The problem with me reading a book like Economics in One Lesson is that I have nothing to compare his suppositions to except my own limited experience and literary examples. My knowledge base is almost zero on this subject although I do own a fair amount of common sense which generally stands in for wisdom at my house.
I very much appreciated it when he used the examples of Robinson Crusoe and Swiss Family Robinson in chapter 15 How the Price System Works.

A Swiss Family Robinson, perhaps, finds this problem a little easier to solve. It has more mouths to feed, but it also has more hands to work for them. It can practice division and specialization of labor. The father hunts; the mother prepares the food; the children collect firewood. But even the family cannot afford to have one member of it doing endlessly the same thing, regardless of the relative urgency of the common need he supplies and the urgency of other needs still unfilled. When the children have gathered a certain pile of firewood, they cannot be used simply to increase the pile. It is soon time for one of them to be sent, say, for more water. The family too has the constant problem of choosing among alternative applications of labor, and, if it is lucky enough to have acquired guns, fishing tackle, a boat, axes, saws and so on, of choosing among alternative applications of labor and capital. It would be considered unspeakably silly for the wood-gathering member of the family to complain that they could gather more firewood if his brother helped him all day, instead of getting the fish that were needed for the family dinner. It is recognized clearly in the case of an isolated individual or family that one occupation can expand only at the expense of all other occupations.

The final quote from chapter 15 also seemed to bring it all down to common sense:

It follows that it is just as essential for the health of a dynamic economy that dying industries should be allowed to die as that growing industries should be allowed to grow. For the dying industries absorb labor and capital that should be released for the growing industries. It is only the much vilified price system that solves the enormously complicated problem of deciding precisely how much of tens of thousands of different commodities and services should be produced in relation to each other. These otherwise bewildering equations are solved quasi-automatically by the system of prices, profits and costs. They are solved by this system incomparably better than any group of bureaucrats could solve them. For they are solved by a system under which each consumer makes his own demand and casts a fresh vote, or a dozen fresh votes, every day; whereas bureaucrats would try to solve it by having made for the consumers, not what the consumers themselves wanted, but what the bureaucrats decided was good for them. Yet though the bureaucrats do not understand the quasi-automatic system of the market, they are always disturbed by it. They are always trying to improve it or correct it, usually in the interests of some wailing pressure group. What some of the results of their intervention are, we shall examine in succeeding chapters.

I also thought it was interesting in light of today’s news about our extra tax refund. While I am happy to take the money and run, I can’t help thinking about what is really going on and how easily bought we must be as a people. Somehow $800 is supposed to make us all feel good about the economy. Oh, what tangled webs we weave comes to mind. Oh, and don’t forget the Mimimum Tax Penalty. If they give you too much money back they have built into the system a way of recovering your money.

So anyone want to discuss this current tax refund?

  Leave a Comment »