Our task

Here's how it works: A man lives for a while, and then dies. A nation lives for a while, and then dies. A civilization lives for a while, and then dies.

If you want your civilization to live, not die on your watch, then economics must be nothing more or less than the effort to get the right answer.

The right answer does not depend on what you or I want. It depends on what the economy wants and how the economy works. Our task is to understand these.

The whole is greater than the sum of its parts

Livio Di Matteo in What's in a Name?:

We all know that the word “economics” comes from the Greek “okionomia” which refers to the thrifty management of household affairs. By extension, the origin of the term “economy” is closely related to the same term as it is from the Latin “oeconomia”, which is again from the same Greek “okionomia”.  From all this, it is not difficult to see an economy as simply the agglomeration of individual households when it comes to the European language tradition.  In a sense this nicely encompasses both our micro and macro traditions, as macroeconomics simply becomes the study of the sum of many individual household behaviours.

No no no no no no no: "macroeconomics simply becomes the study of the sum of many individual household behaviours." No.

That's what people think? No wonder the economy is such a mess.

FDR, Perot, and Hayek

That FDR quote from yesterday reminded me of something.

In Chapter Four of his 1992 book United We Stand, Ross Perot discusses his plan to have "An America that Prospers". Under the heading "Put Government on the Side of Jobs and Growth" he says

Don't worry about our businesses getting too big; worry about our businesses getting too small.

No, I'm with FDR on this one. The growth of private power is a problem.

That sentence from Perot confuses two separate concepts. First is the concern expressed by FDR, captured in yesterday's post: the concern that businesses getting too big is harmful to freedom. Perot dismisses that one.

The second concept is economic decline, which he expresses as businesses "getting too small". But Perot approaches this concept from a microeconomic perspective: He wants to improve the incentives offered to businesses.

Perot just completely misses the "Let's analyze the problem" approach. He wants a policy solution for every damned symptom he sees. That's what we've been doing for 40 years. There is no better way to find your way to the end of civilization.

Oh, and speaking of big business interfering with freedom, here's my favorite line from Friedrich A. Hayek's The Road to Serfdom:

... it is not the source but the limitation of power which prevents it from being arbitrary.