One does not need to be an economist to understand the need for robust economics. A rudimentary understanding of sports will do. The game of soccer, or most sports for that matter, deploys better economics than the self-proclaimed “economic experts” have prescribed for us.
Why not, you say?
We, in the private sector, failed too
Forget the problems with the government for a minute; our independent plans have not worked out that well. We must admit that the private sector’s lack of rational self-governance is why we failed. And that we consistently fail to respect the exploration of universal freedom.
As the arbitrage of innovation, Venture Capital is the youngest and prime (yet indeed not the only) example of a financial instrument left predominantly unregulated. And we made a complete mess out of it, with its subprime maelstrom digging a deepening hole of mediocrity. We cannot blame the government for that fiasco and the devastating effect of uniform deployment of risk on the sub-priming of innovation, resulting in the loss of socioeconomic integrity and value.
The real reason we fail comes from our lies. When we want to be honest and succeed, we must acknowledge that the (often misplaced) regulation deployed by the government is not the cause of our down-slide but the lack of rational self-governance by the private sector to prevent the government from stepping in. We must admit we don’t understand and deploy economics any better than our government.
Hence, it is high time to take a fresh look at what economics are supposed to do.
Back to basics
Economics, as its translation from ancient Greek implies, is a set of rules comparable to those in sports that control what game is being played. Let’s take soccer, the world’s most-played sport, as an example. First, nobody is forced to play soccer. Participation is optional, and any other sport employs a similar equilibrium, albeit with different rules. Few would question soccer’s lack of freedom, even though the game’s rules are pretty restrictive.
In the game of soccer, two teams meet up and collaborate to kick the ball with their feet to the opposing team’s goal. Lines in the grass restrict the range of motion by players; only the goalkeepers can touch the ball with their hands, and attempts to capture the ball must be aimed at the ball, not at the player. Many more rules in soccer restrict the freedom of players. Both teams and players must understand the game’s rules before kick-off. All the rules apply to all players of both sides equally, with the audience cheering on the players.
Three referees enforce soccer rules as players compete to score the most goals. Violations lead to free kicks and hand the ball to the opposing side. Yellow and red cards are handed out to the players who purposely violate the game’s rules, with a red card leading to immediate expulsion. Freedom in soccer comes from the ability to score more goals than opponents, and the winner of all games in a tournament is crowned that year’s champion.
Understood? Now, back to economics.
Rules of nature
Economics, in the broadest sense, defines the rules of life. They dictate how people in a civilized society interoperate and compete to achieve a result per their merit. Just like in the game of soccer, where players compete to let their ball-handling define their merit.
The first significant problem with our current economics (a derivative of “classical economics“) is that they are based on numbers rather than rules, as if the sum of goals in soccer indicates the quality of the game or the capacity of its players. Foolishness does not reasonably describe the acceptance of such metrics.
The second glaring omission is that we have never explained to all players the rules of the game of economics. What does it mean to participate in a “free-market”? What – if any – restrictions apply, and why? Hence, each participant ends up playing to their interpretation of the game of economics, which is likely to be highly selfish and bound to dismiss and damage the pursuit of merit by others.
New rules unearth merit
For over two hundred years, we have played a game of economics led by mindless formulas, wild behavior predictions, and without essential regulations. Except for the whistle by an occasional referee, who finally happens to notice the game is getting out of hand and feverishly starts handing out yellow cards without ever expelling anyone or questioning the game’s intent.
Of course, the term economics has gotten a bad reputation, for we have never deployed any of its preeminent rules. The game of soccer would get out of hand without any rules, too. As a result, we have severely tarnished the economic freedom of its participants and suppressed the exposure of their authentic merit.
A brave new world
As an innovative society yearning to control our destiny and success, we can and must do much better than the mess we created. We must stop pointing fingers at the government and prove that we are better at controlling ourselves. And thereby lead the government to the promised land we share.
New rules establish and renew merit. The merit already here is buried deep under the weight of an old economic religion. And while the implementation of our doctrine of economics is highly questionable, I would caution the doubters: the quality of our unexplored merit is not.