Funny & Frightening...Economics Explained

How to Understand Economics in One Hour
By Marshall Payn

Chapter 1
Panic
“Mr. President, please sir, wake up.”
“Okay, Woodley, I’m awake. It’s three o’clock in the morning…this better be important.”
“Sir, it’s an emergency.”
“Well, come on man, is it war?”
“No, sit.”
“The bomb?”
“No, Mr. President.”
“Well, what is it?”
“The Council of Economic Advisors and its entire staff have unanimously agreed on something.”
The President sat back down…only a President could know what this means.
Economists never agree on anything, and as long as they have never agreed, the country has always somehow gotten by.
“Spell it out, Woodley.”
“Mr. President, the Council has concluded the country is headed for economic collapse and there is no way of stopping it.”
“So here it is, finally…judgment day.” His shoulders slumped, his hands dropped to his lap. It was like the convicted
murderer receiving the death sentence he knew was coming.
“No hope at all?”
“No sir.”
“I can’t accept that, Woodley. There has to be something we can do.”
“They say it’s too late, sir. Unanimously.”
“We all knew it was bad, Woodley, but we were hoping it wouldn’t come to this.
Why weren’t we warned…why weren’t we advised?”
“Sir, I guess no one wanted to believe it could happen…not to us.”
“But wasn’t there anybody who could see this thing coming? Certainly with all those experts out there…”
“Well sir, there was one. As a matter of fact, everything he predicted did come true.”
“Well, why wasn’t I told about it?”
“You were sir! The whole nation was, but nobody would believe him. They called him a ‘merchant of gloom and doom’.”
“Who is he, is he still around?”
“Professor Benjamin Frankum, sir. Professor of Economics at the University.
He’s retired now and living near the border.”
“Woodley, find that man and have him here by lunch!”
* * *
As the clock was striking twelve, into the Oval Office…without knocking…came .Woodley and a white-haired man easily in his eighties, a little slow of foot but with a sparkle in his eye.
“Professor Frankum…Benjamin Frankum?”
“Yes, Mr. President; how may I help?”
“Professor, I’m told you’re the one who forecast everything that has happened with our economy over the years. Is that right?”
“Yes, sir.”
“Why didn’t you speak up?”
“I did sir.”
“Why didn’t people listen?”
“People listen to a lot of things, sir. They believe what they want to.”
“Have you been briefed?”
“He has, Mr. President.”
“Do you agree with the Council?”
“Yes, sir I do.”
“You mean to say there is nothing we can do about our economy…it is absolutely too late…the country is ruined?”
“Yes, sir, I certainly do. Unless, of course…”
“What man, what?”
“Unless, sir, economics could be debunked on a mass scale, and in a very short time.”
“Explain that, sir.”
“Mr. President, the basics of economics are so simple. It’s just that other forces infiltrate economics and make it a puzzle rather than the science it is. If these forces can be prevented from clouding the science then, sir anybody…you, me, anybody… could have predicted what I did and with the accuracy that had to be.”
“Professor Frankum, I still don’t understand.”
“Well, Mr. President, let me put it this way. If the people of the United States, or any place in the world for that matter, could be taught the fundamentals of economics in such a manner as to bypass their biases and prejudices, then the people could turn ruin into prosperity.”
“You believe that?”
“I know it, sir.”
“Is it possible?”
“Mr. President, I don’t know. For years I have been living a very simple life… no newspapers, no radio, no television…I tried to leave my despair behind me, sir, I didn’t want to watch what I knew would happen.”
“Well, what’s that got to do with our crisis?”
“Mr. President, I don’t know how ingrained with myths our people are these days.”
“Can you find out?”
“Yes, sir, I can.”
“How?”
“With an experiment, sir.”
“What do you need?”
“Sir, I’m a teacher. Give me one day with three people of differing views...the more extreme the views, the better the experiment.”
“Precisely what do you want, Mr. Frankum?”
“Sir, a staunch Republican/Conservative, an extreme Democrat/Liberal, and a strict Independent.”
“Woodley, get those computers cranking. You have these people in the White House tonight…appeal to their patriotism; tell them they’ll be back home tomorrow night.”
“Yes, sir.”

