Economics the Hard Way

By David Glenn Cox
http://theservantsofpilate.com

My father used to lament the poor mathematical performance of his children, “They struggle to get a C in math, yet they always know to the penny how much allowance they are due.” It was true enough and goes straight to the heart of the problem with numbers. We have a fundamental disconnect with the numbers that don’t affect us directly. The cheering crowd on the National Mall Tuesday, estimated to be one million plus, was truly an amazing spectacle because of our emotional attachment.

But show us a huge jar filled with a million jellybeans and our eyes glaze over. We have no emotional attachment to jellybeans. If we were threatened at gunpoint to eat all of those jellybeans, our minds would whiz like a super computer estimating our chance of survival, devouring all the beans before a diabetic coma caught up with us.

One million joyous Americans celebrating a flag-waving spectacle is heart warming, yet each of those flag wavers represents one American who has lost their job in just the last sixty days. If you go back to August, the numbers of unemployed since then would be twice the number of those on the Mall Tuesday. The number of homes foreclosed on in 2008 would be one and a half times the number of Americans on the Mall Tuesday.

Economics is a theoretical science; it is like a football game where the statistics of each team are modeled and then a winner is determined by probabilities. No scrimmage or huddles, just statistics, theories and speculation. I have been accused of being a poor economist and I take that as a compliment because so many good economists are clueless, not to the value of the numbers but about what those numbers mean. They count jellybeans without counting the value of the people and their suffering.

My models are as follows: 1.4 million homes foreclosed on in 2008 with an average of four people in each house equals a crowd on the Mall almost six times the size of the crowd Tuesday. Half of that number would be schoolchildren and here’s where my math skills fail me. Of the married couples that lose their homes, how many will lose their marriages at the same time? Where are these children legally entitled to attend school when their parents lose their address? These questions don’t apply in jellybean modeling.

A good economist is a numbers cruncher, totaling categories to arrive at statistics which are used to generate models which explain almost everything, except perhaps where do those 5.6 million people go. Where will they sleep tonight? Our federal government has passed out, to the banks, the equivalent of 35 million dollars for each person on the Mall Tuesday and yet the number of mortgages saved is less than the number of people on the podium with the new President.

My poor economic training was due, in part, to my upbringing as both of my parents were born in the teeth of the last great depression. One was raised in the inner city, the other was raised in a small industrial town. They experienced the depression through evictions and missed meals, cold mornings and scrounging for coal along the railroad track, of cheating the iceman and picking up money working for bootleggers. In our current economic debate I have heard repeatedly that the New Deal actually made the depression worse. They back this theory up with their trusty six gun of statistics.

I have only the fall-back position based on the experience of people who were in food riots before the New Deal, and were not in any more of them after its implementation. My grandfather fought his entire adult life for the right to join a union. He was beaten and he was jailed on more than one occasion, and after the New Deal he was the union steward in his plant. He retired on a union pension and Social Security, both of which he did not have before the New Deal.

My mother’s first taste of watermelon came from a garbage can. Where do the trained economists chart that statistic, hungry children eating from garbage cans? They don’t, because they hold no emotional attachment to the numbers; they merely count jellybeans and spout theories. Adam Smith and his “Wealth of Nations,” written in the leading colonial power over two centuries ago, wrote of ethics and the higher aspirations of man while England ruled one third of the world as a hereditary empire. Smith’s rights of man could be condensed down to the rights of wealthy Englishmen.

But to name any economist is to have another thrown in your face, like Keynes, Friedman, or even the ridiculous Ludwig von Mises, who espoused individualism over the wellbeing of city, state or national interests. Individualism uber alles, or I got mine so screw you. Defying centuries of human evolution and returning to the days of whichever monkey got to the bananas first, he believed that was the only monkey who deserved to eat. These economists go out of their way to deal in the theoretical and never ever postulate negative consequences to their own theories. Of course they believe that their theories have no negative consequences; they speak instead of economic dislocation or short-term economic distress.

My training is in history, and history isn’t detachable from humanity. It is sifting through the ashes and the wreckage of human folly and crackpot theories. So, as I look at the evaluation of the New Deal, I ask myself, "How would Plato consider this problem?" First, nothing was being done to help people’s suffering; then something was done to help people’s suffering. Was it a success even if it had many failings? The Socratic method would invariably answer yes. It would be better to try and fail than to do nothing and then congratulate yourself for being so wise.

It is ironic that in ancient times rulers dealt in absolutes and not in the theoretical. Pharaoh stored grain against famine because it was his duty to do so. Caesar passed out bread and coin to the poor because famine brought riots and riots brought fire, fire that would exceed ten times the cost of the bread and coin. Today, economists would calculate the least amount of bread and coin necessary against the cost of fire and ruin. But all economic theories are true and all are false. While there is plenty, they are true; when there is not, they are all false.

Any system that fails to supply the most wealth into the most hands is a failed system. History proves it again and again and that is a fact and not a theory. So as I dabble in human economics, I count not the empty houses but the people made empty by these theories. Theories that fail by leaving out the most important component in economics, the wellbeing of the people. This singular failure is the root cause of most of the world’s misery, of war, rebellion and revolution.

It has fed the guillotine, the gallows, and the pike on Tower Hill. That’s learning economics the hard way.