Explanation of the Economy

Many people are disturbed by something called "the economy", which is always misunderstood but clearly accepted as being caput at the moment. I shall explain how it works. In a nutshell the economy is an abstraction. It is neither a particle nor a wave. It is the other thing, a system. Right now it is a flawed system.

There are two kinds of economic systems. One is called microeconomics and the other is called macroeconomics. Microeconomics is where you have a maximum of two islands and two products, usually coconuts that grow best on one and clams that grow best on the other. There is a strong and logic-based science that guides the people on these islands toward certain mutually beneficial agreements that make all the islanders better off. These agreements involve the clever practice of trading some of what one island has for some of what the other island has.

The science of microeconomics breaks down when the two products are not both food, but something else such as guns and butter. It also breaks down when a bully owns all the canoes, or when somebody eats the cow that makes the butter. Then it is no longer microeconomics but macroeconomics, sometimes called politics. These aberrations that degrade microeconomics into macroeconomics are accelerated by a special invention, the IOU (pronounced "I owe you") also known as money. Money pretty much drives the nail into the coffin for microeconomics.

Since we are stuck with macroeconomics, here's how it works. It works on greed. Do not be intimidated by the negative connotation this word has in normal parlance; it is a good thing in macroeconomics. If it were not for greed, we would all have starved to death when we finished eating all the clams and coconuts. The greed is that everyone wants the money and performs conniving manipulations to get it, sometimes even resorting to work.

The macroeconomic engine runs on hot air exchanged between two opposing greed driven groups. The first group (called the Haves) worships the earth's first man, Adam Smith, and his only begotten son, Will Rogers, who described the trickle down theory. The second group worships Adam's wife, Eve, who was thrown off the coconut island for eating a coconut from a tree designated by God as his own tree. Eve scraped by on a sandbar with nothing but sand and seaweed to eat. The followers of Eve are called Have-nots and they espouse a theory called the soak-up theory.

The hot air happens when the preaching starts. The Haves start preaching the trickle down theory which reckons that if you designate some money (like in a stimulus package) and give it to them it will trickle down to the Have-nots, creating jobs and income on the way. The Have-nots preach the soak-up theory which reckons if you give all the money to them it will soak up to the Haves, again creating jobs and income on the way. As long as one side has hotter air than the other, the engine will be driven by a law of physics called the Carnot cycle. (Named for Eve's son Sadi Carnot who was half brother to Will.) There is a physical limit to the Carnot cycle's efficiency. Not all of the flowing hot air can create jobs and income. A certain percentage of it turns into entropy which is a lot of hot air floating away in all different directions.

So why has the economy gone caput? Simple! The Haves' aggregate greed slowly caught up to the have-not's aggregate greed even though the Haves were greatly outnumbered by the Have-nots. This destroyed the temperature gradient and the macroeconomic engine ground to a halt. What can you and I do about it? Our best bet is to go back to an island and eat coconuts and clams while something called the market sorts itself out.