In today’s world, mainstream economic theory comes wrapped, at virtually every juncture, in politically exploited packages… The hired henchmen on the left preach the virtues of bigger government, while those to the right stake their claim (feebly) to less government and greater personal freedom…
Leaving us at the mercy of a few very bright, academically-gifted appointees who’ve proven to be most adept at test-taking and, alas, mess-making…
The fact is, macro economics, upon legitimate inspection, is not nearly as complicated as many would have us believe. And that’s what I aim to illustrate here in the months/years to come… I will, in concise language, clear up many of your misconceptions. That is if you’ll allow me…
I should warn you ahead of time that, as with past narratives, you may not appreciate every illustration… All I ask is that you keep an open mind and, as you cringe, consider whether or not your resistance stems from fear over how a given concept might impact your personal situation and/or conflict with your political ideology…
A (hypothetical) Thousand Miles Per Gallon
A scientist in Tuscaloosa, in collaboration with his engineer cousin in Tallahassee, designs the most fuel efficient gas engine known to man – it gets 1,000 miles per gallon… They sell the technology to GM for $billions, Ford and Chrysler invent their own versions (then successfully defend the patent-infringement suits) and over the next decade, economic life, as we know it, improves dramatically…
Gas prices plummet, consumer discretionary income soars (creating huge growth [and jobs] in other industries), tax-revenue sky-rockets, the government balances its budget, yada yada yada…
Now hang on a second… what about the oil industry? What about the worker who’ll lose his job as demand and, consequently, profits plummet? What’s he supposed to do? Oh that’s right… and what about all those stagecoach operators? What are they supposed to do?
I.e., keep in mind that while innovation virtually always disrupts a certain labor pool, innovation, without exception, created that pool to begin with…
Bottom line, society at large always (always) benefits when we find more efficient, less expensive modes of producing the goods we desire…