagine a population unskilled in any practical sense, a nation of equality, poverty, and ecology warriors.  Also imagine another group of politicians, bureaucrats, and financiers.

    There was a humorous bit in the “Hitchhiker’s Guide to the Galaxy” series by Douglas Adams of a society which sought to eliminate what they saw as the useless third of their society, which ultimately collapsed their society because they were not as useless as their “intellectuals” had actually supposed.

    It is considerably less humorous when you see various groups in our own society dismissing one group or another as “non-essential” (or the foolish elevation of others to the level of “front-line heroes”), whether it is socialist views of business owners and managers, political dismissal of certain industries, or my own previous dismissal of bureaucrats and social justice advocates.

    Whether any such characterization is correct or incorrect can only be tested in the real world, in an unbiased contest, which is to say the marketplaces of society.  No society can ever understand the true value of anything if the leaders of that nation have their thumbs on the scales to favor one group over another.

    The constant interference in the markets of our economy by the state negates any argument that the markets have or have not failed.  It is impossible to spot an economic failure in the maelstrom of political interference.

    Markets are that vague place, more of an idea than a real marketplace, where that production in which people engage meet to exchange their products in the hope that other people value that which they have to offer.  Economics after all is an exercise in the social nature of the human species.

    Power is defined as the ability to influence others; liberty is the ability to act without such influence.  There cannot simultaneously exist both power and liberty.

    Has this discussion actually led anywhere?  Not really.  However, if I could offer one thing to be taken away from all of this, it would be to always cut away the frivolous rhetoric, separate the one idea being discussed from the dozen other with which people will try to muddy the waters; that all true economic understanding comes from focusing upon core concepts and guiding principles.