Hi Ed, If I may butt in, economics *is* simple. Harry and I, between us, have given you three basic assumptions which explain all.
It's human nature that's complex. Economics, at bottom, is simply about the relative scarcity of goods and services and their exchange. Everybody understands this and everybody is able to transact sensibly. Even homo erectus, man's predecessor, was trading goods two million years ago. When I ran Jobs for Coventry Foundation in 1980 I included a small unit for mentally retarded teenagers. None of them could do the easiest arithmetical tests on paper and they learned simple job skills very slowly indeed. However, I noticed that when we paid them their weekly allowances, that they were well aware of the value of money. (I remember one of them in particular. A charming but very backward girl. After she was paid, she went around the trainers and her group, busily exchanging notes for smaller denominations and coinage. Then she put different quantities into different pockets. After one "pay parade" I was so intrigued by this weekly performance that I went up to her and pointed to each pocket: "What's that's for?". She replied: "That's for my Mum and Dad"; "That's what I owe my sister"; "That's for an ice cream on the way home"; "That's for when I go shopping on Saturday." She knew precisely the value of her money even though she could never have worked it out on paper. Much the same appreciation of money obviously applied to the others in her group.) Human nature (and the ecology around us) is certainly complex -- the result of DNA acquisition and modification according to different eras of quite different chemical and environmental circumstances during three billion years of life. We are an accumulation of many different drives, instincts, predispositions, skills, cognitive abilities, what have you. Even our brain consists of three distinctly different brains only minimally coupled together. (This often gets us into trouble in stressful situations.) Economics only becomes complicated when governments go beyond their "natural" duties of protection and into all sorts of other activities in attempts to control us. They can't get it right, of course, and never will. You've just been reading Hayek. Well, surely you'll agree that Hayek is eloquent on this point. Human nature is so complex that any stable society can only exist by a voluntary culture that involves everybody. Government should only be a subsidiary of this, not its master. Instead, governments (and government officials of the English Keynesian-intelligentsia Bloomsbury-Circle ilk) all too readily assume that "Nanny knows best" -- for our own good , of course. It is the over-blown interference of power-hungry politicians and officialdom that, in the end, screws up almost everything they seek to control. Having written this, there is no-one on Futurework who enjoys and appreciates your suberb contributions to this list than, Yours truly, Keith (EW) <<<< Harry, what I like about your economics is its simplicity. The economic world is essentially mechanical and two dimensional. Once set in motion, competition moves it onward inexorably, the strong emerging as winners and leaders, the weak falling behind and catching what crumbs they can. Beyond those of competition, there are no principles, and certainly no passions concerning justice and equality for all. There are no people in it, just self-interested robots. And certainly no politics. Politics would spoil its perfect rhythms. The problem is that the real world is not like that, and nor can real world economics be like that. In the real world, economics is rather confusing stuff in which politics, principles and passions get in the way, keeping things from moving to competitive norms and creating higher cost structures than would apply under competition. You mention the airlines. If I recall my history half-way correctly, the Government of Canada created a single national publicly owned airline back in the 1930s because private enterprise simply could not and would not do it. Basically, that airline, Trans Canada Airlines, served the major cities of Canada. It was a fragile business at first, in effect a natural monopoly. Costs were high but traffic volumes were slow in building up. To extend air service to smaller cities required substantial cross subsidization. It would not have happened otherwise. Competition was not a possibility until the late 1950s, when the Air Transport Board allowed a second carrier, Canadian Pacific, which until then had been a regional carrier, to fly across Canada once daily. We now have a deregulated airline industry. I'm not so sure of how well its working. The former TCA, now a privatized Air Canada, swallowed up Canadian Pacific and is not in sound financial health, partly because of 911 but also because it tried to grow more quickly than the market warranted. Some carriers have collapsed. Others, such as West Jet, a low fare, no frills carrier, have emerged. I'm not sure that fares applying to long distance trasport are really that much lower than they were back in the fifties and sixties. Back then, ever so many people, me and my small family included, travelled by rail as a preferred alternative to flying. It was cheaper, and spending a few days on the train was not uncomfortable. The kids loved it. Long haul rail passenger service has now vanished, so the few airlines that now exist have a monopoly on long distance passenger transport. The fare for a recent business trip I took within Canada was nearly Cdn$3,000. The fare for another was about Cdn$1,400. Neither fare was first class or business class. Both meant spending a lot of time squeezed into economy class seats between two fat men and travelling on weekends. The fare for comfortable business class seats on regular working days would have been far higher. One of the trips highlighted another aspect of the messiness of real world economics - that of divergent interests. The trip involved attending a symposium which brought mining interests, Aboriginal land claims beneficiaries, and public government institutions together in an attempt to clarify legislation and processes around prospecting and mining in Canada's Nunavut Territory. What soon became apparent was that each of these groups could not easily accommodate the others. To satisfy their shareholders and get their work done in a hostile environment, the miners needed quick answers. Public government could not give them quick answers because it had a myriad of needs and stakeholders to satisfy. Aboriginal organizations were watching both of the other groups closely. They wanted development, which meant incomes and jobs, but not at a cost to their traditions and lands. The efficient solution would have been to turn the miners loose and lock the regulators up, but that is not things really work. The result is a high cost structure which makes it difficult for miners to operate, but which protects a lot of things people value. Is that the way things should be? An economic purist would say, no, they shouldn't be that way. But that is the way they are, and being that way, one simply has to live and work with them. And, I might add, one has to recognize that every solution creates as many as ten new problems. <<<< __________________________________________________________ �Writers used to write because they had something to say; now they write in order to discover if they have something to say.� John D. Barrow _________________________________________________ Keith Hudson, Bath, England; e-mail: [EMAIL PROTECTED] _________________________________________________
