A Fantasy Based Economy

Karl Marx gets little respect but he was the first economist to describe the business cycle. Karl Marx never explained why the business cycle exists for only one reason. He didn’t know. I do know and I am going to give the explanation right here and now.  I am fantasy free. That does not mean fantasy is bad. It only means it is a handicap based on what I am doing now.

Broad economic movements are based on a fantasy. As the fantasy is pursued economic growth takes off. The more exciting the fantasy the more robust the growth. Since robust economic growth is based on fantasy, the system always unravels. That is the business cycle. Things are great until a society runs up against a wall of reality.

This is a pattern that repeats over and over again. One great fantasy in economics is the notion that one group of people is intrinsically superior to others. This was the reasoning of ancient Romans. During the thirties, NAZIs in Germany fantasized that they were of a super race. With that reasoning Germany became an amazing economic power in just a few years. During the forties they encountered a wall of reality that demonstrated how wrong they were.

All fantasies are not that sinister. During the seventies, the United States faced a serious bottleneck in productivity. The country was in a serious recession. As the information technology era ushered in, the productivity of labor began increasing. That was genuine and organic. All sorts of fantasies were born on top of genuine opportunities. The internet changed lives and cut costs of doing business.  It was wonderful but in time the fantasy of all that eventually would be far exceeded what is reasonable possible.

This is the business cycle. The end of a fantasy driven expansion is not the end of the world. Free markets handle fantasy and the business cycle just fine, except there are no free markets in the world today. There is not one major economy that is more free now than when the current expansion started. All genuine economic growth is private and organic. Based on today’s situation, the kinds of periods of robust economic growth we have always known will have trouble getting started.

Prosperity comes from chasing dreams. The dreams can be real and worthwhile. Even when dreams are reachable, it is human nature to pile new dreams on older ones until all dreams become unreachable. That is the nature of the business cycle.

 

 

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About Fantasy Free Economics

James Quillian independent scholar,free market economist,and teacher of natural law. Who is James Quillian? Certainly I am nobody special, Just a tireless academic and deep thinker. Besides that, I have broken the code with respect to economics and political science. Credentials? Nothing you would be impressed with. I am not a household name. It is hard to become famous writing that virtually no one in the country is genuinely not in touch with reality. But, if I did not do that, there would be no point in my broking the broken the code. If you read the blog, it is easy to see that there are just a few charts, no math and no quantitative analysis. That is not by accident. Given what I know, those items are completely useless. I do turn out to be highly adept at applying natural law. Natural law has predominance over any principles the social science comes up. By virtue of understanding natural law, I can debunk, in just a few sentences , any theory that calls for intervention by a government. My taking the time to understand the ins and outs of Keynes General Theory is about like expecting a chemistry student to completely grasp all that the alchemists of the middle ages thought they understood in efforts to turn base metals into goal. Keynesian theory clearly calls for complete objectivity. Government can only make political decisions. Keynesian techniques call for economic decisions. So, why go any further with that? Fantasy Free Economics is in a sense a lot like technical analysis. Technical analysis began with the premise that it was impossible to gain enough information studying fundamentals to gain a trading advantage. Study the behavior of investors instead. Unlike technical analysis, I don't use technical charts. What I understand are the incentives of different people and entities active in the economics arena. For example, there is no such thing as an incentive to serve with life in the aggregate. In the aggregate, only self interest applies. It is routinely assumed otherwise. That is highly unappealing. But, I am sorry. That is the way it is. I can accept that because I am genuinely in touch with reality. Step one in using Fantasy Free Economics is for me to understand just how little I really know. A highly credentialed economist may know 100 times what I do based on the standard dogma. Compare the knowledge each of us has compared to all there is to know and we both look like we know nothing at all. There is always more than we don't know than what we do know. I am humble enough to present myself on that basis. Why? That is the way it is. I am not bad at math. I have taught math. What I understand is when to use it and when to rely on something else. Math is useless in natural law so I don't use it. While others look at numbers, I am busy understanding the forces in nature that makes their numbers what they are. That gives me a clear advantage.