Economics the Hard Way
January 23,2009 
By David Glenn Cox
http://theservantsofpilate.com
My father used to lament the poor mathematical performance of his
children, “They struggle to get a C in math, yet they always know to
the penny how much allowance they are due.” It was true enough and goes
straight to the heart of the problem with numbers. We have a
fundamental disconnect with the numbers that don’t affect us directly.
The cheering crowd on the National Mall Tuesday, estimated to be one
million plus, was truly an amazing spectacle because of our emotional
attachment.
But show us a huge jar filled with a million
jellybeans and our eyes glaze over. We have no emotional attachment to
jellybeans. If we were threatened at gunpoint to eat all of those
jellybeans, our minds would whiz like a super computer estimating our
chance of survival, devouring all the beans before a diabetic coma
caught up with us.
One million joyous Americans celebrating a
flag-waving spectacle is heart warming, yet each of those flag wavers
represents one American who has lost their job in just the last sixty
days. If you go back to August, the numbers of unemployed since then
would be twice the number of those on the Mall Tuesday. The number of
homes foreclosed on in 2008 would be one and a half times the number of
Americans on the Mall Tuesday.
Economics is a theoretical
science; it is like a football game where the statistics of each team
are modeled and then a winner is determined by probabilities. No
scrimmage or huddles, just statistics, theories and speculation. I have
been accused of being a poor economist and I take that as a compliment
because so many good economists are clueless, not to the value of the
numbers but about what those numbers mean. They count jellybeans
without counting the value of the people and their suffering.
My
models are as follows: 1.4 million homes foreclosed on in 2008 with an
average of four people in each house equals a crowd on the Mall almost
six times the size of the crowd Tuesday. Half of that number would be
schoolchildren and here’s where my math skills fail me. Of the married
couples that lose their homes, how many will lose their marriages at
the same time? Where are these children legally entitled to attend
school when their parents lose their address? These questions don’t
apply in jellybean modeling.
A good economist is a numbers
cruncher, totaling categories to arrive at statistics which are used to
generate models which explain almost everything, except perhaps where
do those 5.6 million people go. Where will they sleep tonight? Our
federal government has passed out, to the banks, the equivalent of 35
million dollars for each person on the Mall Tuesday and yet the number
of mortgages saved is less than the number of people on the podium with
the new President.
My poor economic training was due, in part,
to my upbringing as both of my parents were born in the teeth of the
last great depression. One was raised in the inner city, the other was
raised in a small industrial town. They experienced the depression
through evictions and missed meals, cold mornings and scrounging for
coal along the railroad track, of cheating the iceman and picking up
money working for bootleggers. In our current economic debate I have
heard repeatedly that the New Deal actually made the depression worse.
They back this theory up with their trusty six gun of statistics.
I
have only the fall-back position based on the experience of people who
were in food riots before the New Deal, and were not in any more of
them after its implementation. My grandfather fought his entire adult
life for the right to join a union. He was beaten and he was jailed on
more than one occasion, and after the New Deal he was the union steward
in his plant. He retired on a union pension and Social Security, both
of which he did not have before the New Deal.
My mother's first
taste of watermelon came from a garbage can. Where do the trained
economists chart that statistic, hungry children eating from garbage
cans? They don’t, because they hold no emotional attachment to the
numbers; they merely count jellybeans and spout theories. Adam Smith
and his “Wealth of Nations,” written in the leading colonial power over
two centuries ago, wrote of ethics and the higher aspirations of man
while England ruled one third of the world as a hereditary empire.
Smith’s rights of man could be condensed down to the rights of wealthy
Englishmen.
But to name any economist is to have another thrown
in your face, like Keynes, Friedman, or even the ridiculous Ludwig von
Mises, who espoused individualism over the wellbeing of city, state or
national interests. Individualism uber alles, or I got mine so screw
you. Defying centuries of human evolution and returning to the days of
whichever monkey got to the bananas first, he believed that was the
only monkey who deserved to eat. These economists go out of their way
to deal in the theoretical and never ever postulate negative
consequences to their own theories. Of course they believe that their
theories have no negative consequences; they speak instead of economic
dislocation or short-term economic distress.
