I have been very frustrated by the different economic theories taught in our colleges and universities. I was graded down by Prof Ted Krepps in graduate school because I disagreed with his simple minded economic theories. I think that my original economic theories were better than Prof Ted Krepps', but now, I think that I have stumbled onto a much better theory. That is what this blog is about.
The history on economic theories has always been simple minded because of the simple minded people who came up with them and the requirement that they be simple so that they could be "sold" to their simple minded customers, the college professors. It is really that simple. It is the same reason that simple minded religion has swept the human race. Religion is total bull, but it is simple and easy to understand by the simple minded followers. I think that the really smart economist of the past knew that their theories were seriously lacking, but if they made them more correct, they also made them more difficult for the simple minded to understand and accept. The result is the sad state that we now find ourselves in. Think about old Sigmund Freud ? His theories were also total bull but they were eventually rejected, but it did take a long time. Professors and students who were brain washed found it difficult to realize that old Sigmund was full of bull. It is the same with economics.
The real theory of economics is very complicated. I think that you all knew that. Further, because it is made up of so many factors, the impact of individual factors that change over time by the affect of other variables. Even with advanced math and sophisticated computers, it is difficult to model the real theory of economics. My theory is made up of several different systems that interact. There is no limit to the number of factors, but there are those which are more significant and those which are less significant. These weights change over time making it even more complex. Sorry that this is not simple!
Here is my list of factors:
(1) Wealth from natural resource exploitation
(2) Wealth from value add by human effort not related to (1) above
(3) Zero sum game activities that shift wealth, including theft
(4) Wealth consumption without the generation of addition wealth
I know that my list seems strange, but you will see why I have selected these. In the early history of the United States, most of the wealth generation was by natural resource exploitation. Things like fish, fur, lumber and farm products. Later, it was Gold, oil, coal and hydro power. Think about countries like Saudi Arabia. The only thing that they have off the list above is "oil" and they did not start to exploit that until the last 75 years. How about Cuba or Porto Rico or even Spain. Are you starting see why they are so poor? It is my observation that the real big money or wealth of the world has always been traced back to the exploitation of natural resources.
What about wealth from value added human labor. This includes both physical and intellectual efforts. Humans started out with manual labor and physical skills as the basis for their wealth and gradually it has slowly shifted to intellectual efforts as being of the most value. In most enterprises, it is a "mix" of low and high intellectual skills. These include managerial skills as well as technical skills. Historically the human race had an adequate supply of intellect compared to it's demand so there was not a very large big spread between to top people and the bottom people in terms of the value added and thus their pay. That has changed significantly recently with those on top being "worth" many times those on the bottom. If you look at the median pay for these groups, you will notice that the median has "not" gone up. In fact, in many cases, it has gone down. Take the telephone companies like Western Electric who invented the transistor. The median income and quality of life for workers at Western Electric in the 1950's was better than that for the median worker at Apple today! How can I say that you might ask? In the 1950's a median worker at Western Electric could easily buy a house and car here in the United States. It is currently impossible for the median worker for Apple to do that today. Realize that we need to include "all" the workers in China and other 3rd world countries in the total Apple enterprise, not just the high tech people at the top located in Santa Clara Valley. The bottom line is that the value added segment of the economic model has not produced too well for the human race. In the limit, value added will produce wealth, but it will not significantly raise the median quality of life of the human race. More workers will make the pot bigger, but it will not provide a larger piece of pie for the median worker. Sorry, but that those are the facts. If you have contradictor facts post a comment.
Next, the zero sum game segment. You all know what a zero sum game is, or do you? It is like a poker game. Several people come to the table with wealth that they have acquired some place else and when the game is over the wealth is in different hands, but the amount of total wealth has not increased. The change in wealth is "zero", thus a zero sum game. This also includes theft, like bank robbery. Spain in the 1500's stole ship loads of Gold from the new world that made them rich, but their efforts did not create any new wealth. It took Spain a while to spend all that stolen wealth and when it was all gone, they were back where they had started as poor as ever. The economics of theft go on at all levels and many appear to be honest productive enterprises when they are actually zero sum games. Most of these zero sum game activities actually interfere with legitimate activities that do produce new wealth. I think that our legal system is guilty of this. Lawyers get rich often at the expense of lowering the generation of wealth by others. Governments are just as guilty too with their regulations and mandates. You know what would happen if 100% of the people worked for the government?
Finally, the waste and squandering wealth. What is wealth for, but to use and spend, but there are at least two ways to spend wealth and those are (1) Those that destroy the wealth and (2) Those that provide for the generation of more wealth. Here is a simple example. You are hungry for a meal and go to the store and buy a fish and take it home and cook it and eat it and then go enjoy a movie. That would be a (1) above, or you could buy a fishing pole and enjoy the sport of fishing and catch a fish and take it home and cook it and eat it. That would be a (2), plus a little exploitation of a natural resource. In the short term, consumption of the wealth is not bad, but if it is all consumed or more is consumed than is being produced, that is bad! Sounds a little like the United States right now. During the Obama administration we only collected about 80% of the taxes needed and the economy still was static. Do you now really think that by collecting less than 80% of the taxes that we spend with jump start our economy? What are you smoking?
