March 16, 2011

Economics is not a Mechanical Machine

I was shown this article written by Bill Bonner that captures the way the Economy works in any country and for every individual, much unlike any other mechanical machine... Its one of the best articles that captures the subject and so philosophical... I felt the author was echoing the Hindu way of life..
I am copying the part of the article in this post...

"An economy is not really like a machine at all. It is not a mechanical system. It is a moral system.
Yes, dear reader, it is a system that punishes sin and rewards virtue. It gives no one what he expects…and ALMOST everyone what he deserves. The “almost” is an important qualifier, to which we will return…

What do we mean when we say it “rewards virtue”? Well, that’s what it does. It rewards saving, thrift, hard work, innovation, honesty, thinking about others, self-discipline, creativity and all the other qualities you normally associate with decent people and financial progress.

As for sin, it punishes the obvious ones – greed, vanity, short-sightedness, extravagance, envy, laziness, lying, cheating, stealing, stupidity, self-indulgence…and so forth.

When the Fed creates money out of thin air, for example, it is a lie. It is a sort of fraud. It is trying to get something for nothing. It is distorting the facts and encouraging mistakes. It surely will be punished. When? How? We can take a guess, but it’s not for us to say….

Likewise, take a fellow who works hard and saves his money… Will he be wealthy? Again, we don’t know. All we know is that he OUGHT to do well…

So, we should return to our qualifier…it USUALLY works that way.

Some greedy bastards do get rich. Some lazy fools win the lottery. We never know for sure who will make money and who won’t.

Why not? First, because we’re not God. He sees things we don’t see…and He has his own plans that he doesn’t share with us.

Second, because there is sin and virtue IN THE SYSTEM itself…to which we are all subject. When the Roman Empire fell apart, and Rome was sacked by barbarians, even the most virtuous Roman probably suffered a decline in his standard of living. Not much he could do about it.

Why would a system that rewards virtue and punishes sin be so frustratingly unreliable?

Well, that’s just the way it is. It’s a moral system, remember. And moral systems do not make it easy for you. If all you had to do to get rich were to respect the moral rules it would not be a moral system. It would be a simpleton’s system. Everyone would follow the rules. Moral systems are more demanding. They require you to follow the rules without being sure what it will do for you.

As every theological thinker from St. Augustine to Billy Sunday has noticed, you can’t get to heaven just by following the rules. That would be too easy. Instead, you follow the rules…and HOPE to get heaven by the grace of God. Similarly, you have to follow the rules of an economy…knowing you might not get rich after all.

There’s no gaming the system. There’s no pretending. There are no quick fixes…no shortcuts…and no guarantees. And even if this isn’t true, you’re better off believing it anyway.

You have to love virtue for its own sake. And hate sin.

And keep your fingers crossed."

Brilliant read, isn't it?? Readers can read the full article here.


R Swaminathan said...

Can't agree more with Bill Bonner. Wealth has to be accompanied by moral authority over it. And that moral authority comes only if the wealth is gained by positively contributing to society.

Sometimes it can be argued that even if the wealth is unfairly accumulated, moral authority can be subsequently acquired by spending it for society's benefit. Like Robin Hood, who robbed the rich, but ensured that the wealth went to the poor. Take the example of Bill Gates. You could argue that he became the richest man in the world by creating an unfair monopoly over the Windows Source Code -- effectively preventing millions of poorer people to legitimately pay for Microsoft Software. However he is using all that (questionably acquired) wealth to pursue philanthropic activities. Justifiable? Difficult to answer. That will even justify corrupt politicians who claim to spend their wealth for the "people's" benefit.

Raji said...

Yes Swamy, your comment is on a highly debatable topic and a complete grey area on Ethics.. I guess, end of day, if one is really able to go to bed, happy, he/she had led a good life