10 Secrets About Economics

Once you violate the principles, all else is hot air. What is worse is that people then expect you to no longer stand for your principles. Compromise seems to be a hard habit to break…
That is what you are, when you compromise your principles.
When you compromise your principles, you have no principles.
This is how incrementalism works.
Now, just imagine what life could have been like,
had there been no compromise on this issues, since at least 1913…
Not to mention the more recent issues of:
Groping, TSA, Abortion, NDAA, Patriot Act, QE, Drones, Government Health Care, Gun Control, NWO, Perverts, NAFTA, GATT, UN, Homeland Security, Foreign Aid, Bailouts, The Fed, Man-made Global Warming, Cap And Trade, Illegal Aliens, and oh so much more.
The liberals have won the war of ideas. Their agenda will prevail, though most will not like it.
You can ignore Truth, all you want.  But, you will not be able to ignore the consequences of ignoring the Truth ………..  The compromisers have won. I concede defeat.
The following article will help you understand a little of the basics of economics. The professors in higher education, be they marxist, fascist, or communist, will likely not take kindly to this article, because the truth is not in them. Yet, even the most dense liberal could learn something, when they become willing to see the Truth.

10 Secrets About Economics

By: Richard Johnsson | Tue, Jan 1, 2013


The conclusion first:
It doesn’t take a lot to know more about economics than the average Nobel laureates (see the endnotes).  That’s the sad state of modern economics, mostly reduced to an orgy of quasi-advanced mathematics and the complete absence of basic things like cause and effect.


When studying economics at a university today you undoubtedly learn a lot of things. For example, you learn that central banks stabilize the currency and help us avoid booms and busts. You learn that leaving people alone in the market place, they will set the wrong prices of most things, and that we need to regulate this. You learn that the road to wealth and growth of nations comes through more labor, i.e. more man hours, and technology. And you can prove all this through advanced mathematical modeling, so advanced that only very few understand it and can question it.

In other words, you become very good at things like downplaying individual freedom, a pleasant lifestyle and at justifying the elites robbing the rest of the people. Yes, it’s indeed a dismal science, when put into this perspective.

Fortunately, the stuff you learn at school has very little to do with economics. And if you read on, I will give you the top 10 things I think you need to know about economics that the average professor likely won’t tell you about. They are fundamental insights, new and old. They are so well hidden from students today, that you might well call them secrets. If you have encountered even one of these 10 secrets in class, I’d be surprised.

Secret #1 – The Division-of-labor[1]

While I think most people have a general understanding about what the division-of-labor is, I reckon very few have any idea about its absolutely fundamental importance for the creation and sustenance of any advanced society. And unless you take a class in economic history, you might get a full degree in economics without even hearing about it.

Back in 1776, Adam Smith published his Wealth of Nations, and here are the opening lines:

“The greatest improvement in the productive powers of labour, and the greater part of the skill, dexterity, and judgment with which it is any where directed, or applied, seem to have been the effects of the division of labour.”

In fact, it’s the division-of-labor that explains how we nowadays can be so many times more productive than only say 200 years ago. It’s the basis of capital accumulation, the division-of-knowledge and all the insights that follow from it, like new technological inventions. More man-hours have very little to do with explaining the rising living standards, and technological advances doesn’t fall from the sky, like the modern growth models assumes.

Secret #2 – The law of comparative advantages[2]

Similarly, I think many people have a general understanding about what the law of comparative advantages is, although they might be gravely mistaken about what it really tells us. Most people likely think that this law says that a country should specialize in an area that they are best at.

In his book Principles of Political Economy and Taxation from 1817, David Ricardo outlined the principle of comparative advantages by means of an example involving two countries, England and Portugal. In Portugal they could produce a certain amount of both wine and clothes faster than in England and, hence, the Portuguese had absolute advantages in both these areas of production. In other words, one might conclude that international division-of-labor should be arranged according to what you’re best at. This idea implies that a country that is best at nothing will be run over by the more productive, a very common notion today.

However, Ricardo showed that it was in the interest of both countries, i.e. also the more productive Portuguese, to specialize in one area and trade their goods with the other party. In this case the countries specialize in the production where they have a comparative advantage. Hence, even if a country had no absolute advantages, there would still be room for this less productive country. Most people that have studied some economics likely remember this law when asked about it. But few academics seem to have read the sources of the idea, including the famous Paul Krugman (look, no reference to Ricardo in his reading list).

However, what is perhaps less well known is that this is also true for the division of labor at all other levels of society, as Ludwig von Mises emphasized. In fact, all trade, international as well as domestic, stems from the same source – the comparative advantage of the individual. The comparative advantage of the individual then lends itself to groups of people, companies, regions and countries. It is these that make it worthwhile for people to cooperate and divide labor at all on any larger scale. The law guarantees that there will be room for everybody. The comparative advantages could thus be seen as the glue of society.

Hence, when people are left free to specialize in the things they seem to be best at relative others, the division-of-labor flourishes and there’s room for everyone. As Mises pointed out, “it makes friends out of enemies, peace out of war, society out of individuals.” Absent this knowledge, it should come as no surprise that people sees potential friends as enemies, makes war out of peace and sees freely cooperating individuals as threats to society.

Secret #3 – Marxian exploitation[3]

Well, even if people did appreciate the division-of-labor and the comparative advantage, people would still be alienated and, worse, exploited. You see, some people would soon come and take the wages of the laboring people, or in the common lingo, the capitalist would exploit the workers, profiteering on the backs of the ordinary citizens. Or so we are led to believe.

There have been many attempts at falsifying this Marxian exploitation theory, and the perhaps best known is Eugen von Böhm-Bawerks attempt, in his Karl Marx and the Close of His System.

However, there’s a much more powerful rebuttal of the Marxian exploitation theory, as suggested by George Reisman. He points out, that in a world without the capitalist, the income people earn aren’t wages, but profits. If I grow flowers in my garden and then sell them at the local fair, my income is 100% sales revenue, and since my money outlays are likely zero, the revenue turns into 100% profits. Hence, profits are the primary form of income, not wages. It is only when capitalists enter the scene that people are able to work for wages.

In other words, if I hire somebody to take care of my flowers, I pay them out of past sales revenue and profits, i.e. out of my savings (often referred to as the wage fund). Thus, the interests of the capitalists and the wage earners are complimentary rather than exploitative. My employee might be happy I offer them a chance to work for wages, believe it or not.

I take it this completely explodes the Marxian exploitation theory, and the labor theory of value as well. My Marxist economics professor didn’t speak to me for months after I told him about this, and I take that as a kind of confirmation as well.

Please click the link to see the complete article.

About ace5ace

60, roaming the Ozarks.
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