This is chapter #1, My next chapter will try to better connect and develop the interaction between these.
The history on economic theories has always been simple minded because of the simple minded people who came up with them and the requirement that they be simple so that they could be "sold" to their simple minded customers, the college professors. It is really that simple. It is the same reason that simple minded religion has swept the human race. Religion is total bull, but it is simple and easy to understand by the simple minded followers. I think that the really smart economist of the past knew that their theories were seriously lacking, but if they made them more correct, they also made them more difficult for the simple minded to understand and accept. The result is the sad state that we now find ourselves in. Think about old Sigmund Freud ? His theories were also total bull but they were eventually rejected, but it did take a long time. Professors and students who were brain washed found it difficult to realize that old Sigmund was full of bull. It is the same with economics.
The real theory of economics is very complicated. I think that you all knew that. Further, because it is made up of so many factors, the impact of individual factors that change over time by the affect of other variables. Even with advanced math and sophisticated computers, it is difficult to model the real theory of economics. My theory is made up of several different systems that interact. There is no limit to the number of factors, but there are those which are more significant and those which are less significant. These weights change over time making it even more complex. Sorry that this is not simple!
Here is my list of factors:
(1) Wealth from natural resource exploitation
(2) Wealth from value add by human effort not related to (1) above
(3) Zero sum game activities that shift wealth, including theft
(4) Wealth consumption without the generation of addition wealth
I know that my list seems strange, but you will see why I have selected these. In the early history of the United States, most of the wealth generation was by natural resource exploitation. Things like fish, fur, lumber and farm products. Later, it was Gold, oil, coal and hydro power. Think about countries like Saudi Arabia. The only thing that they have off the list above is "oil" and they did not start to exploit that until the last 75 years. How about Cuba or Porto Rico or even Spain. Are you starting see why they are so poor? It is my observation that the real big money or wealth of the world has always been traced back to the exploitation of natural resources.
What about wealth from value added human labor. This includes both physical and intellectual efforts. Humans started out with manual labor and physical skills as the basis for their wealth and gradually it has slowly shifted to intellectual efforts as being of the most value. In most enterprises, it is a "mix" of low and high intellectual skills. These include managerial skills as well as technical skills. Historically the human race had an adequate supply of intellect compared to it's demand so there was not a very large big spread between to top people and the bottom people in terms of the value added and thus their pay. That has changed significantly recently with those on top being "worth" many times those on the bottom. If you look at the median pay for these groups, you will notice that the median has "not" gone up. In fact, in many cases, it has gone down. Take the telephone companies like Western Electric who invented the transistor. The median income and quality of life for workers at Western Electric in the 1950's was better than that for the median worker at Apple today! How can I say that you might ask? In the 1950's a median worker at Western Electric could easily buy a house and car here in the United States. It is currently impossible for the median worker for Apple to do that today. Realize that we need to include "all" the workers in China and other 3rd world countries in the total Apple enterprise, not just the high tech people at the top located in Santa Clara Valley. The bottom line is that the value added segment of the economic model has not produced too well for the human race. In the limit, value added will produce wealth, but it will not significantly raise the median quality of life of the human race. More workers will make the pot bigger, but it will not provide a larger piece of pie for the median worker. Sorry, but that those are the facts. If you have contradictor facts post a comment.
Next, the zero sum game segment. You all know what a zero sum game is, or do you? It is like a poker game. Several people come to the table with wealth that they have acquired some place else and when the game is over the wealth is in different hands, but the amount of total wealth has not increased. The change in wealth is "zero", thus a zero sum game. This also includes theft, like bank robbery. Spain in the 1500's stole ship loads of Gold from the new world that made them rich, but their efforts did not create any new wealth. It took Spain a while to spend all that stolen wealth and when it was all gone, they were back where they had started as poor as ever. The economics of theft go on at all levels and many appear to be honest productive enterprises when they are actually zero sum games. Most of these zero sum game activities actually interfere with legitimate activities that do produce new wealth. I think that our legal system is guilty of this. Lawyers get rich often at the expense of lowering the generation of wealth by others. Governments are just as guilty too with their regulations and mandates. You know what would happen if 100% of the people worked for the government?
Finally, the waste and squandering wealth. What is wealth for, but to use and spend, but there are at least two ways to spend wealth and those are (1) Those that destroy the wealth and (2) Those that provide for the generation of more wealth. Here is a simple example. You are hungry for a meal and go to the store and buy a fish and take it home and cook it and eat it and then go enjoy a movie. That would be a (1) above, or you could buy a fishing pole and enjoy the sport of fishing and catch a fish and take it home and cook it and eat it. That would be a (2), plus a little exploitation of a natural resource. In the short term, consumption of the wealth is not bad, but if it is all consumed or more is consumed than is being produced, that is bad! Sounds a little like the United States right now. During the Obama administration we only collected about 80% of the taxes needed and the economy still was static. Do you now really think that by collecting less than 80% of the taxes that we spend with jump start our economy? What are you smoking?
This is chapter #1, My next chapter will try to better connect and develop the interaction between these.
