Mr. Moderate

This is the parent page for an on-line course I’m developing to teach readers the basics of economics.

Unfortunately, this page is a stub.

UNDER CONSTRUCTION!

For those of you who are wondering what background I have to preach on matters economic, I will admit that my qualifications are extremely limited. I took a college level course in Economics, and the text book for that course was written by Paul Samuelson, the winner of the 1970 Nobel Prize for economics. I must have learned something from that course as the instructor assigned me a grade of A, and I didn’t do anything to deserve that other than submit excellent papers and test answers. In other words, I earned my A, so I must have learned something about the subject of economics.

A working economist advises a government or corporation on what policies should be most beneficial given the current state of affairs within the economic world as a whole. For a corporation, the best policies are easily defined in terms of what generates the most profit. But for a government, the best policies are not necessarily so obvious. The objectives of government interaction with the economy could be quite a bit more complex, and it is not infrequent that the government finds itself working against its own purposes in one realm of economics in order to benefit itself in another realm of economics.

High unemployment tends to keep prices (and therefore inflation) down, but high unemployment tends to cause voters to get mad at the government. So, the government tends to engage in a kind of psychological warfare with the consumers (voters) about just what the phrase “high unemployment” means. For some time now, so-called “full employment” has been defined as having 96% of the available workers employed at jobs, with only 4% of the available workers “unemployed.” But buried in the details of how the number of “available workers” is determined, and how the number of “unemployed” is determined, are any number of fudge factors that the political powers can use to arbitrarily move the numbers one way or the other. I’m sure that the one person in 25 who is without gainful employment at a time of “full employment” will not tend to see the economy as doing particularly well.

Economics is all about numbers and what those numbers mean. While most people tend to classify economics as a science (based upon the numbers that are generated with mathematical precision), in reality the practice of economic is more about interpreting the psychology of the people who will be making economic decisions. Even if the fundamental numbers of the economy are good, an ongoing war can affect the psychology of the nation in a negative way. And an era of good feeling can easily overcome a set of bad economic numbers. This would tend to define the practice of economics as more of an art than a science.

But this tends to lead to the idea that, in our media-hyped age, all we really need to do is pull the psychological levers of the consumer population and that will effect whatever change is necessary in the overall economy. This has just as much of an effect as any decision to calculate the exact amount of money to be injected into (or removed from) the overall economy, or the exact amount by which interest rates ought to rise (or fall). Even though the relationships are not precise, we still know in general which buttons to press (stimulus) in the minds of consumers in order to generate the economic reaction (response) we are seeking. In at least that sense (the overall idea that stimulus-response relationships exist), economics remains scientific in nature, and so I have included it within the realm of fact as opposed to opinion.