My training is in
history, and history isn’t detachable from humanity. It is sifting
through the ashes and the wreckage of human folly and crackpot
theories. So, as I look at the evaluation of the New Deal, I ask
myself, "How would Plato consider this problem?" First, nothing was
being done to help people's suffering; then something was done to help
people's suffering. Was it a success even if it had many failings? The
Socratic method would invariably answer yes. It would be better to try
and fail than to do nothing and then congratulate yourself for being so
wise.
It is ironic that in ancient times rulers dealt in
absolutes and not in the theoretical. Pharaoh stored grain against
famine because it was his duty to do so. Caesar passed out bread and
coin to the poor because famine brought riots and riots brought fire,
fire that would exceed ten times the cost of the bread and coin. Today,
economists would calculate the least amount of bread and coin necessary
against the cost of fire and ruin. But all economic theories are true
and all are false. While there is plenty, they are true; when there is
not, they are all false.
Any system that fails to supply the
most wealth into the most hands is a failed system. History proves it
again and again and that is a fact and not a theory. So as I dabble in
human economics, I count not the empty houses but the people made empty
by these theories. Theories that fail by leaving out the most important
component in economics, the wellbeing of the people. This singular
failure is the root cause of most of the world’s misery, of war,
rebellion and revolution.
It has fed the guillotine, the gallows, and the pike on Tower Hill. That’s learning economics the hard way.
By David Glenn Cox
http://theservantsofpilate.com
My father used to lament the poor mathematical performance of his
children, “They struggle to get a C in math, yet they always know to
the penny how much allowance they are due.” It was true enough and goes
straight to the heart of the problem with numbers. We have a
fundamental disconnect with the numbers that don’t affect us directly.
The cheering crowd on the National Mall Tuesday, estimated to be one
million plus, was truly an amazing spectacle because of our emotional
attachment.
But show us a huge jar filled with a million
jellybeans and our eyes glaze over. We have no emotional attachment to
jellybeans. If we were threatened at gunpoint to eat all of those
jellybeans, our minds would whiz like a super computer estimating our
chance of survival, devouring all the beans before a diabetic coma
caught up with us.
One million joyous Americans celebrating a
flag-waving spectacle is heart warming, yet each of those flag wavers
represents one American who has lost their job in just the last sixty
days. If you go back to August, the numbers of unemployed since then
would be twice the number of those on the Mall Tuesday. The number of
homes foreclosed on in 2008 would be one and a half times the number of
Americans on the Mall Tuesday.
Economics is a theoretical
science; it is like a football game where the statistics of each team
are modeled and then a winner is determined by probabilities. No
scrimmage or huddles, just statistics, theories and speculation. I have
been accused of being a poor economist and I take that as a compliment
because so many good economists are clueless, not to the value of the
numbers but about what those numbers mean. They count jellybeans
without counting the value of the people and their suffering.
My
models are as follows: 1.4 million homes foreclosed on in 2008 with an
average of four people in each house equals a crowd on the Mall almost
six times the size of the crowd Tuesday. Half of that number would be
schoolchildren and here’s where my math skills fail me. Of the married
couples that lose their homes, how many will lose their marriages at
the same time? Where are these children legally entitled to attend
school when their parents lose their address? These questions don’t
apply in jellybean modeling.
A good economist is a numbers
cruncher, totaling categories to arrive at statistics which are used to
generate models which explain almost everything, except perhaps where
do those 5.6 million people go. Where will they sleep tonight? Our
federal government has passed out, to the banks, the equivalent of 35
million dollars for each person on the Mall Tuesday and yet the number
of mortgages saved is less than the number of people on the podium with
the new President.
My poor economic training was due, in part,
to my upbringing as both of my parents were born in the teeth of the
last great depression. One was raised in the inner city, the other was
raised in a small industrial town. They experienced the depression
through evictions and missed meals, cold mornings and scrounging for
coal along the railroad track, of cheating the iceman and picking up
money working for bootleggers. In our current economic debate I have
heard repeatedly that the New Deal actually made the depression worse.
They back this theory up with their trusty six gun of statistics.
