Chapter 6, "From Beatnick to Business Major,
So far, from an examination of the basic principles of economics, we've learned that things are scarce. We knew that. Fortunately, the less-basic principles of economics are more interesting.
A thing is worth what people will give for it, and it isn't worth anything else. If you have some shares of Apple Computer and you go into the NASDAQ market offering those shares for $1,000 apiece, you may be brilliant. Apple stock may be worth $1,000, easy. And all the NASDAQ customers may be idiots for buying Apple at a mere thirty dollars. A Macintosh is a much better computer than an IBM PC. But, smart as you are and dumb as everybody else is, the market says your shares didn't sell. And the market is right.
Also, a thing may be "priceless." You'd rather die than trade your Macintosh for an IBM. But that's still a price, albeit a very high one.
It's no use trying to fix prices. To do so, you must have a product that can't be replaced, and you must have complete agreement among all the people who control that product. They're greedy or they wouldn't have gotten into the agreement, and they're greedy so they sneak out of it. This is what was wrong with Paul Samuelson's idea about crop restrictions in Chapter 1, and this is why the members of OPEC are still wandering around in their bathrobes, pestering camels.
Any good drug dealer can tell you that to ensure a monopoly, you need force. To ensure a large monopoly, you need the kind of force only a government usually has. And it still doesn't work. ...
The government of Cuba, with force aplenty at its disposal, decided that beef cost too much. The price of beef was fixed at a very low level, and all the beef disappeared from the government ration stores. The people of Cuba had to hassle tourists to get dollars to buy beef on the black market, where the price of beef turned out to be what beef costs.
When the price of something is fixed below market level, that something disappears from the legal market. And when the price of something is fixed above market level, the opposite occurs. Say the customers at suburban Wheat Depot won't pay enough for wheat. The U.S. government may decide to buy that wheat at higher prices. Suddenly there's wheat everywhere. It turns out that people have bushels of it in the attic. The government is up to its dull, gaping mouth in wheat. The wheat has to be given away. The recipients of free wheat in the Inner City Wheatfare Program hawk the wheat at traffic lights, and what they get for it is exactly what people are willing to give.
Everybody remembers this except politicians.
or any economic thinking, good or bad, or any pizza, or
anything else. We would sit around and stare at rocks,
and maybe later have some for dinner. ...
Wealth is based on productivity, and productivity is
exapandable. In fact, productivity is fabulously expandable..."
"If we want the whole world to be rich, we
need to start loving wealth.
|*"Economists could make such errors with impunity
without any adverse
effect on their careers because a positive attitude toward central planning
was considered a sign of sophistication. It was more important not to be
considered anticommunist than to know what one was talking about.
Even as late as 1989, Paul Samuelson delivered the obligatory paean to
the Soviet economy in his economics textbook (Samuelson and Nordhaus
1989, 837)." -- Paul Craig Roberts, "My Time With Soviet Economics"
"What's even more amazing, Coase wrote his trailblazing article in 1974,
"Samuelson is a great mathematician, but he knows little about
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