US economy is not working because Americans forget what economics is about
Why is the economy not working? Let me explain economics so simple even Obama could understand, yet he will not. Nor will his Einstein advisers with wing-tip shoes and fancy degrees. I wish he would read this.
- The simple answer is this: Americans have to build a better mouse trap to compete with countless legions of hungry, educated and clever capitalists in the emerging markets who are lean and ready to do economic battle with US citizen Joe Blow who is looking to politicians to solve the mess.
The solution is not a top down industrial policy that wise men (yeah right) in Washington choose. That is, which industries including banking and real estate, to develop, help, bail out or steer. The solution is to let the markets work, and people with their own innate intelligence and creativity will find the solutions to their personal economic issues. I mean can you imagine if the government ran Apple, what the company would have turned into? The solution to economic problems large and small will always be this. To let the markets work. The result of unintended consequences of aggregate economic activity created by individuals acting on their own enlightened self-interest.
Everything else is gobble goop analysis.
Economic challenge to the reader
What is so hard about that to understand? I defy anyone to counter me on this point. Anyone at all can give their best shot as to why capitalism does not work and if there is a better way. Just leave a comment. I gets hundred of readers to this website daily so there has to be one person that can come up with something better for an economic solution.
Think of yourself as a consumer
As a consumer I will always try to buy the best product on the market for the lowest price. Americans as individuals, not as a country mind you, need to figure out how to provide services and goods of better quality for a lower price. It is that simple.
And before you hem and haw about unfair trade, if trade is unfair then use it to your advantage. For example, manufacture a product in China and import it here with your quality control, design and marketing. If the economy is unfair, find the way it is unfair and use it to your personal advantage and this will create wealth for those around you.
- Economics is not top down but bottoms up, it always has been. Government’s roles is to protect your personal liberties so you and I can find the best way to solve our own problems.
The basis for the free market solution to the US economic problems
- From Adam Smith and enlightenment thinkers you have the idea that individuals acting on their own enlightened self-interest will bring society on aggregate to a higher level culturally and economically than other social economic model. The USA will be a better place to live socially and economically.
From the Austrian economics we learn about value What is valuable?
- The human mind is what determines what is of value. The human mind alone. Something is valuable because you think it is. Period, end of sentence. This is illustrated in the diamond water paradox and answer the question why Karl Max was wrong. It also answers why a stock is worth what it is priced.
- I will pay for something based on what I think it is worth. This is so obvious that even a child could understand it.
- Value is determined subjectively by the human mind.
- To paraphrase Shakespeare ‘There is nothing valuable or invaluable, but thinking makes it so’.
What is the role of the market?
- The market though the price system orchestrates valuation between people who demand goods and people who supply goods. Consumers and producers are coordinated. Is there a better way to do it? No, because non-price rationing results like seen under communism where people had to stand in line for eight hours for a loaf of bread. The shop workers had a sense of power and entitlement, and no one was happy. My family lived through this surreal experience.
- Yes, you can make exceptions to the market allocation system of course. Public goods like the environment and help for the poor. But even with these, the market system can help. I have always said in a rich society like we live in we can help the poor.
I am not an economic evangelist for capitalism. What I convey is simply the way economics works and how to jump-start the US economy. This includes returning prosperity to the middle class. That is reduce the burden of government so you and I can find our own solutions. People have been lulled to think the burden of government is light, it is not, your income would be over double what it is now if the markets were free.
How can America recover? Americans need to read books by Adam Smith and other economics like: Carl Menger 1840-1921, Ludwig von Mises 1881-1973,F.A. Hayek 1899-1992. After they as individual understand how economics works, spend the time thinking about the better mouse trap. The government needs to reduce the heavy bonds and burdens placed on US citizens that prevent this from happening.