Chapter 2
The Experiment
“Good morning to you all. I’m your teacher, Dr. Benjamin Frankum. You are here to learn economics. At the end of the day I must report to the President that you have either learned economics or you have not. The fate of the country may well be influenced by what happens here today. Don’t be nervous. You were not chosen because of who you are, but rather what you represent. Let’s begin by going around the table: identify yourself, tell us a little about yourself and how you feel about our government and our economy. You, sir…”
“Well, all I know is the phone rang; someone asked me a few questions, asked me if I loved my country…and 45 minutes later there was a man in uniform at my door. In no time we were in a military jet on our way here to Washington. I’ve never been so amazed. Me, right here in the White House! Well, my name is Tom, I’m 47 years old, single, a history teacher at a high school just outside of Boston. I’ve been a teacher all my life, and I love it. I think I’m good at it, and it’s rewarding to mold young minds. I’ve also been a Democrat all my life. I feel there are so many people in this country that need help, and I think it’s the government’s job to give them that help. Through the years it seems like the government just never does enough for people. There are so many people so rich and so many so poor, an I just think it’s unfair…this is why I’m a Democrat.”
“And you, young lady?”
“My name is Carol, I live in San Diego. I’m a certified public accountant, and I’ve been in business for myself for several years. I’ll confess to be crowding my mid-thirties, and I have a feeling the reason I’m here…or that I’ve been selected…is I’m just about the political opposite of Tom. I’m as Republican an as conservative as they come, I guess. The reason for my conservatism is I’m an accountant an I understand fiscal responsibility. Ever since I voted, it seems to be the Republicans who care the most about the country’s finances. My husband and I have no children, we work hard and we wish there was a lot less government interfering with our lives.”
“And you, sir…”
“My name if Jeff. I was born and raised in Saint Joseph, Missouri…that’s a small city on the Missouri River about halfway between where Tom and Carol live. I just turned thirty, I’m married, and my wife stays home with our two children. I’ve been working at the same plant in St. Joe since I got out of the Army. As far as politics are concerned, I vote for the man and I vote on the issues. I don’t consider myself any particular type of voter. I make a decent wage, but frankly it seems we just get by. With all the payments we’ve got and all the things the kids need, we just don’t seem to be making any headway, so I usually vote for the person who is going to work for those things that might improve our situation.”

“All right,” said Frankum, “now a little exercise to help you learn. Carol, pretend you are inside Tom’s brain. Look at yourself through his eyes…what do you think he sees?”
“Gosh, Professor, now that I think about it…he probably sees me as hard, unyielding and cruel to people just because I feel as strongly as I do about fiscal responsibility. Tom, I’m not…I’m really not! I really care for people, and consider myself a loving person. I just wish everybody in the world was well and happy.”
“Now, Tom, get inside Carol’s brain and look at your self through her attitudes. How do you think she perceives you?”
“Well, I guess she’d think there isn’t any way in the world she and I could agree on anything. She probably thinks I’m one of those do-gooders with my head in the clouds; that I’m just an idealist and haven’t the faintest idea about the realities of life. Honestly, Carol, I work hard, I do the grocery shopping…I see the prices going up. I’d just feel better about this world if things were more fair. I think I’ve got just as good a handle on reality as anyone else.”
“And Jeff, how would you think either Tom or Carol would perceive you, your thinking and feelings?”
“You know…I’ve never really thought about anything like that. But now that you mention it, I suppose it’s possible either one of them might think I’m a little wishy-washy for not supporting a certain cause or party. And maybe they do, but honestly I don’t feel it’s wrong not to pledge allegiance to any one of our political parties. Sometimes I think the country would be better off if there weren’t any political parties…just the issues and just the caliber of the person running for an office. Seems like when the Democrats get in, the country is full of problems; then when the Republicans get in, it’s still full of problems. I’m not sure what difference it does make, but I think I get your point. I think other people who feel strongly one way or another might look at somebody like me as either not caring enough…or maybe not smart enough…to call himself one or that other.”
“Now students, you have already grasped one of the essentials to becoming good learners…our views can be very different and yet very sincere. If there is a difference, it doesn’t necessarily mean somebody is right and somebody is wrong.
“What we will learn today is:
YOUR VIEWS DON’T MAKE ANY DIFFERENCE IN ECONOMICS.
“Economics is independent of your education, of your political belief, of your religious belief, of your color, your gender, your age. We will see that the basic principles in the science of economics…which is the science of the material welfare of mankind…apply to any economic entity.”
“Uh, what do you mean by economics entity, sir?”
“Well, Tom, all by yourself you are an economic entity. You are a wage earner; you could be considered a family of one. Jeff, you family of four is an economic entity. Carol, you business could considered an economics entity. An oil company or steel manufacturer could be called an economic entity. In other words…a corporation or company, a town, a county, or a state…is an economic entity. A country certainly is an economic entity. A region or a continent could be called an economic entity. The whole world could be called an economic entity. A tribe of head-hunters in New Guinea could be called an economic entity.”
“OK, Professor, we get it.”
“Fine. Let’s see how the basic principles of economics apply to each and every one of these entities.”

