The basics tenets of the economy

The Circle. Since decades, most clueless accuse economists to understand nothing. It is true that as in all professions, there are charlatans, astrologers and those preferring what is "fashionable" and mays "buzz" than demanding and often unpopular objectivity.  The others are never listened

Everyday, we collect poisoned fruit of a state that no longer plays its role and assumes more duties. The state is a crucial agent of the company as all of society -including its institutions and its economy- who suffers from the failure of a public sector which returns the monopoly in vital areas of our economy. And to interfere in the life of companies, the wanting to enact the "social" and to regulate the economics, state no longer has the means to discharge its essential and irreplaceable police, justice and security missions. Beyond the regrettable fact that rising insecurity increases the risk, and therefore the cost of economic activities, , the indictment of the authority concerned, the serious consequences for the fuel of training of individuals and their ability to work. yet while the Moscow trial ( 1935-196), caught some consequences, the Nobel laureate Kenneth J;Arrow yet very sensitive to social issues and equal opportunities said" " The socialist economy does neither democracy nor individual freedom. I had the naive idea that in the absence of capitalist class, there would be not interest in the operation of one class by another. It had become clear that this vision was not likely. The mysterious failure was the possibility that socialism, focusing the control of the economy in the state apparatus rendered the authorization or even period it inevitable [1]"

Another Nobel price, Milton Friedman, once said «What is extraordinary with the economics law is that all it laws actually in a page, but their simplicity has never been accepted by most people.[2]"

Finally, the professor James Bucchanan himself winner of the Nobel prize in economics, opened the meeting of the Mont Pelerin Society in Potsdam in October 1999 with these words:" "Anyone so little educated and intelligent knows that the liberal doctrine lies in the belief that it is primarily expending the domain of individual decisions that we extend of the issues based on collective projects that can best advance the society [3]"

French don’t like to receive lessons especially coming from American Nobel prize. It would be right to blame the Americans for holding secret the «recipes” for their economic growth. But this is not the attitude they have in reality. The results of economic science are known and moreover are common Knowledge.  But this is because one persists in France to be deaf to these fundamental teachings:  It is because in this blocked country they keep on willing to treat many folders (Pension, education, health, social protection, employment etc…) under the single collective angle that many of these files are now at an impasse.

It’s urgent to recall a few founding principles of economic science that sophisticated models as well as academic jargon  -as well as the official language of wood-  tend to forget by treating problems only with technical and specialized angle.

-Principle 1: Nobody spends someone else’s money as carefully as his own. It’s easy thus to be generous with other’s money while one tend to be rational with his own money.

Principle 2: The key of the raising of the standard of living is to develop savings, capital, education and technology training

Principle 3: In any voluntary exchange when they have accurate information, the buyer and seller are both winners; so an increase in trade between individuals, between croups or between countries is beneficial to both parties.

Precept 4: Given the universal reality of limited resources and unlimited asks, concurrency is a universal fact that can’t be abolish by governmental decree. But competition doesn’t exclude cooperation.

Principle 5: Since most individuals aren’t self-sufficient and almost all natural resources must be transformed to become usable, individuals – Workers, owners, capitalist, entrepreneurs etc..- must work together in the aim to produce goods and services of value. But the cooperation doesn’t exclude cooperation.

Principle 6: Differences of talent, intelligence, knowledge and property lead to specialization and comparative advantage for each individual, company or country. Wanting to do everything is inefficient.

Principle 7: Information about market‘s behavior is so diverse, important, changing and pervasive that it’s can’t be fully understood and calculated by a central authority. 

Principle 8: Profit and loss are the market mechanisms that indicate what has or doesn’t have to be product in the long term.

Principle 9: Do something implies to renounce to other thing what you have liked to do too.

Principle 10: Prices are determined by the subjective buyer estimation (request)and the subjective seller estimation (offer),and not by any production objective cost.

Principle 11: It always exists a dose of objective risk and uncertainty about the future, especially when people are free to make choices, learn from their mistakes and change their mind. What makes difficult any prediction on the future and any attempt to failure, at least in a society of freedom.

Principle12: The increase in wages on the long term can be achieved by greater productivity i.e more capital investments for each worker, the chronic unemployment is a consequence of the action of the government which sets the rate of pay above the market clearing level.

Principle13: Controls on prices, wages, and rents can’t benefit to society as a whole. In the end these controls may create shortages, back market, a deterioration in the quality and services. Free meals, that doesn’t exist…

Principle14: Deliberate attempts to depreciate the currency or to artificially lower interest rates, or to engage in easy money policies lead to inflation, cycles of prosperity/recessing and economic crises.

The money is an expression of wealth, it is not wealth.

Principle 15: The government must stick to what private companies can’t do. It must not engage in business that the private sector handles better than him or a fortiori,  prevent companies from doing what they could do at least as well as he  ( enacting a public monopoly, for example)…

The understanding of these principles doesn’t imply to have a PHC in economics. Economics is interested in how people organize, operate and evolve in society and how they reach others objectives by mobilizing resources. The consumer doesn’t make this or that decision because an expert proved it was optimal to do so, expert –competent-   concludes to this model that allows him to predict this out because he has observed consumers to do so.

But our leaders are still surrounded by experts considering that business located within the French territory must behave according to their models and their political choices. Hence the illusory claim to regulate the economy and format the society. May the State restore the conditions of freedom , may the State ensure the protection of human rights of property ( which is the liberty  to dispose of the fruits of his work) , of the freedom of movement and the freedom to work;  may State cease interference in social and economic  and there will be economics mechanisms to develop according to the precepts set out above.

 

1)      [1] In Feiwel,  g.(ed )(1987), Arrow and the foundation of the theory of economic policy, London, Macmillan.

2)      [2] The full text of this speech was published in summer 2000 in the Independent Review, quarterly magazine published by the independent Institute of San Francisco.

3)      [3] Idem