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Economics the Hard Way

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By David Glenn Cox

337/365: The Big Money by DavidDMuir.

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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

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.

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.

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

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

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.