17 February 2009

It has been argued that all of history has an economic basis, and it's difficult to refute if one accepts that eating and living have an economic basis as well.  When things change, so does everything, as each adjusts to all the rest, and most changes have economic impact.

A worrisome situation is that if all history is economics, and our leaders are not nearly asute enough in their knowledge of economics, we have problems that need not be, or at least could be lessened.  Now, one would argue, who understands economics?  It is a very complex subject made even more complex by the influence of human nature - fear, greed, manipulation, etc.  But the last century or so has given us much more insight into what works and what doesn't and not understanding - or ignoring - what we do know is tragic.  What our representative leaders seem to know is politcs, and knowing politics and not knowing economics leads them continually in the wrong direction.

But there is more, and that is that most politicians are lawyers, with knowledge of legal matters, but usually, also, little knowledge of economics.  This leads our representatives who are incentivised by politics and trained in making laws to continually make decisions that are economically dangerous.

I would contend that one of the first rules of economics has to do with risk.  The higher the risk the higher the chance of getting hurt, and big investments that entail big risk can hurt a lot of people - but not all.  So those who risk, or invest in risk takers, must endure the consequences.  Free market economics argues that we need to let it happen so that bad management can be allowed to fail and be replaced by that which has more hope of success.  But that is not the politicians' way, so the two (politics and economics) appear to be constantly in opposition.

I guess that's what makes life interesting, and we have survived - even prospered - prospered herioically.  But it doesn't do much for confidence in politicians who seem more intent on punishing the means of prosperity than strengthening it.  On the other hand, and we must never forget this, the alternatives are not attractive - alternatives, that is, to elected representatives.  At least we can dump elected representatives and try again when they become really bad - that is to be proven overly stupid or greedy.  That seems to keep some of them on their toes anyway.  We must be thankful for such small favors - and keep our fingers crossed that it will be enough for a future.