Chapter 3
The Model
“One of the best ways to understand something is to create a model of it. Physicists make models of the universe and the solar system. They make models of the tiniest particles…atoms, molecules, and such. Architects make models of buildings before they are built. Biologists make models of the most complicated cells in order to understand them. Sociologists make models of societies and groups they are striving to understand. In medicine there are models of body organs. The jumbo jet…before it became reality was a small model in a wind tunnel.

“Let’s create a model of an economic entity, say for instance, a country. We will call our country the land of Noz”
“Why Noz, Professor?”
“Why not! Now let’s say the land of Noz is composed of ten people, and these ten people produce various goods and services.
“We have in Noz:
A CARPENTER who make things
A DOCTOR who tends to people
An AUTOMAKER who produces cars
A JANITOR who cleans up places
A FARMER who grows crops
An ARTIST who paint pictures
A TAILOR who makes clothes
A MOVIE PRODUCER who produces movies
A REPAIRMAN who fixes things
And a BAKER who bakes bread, rolls and cakes.

“Okay, students, can you visualize Noz…the farmer takes off in the morning and plows the field; the doctor treats a broken leg; the repairman fixes a clock, and later several of them gather around while the artist paints a picture. Everybody is busy in Noz.
“Now, the total of all things that are made and all the services rendered by these different people who are producing their own things for the benefit of themselves and the other people in Noz, the total of what they do throughout the course of a given year is what the economists call the ‘GROSS NATIONAL PRODUCT’. These are fancy words that simply mean…the sum of all the goods and services produced in a given year.
“In other words, the movie producer is going to make so many movies, the carpenter is going to build so many tables and chairs, the farmer is going to bring in so many bushels of wheat, the janitor is going to be able to clean so many places, and so on.
“You get the concept? All the things that are made and all the services rendered in one year, put them all together and that is called ‘GROSS NATIONAL PRODUCT.’
“Now we must understand the movies that are produced, people go to see; the tables that are built, people buy; the shirts the tailor made, are bought. In other words, all the goods made and all the services rendered are consumed.
“Now we come to a very important concept. You’ve heard people talk about the ‘STANDARD OF LIVING’ for any economic unit, whether it be a country, a person, a family, a continent, a company, what have you. The standard of living of Noz is equal to what is consumed. How well off people are is measured by what they buy, what they use, or what they consume.

