The American Spectator

coal carrier| 7.21.10 @ 8:01AM

You say, “don’t listen to economists”. Yet you must have listened to Milton Friedman since you chose the pencil to describe the supply/demand curve. The pencil is the exact object of production that Milton Friedman used to explain the way of the world in economics. Mr. Friedman’s example was to show that a number of individuals, from various parts of the world came together, independently, to produce a product without any government intervention. Mr. Friedman was a Libertarian. He believed that government that governed least, governed best. Sorry, I’m going to continue to believe in what Mr. Friedman preached.

Dan Hirsch| 7.21.10 @ 9:14AM

Milton Friedman was clarifying what Adam Smith propounded in the 1780's. The pencil has been used by every economics lecturer since Adam (Smith.)

What Mr. Young might have more usefully suggested is that people would be far better served by learning the fundamental laws of economics, e.g. laws of supply and demand, diminishing marginal returns, elasticity of supply, elasticity of demand, et al. and then applying them to the talking heads' talks.

Not listening won't help anybody. Learning and then listening critically would be far more useful and helpful.

Then atrocities like the minimum wage (which simply outlaws low value work) and Keynesian stimulus programs would be greeted with the uproarious laughter they so richly desire. Not Presidential signatures on hopelessly convoluted legislation.

RSDavis| 7.22.10 @ 12:12PM

"I Pencil" was written by Leonard Reed.

Dave Thomas| 7.22.10 @ 3:56PM

If you choose to ignore the truth in what Friedman it's a free world. Friedman championed freedom above all else and felt that the government that government least allowed individuals the most freedom. I can't see how anyone could not want that, but what do I know.

grant1863| 7.21.10 @ 8:24AM

Hopefully that's why his picture is on the column header. A note in the column would have been nice.

Indiana Alex| 7.21.10 @ 8:24AM

Tell the Fed to stop paying interest to banks on reserves held at the Fed.

They may then resort to lending in order to generate income.

There, problem solved.

Troy| 7.21.10 @ 8:44AM

Is it logical to listen to someone who says "Don't listen to economists" and then says "I'm an economist"? I think we're getting the Liar Paradox that Epimenides accidentally created about 26 centuries ago.

Alexandra| 7.21.10 @ 10:27AM

According to your logic, only people who have never touched drugs should be counselors for addicts. The fact that Mr. Young is an economist means that he can relate to what other economists are doing and saying. Perhaps you'd rather have an expert on cleaning supplies write an article about the topic.

Ellis Wyatt| 7.21.10 @ 8:47AM

Adam Smith never would have made it in Hollywood, but time and again his theories are proven correct. The Krugman's of the world will be long forgotten.

John W.| 7.21.10 @ 9:25AM

Mr. Young,

Thanks for the essay.

I have one, minor, quibble. Your assertion is that the problem is economists, not economics. I suggest that people who steep themselves in leftist ideological cant lose the ability to comprehend economics. Thus, Mr. Krugman, to take one example, is not an economist. He is a leftist ideologue, fully qualified to describe macro- and micro-economics in his fantasy world, but completely at a loss in understanding the give and take of economic activity in this one.

Regards.

Fred Taylor| 7.21.10 @ 9:56AM

In the "golden age" of soap opera the serials were written by "Frank and Anne Humert" The actual writer was a woman who had won many typing contests. Later at Orwell's Ministry of Truth (modeled on the BBC) stories were all produced by machines. (Winstead's lover was a writing machine repairer). I believe that Word Processor Manque are producing ObamaCare ,Sarbox,andFranksDodd automatically with no human input or intervention.

Tim*| 7.21.10 @ 9:57AM

Economist Young , Heal Thyself First .

" In late 2009, the Competitive Enterprise Institute reported a budget gap of at least $450,000 [12] and the loss of its profitable Center for Risk, Regulation and Markets to the Heartland Institute. Shortly thereafter, CEI reported a year-over-year decline in its program spending coupled with a large increase in its fundraising spending. As a result, the website Charity Navigator cut CEI's four star rating to two stars. CEI also contracted its web presence significantly in the wake of its financial ills leaving sites including controlabuseofpower.org, ethanolfacts.org, and enjoybottledwater.org dormant."

