Astounded

Let me apologize for the egomaniacism of the last post. But I'm sure you know how it goes.

We were discussing Marx and Rand in class yesterday and I said something about the invisible hand of greed. Almost all of my students laughed because they thought it was something I was making up on the spot. There were only two who had ever heard the phrase before.

Also, earlier, I said something about "opportunity cost" - as in, the post from a few days ago, and people had no idea what I was talking about.

SERIOUSLY? What the crap do people learn in economics?

So, today we get a very basic lesson in economics, because NEWSFLASH - if you don't understand economics, you have no idea what's going on in American politics today.

Here are the things you need to remember:
1. The invisible hand of greed
2. Opportunity cost/guns and butter
3. Efficiency

To begin with, economists worship at the altar of efficiency. Their whole purpose is to be able to explain the course that will have the greatest output with the least resources expended. That is easy enough - except efficiency is a value-laden term.

This is because of opportunity costs. That is the cost of something in terms of the resources it takes away that will reduce the ability to produce other items. This is the classic guns and butter scenario, or as I learned it, baby food and napalm. Let's say there are only two products produced - guns and butter. Some of the resources to make one product are necessary for the other. Which means, for every gun you produce you reduce the amount of butter you can produce. Why? Because the guns sap your resources leaving you with little left to make butter. This is OPPORTUNITY COST on a macro scale. Hence, the idea of efficiency is a value judgment. It is probably most efficient on paper to make all butter or all guns - but can you run a society or community with only that one product. No - not even in the current global economy. You have to decide the most efficient way to produce given your opportunity costs and based on which product ultimately is most beneficial AND does not waste resources. I feel the example has more poignancy when you use baby food and napalm - the contrast is more clear. So one can see that the market does not run on money but on opportunity cost. - this is an important point. Don't forget.

Finally, the liberal market is not a moral one. Adam Smith himself told us that the market is driven by "the invisible hand of greed." I'm not saying you are a bad person if you are a capitalist...hell, communism is no ethical picnic, either. But the market forces remain stagnant without an invisible mechanism, and for us that is greed. Avarice. The desire for more than is necessary. This is an excellent way to achieve progress, right? We are encouraged to continually make the market more efficient. However, to somehow see Jesus as a good capitalist is a display of profound ignorance of one or the other - or both. There is no way around the fact that our market is powered by something most people disdain. We will get to Objectivists at some other point - they have an interesting "moral" counterpoint there.

Finally, a parting note that is not completely necessary to understanding American market forces, but a useful one. FDR's main money guy was John Maynard Keynes. Keynes sort of designed that whole "New Deal" thing. His motto: "In the long run, we are all dead." American economics ran on that principle for years and now it is coming home to roost. It is an interesting footnote to the efficiency principle. Is it better to be efficient in the long-run or efficient now? See how that comes back to a value judgment? What's the most efficient of the efficients? Keynes and FDR did great things for America at a rough time - but sixty years later are we paying the piper? Keynesian economics...ask an old economics teacher. They will either get a far-away lovelorn look in their eyes, or go apoplectic. Either way, there is amusement to be had.