“The standard of living for Noz is equal to the sum of all the things a carpenter builds, all the treatments or services the doctor give, all the cars the automaker makes, all the cleaning the janitor does, all the crops the farmer grows, all the paintings the artist paints, all the clothes the tailor makes, all the movies the producer makes, all the things a repairman fixes, and of all the things the baker bakes. Add them all together and that is the Gross National Product of Noz. All these things are then consumed by ten people. The consuming of these goods and services is what’s called ‘Standard of Living’ for the country of Noz.
“Add up the results of everyone’s labor, and that is the Gross National Product. Then the consuming of that Gross National Product is the measure of the Standard of Living of Noz.”
“Professor, are you saying the standard living for the repairman would be the same as what it is for the doctor, as an example?”
“Not at all, Jeff. We are only talking about the country as a whole. Now, in your family is your standard of living any different than, say, one of your children?”
“Absolutely. I work and my children don’t. I eat more than they do.”
“Right, there are differences within the individual unit, but for now we are viewing the country as a whole.”
“I see.”
“And now we are on the verge of the first and the most basic of all economic principles, that of ‘production’.
“Let’s say, as an example, in a particular year the carpenter decides to work twelve hours a day instead of the eight hours he has worked in the past. An then, instead of just building tables and chairs, he now also builds some bookcases and cabinets. And let’s say the farmer, instead of plowing by mule, buys himself a tractor and, working no longer hours than he did in the previous year turns out many more bushels of wheat and corn and also produces some other crops with the spare time he tractor has given him.
“And let’s suppose the tailor goes to school and learns how to make all the things he made before…dresses, shirts, and pants…much better and faster, and with these newly acquired skills produces all he did in any other year plus some suits,
skirts and blouses…things he never did before. In this year because some people work longer, some work smarter or more effectively, an some work with better tools, there are more things produced in Noz.
“Now my question to you is this: If the standard of living of Noz is equal to consumption (the consuming of all the prods and goods made); and if in a particular year we have everything we had the previous year plus more farm goods, more clothes and more articles made, is there any possibility the Gross National Product and the Standard of Living can go any way but up?”
“Well, of course not, Dr. Frankum. Anybody can see that. If the gross national product goes up, there are more things to be consumed; in other words people just plain have more than they did the other time; that means the gross national product is up and the standard of living is up. That’s not very complicated.”
“But sir, does that mean all the people in Noz are better off or just some of them?”
“Tom, you are talking politics now. Politicians say who gets what. But one thing is certain: The problem of who gets what is more easily resolved when there is more to distribute.”
“I think what he’s saying, Tom is that the politicians have an easier time saying who gets what when there’s more to divide.”
“Right, Carol. And conversely, you just cannot distribute more than what’s there.
“Does that make sense?”
“Sure it does, Professor.”
“In other words, Tom, if the economy has grown, if the Gross National Product is up, if consumption is up…all we are saying at this point is somehow things have gotten better for the country and for at least some people. It could be just one person, it could be two people, it could be everybody, it could be half the people. It’s entirely possible some people’s standard of living even may go down. What we are trying to say is the nation as a whole…the land of Noz…has got to be enjoying a higher standard of living if the total production goes up.”
“I don’t see any way of arguing that,” said Carol.
“Now, let’s take a look at the reverse. Suppose, for example, the movie producer comes down with some ailment and instead of making five movie a year he only makes three. Suppose the repairman, because some of his equipment breaks down…instead of
fixing 100 things in a particular year, he only fixes 60.
“And suppose the baker, who says ‘I’ve been working too hard…nobody should keep up a pace like this…I’m just going to work every other day instead of every day,’ so that means half the bread, half the rolls and half the cakes are produced this year as
opposed to the previous year. What then happens to the standard of living? What happens to the gross national product? What happens to the production of Noz?”
“Well, they go down.”
“Is there any way in the world they can go up?”
“No way.”
“Is there any way in the world the can stay the same?”
“No, sir, there is less there.”
“Okay, we have now arrived at the first unbreakable basic rule of economics:production up, things get better; production down, things get worse.”
“Does this go for any economic unit?”
“Sure, Carol, let’s look at your business. If one year you worked ten accounts and made $20,000, then the next year you work more productively and double he number of accounts, your income goes up, doesn’t it?”
“Yes, sir.”
“And what you can do with that income determines your standard of living, doesn’t it?”
“You bet it does.”
“How about the opposite? If one year you have ten accounts and make $20,000, and the next year you only have half of them and half the amount of money, you’ve got to be worse off, right? Same for a country.”
“No problem with that, Professor.”
“That just doesn’t seem all that significant, sir.”
“Maybe not for now, but I think it will later. As a matter of fact, knowing what you know now, you probably have more practical knowledge of economics than do most of the people in the world.”
“That’s quite a statement, sir.”
“Well, you tell me later if it is or it isn’t.”