Alexandra| 7.21.10 @ 10:17AM

Tim, attacking the messenger when you don't like the message is getting a little old. I've read your comment twice and don't see a single relevant word about the article or the points made.

Go pick up your pay check from whatever attack dog you work for and head back to your mom's basement. K?

Tim*| 7.21.10 @ 11:07AM

Gee Alexandra , we are experiencing an extended recession because Obama & Bush before him didn't allow the Free Market to correct the situation . Instead they threw tons of taxpayers money at failing enterprises .
Aaaaand , now the inmates , Bawney Fwank & Chris Dodd & The Boys are running The Insane Asylum .

That's why Keynesian economics is a failed economics .

Got It !

Alexandra| 7.21.10 @ 11:17AM

See Timmy? You actually can make a valid point. Your mom must be so proud. And mocking people's speech impediments really punches up the quality of your work. Or am I "escalkating?"

Tim*| 7.21.10 @ 11:19AM

By the way , Alexandra , you owe me an apology.

You got a loose cannon hair trigger mouth .

Alexandra| 7.21.10 @ 11:32AM

You mean hair 'twigger'? I, too might have a speech impediment. You never know. Why don't you re-read your first comment. And second. And third. You do kind of make yourself a target. I'll take back the mom's basement remark if you'll learn to actually respond to content rather than attacking an author and organization. Howth that thound?

Tim*| 7.21.10 @ 11:36AM

You got more than a speech impediment Chubby Cheeks .

Alexandra| 7.21.10 @ 12:10PM

:)

Tim*| 7.21.10 @ 12:41PM

(.) (.)
( )

Tim*| 7.21.10 @ 12:44PM

Alexandra After Her Nose Job .
(.) (.)
( )

Alexandra| 7.21.10 @ 12:52PM

:)

Tim*| 7.21.10 @ 1:06PM

We aims to make ya chuckle .

You are my new friend .

R Martin| 7.21.10 @ 10:07AM

What Mr. Young and others above have failed to mention is that economics is based entirely on the "rational man" theory, i.e. what would a rational man do in a given situation. For example, he would buy more pencils when the price is low than when it is high. That is why supply side economists have long argued that when taxes are low business investment increases because investors, behaving rationally, know they will be able to retain more of the fruits of their efforts--resulting in economic growth and high employment. And, of course, history has shown those economists to be correct. Unfortunately current government policy is to raise taxes and burden the economy with restrictions and regulations while pursuing some nebulous redistribution of wealth philosophy. Those economists who condem such policies as counterproductive are always correct and should be listened to.

All the people in the Country Party meet the definition of rational men.

BZ| 7.22.10 @ 11:40AM

"economics is based entirely on the "rational man" theory, i.e. what would a rational man do in a given situation"

This statement is false.

Autour du Rocher| 7.22.10 @ 1:30PM

What we should really be asking is:

"What would Jimmy Buffett do?"

Alexandra| 7.21.10 @ 10:09AM

I understand what you're saying. But sometimes economists make things too complicated and forget about using commonsense. For example, if you have a country running up a huge deficit and finds it necessary to borrow more money from the loaning country in order to pay the interest on that debt, just maybe one should cut back on spending.

Not too complicated. And not hard to understand what the consequences will be if the borrowing country doesn't stop bleeding money like Russian royalty.

Clinton nee Publius| 7.21.10 @ 10:25AM

This article points to a larger issue and question pertaining to the utilitarian nature of mainstream economic theories to real-world settings. In the modern era we have witnessed the liberal-progressive religious movement that worships the failed pronouncements of Keynesian Economics. We have watched liberal and conservative bow before the monetarists only to find that the price of money and the velocity of money in the economy didn't have a big impact - even when the Federal Reserve lowered its benchmark interest rate to 1.00%.

