70. What Is the Economy?

We often hear the term “economy” thrown around on the news or during political debates. But what exactly is the economy and why do those in power think they can control it?

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Links:

• Teach Your Students About The Free Market
• Fight of The Century 
• John Maynard Keynes 
• Invisible Hand 
• Economics in One Lesson

Here’s a transcript of our conversation:

Connor: Hey, Brittany.

Brittany: Hi, Connor.

Connor: In college, I took a class from, is it Economics class? And I was, learning from a professor, or rather required to learn from a professor all about economics. And I distinctly remember this class, ironically enough, not because of anything I actually learned in the class, but because awkwardly this professor sweat sweated sweat a lot, and he would ha he would point in the back of the room and his armpits would just be, you know, soaked with sweat. It’s really gross. That is like my one memory of my economics class. And that shows you how boring of a class it was. Cause when you learn about economics the right way, it is amazing. is so much fun. We have thousands of kids learning about economics using our free market rules and curriculum. And we’ll link to that on the show notes page. But it’s super easy. It’s just, a free market. Tuttletwins.com. And so families there are learning the nuts and bolts of free market economics. Everyone who signs up, no matter when you sign up, starts with, you know, like unit one, lesson one, and you progressively go as you learn more and more complex ideas. We have activities and lessons for the young kids, for the older kids, information for the parents. And it’s been so fun to see how now thousands of kids are learning about economics in a way that is relevant to there life. In other words, if you’re a kid listening right now and you’re wondering as the name of our podcast is, the way the World works and, and Why people make the decisions They do, why Things change in Price, what the purpose of money is, how we can make more of it, why entrepreneurship is important, how we can serve other people, why needs and, wants change over time. These are all fascinating things because, you know, I, don’t know Brittany if you ever, do this, but I like people-watching. Yes, I like going like to the beach. We were at Lake Tahoe with the family recently and just sitting there and watching people interact, why are they doing what they do? What motivates them, to act the way they do? And, I enjoy that. Just wondering about people and seeing how unique and creative and different people are. That’s the economy in a lot of ways. And that’s not at all what my sweaty college professor taught me. He, us a bunch of curves and graphs and definitions and, and big long papers that people who work at banks wrote, like just, you know, mind

Brittany: Sounds thrilling,

Connor: Oh, totally thrilling. Don’t get me started. So, I think learning about the economy is fun. How Brittany, if, one of our kids were to stop you, let’s say you’re back teaching a bunch of kids and they were to say, you know, what is the economy? What does it mean? How, how do you help young kids kinda understand that question? What is the economy?

Brittany: Yeah, I think my biggest thing I would say is the economy is us, right? it’s not this giant machine. It’s not some big crazy thing, right? It’s each of us. It’s every time you and I go to the store and we give money to someone, maybe we don’t even go to the store. Maybe we just go on Amazon and we order something. Every time we engage in commerce is what that would be called. We are the economy. So, I would tell them that the economy is us.

Connor: Why, why is that important? So, let me push on you further. So, people think that the economy is, you know, this separate thing that could be controlled and has buttons and levers. And it can be why is that, perspective so wrong? Why, should kids understand, that the economy is us? What, what’s the problem if they don’t understand it that way?

Brittany: So let’s say it was a big machine, then you could probably argue that maybe it wouldn’t be best to control it, but that someone could, right? That a government could control it. So because we are the economy, because all the different, you know, actors that are making products and widgets and gadgets and selling it to us or services, because we are all, the economy gets a lot harder to control for a lot of reasons. One being that, you know, a government person sitting in some big building in Washington DC has no idea what Connor, the entrepreneur in Utah needs to be successful. He just can’t, you know, they can’t make those decisions cuz he’s not there, right? So I think that what’s really important is when we think of the economy as people and the actions that people take, you realize really quickly that it becomes very hard to even try to plan an economy or to control an economy. There’s just too many moving parts.