Chapter 4
Money
“We’re ready to introduce a needed commodity into Noz, students.”
“What’s that, Professor?”
“Money. Down through the ages money has taken many forms. It has varied from cows and beads to wives and shells to precious metals…and of late, to pieces of paper. In the world today we have dollars and yen, we have marks and rubles and shekels and
pesos and so forth. “But basically, money is supposed to have three characteristics. First, it needs to
be portable, it needs to be of such character that it can be easily carried. Second, it needs to be readily divisible. If you want three things instead of ten things, money must have the ability to satisfy both quantities and prices. And third, the most important characteristic of money is it should represent a storage of value. If you have enough money in your pocket on Monday to buy ten loaves of bread, money should be such that on Friday, or next year, the same amount will still be enough to buy those ten loaves of bread. PORTABLE, DIVISABLE, AND A STORAGE OF VALUE.
“Now there are other characteristics, such as the degree of difficulty one would have in counterfeiting, and durability, but these are minor considerations. So, into Noz let us now introduce money. And so as not to confuse the doings in Noz with any other country, let’s call the money unit in Noz a ‘Buk’, and let’s assign somewhat arbitrarily to our ten citizens the amount of Buks they earn in the course of a year:

Carpenter - 20 Thousand Buks
Doctor - 40 Thousand Buks
Automaker - 30 Thousand Buks
Janitor - 10 Thousand Buks
Farmer - 15 Thousand Buks
Artist - 25 Thousand Buks
Tailor - 20 Thousand Buks
Movie Producer - 50 Thousand Buks
Repairman - 25 Thousand Buks
Baker - 15 Thousand Buks