The real question is why are we pursuing these obviously discredited theories of how our economy operates and how we should conduct fiscal policy in light of these findings. After nine (9) years of research, I have concluded the so-called "mainstream" economic theories only exist to sustain the idea that fiscal spending is somehow a benefit to our economy and must be maintained at all costs, because; the people who make these pronouncements benefit from the redistribution of wealth that fiscal policies sustain.

Lovellian economics states that fiscal spending can never be a stimulus to the economy because all spending must have a source - and in our current economic society that source is the productive side of the private-sector economy. This means that to stimulate the productive side to be more productive, government must first penalize it (by taxing it or borrowing money from it) before it can create a fiscal stimulus. This is the most extreme example of the non sequitur that exists today. It cannot be so. For those who would like to believe that government spending is the answer, the test would be the increase of benefits on scale. This means that the governments that spend a higher percentage of the economy's output would be expected to generate the highest output over time. This would support the idea that socialist and other command economic systems (where government spending is the vast majority of economic activity) would outperform other societies. If this were in fact true, then Cuba would be vying with Argentina for the largest economies in the Americas and North Korea would dominate the Asian economy. The world's largest economy would be that of the Union of Soviet Socialist Republics and China would have the highest per capita income.

None of these postulates are true.

Lovellian economics is heterodox economic theory in that it focuses on creating sustainable solutions for fiscal spending and the organization of the economy, as theoretical studies and after-the-fact analyses have proven to be of little worth in a time where we need real answers. Lovellian economics provides real answers for ending the threat of recessions forever, for providing a source of unlimited spending for government, restructuring our economy so that government corruption is no longer possible and ending the tyranny of Wall Street over our lives with a completely new kind of commercial banking system and central banking system that ends our fears of bubbles, inflation, fiat money, systemic unemployment and unfunded government mandates that have robbed our society of the opportunity we all seek.

This article points to the truth; if there are no practical benefits of these so-called mainstream economic theories, then what good are they?

Ryan| 7.21.10 @ 10:47AM

"Lovellian economics provides real answers for ending the threat of recessions forever..."

Which makes it partially invalid.

Recessions occur in all economic systems.

Clinton nee Publius| 7.21.10 @ 11:17AM

The real secret of Lovellian economics is to structure the private-sector economy so that government is an exogenous stakeholder to that economy. This means that the structure results in all government spending being a direct stimulus ("new money") to the private-sector economy and all of the appropriations come as a result of applying a stimulus to the demand schedule for capital investment.

By definition, every recession is caused by a reduction in capital investment to a point where current employment and output are no longer sustainable.

Accordingly, if you never want a recession to take place, then you would contrive a solution that results in a constant stimulus being applied to the demand schedule for capital investment, thus making a recession impossible to be created because the key condition precedent has been removed from the schedule of causal events.

That's why Lovellian economics works and is also why you should go look in the mirror and realize you aren't any smarter than anyone else; in fact, you are like those people who read the telegram about the Wright brothers' flight on December 17th, 1903 and flapped their arms and laughed, saying it was impossible for man to fly.

Like all true narcissists, your ability to judge matters is clouded by your desire for a corruption by which you gain and one of the great things about Lovellian economics is that it eliminates the ability of people like you to corrupt our society or economy ever again and it does this without anyone having to lift a finger. Like the solution for recessions, the end of people like you is a structural solution that provides a permanent outcome.

Ryan| 7.21.10 @ 2:32PM

Riiiight.

"Desire for corruption."

Way to win over people by implying motivations that don't exist.

When and where has it ever been tried and worked?

Does it take into account the Law of Unintended Consequences?

It's an economic theory that claims to fix everything. I've heard that before.

It appears to assume something that is dumb - rational behaviour on the part of individuals, corporations, and government.

Doesn't happen. Never has and never will.

