Social science, pulled from one side to the other by those who prefer to see it as more science than social, and vice versa, economics has a divided library. There is no single way to approach this vital and slippery matter related to the management of scarce resources, although there are unquestionable basic principles.
The Chilean lawyer axel kaiser has chosen to walk the path of liberalism. Doctor of Philosophy from the University of Heidelberg, director of the Friedrich von Hayek chair at the Aldolfo Ibáñez University in Chile and senior fellow at the Atlas Center for Latin America based in Miami, revealed in his latest book, the street economist (Ariel), 15 economics lessons “to survive politicians and demagogues”.
The author confesses that this book is the fruit of many years of reading, following in the footsteps of economists such as Hayek, Ludwig von Mises, Joseph Schumpeter, Deirdrie McCloskey, Milton Friedman, Frederic Bastiat, James Buchanan, Henry Hazlitt, Jean-Baptiste Say, Jesús Huerta de Soto, Adam Smith and Israel Kirzner. Then he read Karl Marx and John Maynard Keynes, only to corroborate, he assures, that the previous ones were right.
The desire is clear: to leave behind the superstition that surrounds the economy, the science that is the axis of our lives and that, however, ends up being the least studied by most people. There is something that is frightening, and Kaiser is willing to show that matter is accessible, that its essence can be understood by going, little by little, from minor to major.
The 15 Economics lessons are as follows:
1– To work is to live. The author focuses here on the basic notion of the scarcity of resources and the urgent need to obtain them in order to have a decent existence. So you have to take action. Only work, in all its forms, will allow us to solve this original equation. Solved this primary material situation, such as obtaining shelter and food, humanity was then able to display other virtues such as the arts, spirituality or sports. “A good street economist must take into account that one must always work, and not just in anything, but in productive tasks. It is about carrying out work that creates or serves to create goods or services that others demand, because only that will allow the person who produces to acquire part of what others produce in order to live”, he points out.
two– You can only live from your own work or someone else’s. The notion of capital and investment versus the structure of a parasitic State begins to take shape in the text. The concept of “social rights” emerges, the obligation for the state apparatus to respond to the unsatisfied needs of society. And, in this context, taxes appear, a scheme that the author considers a confiscatory mechanism of private wealth. Tacitly, Friedman’s aforementioned phrase appears: “There is no such thing as a free lunch.” The tax pressure, in its intention to finance these rights, ends up suffocating the incentives for production. Says Kaiser: “If there are more and more people who prefer to live off what others produce without requiring any effort, then the incentive will be not to work, but to wait for someone else to work for them.” And he adds: “The street economist knows that taxes must be moderate; otherwise, production will decrease and society will be impoverished”.
3– Supply is demand and demand is supply. The first palotes have already been traced. There is a vague idea hovering over the book. It must necessarily land in a space where the exchange of goods and services takes place. Then the concept of market arises. “Demand and supply are two sides of the same coin: every supplier is at the same time a demander and every demander is at the same time a supplier”, the author emphasizes. In the lubricated gears of the capitalist system, Kaiser emphasizes, the subsidy scheme distorts the economy, affecting society in general. It also incorporates the problem of inflation from a monetary point of view, and clarifies: “A good street economist understands that the rise in prices after an increase in the monetary mass is inevitable, since there will be more money chasing the same amount of goods” .
4– The one who exchanges profits. Kaiser addresses the issue of profit, emphasizing from the beginning its subjective nature and rejects the negative connotation given to the word from the socialist camp. After this concept, he bursts into the idea of price, a precious clockwork mechanism that keeps the entire economy in harmony. He also emphasizes that those who benefit from social rights also profit, although they receive something but do not give anything in return. “Demanding free education implies claiming unilateral profit because a benefit is obtained (something valued) but without giving anything in return. Hence, gratuity can only occur through the confiscation that the State makes through taxes”, he emphasizes.
5– Productivity determines our income. The increase in the level of production of goods generates a surplus, and these margins allow the generation of employment. Through technology and investment, the capitalist will be able to work less and earn more since others now work for him, his employees. “A good street economist never prefers equality to prosperity because he understands that what matters is multiplying resources for everyone and not preventing a few from having more than the rest”, the author underlines.
6– The value is subjective. At this point Kaiser takes up the idea, basic to the development of liberal economic thought, about the subjective condition of value and the singular relevance of the price system. “Simply because the source of value is in people’s minds it is subjective and not objective. In other words, things are worth only because others want to have them, as simple as that”, writes the Chilean. He then generates a contrast between the essence of the liberal view and the Marxist dogma, mainly with regard to Goodwill, and ends up discrediting the so-called Objective Theory of Value. “Value derives from a combination of utility and scarcity,” he emphasizes, dismissing the idea that the labor factor is preponderant.
7– Salary is paid by consumers. It is clear, at this point in the book, that capital is the basis of economic progress. Kaiser emphasizes that wages, the income of workers, is tied to their productivity, and scares away the notion of exploitation by employers. He also disqualifies the Minimum Wage mechanism since it “condemns informality.” He charges against the fallacy of fair wages and remarks that, in capitalism, efficiency involves creating more with less.
8– Capital is savings and applied ingenuity. Little by little the reader is taken to deeper waters. Then comes the time to analyze and understand the role of capital goods and, inevitably, the concept of savings, understood as underconsumption, is addressed. “Capital is not accumulated labor as Marxists maintain. It is individual savings and ingenuity applied,” he explains. The keyword happens to be Incentives.
9– Money is not wealth. The notion is simple: the monetary flow is only a necessary means to carry out the mechanism of exchange within capitalism. It supplants barter, a primitive stage of trade that, due to its limitations, put a brake on growth and development.
10– Prices are information. Considered as subjective values, the author returns to the fray in this chapter with the idea that “prices are mechanisms for transmitting information about the resources that are available in the economy.” Kaiser points out that “free prices are the main beam of the entire production chain”, and flatly rejects price control schemes, intended to put a ceiling on increases.
eleven– Competition is collaboration and discovery. The free trade scheme, in which the actors weigh advantages and disadvantages, ends up enriching society as a whole. “Competition forces innovation because consumers will simply choose who serves them best and at the best price,” Kaiser says. Whoever fails to compete because it is inefficient, loses and may disappear from the market”.
12– The employer is a social benefactor. Quixote against the prejudices that society erects against businessmen, the author emphasizes the special talent and unique role that businessmen have in the capitalist economy as generators of wealth. The division of labor, he warns, has been key to world progress.
13– To innovate is to destroy. In the final section of the book, Kaiser appropriates an already classic concept such as the one that capitalism is, neither more nor less, a process of creative destruction. Each innovation, each improvement, buries its predecessor, often taking it out of the market. Far from being painful, the movement guarantees the progress of society.
14– Trade enriches us. The banner of free trade, the cornerstone of the capitalist system, is raised and waved. State protection of inefficient sectors will end up being harmful to the entire system. “Trade protectionism is absurd because it makes it impossible for us to benefit from the innovative talent of others,” he says.
fifteen– The luxuries of today are the necessities of tomorrow. The free flow of production must be guaranteed for the proper functioning of the system and for profits to flow. What at first may be considered an eccentricity could soon become a key tool for society. Only commercial freedom will allow the movement to make the journey from elite to mass.
Finished the 15 basic lessons for street economists, axel kaiser concludes: “We do not need an authority or a central power that is telling us what we have to do or intends to direct our activities to enrich ourselves.” And he adds: “Basic conditions of order that provide us with the necessary peace so as not to fear for the integrity of our lives and possessions, and a culture that encourages and rewards success, is all that is required to create progress.”