How many of your recall the story about Sir Issac Newton sitting under and Apple tree and having an Apple fall on his head? From this story, he apparently discovered the fundamental laws of physics. Recall, "a body at rest will remain at rest unless a force is applied to move it" or "a body in motion will remain in motion in a streight line unless a force is applied to change its course" or "force equals mass times acceleration". These are all fundamental principles or laws that Obama and his boys can't change. Now just how do these laws apply to Economics? Glad you asked.
Have you ever been sitting in a bus next to another bus and felt like your bus was backing up when the bus next to you drove away? I am sure you have. When you were flying in an airplane at 300 or 400 mph, did it feel like you were just sitting still? Did you have any sence that you were moving? How about the feel of speed from the Earth flying through space at thousands of miles per hour? Did you feel like you were going to fly off? No and that is due to the basic laws of physics. You can't feel speed, only acceleration. Now this brings me to Economics. If you look at recent economic history, you will see a period where real estate prices were going up at a very steady pace. Many people "made" a lot of money during this period by buying low and selling high, but did they really "make" any money? Did they create or add to the value? It was a zero sum game with some players walking away with other peoples money. You ask, whose money, because you did not lose any money. That is the rub. You did not lose any money at the time because the money your friend ended up with is by way of credit that was taken out in your name as a tax payer and you or your kids will have to pay it back. Notice, the application of the "no free lunch rule".
Now back to Newton. The point is that during this real estate price run up, you were being carried along similar to being in a boat on a moving river. You were being moved, but you had no sence of movement. That is Newton's first law of motion. You can tell if you are moving or not. If you were on a train next to another train, and one was moving, you would not be able to tell which train was moving or in what direction. When you use you animal sensus to made observations about economics it is possible to come up with some very strange ideas about what was or is happening. I like to visit Keynes and his ideas about economics. He developed his theory about 100 years ago on data that was even older. It was a simple concept so it was easy to teach in Econ 101 and for that reason it is still around today. Notice that Keynes did not use any advanced math to formulate his ideas. If he had done that he would have gone over the heads of 99% of the Economic students. He had to keep it simple. Using the methods of Keynes looking backwards, he would have concluded that his big red rooster caused the Sun to rise because he heard the red rooster crow about an hour before the Sun came up each day. In the case of the rooster, he died one day and the Sun still came up. The same can not be said about Keynes theory since it has never been double blind tested. Isn't that interesting?
Back to Newton. Now we know that, "a body at rest will remain at rest unless a force is applied to move it". If our economy is not adding any new jobs, we could conclude it is at rest and could remain at rest until a force came along to move it and once moving, it would continue to move unless a force were appliced to stop it. Now it is getting interesting. What do you think are these big forces? Taxes and profit. Taxes slow or stop movement while profit positivly acclerated it. Back to the zero sum game in real estate. See what profit did? People were making a profit out of the price run up and that profit created the acceleration that continued to increase the speed of the cycle until something had to burst. Trade unions create a form of tax on business similar to the mob demanding protection money. Now what do taxes do to economic productivity? They slow it and can kill it.
I think that you can see how Newton's laws apply to economics and the difficulty us human have recognizing them.