Clinton nee Publius| 7.21.10 @ 4:24PM

Your motives are obvious, you want to protect the status quo because you are a corrupt, liberal-progressive dirt bag who only survives in this world by sucking off of the rest of us and your lack of ability to reason, understand basic macroeconomics or logic provides the proof that you must have attended the right school, have the accepted thoughts and the right network. I'd wager you never created anything in your life that was given to you by someone else.

You obviously don't understand Rational Choice Theory as you probably were either jerking off in class or high on drugs. Rational Choice Theory states that all parties act in their self-interest first and always. You wouldn't know this because - being the stupid, illiterate and arrogant parasite that you are - you are part of the crowd that believes the laws of mathematics don't count or liberal economics (and I am here to tell you they do, buster), that Rational Choice Theory doesn't apply - and ask your commie buddies in Russia, after 72 years of complete failure of liberal-progressivism it always applies and that somehow - you can spend your way to prosperity.

You have no understanding of this subject and showed up here to try and show us how clever you can be when in fact all you are is another stupid cockroach who needs to be neutered for the benefit of our society.

When you get a brain, come on back and post something else. I enjoy beating the fire out of you and I have a feeling you like it because - being the loser you are - you're used to the division of labor.

Kiss, kiss, comrade.

Ryan| 7.21.10 @ 4:56PM

Someone's new around here.

If you ever read anything I posted, ever, you would probably see that I am nowhere near left of center.

And you didn't answer several questions.

Where and when has your theory been applied?

Does it take into account the Law of Unintended Consequences?

The theory also appears to have a critical flaw - that it assumes that government, corporations, and individuals aren't stupid and don't make dumb decisions. It appears, at least at face value, that is believes that Rational Choice Theory doesn't take that into account, when it essentially does.

Systems may be perfect. People aren't. It will break.

Clinton nee Publius| 7.21.10 @ 5:12PM

I'll throw you a bone. The Law of Unintended Consequences isn't an economic principle, while Rational Choice Theory is. You are headed down the "walk to work or carry your lunch" argument that most liberal-progressives seek to use as a distraction to allow them to dissuade attention from the facts of life.

Like gravity, Rational Choice Theory isn't a good idea, it's the way it is. Whether it is the planet, Mother Nature, sports, business or units of government, Rational Choice Theory applies to all parties at all times.

The Law of Unintended Consequences is a bit of conventional wisdom that applies to the liberal-progressive movement in its entirety, because; the liberal-progressive movement isn't founded on sustainability - it's founded on the principle of a criminal conspiracy where the co-conspirators (that would be the group you are a member of) agree to sustain the conspiracy of using the color of authority to steal people's money and keep a portion of it for themselves. The simpleton explanation would be if the Sheriff of Knottingham turned into Robin Hood.

One of the key issues in macroeconomics is corruption of outcome. Corruption of outcome is caused as a result of a systemic design failure of the organization of the markets, the administration of fiscal policy or the means by which fiscal policy is conducted.

For simpleton liberal-progressives, this means that if the macroeconomic system you are seeking to create is not self-sustaining AND self-regulating in nature, then it will become a target of government regulation (and by definition, all government intervention in the economy is a corruption) and it will also have the addition consequence of causing the economy to act in a cyclical manner due to the biases that are introduced into the system (for which the system will treat as if they are stakeholder inputs acting in accordance with Rational Choice Theory).

The difference between what you think you believe and what is in fact known is that Lovellian economics offers the only solution that is also self-sustaining and self-regulating and your attempts to come to grips with it using a crude and intellectually-bankrupt argument pertaining to the Law of Unintended Consequences is the same as trying to undertake dentistry with a power wrench.

Once you have done some real work come on back, comrade.

Alexandra| 7.21.10 @ 6:08PM

How refreshing. A commenter heaves insult after insult at a writer whose work he hasn't followed, and the writer being insulted responds with logic and dignity, managing to avoid a single personal slur in return.