I
have only the fall-back position based on the experience of people who
were in food riots before the New Deal, and were not in any more of
them after its implementation. My grandfather fought his entire adult
life for the right to join a union. He was beaten and he was jailed on
more than one occasion, and after the New Deal he was the union steward
in his plant. He retired on a union pension and Social Security, both
of which he did not have before the New Deal.
My mother's first
taste of watermelon came from a garbage can. Where do the trained
economists chart that statistic, hungry children eating from garbage
cans? They don’t, because they hold no emotional attachment to the
numbers; they merely count jellybeans and spout theories. Adam Smith
and his “Wealth of Nations,” written in the leading colonial power over
two centuries ago, wrote of ethics and the higher aspirations of man
while England ruled one third of the world as a hereditary empire.
Smith’s rights of man could be condensed down to the rights of wealthy
Englishmen.
But to name any economist is to have another thrown
in your face, like Keynes, Friedman, or even the ridiculous Ludwig von
Mises, who espoused individualism over the wellbeing of city, state or
national interests. Individualism uber alles, or I got mine so screw
you. Defying centuries of human evolution and returning to the days of
whichever monkey got to the bananas first, he believed that was the
only monkey who deserved to eat. These economists go out of their way
to deal in the theoretical and never ever postulate negative
consequences to their own theories. Of course they believe that their
theories have no negative consequences; they speak instead of economic
dislocation or short-term economic distress.
My training is in
history, and history isn’t detachable from humanity. It is sifting
through the ashes and the wreckage of human folly and crackpot
theories. So, as I look at the evaluation of the New Deal, I ask
myself, "How would Plato consider this problem?" First, nothing was
being done to help people's suffering; then something was done to help
people's suffering. Was it a success even if it had many failings? The
Socratic method would invariably answer yes. It would be better to try
and fail than to do nothing and then congratulate yourself for being so
wise.
It is ironic that in ancient times rulers dealt in
absolutes and not in the theoretical. Pharaoh stored grain against
famine because it was his duty to do so. Caesar passed out bread and
coin to the poor because famine brought riots and riots brought fire,
fire that would exceed ten times the cost of the bread and coin. Today,
economists would calculate the least amount of bread and coin necessary
against the cost of fire and ruin. But all economic theories are true
and all are false. While there is plenty, they are true; when there is
not, they are all false.
Any system that fails to supply the
most wealth into the most hands is a failed system. History proves it
again and again and that is a fact and not a theory. So as I dabble in
human economics, I count not the empty houses but the people made empty
by these theories. Theories that fail by leaving out the most important
component in economics, the wellbeing of the people. This singular
failure is the root cause of most of the world’s misery, of war,
rebellion and revolution.
It has fed the guillotine, the gallows, and the pike on Tower Hill. That’s learning economics the hard way.
Taking the first paragraph: “Smith’s rights of man could be condensed down to the rights of wealthy Englishmen”, I accept it as a point of view, presumably by a US citizen, but it is, in my humble view, more than a little unfair to Adam Smith, who, incidentally, being Scottish, would hardly have been overly concerned with “the rights of wealthy Englishmen”.
Smith’s Wealth Of Nations is studded with examples of his concerns with the rights of the poor majority of British society, most of whom were badly treated labourers, tenant farmers and landless farmhands, with corresponding poverty-level, subsistence only, incomes.
Smith’s mocking contempt for the rich and powerful is only restrained by the necessary proprieties of public discourse in mid-18th-century Britain. It may be taken for granted by David Glen Cross that under US law he is free to write and speak as he pleases to a degree that was not enjoyed by Adam Smith and his fellow professors.
That is one of the benefits of liberty, still almost unique in the entire world 232 years later. And bad as life was for David’s parents and grandparents, and during his own childhood years, those of us who take a more dispassionate view of the whole world, have to note, out of respect for hundreds of millions who do not live in North America or Europe and a few other places, that the sort of rotten lives lived by the poor in the 1930s US depression, illustrated so eloquently by David, have been and still are the permanent lot of all of those in the poorer and less free countries (except the kleptocratic, hopefully jail-bound, refuse who form their governments and administer their crummy tyrannies).
