“At the heart of economics is a scientific mystery: How is it that the pricing system accomplishes the world’s work without anyone being in charge? Like language, no one invented it. None of us could have invented it, and its operation depends in no way on anyone’s comprehension or understanding of it. … The pricing system–How is order produced from freedom of choice?–is a scientific mystery as deep, fundamental and inspiring as that of the expanding universe or the forces that bind matter.”
There are fundamental facts about the nature of the world we live in which are unalterable by human desire or action. Conservation laws are an example of this. You cannot get something for nothing, on the aggregate. Certainly, A can get something for nothing but only if someone else, B, gets nothing for something.
When the government gives something to some identifiable group, it cannot do so without taking (usually by force) from some other person or group. On the aggregate, the government does not produce the goodies it distributes. It merely takes through taxation what it intends to distribute, keeps part of it for its own consumption and distributes the remaining (often a very small part of what it takes) to certain groups to buy their allegiance. Continue reading “On Taxes and the Nature of the Government of a Society of Morons — Part 2”
In 1789 Benjamin Franklin wrote that “in this world nothing can be said to be certain, except death and taxes.”
I beg to differ. Unlike the certainty of death which is imposed by nature, taxes are entirely man-made and therefore avoidable. But most people accept taxes with the same resignation as they do the inevitability of death, and by this uncritical passive acceptance of taxes they acquiesce in the persistence of a system that is positively harmful to personal well-being and social welfare. What’s worse, they consider taxes to be a social good.
A reasonable way to think about any subject — science, engineering, technology, economics, etc etc — is to base the analysis on fundamental principles. It’s like using maths, starting with axioms and logically deriving theorems that can then be said to be true within that axiomatic system. If you know the underlying bits, you can work out the rest yourself — or rely on the work of others who have worked out the maths.
We know that there are fundamental principles, whether we know them or not. Some people do know, and they use that knowledge to make stuff that we find useful. I know precious little fluid dynamics but I know that those who design airplanes understand fluid mechanics, and I fly around in airplanes that are the result of various people’s understanding of various different scientific principles or truths.
Economics also has discovered certain “truths”. These relate to property, division of labor, exchange and subjective theory of value. These ideas are not generally known by people, and understandably so. They don’t need to. They get by very well without knowing them, thank you very much. Continue reading “Economic Principles and Immunity from Silly Ideas”
In the previous post “Economics and Physics” I briefly explored why the basic explanations of physics are hard to understand and why the basic explanations of economics are easy to understand. Physics is called a “hard science”. I believe it is hard in the sense that advances in physics are made by supremely intelligent people and even comprehending them requires a good deal of training and intelligence.
Physics is also hard in that it is not some soft and squishy, namby-pamby whatever goes kind of nonsense, unlike in some other intellectual enterprises where people just make up stuff as they go along.
Nobel Prize winning New Zealand physicist Ernest Rutherford (1871 – 1937) is reported to have claimed that “all science is either physics or stamp collecting.” He evidently meant that physics is the only real science and everything else that goes under that label is just a collection of facts.
The wiki’s definition of science as “a systematic enterprise that builds and organizes knowledge in the form of testable explanations and predictions about the universe” serves our purposes. Physics is the über-science because it alone provides the ultimate foundation for all explanations related to what the natural world is about.
What makes physics not merely a heap of facts — what distinguishes it from stamp collecting — is that it is organized knowledge. The organization of knowledge is achieved through what are called “theories”. Theories are conjectures (hypotheses) about the nature, structure or working of some aspect of nature. Theories in physics are conjectures about what the physical world is and how it functions. Continue reading “Economics and Physics”
Most people would readily identify a heap of gold ingots as wealth. But a moment’s reflection is enough to conclude that what can be considered wealth depends on the context.
Imagine Robinson Crusoe alone on his otherwise uninhabited island coming across a pile of gold nuggets in a stream. What’s more valuable to him: the gold or the fresh water in the stream? Gold is pretty useless to him because he cannot use it for anything. Gold is a heavy, soft metal. A piece of iron would be more valuable for making a knife or a pickax. Gold is of little value to him.