Dear Friends,
It seems to me that if we look at the “economy” as an aggregate, it is an analog of an ecosystem. Individual markets and industries are like organisms in that ecosystem.
This organic way of looking at the economy and markets gives us the ability to contextualize the historic trends and events that have shaped our economy. With this insight we can then extrapolate into the future to try to minimize government’s unhelpful tinkering with the economy.
Take the Great Depression. In this period the Hoover administration poisoned the economy then compounded that toxic spill of regulation with anti trade legislation. Roosevelt then ran as a conservative claiming that he would back off on government spending and over regulation. After he won, he doubled down on Hoover’s foolishness, and kept the economy in the toilet with constant tinkering, regulation, tax changes and such unconstitutional acts as the NRA and AAA. Roosevelt continued to rain toxic waste on the economic environment until the Second World War. A war that was made inevitable by the anti trade tariffs and legislation that cut Germany from international trade while the German Republic shouldered the burden of the Treatise of Versailles‘s reparations. “When goods don’t cross boarders armies will.”
Markets are like organism’s in many ways. They are born, live some natural life span and then become obsolete and die. Buggy whips are the classic example. With the advent of the buggy, buggy whips were invented, to improve the driver’s control of his animals. The buggy whip saw a steady series of improvements, and eventually became obsolete when the automobile came into wide spread use. A market can get cancer as well.
The railroads are an example of industrial cancer. When the tracks were mostly laid. The railroad magnates began a trade war. This trade war almost bankrupted them. It’s now a well known phenomenon. Networks are especially vulnerable to this form of market cancer. They are expensive to build but cheap to maintain and use. When competition becomes mature it then must become monopoly or else begins to grow into perfect competition. Government legislation prevents monopoly so when perfect competition is established the profit margin is squeezed and squeezed until everyone in the industry is poor. From the magnate, to the laborer, destitution is universal. The modern airlines are another example.
I believe that this tool for understanding the economy and markets is easier for the average person to understand. With a better understanding of history and economics the electorate can make wiser decisions about our economic future.