I think I saw the words "intellectually bankrupt" in Publius' argument somewhere. It was kind of hard to maneuver my way to his point through the minefield of personal attacks. If you can't make your point without the attacks, I suppose you are intellectually bankrupt.

Oh, dear, was that an attack?

My bad.

Ryan| 7.22.10 @ 8:51AM

Again, you're painting me as a leftist when I am anything but. You're also attempting to be demeaning intellectually and verbally.

How does that win me over? How does telling me that I'm stupid convince me that I am wrong?

You're also using an economic theory that doesn't have a lot of clout. Yes, you may have spent a long time studying it, and I'm the first to admit that the big boys can be wrong (as with Keynesian economics), but there's an issue with you're pet theory.

No one else is talking about it. All I see on google are your posts to various web-boards. It doesn't make you wrong, but it does question your credibility at present.

My main problem is that you are treating this theory as a panacea.

The human experience is that there is no such thing. No one cure for economic, physical, emotional or any other woes.

The other part of the human experience is that we are imperfect creatures. We make mistakes. We make stupid decisions. We make good systems of government - like the USA - and we corrupt it.

We are also limited. I bring up unintended consequences not because I am some whacky leftist, but because that's the way the world works. We don't know all the consequences of our actions, of all our pet theories.

Again, I ask the question - where has your system been tried?

If you want to find something that helps fix people, don't look to what happens with our money. There's NOTHING in this world that makes things right.

Look to the Gospel. Look to eternity.

Tim*| 7.21.10 @ 10:27AM

Inquiring Freemen May Wanna Compare :

Austrian School Economics , Chicago School Economics , Keynesian Economics .

While sometimes appearing counter-intuitive economics can be broken down for We ,The Great Unwashed .

The Tea Party Rebellion Escalkates .

104 Days to November 2nd .

RCV| 7.21.10 @ 12:40PM

The Tea Bagger Implosion Escalkates!

Tim*| 7.21.10 @ 4:27PM

More Fruit Talk By RCV ObamaBoy .

Louis Jenkins| 7.21.10 @ 11:38AM

Economics- the science of reading tea leaves. The problem is our august leaders listen to the Economists, and then go off on a tangent writing and passing laws that, for the most part, don't work or negatively impact the economy. A bunch of Einsteins. We should be so blessed.

Ross Kaminsky| 7.21.10 @ 12:24PM

Mr. Young should have given credit for the pencil metaphor for the man who made it famous, at least within economic circles, Leonard Read, who wrote "I, Pencil" in 1958.

It remains one of the greatest (and shortest) economic essays of all time:

http://fee.org/library/books/i-pencil-2/

Doug Galt| 7.21.10 @ 3:20PM

Thanks for the link to this wonderful gem.

William R| 7.21.10 @ 12:53PM

The Austrian economist predicted the financial meltdown.

http://www.ronpaul.com/2008-09.....july-2002/

Adam Woodard| 7.21.10 @ 3:24PM

I'd say people are better off studying the basics of Austrian Economics, where there is no alchemy of government stimulus. Just plain ol' human action.

Who predicted the Great Depression? The Austrians. Who predicted our current depression? Austrians. Who is predicting our future currency crisis? Take a guess- it's not Bernanke.

dean| 7.22.10 @ 2:09PM

Agreed, we need more Mises and Hayek.
Want your children to learn about them from the best?
Send your kids to Hillsdale College

John Navratil| 7.21.10 @ 3:43PM

Excellent article, Mr. Young.

In your spare time would you mind doing a little moonlighting as a weather scientist?

Ted| 7.21.10 @ 3:47PM

"Let's go back to our humble friend, the pencil. They're cheap. They're everywhere. But nobody knows how to make one. It is mentally and physically impossible. Think that through for a minute. "

Really? Nobody knows how to make one? Perhaps that would be an accurate statement if you said not everyone knows how to make them. Saying noboby knows how to make a pencil is inaccurate because.... We have pencils.... So someone does know how to make them.

