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"Keynesians" are at the "monetarists' "
throats, and
vice
versa. The housewife
blames the grocery store chain, and
the store blames the supplier. The
farmers blame the government, and the
política! leaders blame the previous
administration !
Nearly every sophisticated economic
system has been tried - but all seem to
fail. Crisis conditions continue, and no
economist has the answers.
One joke among the economists
themselves is that if all of the world's
leading economists were laid end to
end, they still wouldn't reach a con–
clusion! Top economists know they
have an unruly "tiger by the tail."
Leading economist and
Newsweek
columnist Henry
C.
Wallich has written
that: "In economics, nothing is certain,
anything is possible, and everything
depends on everything else. The plain
difficulty of understanding what goes on
in the economy is the first big handicap
faced by economists. . . .
Economics
iJ
not an exact science
...
absolute cer–
tainty is vouchsafed to no science and
complete conviction in this world can
only come from ignorance."
Why such a startling admission of
helplessness from a leading economist?
Partially, because economics is not an
exact science. A physicist or chemist
deals with unchangeable, immutable
LA.W.
But economics- a branch of the
social and political sciences - deals
with
HUMAN BEINGS.
And humans are
predictably unpredictable.
Economic Upset- A PEOPLE
PROBLEM
Economics is inextricably tied to
people. It is people, after all, who make
money and spend it. The consumer
1
wage earner can upset the best-laid
plans of renowned economists.
Trends, fashions, moods among con–
sumers may send entire industries into
bankruptcy. War disrupts al! fundamen–
tal plans in politics, business and labor.
A second "people problem" in
eco–
nomics is the dominant role of a few
important decision makers. These are
the leaders of business, labor, and
government.
The actions of the nation as a whole,
or its leaders, can make oc break an
(Continued
011
page
12)
DAVID RICARDO
aeumonn
Mchi••
ROBERT MALTHUS
TWO CENTURIES
Economics means
houuhold
(from
the Greek
oik011omos),
and until 200
years ago, economics was merely a
pragmatic way of cunning a household,
village, or city state. It wasn't until
1776, with the publication of Adam
Smith's
lf/'ealth of Nations,
that man
began to expand these "household"
principies to the national leve!.
Adam Smith wrote of the "invisible
hand" - supposedly a natural God–
given equilibrium of wages, produc–
tion, land, and rent - which any
economy will reach
if left alone.
This
was called, in French,
"Laissez-faire
et laiuez pasJer, le monde 11a de
illi–
meme,"
or "Don't interfere, the world
will take care of itself."
But Adam Smith didn't foresee
ravages of human nature
in
wars and
revolutions. In the generation follow–
ing
The W ealth of Natiom,
the
French and American revolutions
caused widespread destruction and
inftation in those countries, leading to
the Napoleonic wars and the War of
1812. War and cevolution are primary
"people problems" of economics.
Next carne the debate between
David Ricardo, Smith's leading disciple
and Robert Malthus, the famed
"population explosion" prophet. Mal–
thus simply pointed out
laissez faire
was not working! But Ricardo's
theories showed on papee how beauti–
fully it should work (during peace–
time).
Both Ricardo and Malthus failed to
foresee the next "people problem" -
the dislocation caused
by
the Industrial
Revolution. Because of human greed
during
peacetime
(
about 1815 to
1848), economic power was centered
in a few individuals, the industrial
giants. Cheap labor was luced from
the farm; children were employed in
15-hour-a-day sweat shops. The robber
barons of the 1800's niined the
theories of Ricardo.
Marxism and Monetarism
Then carne "Round Two" of eco–
nomic theory- Marx,
Mi
U,
Marshall,
and monetarism.
In 1848, revolutions broke out all
over Europe, as exploited workecs rose
to "break the chains, of industry, the
fruit of
Jaissez faire.
Also in 1848, Marx and Engels
wrote the now-infamous
Commrmisl
Manifesto,
and the brilliant classicist
John Stuart Mili wrote
Principies of a
Po/itical Economy.
Marx wanted aH economic and
political power in the hands of
the people (called "proletariat," or
workers). He called for now-accepted