There is no doubt that you are a poor economist, the evidence is written throughout this article, but it should not be a point of pride for you. Your history is abysmal, which isn’t any surprise since you apparently rely on anecdotal evidence to support your arguments.
“First, nothing was being done to help people’s suffering; then something was done to help people’s suffering.”
Well perhaps you should revisit the Hoover administration before making such pronouncements, as it involved the largest interventions into any peacetime economy the US had ever seen up to that point. FDR actually campaigned in 1932 against Hoover’s big government administration. If we were to apply your logic on the eve of FDR taking office we would say “things were being done to alleviate suffering and yet things were getting worse!” would we not reach the conclusion that FDR should do nothing rather than make things worse?
“I have only the fall-back position based on the experience of people who were in food riots before the New Deal, and were not in any more of them after its implementation. My grandfather fought his entire adult life for the right to join a union. He was beaten and he was jailed on more than one occasion, and after the New Deal he was the union steward in his plant. He retired on a union pension and Social Security, both of which he did not have before the New Deal.”
What do you say to those people who lost their jobs in 1937 and 1938 when a new downturn emerged as FDR cranked up taxes to pay for his programs like social security. Why does your grandfather’s well being trump the poor schumk who was out of work then? Besides the obvious fact that you never heard his tale of woe? What about the fact that the SS tax is highly regressive and has been taking money from the poor of this country since then, how do you measure the pain that has caused in relation to those who benefited?
“But to name any economist is to have another thrown in your face, like Keynes, Friedman, or even the ridiculous Ludwig von Mises, who espoused individualism over the wellbeing of city, state or national interests.”
Have you read Von Mises? The first few paragraphs you wrote were very Von Misean. You cannot measure utility in aggregate is an Austrian position, this is why they rely on the individual to make decisions for themselves, for the individual to determine what is best or not best.
“Theories that fail by leaving out the most important component in economics, the wellbeing of the people.”
When people are left to themselves they trade and protect their property with equal vigor, who are you to tell them where their well being lies?
Hoover’s intervention by today’s standards was ridiculously tiny and short sighted; sending out seed packages to the dust bowl and loan guarantees to industry has an all to familiar ring to it. The Hoover administration was against any direct aid to it’s citizens that speaks for it’s self and the fact that FDR carried 47 states should speak for the rest.
You say that things got worse, while you accuse me of using anecdotes, your argument is that their was a fire and it got worse and that it was all the fault of the fire department and not the fire! That doing less or helping industry more would have been the better course yet that is how we got to where we find ourselves now. Is the same poison, which sickened us the cure as well?
You cry about taxes just as all cry about taxes, I wish I could double my taxes.
You see Roosevelt as the adversary of Capitalism instead of understanding that he was its savior. He inherited the office of a nation in shambles and restored a well governed capitalism, that functioned well until it was dismantled by deregulation and global arbitrage.
Who am I? I am a man with an opinion who cares for his society not just himself. A man who sees people for their intrinsic value and not just as econonmic units to be divided by their profit potential. That the law of the jungle is fine if you only aspire to live no higher than in a jungle
“Hoover’s intervention by today’s standards was ridiculously tiny and short sighted”
Today’s standards have nothing to do with your logic, the point was how lazy your analysis is. The only information FDR would have had upon taking office would be that
A. The largest attempt at alleviating a depression had been enacted and
B. Things were getting worse and the depression was worse than any in history.
What would the ‘Socratic Method’ have led him to conclude in that scenario? You simply draw the conclusion that you want to draw, not one driven by logic by using skimpy information and twisting words.
“You say that things got worse, while you accuse me of using anecdotes, your argument is that their was a fire and it got worse and that it was all the fault of the fire department and not the fire!”
You have no idea of my argument because it hasn’t been put forth in this format. All that was written was a critique of how poor your reasoning skills are. The reason ‘good economists’ eschew anecdotes is because you cannot possibly have known a large enough random set of people to conclude that the experiences of those you do know are representative of a country of 130 million. You want us to feel so sorry for your parents and grandparents that we ignore the opposite end of the equation, where did the resources that they received come from and what pains did moving them cause?
“You cry about taxes just as all cry about taxes, I wish I could double my taxes.”
Feel free to send a check in right now, the IRS will cash it.