“And that, students, adds up to a gross national product of 250 thousand Buks.”
“Are you sure of that, Professor?”
“Yes, I am Jeff. Let’s not get all involved in mathematics, because mathematics has very little to do with the understanding of economics…take my word for it. Now, let’s work a little with these concepts. Introducing money into our model we can say the
gross national product or the standard of living for the country of Noz is 250 thousand Buks for a given year, because that’s the sum of everyone’s work. Now, let’s say the movie producer made only four movies instead of five, so his production totaled 40 thousand Buks instead of 50. So somehow the gross national product of Noz is going to drop by 10 thousand Buks. What does that mean, Carol?”
“Well, it means the movie producer isn’t going to be as well off. It means his standard of living is going down.”
“That’s correct, Carol, but what does it mean for Noz?”
“Oh, I see what you’re seeing, Professor. The gross national product for Noz is down 10 thousand Buks.”
“And so what happens to Noz?”
“Sir, that means the general standard of living for Noz has gone down 10 thousand Buks for that year; or another way to look at it is the average standard of living for each of the ten citizens of Noz has gone down 1 thousand Buks for the year. Is that right?”
“You bet it is. Now Tom, how about what we said before – the automaker, instead of making three cars a year at an income of 30 thousand Buks, produces four cars a year.”
“Yes, Professor. I understand. That means the automaker’s standard of living will go up. It also means the Noz standard of living is up 10 thousand Buks, and the average standard of living for each of the ten citizens of Noz is up by 1 thousand Buks a year. Correct?”
“Correct. Now let’s put both situations together. The movie producer’s standard of living is down by 10 thousand Buks a years, meaning the standard of living of Noz is down by 10 thousand Buks a year. But at the same time the automaker’s standard of
living is up by 10 thousand Buks a year, meaning the standard of living of Noz is up by 10 thousand Buks a year. The two offset each other, so basically the standard of living for Noz remains the same even though the movie producer’s and the automaker’s personal standards of living have changed. By adding the concept of money to Noz what we are doing is no different than we did before, we are simply adding monetary values to help us more clearly understand what’s happening. And again, students: for whatever reason if somebody or some people or all people somehow produce more one year than they did the previous year, what must happen to the standard of living of Noz?”
In unison…”it has to go up, sir.”
“And if for some reason people don’t produce what they did the previous year, what must happen to the Noz standard of living?”
“It must go down, sir.”
“Equally?”
“Not necessarily, but it must go down. The more that is produced, the better off Noz has to be; the less that is produced, the worse off Noz has to be.”
“We have it, sir.”
“Now we are ready for another concept. Carol, you are the accountant. In our land of Noz with a gross national product of 250 thousand Buks, what would you say is the average standard of living?”
“That’s easy, sir, ten people…250 thousand Buks…the average standard of living in Noz is 25 thousand Buks.”
“Any problem with that, anybody?”
“None at all, sir.”
“You see, this is how you compare one family to another family, one nation to another nation, one tribe to another tribe. It’s the average standard of living, which is the gross national product divided by the number of people, and measured in money.”
“Sir, is it right to talk about the average standard of living when some people are so poor and other people are so rich?”
“Tom, I know these things are so important to you, as well they should be. But what you’re talking about is politics, not economics. It is the politicians who says how the wealth is divided. Economics makes no moral or political judgments…economics measures, economics forecasts…but economics does not decide how wealth is divided. Others do that. Okay, now we see where the average standard of living of Noz is 25 thousand Buks a year. How do you think Noz fares compared to the land of Roz…let’s say their average standard of living is 10 thousand Buks a year?”
“Sir, folks in Noz have got to be way better off than folks in Roz.”
“Why?”
“Well, because the possess more things, more products, more services and they consume more things, their standard of living is higher. They have more to live with.”
“Anybody disagree? And how about people in Noz compared to people in Koz where the average standard of living is 50 thousand Buks a year?”
“Sounds like Koz is the place to live, sir. They have twice as much as the people in Noz.”
“Okay students, now you’re getting it. How well off people are depends on the quantity and, of course, the quality of the goods and services they are able to have. These are whatever goods and services are produced.”
“Professor?”
“Yes, Tom.”
“Sounds like production is the key to economic health.”
“You are halfway home, Tom. The world would be a better place to live if everyone understood just that. The fact you are from different parts of the country, have different educational backgrounds, you have diverse political views…so far do any of these differences, in any way, affect the economic principles we’ve derived to this point?”
“No, sir, not a bit. Even Tom and I agree whole-heartedly.”
“Now, students, stop and think about this. The head of every country, the head of every political party, the head of every tribe, the head of every nation, the head of every union, the head of each faith say to their people or say to their subjects or say to their
constituencies…’Do it my way, my way is the best for you.’ The kings say it, the communists say it, the capitalists say it, the Democrats say it, the Republicans say it, conservatives say it, liberals say it, the leader of the clan says it…they say ‘I know what’s best for you; do it my way and you will be better off.’ Some even say so it my way or I will eliminate you. But despite what they say, remember we know: whenever as a result of people’s efforts production increases, the net result is the average standard of living must increase. And if the average standard of living increases that means the net result for the country is either all people or maybe just certain people will enjoy a better life. And we know the opposite is true in that any time production goes down, the net result is people will be worse off.
“SO NOW YOU CAN LOOK AT ANY EVENT IN ANY ECONOMY TO SEE IF THE RESULT OF THE EVENT CAUSES PRODUCTION TO GO UP OR DOWN AND KNOW HOW PEOPLE MUST FARE BECAUSE OF IT.”

