My Return to Publishing
I apologize to my regular readers for my extended absence. I have had a lot of accidents and mishaps over the last several weeks that have prevented me from writing regularly. The clincher, however, was that my computer crashed. I won’t go into much detail, but it was bad enough that I had to buy a new computer, install it, and reinstall all my software. I cleverly saved all of the data from my old computer. One never realizes how many wires, programs, and passwords it takes to get their system back up and running. The “downtime” led me to reassess some of my goals in my publishing activities. I will soon get back on schedule. I’m not yet ready to commit to a regular schedule, but I hope to make it more frequent than before.
I want to make it clear that this publication is more about clear thinking than about economics and free markets. I use free markets as my primary vehicle for demonstrating the importance of clear thinking. I’m offering a brief introduction to systems thinking to demonstrate how systems thinking can be used to examine more deeply some of the things you were told.
Politicians and economic commentators make many statements that you are supposed to accept without question. After all, they spent a good bit of time studying the subject. Regardless of your level of expertise, these subjects are too important to you personally not to spend a little extra time making sure that you fully understand them. Systems thinking provides you with a powerful tool to ask a few extra questions. I want to introduce the subject by discussing what is commonly known as “the broken window theory.”
The broken window theory is attributed to Frederick Bastiat. The title is derived from a story about a shoemaker who comes to work one day and finds one of his windows broken. He calls a glazier and has the glass replaced, which is done in relatively short order. The shoemaker has to spend a certain amount of money to get the class replaced. Many economists will look at this incident and say that’s good because now the glazier has more income, raising the income level of the economy.
Bastiat wants to point out that although the glazier will indeed make more money, one has to ask on what the shoemaker would have spent that money. Because of the expense of replacing the window, the shoemaker must delay his plans to buy new equipment for his shoemaking business. We cannot say with certainty whether the general economy benefits from the glazier’s income, or whether the shoemaker would have contributed more had he been able to retain the money to buy the equipment he needed.
Every economic activity consists of two parts: first, the price that one person must give up in the present to receive a good or service; second, the cost, which consists of what that person has to give up in the future.
Now, I would like you to connect to personal exercise. Take out your latest pay stub, or whatever record you have that shows your gross pay and deductions. Gross pay is the amount you negotiated with your employer at the time of your employment. Now, focus on your deductions, about which you did not negotiate with your employer. Think about the goods and services that you might have bought if that money had not been taken from you. To possibly get benefits in the future, don’t forget that you’re giving something up in the process. Which do you value more: the “benefits” from those deductions, or the consumer goods or services you could’ve bought with that same money?
These are the kinds of questions that I plan to address over the coming weeks and months. These are not questions just for economists. These are questions you must answer daily.
I will get back to the subject of systems thinking in my next publication.