If you want to invest with the economy, make business decisions based on the economy, or design successful government economic policies, what you should know, above all else, is that the economy is real and important, and economics is not.—D. F. Paulaha
FOREWORD: THE WATER
In his 2005 commencement speech at Kenyon College, David Foster Wallace opened with a story about two young fish who are swimming along and meet an older fish swimming the other way. As they pass, the older fish says, “Morning, boys. How's the water?” The two young fish don’t say anything; they just keep swimming. After a while, one of the young fish looks over and says to the other, “What the hell is water?"
“The point of the fish story,” Wallace continued, “is merely that the most obvious, important realities are often the ones that are hardest to see and talk about. Stated as an English sentence, of course, this is just a banal platitude, but the fact is that in the day to day trenches of adult existence, banal platitudes can have a life or death importance, or so I wish to suggest to you on this dry and lovely morning.”
The point of this book is that we are the fish and, contrary to what we are told and taught and think we see, the water we live in, do business in, and invest in, is not the fictional world of free-market capitalism invented by economists and used by politicians; the water we live in is a world of monopoly capitalism, a difference that can and does have life or death consequences.
In other words, THE ECONOMY is a book for everyone who cares about their health, wealth, wisdom, income, profits, safety, security, and freedom; and who understands why truth matters.
ECONOMICS IN ONE MINUTE
“Are you an economist?”
“Great. You know the markets Adam Smith wrote about? The markets economists keep telling us about? The markets economists say regulate and prevent bad actions by individuals and businesses, encourage good things, and allocate resources in ways that keep us safe and make us rich? Could you tell me where I can see one?”
“You can’t see one. Markets aren’t real. Supply and demand aren’t real. Equilibrium market prices aren’t real. The idea that markets can regulate bad actions by individuals and businesses isn’t real. The idea that equilibrium market prices are used by buyers and sellers to make decisions that lead to a use of resources that is best for the country was never true. We made it all up using unrealistic and knowingly false assumptions.”
“It seemed like a good idea.”
“So, what’s real?”
“All sellers are monopolies.”
“Because any seller that can set its own prices is, by definition, a monopoly, and the fact is, all sellers can set their own prices.”
“Can we trust monopolies to do all the good things economists told us markets can do?”
THE SMART GUYS
The idea that economists are the smartest guys in the room was never true.
If they were, they would not have made economics a branch of philosophy, they would have followed the physical sciences and the scientific method.
Debating whether or not a tree that falls in the woods makes a noise if there is no one there to hear it may not hurt anyone (assuming it does not fall on anyone), but it may be a questionable use of resources.
Claiming the markets they made up will regulate excessive speculation, prevent financial collapses that lead to recessions and depressions, and allocate resources in ways that make us all healthy, wealthy, and wise, hurts almost everyone.
But economists never wanted economics to be a science.
If they had, someone, whether it was Plato, in 360 BCE (The Republic), Adam Smith, in 1776 (The Wealth of Nations), John Maynard Keynes in 1936 (The General Theory of Employment, Interest and Money), or any economist since then might have given us something close to the truth George Saunders (a writer, not an economist) expressed in two paragraphs in The Braindead Megaphone.
“In the beginning, there’s a blank mind. Then that mind gets an idea in it, and the trouble begins, because the mind mistakes the idea for the world. Mistaking the idea for the world, the mind formulates a theory and, having formulated a theory, feels inclined to act.
“Because the idea is always only an approximation of the world, whether that action will be catastrophic or beneficial depends on the distance between the idea and the world.”
—George Saunders, The Braindead Megaphone.
Two short paragraphs that are far more useful than the countless pages of nonsense cobbled together by philosopher-economists over hundreds of years (or thousands, depending on which philosopher-economist you begin with).
Two paragraphs that offer a rational and insightful warning to a world we have allowed to be dominated by people acting on ideas that are treated as facts without ever demanding to know where the ideas came from or that they be subjected to even a cursory examination as described by the scientific method before being used.
The only defense economists offer (and they offer it over and over again, seeming to think it will be accepted by outsiders) is that if economic ideas were subjected to the process described by the scientific method, there would be nothing left of economics.
That is true, of course. But it is hardly a defense (or even an excuse) for accepting the catastrophic results that flow from using ideas with no basis in fact.
The question is: Given the unconscionable distance between economic ideas and the world, is there an alternative? There is: Facts.
* * * * *
If you read this far, you have already read the FOREWORD and the first two chapters of a book everyone who makes investment, business, or political decisions should read.
Why? Because it replaces economic fiction with facts, and using facts instead of fiction when making decisions puts the odds of success in your favor.
FACTS ABOUT WHAT?
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