Chapter 5
Government
“Now students, we are ready to introduce another concept into the land of Noz.”
“What’s that, Professor?”
“Government. One year the people of Noz got together and decided they needed somebody to paint lines down the middle of the streets so they wouldn’t crash into each other. They also decided it would be good if there was somebody to find out whether owls
hoot louder on hot nights than they do on cold nights. And, remember the land of Roz, where the standard of living is only 10 thousand Buks a year? Those people have been making noises like they might want to come over to Noz and take things. Well, the good folks of Noz decided they needed an army. So they got together and established a government, and elected the repairman to be the head of their government.”
“What did they call this fellow, Professor?”
“Well, it doesn’t matter; what would you suggest?”
“President, King, Mayor, Chairman?”
“Well, let’s not associate him with countries that have leaders with those titles.”
“Professor, how about the Great Wizard?”
“Why?”
“Why not?”
“Okay. The Great Wizard it is. Now the land of Noz…which formerly had ten producers…now has nine producers and one non-producer, the government. And the people of Noz realized The Wizard, while not doing repair work any more, certainly has to live so he should be paid 25 thousand Buks a year for serving as the head of the government. So now we have a government to paint lines, make studies, and protect Noz. Isn’t Noz better off than it was before? Well, from one vantage point it is, but let’s take a look at the economy.”

Year 1 – With No Government Year 2 – With a Government
Carpenter 20 thousand Buks Carpenter 20 Thousand Buks
Doctor 40 Thousand Buks Doctor 40 Thousand Buks
Automaker 30 Thousand Buks Automaker 30 Thousand Buks
Janitor 10 Thousand Buks Janitor 10 Thousand Buks
Farmer 15 Thousand Buks Farmer 15 Thousand Buks
Artist 25 Thousand Buks Artist 25 Thousand Buks
Tailor 20 Thousand Buks Tailor 20 Thousand Buks
Movie Producer 50 Thousand Buks Movie Producer 50 Thousand Buks
Repairman 25 Thousand Buks
Baker 15 Thousand Buks Baker 15 Thousand Buks
Total 250 Thousand Buks Total 225 Thousand Buks

“And over on the side we have The Wizard making 15 Buks, but where do those Buks come from? Students, where is the only place in the world money can come from to pay The Wizard?”
“Out of the 225, Professor. That’s the only money there is.”
“You’re right. So the citizens of Noz decide each of them will donate a small portion of their income to pay The Wizard’s salary. We’ll call this money that each of them donates: TAXES. Now the 255 has to drop to 200 for the nine workers. That leaves 200 thousand Buks for nine people. Anybody got a calculator?”
“I do,” said Carol. “It’s 22,222 Buks.”
“The 200 thousand divided by 9 is 22,222 Buks, so the standard of living of Noz is a little less than the 25 thousand it used to be, but now people have lines down the middle of the street so they are less likely to kill each other; they are going to finally find out if owls hoot more on hot nights or cold nights; and, by golly, those people from Roz better stay out of Noz or The Wiz will shoot them. Well, students, how do you feel about Year 2…how do you feel about this new government?”
“I think it’s fair and it’s logical,” Tom stated. “You just can’t put a price on safety or education. I think it’s definitely worth it to the people of Noz for each of them to give up a little of what they have for the good of all.”
“Carol?”
“Well, I guess it’s not too bad, Professor. I especially think every country needs an army, and the stronger the army, the safer the country. And if the people of Roz know they are going to get shot if they try to plunder Noz, they won’t even try it. So I guess what they did was okay.”
“And Jeff?”
“Well, Professor, while you were all talking I figured the nine citizens of Noz have to live on less than before, so I’d say it’s a judgment call. If the people of Noz figure that having benefits they didn’t have before is worth living on less money and having less things for themselves, then I guess it’s worth it. If they discover their life styles are going to diminish too much, then I guess it isn’t.”
“Well, let’s go on with it. Let’s go to Year 3. When something happens to the artist…let’s say either he’s getting to an age where The Wiz says he should retire, or let’s suppose he gets injured, or let’s suppose…anything. And let’s say the people of Noz,
together with The Wiz, pass a law and say not only should the artist not work anymore, but he should be supported by the government. So the government pays him, let’s say 15 thousand Buks a year.
“Tom?”
“Fifteen thousand isn’t very much compared to the 25 thousand he was making
before.”
“Carol?”
“Yes, but he’s now making more than the janitor who probably works 40 hours a week, and as much as the farmer who probably works 80. It’s not right to pay someone for doing no work at all.”
“Now, wait a minute, students. The Wiz says what the artist is to get and that’s the way it is in the land of Noz. But let’s take a look at what happens to the economy.

