Sunday, October 30, 2005

The Invisible Hand and Other Halloween Horrors

Every day I punish myself by listening to Neal Boortz. I guess that makes me the Subversive Redneck Sadomasochistic Librarian. Every day he provides the public with his economic prowess which is considerable. At least, he says it is.

Now, Boortz is promoting his new book, cowritten with Georgia congressman John Linder, about the "fair tax" proposal. The Fair Tax proposal eliminates income tax and replaces it with a national sales tax. People get rebates of the tax up to the amount you'd spend on necessities at the poverty level, I believe.

I'm not here to promote or attack the idea of the fair tax, because I haven't read the book. But I am getting tired of right/libertarian media types shoving economic assumptions down my throat without bothering to mention that's what they're doing.

Neoclassical economic theory -- the theory favored by the right -- promotes "laissez faire"economic policy. That is, if you leave The Economy alone and stop mucking it up with government regulations, wealth will be maximized. Prices will go where they ought to, and everyone will have equal economic opportunity as long as they're willing to work hard. All this is due to something Adam Smith called The Invisible Hand (shiver!).

I majored in economics and philosophy as an undergrad, so I had to take a whole bunch of econ classes. I don't remember much, but I do remember a few things:

First, I remember that neoclassical economic theory operates in a vaccuum (particularly in the oversimplified form presented by wingnuts), but the real economy doesn't. For example:

1. Noeclassical theory tends to assume a perfect information flow between buyer and seller, especially for commodities. In other words, we know as much as the oil companies do about what the price of gas ought to be.

2. Classical theory tends to assume perfect "elasticity." In other words, prices go down and up with equal ease.

3. Classical theory tends to assume that people will act rationally to maximize their scarce resources.

The most unfounded assumption -- and the most irritating -- isn't made within economic theory itself, but by commentators who claim to know about such things. And that assumption is that there is one, and only one, valid theory of economics. And wouldn't you know, it's the one that favors corporations. Basically, these guys take for granted that neoclassical economics constitutes The Truth. Indeed, Boortz seems positively cultish about it. He doesn't even acknowledge that there's any intelligent disagreement on basic economic theory.

But, in fact, he's only giving half the story (what a shock!). The fact is, some economists think that the economy just doesn't work that way. And therefore, they refuse to treat the economy as something sacrosanct, something that mustn't be touched.

And these economists don't just blow hot air. If you read their articles, you'll see just as many incomprehensible charts and graphs as you will in the articles by the neoclassical types.

These other economists point out things that the conservatives don't usually mention. Like, Reagan spent a fortune on the military; so while conservatives spout off about Reagan's success with trickle-down, supply-side, neoclassical economics, Reagan was actually instituting Keynesian policy.

During my college days, I concluded that all the charts and graphs are complete bullshit, no matter who is using them. I suspect a lot of economists use them just because they think they have to.

My favorite econ professor (who also thought the charts were bullshit) used to describe laissez faire policy as "the Lazy Fairy." Why, just put it into the hands of the lazy fairy and it will all turn out just great!

Or, as he also put it, "let the Lazy Fairy do his thing, so rich and poor alike will be able to sail their yachts around the harbor."


  1. I don't really know economics. It all seems like a crapshoot to me. But I do know rednecks. As a former redneck myself (from the cornfields of north-central Indiana) I feel compelled to bloviate on the subject.

    First, the origins of the word redneck. It refers to farmers who spend their summers riding around on tractors. Back in the day, tractors didn't have air-conditioned, GPS navigating, satellite radio equipped cabs. Farmers were left uncovered to fry in the sun. Their necks reddened as did the backs of their hands (but not their fingers which were wrapped around the steering wheel of the tractor). Hence, farmers became known as rednecks.

    I can only imagine that the word eventually came to be identified with people who shared the farmer's mindset - conservative, somewhat simple and relatively uneducated in the ways of the world. I am not knocking farmers - I happen to know that they are really very versatile, actually quite bright and very hard working - I am just trying to explain the origins of the word.

    So, today, the word redneck often refers to the NASCAR race goin' (or watchin'), Budweiser drinkin', Pall Mall smokin', twelve-dog havin' s**t-kicker with seven teeth who lives down the street with at least one car up on blocks in the front yard and a carbuerator disassembled on the kitchen table.

    Now, I have never met you. I only know you by what you post to this here blog. But, do you really want to be a redneck?

    Maybe you do - who am I to say? In a traditional sense, it might even be considered a romantic ideal.

    I will always consider you the Subversive Samurai Librarian, though.

  2. Bernice Stelle Autumn Drake4:34 AM

    Read by Bea.