Dan| 7.21.10 @ 4:40PM

Way to steal a Rustici lecture Ryan. Not that I haven't done the same myself.

Answer for Ted| 7.21.10 @ 4:48PM

The point you have missed Ted is that no one has all the skills that are involved in making a pencil. For example, a chemist may understand the processes necessary to create rubber, but he does not know how to put together the tractor that hauled the trees needed to form the body of the pencil. Take a minute to read Leonard Read's full essay. His point is that in the market, it's fine that no one knows how to make a pencil. Everyone engages in their own job not out of charity for the pencil buyer, but for their own self-interest in acquiring money. Be it the chemist or the woodsman or the factory worker, none could honestly claim they can make a pencil. But they have been brought together by the demand for pencils to perform this task. And if something as simple as a pencil can not possibly be understood or created by one person, how much more ridiculous would it be for someone to claim they understood the workings of the market at large. The large point he is making is be wary of economists claiming they have the economic cure-all, just as you are wary of a snake oil salesman.

Ken Royall| 7.21.10 @ 6:43PM

I don't think the author of the article knows every economist, so to say none of them predicted this meltdown is not a credible statement. Peter Schiff is not an economist per se, but he certainly seems to subscribe to the Austrian school and his predictions were quite prescient in regard to the meltdown.

Tim*| 7.21.10 @ 6:50PM

Indeed , Young purloined Leonard Read's Work .
Leonard Read ,The : I , Pencil author was an Acolyte of Adam Smith ( Wealth Of Nations ' Invisible Hand Theory ) and Frederick Hayak (Road to Serfdom ). He founded The FEE .

polo shirts| 7.21.10 @ 9:53PM

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Howard| 7.22.10 @ 8:46AM

OK, so let's see if I have this straight. Ryan Young does not understand anything that is going on and so let us not trust any other economist lest Mr. Young be left all alone in his ignorance.

Pat Fields| 7.22.10 @ 3:23PM

All anyone needs to know about economics today is that the current system of virtual 'money' is fundamentally self-destructive.

'Money' is issued at compounding interest. Where must the interest come from? Only one place ... issuance of further 'money' ... at compounding interest. Ad Infinitum. It's this reverberating, reciprocal co-generation of 'money' and interest that make it a Maw that will grow uncontrolably until no more surplus of productive capacity exists to substantiate the interest service.

Since the entire world is addicted to this financial heroin, it's doomed to economically implode unless all banknotes are converted to their residual real value expressions in some sort of specie.

In the case of the US, since the Fed's Notes have depreciated 97% since inception, the would convert to a 10 gram copper piece that would then trade seamlessly on a par.

The chief advantage to making this switch over, is that the 'coppers' would issue interest free at a cost of production alone and the economic foundation would again operate on rationality!

B.| 7.23.10 @ 5:44PM

I too wondered where the credit to Leonard Read's "I, Pencil" was. But I guess most of the readers targeted by the article wouldn't know who Leonard Read was, and probably wouldn't care anyway. Perhaps the aim was to keep the analogy as simple as possible, and to not include extraneous facts and sidenotes.

But since we're on the subject of treasured economics analogies, allow me to mention Bastiat's broken window. Personally, I prefer Henry Hazlitt's narration of it (being the basis of the also classic, "Economics in One Lesson") even over the original.
Here's the entire book online:
http://jim.com/econ/contents.html

DaveT| 7.25.10 @ 9:14AM

Glazier's fallacy--SO great. Memorably enacted by Krugman when the big, big window-shattering happened in lower Manhattan a while back. That guy has no clue, at all

weddingdresses| 6.23.11 @ 5:49AM

Indeed , Young purloined Leonard Read's Work .
Leonard Read ,The : I , Pencil author was an Acolyte of Adam Smith ( Wealth Of Nations ' Invisible Hand Theory ) and Frederick Hayak (Road to Serfdom ). He founded The FEE .

Adult toys| 7.4.11 @ 3:33AM

l like the space.support.
thank you.