Connor: So the people who want to control our lives, they almost have to have a perspective that the economy is this thing to be controlled. Because that’s what they want to control. They want to pass laws, they want to do things that allow them to try and enact controls. Even though if you look at countries that have enacted much more heavy control over the economy, or rather us as you point out, controls on, people, what they can sell, the price, they can sell things at, much they can sell, things like that. see in those countries, think of like Soviet Russia, for example, under communism, it completely falls apart because you’re trying not to control this machine with buttons, but people’s lives. And they’ll only take it for so long and it really doesn’t work because humans can’t really ultimately be controlled. Everyone makes different decisions for different reasons, and they can be maybe controlled for a while, maybe they’ll tolerate it to a certain degree. But pretty soon, you know, you have things like the black market, which is a nickname for people who are secretly buying and selling things that the government says they can’t. Or maybe if the government says you’re only allowed to, to, you know, sell this much of your wheat crop, well, maybe that, the wheat farmer is going to find the, you know, someone on the black market who will buy the rest of what they’ve produced. They don’t wanna just throw it away. They don’t wanna just feed it to the cows. They wanna make money. That’s why they did it. And so they’re going to pursue other opportunities to still, you know, make a profit. So, the government, you know, these, central planners, as we sometimes call them, we, talk about that in the road to, Serfdum title trends book. These central planners have these designs, they have these visions, these desires, but ultimately people won’t be controlled over the long term because they have their own incentives. That’s another word in one of our books. In other words, their own motivations to act. and so I think it’s interesting for us to ponder history because there’s so many instances where when someone tries to control the economy, they ultimately fail. One thing, I think it would be fun also to link on our show notes page, Brittany is, Hayek and Kane’s rap.

Brittany: Yeah,

Connor: actually, there’s more than one, right?

Brittany: There’s, I think there’s three of them now. I can only speak for two of them, but they are, great. I will link to those. They’re fun to listen to.

Connor: And so, one of our friends, John Paola put this together. This is fun to watch. And I will say for the younger kids, you know, it’s fun, it’s silly. but for the older kids and the adults, if you’ve been learning about economics, if you’ve been learning about free markets, if you’ve read any of our books, you’ll recognize some of the things that are said in there because, the, what they do in this fun little rap is, introduce a lot of economic concepts and they show the kind of two sides if you will. Hayek is, FA Hayek. He wrote The Road to Serfdom which we based our road to Serfdom book on. And, so he’s kind of the free market guy talking about, much like you and I Britney have been discussing here, you can’t control the economy. The economy is people. You can’t centrally plan the lives of, you know, millions of people. And so he’s making those arguments and he kind of represents the free market point of view. And then on the other side of the argument, you have John Maynard Kanes, Keens, Kane, I, think it’s

Brittany: Kanes, yeah, whatever

Connor: Keynes. So John Maynard Keynes was a banker and an economist kind of guy, and he was very much in favor of government control. He supported, the idea that the government should manipulate what prices are, what interest rates are, and things like that. In other words, he felt like central planning of the economy was not only possible, but that it was a good thing and that should be done. And so in this fun rap video, the two characters, Hayek and Keynes each kind of, you know, spar or fight back and forth with their ideas and this little, you know, boxing match. And then, some other videos as well. So, fun little videos we’ll link to, but it, points out, Brittany, that there are wildly different perspectives on the economy. So let me maybe ask your opinion on why is it important to learn this stuff. I, never even took an economics class until that sweaty teacher in college required me to. and even then, I didn’t really learn economics. I learned, nothing. But I was taught charts and graphs and boring stuff. So I didn’t, I didn’t really retain anything. I didn’t, you know, remember it. But, so we got a bunch of kids listening to this and certainly their parents. Why is it important for all of us, no matter our age to learn about economics?

