Notes Book

Economics, the wonderful science

Malthus famously pointed out that the environment has limited resources, but population expands at an exponential rate. I believe this statement is one of the foundations of the "dismal science" theory. Malthus predicted a future of mass starvation, war and plague. To some extent, this has proven true. More than a hundred and fifty million people were killed in the twentieth century by their own governments. More millions were killed in wars, plagues, and famines.

Yet in the last 50 years of the twentieth century, the human population of the world went from about two and a half billion to six billion. I don't think this was what Malthus had in mind. As the populations increased, the amount of labor available to extract a living from the environment also increased. Not only were there more people to grow food, but we also got a lot better at it. We also got better and storing in distributing food, and tools.

Economics has helped make this possible. Of course, I don't mean that a bunch of "economists" in universities are responsible for our survival. I do mean that money as a form of social organization has proven to be very efficient. Where people are free to work and trade with minimal interference, societies prosper. Where there is an authoritarian state calling all the shots, societies become poor. There are many examples of this. The most striking are cases where societies were split by the cold war into communist and capitalist societies. East and West Germany. North and South Korea.

My view of the first principle of economics is this: Groups that spend more time working and less time fighting get prosperous.

And it doesn't take long for this to happen. The Bush administration is the most belligerent we have seen in recent times, and immediately the economy tanked. Whatever Bill Clinton's faults, he was successful at minimizing our fights with each other, and he also made a lot of efforts to reduce conflict in the world. His aggressive pursuit of the drug war is, of course, a notable exception to this generalization. His continuing feud with Iraq was another. It all makes one wonder what we could achieve with a truly rational society.

The economy started to falter in the last months of the Clinton Administration, but that could be attributed to the bitter election fight.

Clinton had been treating Israel and the Palestine as at least somewhat equal. Bush immediately changed that policy and refused to meet with Chairman Arafat. Who knows what other wonderful diplomatic messages we were sending to the Arab world. A few months later, we got 9-11. The situation has gone steadily downhill from there and the economy has tanked. We are on the brink of conflict with a billion Moslems. Some are flirting with another war with China over Korea. Some want to go to war with Iran. The war on drugs is over in a lot of places in the world, and drugs have won. We are becoming more and more isolated, feared, and hated, and less and less prosperous and respected.

Hypocrisy and arrogance don't pay well. Hypocrites and thieves prosper for a while, while honest, productive citizens suffer, but eventually all pyramid schemes collapse, even if the call themselves corporations or governments. What goes around comes around.

It's becoming clearer that government is a negative sum game. When people are forced to do something, they resist. They waste time fighting, and destroy resources in the course of the conflict. The use of force inside and outside the society creates waste heat that destroys resources and wastes time. Eventually the pot boils over.

When we decide it's time for us all to just get along, our economy, and the world's economy will get back on track.