Brittany: Because unless you are living on a mountain in a cave without any access to any other human beings or any technology, which I’m sure there might be some people, but most of us, you know, especially for listening to this podcast, are not living that life, then you’re part of the economy. There’s a quo, I don’t remember what it is that says like, even if you don’t care about politics, politics will always care about you. I don’t know how true that is. I don’t know that politicians are as important as they like to believe they are, but I think the economy is because you are living and breathing the economy, you are the economy. So I think it’s really important because you have to understand, first of all, the role you play. And there, I mean, it’s kind of like unlocking the secrets to the world. I remember thinking that I was never going to get into economics. It felt like it was something, some weird language that I was gonna have to study in college with a boring, sweaty teacher like you had. But when I started learning from the right places and I started learning the important things, the right part of economics, it became like really interesting and really fun because you start understanding the way the world works. so I do think it’s important for everyone, and I don’t think you should listen to anybody who tells you that maybe you’re not gonna get it. Like, I remember thinking, oh, I’m not good at math, so I’m not gonna get the economy. That doesn’t, that’s so irrelevant to everything. So I think that is one of the most important things you can do is get a basic, you know, econ 1 0 1 one great book you can read is Economics, One Lesson by Henry Haslet, and I will link to there in the show notes. So I think that is 100% more so even than politics and, you know, civil, you know, how our political system works. I think everybody should get a basic understanding of the economy.

Connor: Maybe one of the final things we can talk about is this concept of the invisible hand. Yes. And we talk about the economy, that’s kind of the free market side. This stems from,  Adam Smith, who will link, in the show notes page to a little article about, him. And, he was an economist, a long time ago who came up, with this concept of what he described as the invisible hand. this idea that you know, the economy kind of takes shape and, and moves forward almost as if there was this invisible hand guiding it because, you know, life gets better, new products get made, new inventions come on board, people buy and sell resources, get where they need to be. I have, you know, oranges in the middle of winter in Utah, right, because the market kind of sorts itself out because the needs and demands of all these different people all over the world kind of interact with one another. And it all just kind of settles out where yeah, you can get tropical fruit, in the middle of winter on the other side of the world. So, this idea that there’s this kind of invisible hand guiding the process almost, where you would think that, there’s someone kind of bringing order to the system, but as has lit and Hayek and others talk about, it’s not an actual hand from a central planner. It’s really more, what’s called spontaneous order,

Brittany: Which we’ve talked about before, I think. Yeah.

Connor: Yeah. And in other words, order that has come about spontaneously or, suddenly and on its own where the actions and the interactions of millions of people each doing what they want. Like, think about in the Tuttletwins in the miraculous pencil when the pencil was being made. Well, the logger cutting down the trees has no idea that he’s cutting down a tree to make a pencil or a table, or like, he has no idea. He’s just cutting down the tree and sending it down to the mill and he doesn’t know what he is doing, but his actions later contribute to the production of a pencil. And, there’s no pencil, you know, the president there’s no central planning office of pencil production. There’s, there’s no one that needs to oversee that or no actual hand, right, to guide it. but it’s more of an invisible hand. You would think that someone is in charge because everything just works so well all the time. And yet it’s the spontaneous order. It’s all these, people making their own decisions that in the totality of everything, seem to work out okay.

Brittany: Absolutely. I think you’re absolutely correct in that. So it’s, really interesting to see that there isn’t some big mystery and there’s some hidden machine, you know, behind the curtain that is the economy. It’s important to remember that we are the economy.

Connor: I think that’s exactly right. And guys, take advantage of the show notes today. We’re gonna have several resources for you. Go watch the fun, rap video, and even if some of the concepts are over your head, frankly, it’s a great opportunity to, go learn a few things from what they bring up in the video, cuz it’s, it’s packed full of, different, ideas that are really important to explore. Of course, if interested in learning more as a family, you can also then become a subscriber of Free Market Rules. Head to Freemarket.Tuttletwins.com, and, you can sign up today, Brittany, until next time, as always, great chatting with you and, we’ll see you next

Brittany: Time. See you next time.