“In Year 3, we have:
Carpenter - 20 thousand Buks
Doctor - 40 Thousand Buks
Automaker - 30 Thousand Buks
Janitor - 10 Thousand Buks
Farmer -15 Thousand Buks
Artist (minus) - 15 Thousand Buks
Tailor - 20 Thousand Buks
Movie Producer 50 Thousand Buks
Repairman (now The Wiz) (minus) - 25 Thousand Buks
Baker - 15 Thousand Buks
Total: (200,000 – 40,000) = 160 Thousand Buks

“Good grief, Professor, that adds up to 160 thousand Buks for the gross national product, and with eight producers and two non-producers the producers are only averaging an even 20 thousand Buks a year.”
“Right you are, Jeff.
“All right, let’s go on with it. Everybody knows governments have lots and lots of laws and some of the laws are pretty weird. So The Wiz decides one day that instead of the farmer working so hard and so efficiently and making 15 thousand Buks a year, now
the government is going to pay the farmer 15 thousand Buks a year not to produce any crops.”
“Professor, that sounds kind of familiar.”
“It ought to, Jeff.
“So now we have Year 4 with an artist not working, a farmer who is paid not to grow and a repairman who is The Wiz. We have seven people producing the gross national product, and three people being paid from what the producers produce. Now let’s remember that whenever the government gives money to someone it must first take money away from someone else; so let’s see how the workers of Noz fare when the government helps someone else:

“In Year 4 we have:
Carpenter - 20 thousand Buks
Doctor - 40 Thousand Buks
Automaker - 30 Thousand Buks
Janitor - 10 Thousand Buks
Farmer (minus) 15 Thousand Buks
Artist (minus) 15 Thousand Buks
Tailor - 20 Thousand Buks
Movie Producer 50 Thousand Buks
Repairman (now The Wiz) (minus) - 25 Thousand Buks
Baker - 15 Thousand Buks
Total: (185,000 – 55,000) = 130 Thousand Buks

“Now the gross national product for the seven people is 130 thousand Buks a year, and that has each of the seven averaging a little over 18 thousand Buks a year. What do you think students?
“Carol?”
“This is a cancer.”
“Jeff?”
“If this keeps up it’s going to ruin Noz.”
“Tom?”
“Well, professor, the artist couldn’t work and he’s got to live…and everybody knows that farmers are the most underpaid, unappreciated workers in the country…can’t have a country without a government…but I think you’re making your point.”
“Students, let’s continue. Back in the days when The Wiz only had to paint stripes, make the studies, and ward off Roz, he could handle all that. But now come all these additional burdens, such as tending to the unemployed and showing the farmers how to live better. He can’t handle this workload; he’s got to have an assistant.”
“What will we call the assistant, Professor?”
“Well, why not just call him what he is…let’s call him a bureaucrat. And, let’s say…the movie producer is the logical one to serve this role. But he’s used to big Buks, and he’s obviously got to make more than the idle farmer and the unemployed artist…so let’s say we pay him 20 thousand Buks. After all, he’s serving his country and can certainly do with less of the frivolous things in life, but he can’t make the Buks The Wiz does.
“So now we have Year 5 where we have six of the people producing and four
living on taxes. We have the farmer enjoying his spare time at 15 thousand Buks, we have the unemployed artist being paid 15 thousand Buks, we have a 20-thousand-Buke bureaucrat and we have a 25-thousand-Buk Wizard. These are not excessive salaries, and each seems a worthy expenditure. But let’s see what has happened to the economy:


“In Year 5, we have:
Carpenter - 20 thousand Buks
Doctor - 40 Thousand Buks
Automaker - 30 Thousand Buks
Janitor - 10 Thousand Buks
Farmer (minus) -15 Thousand Buks
Artist (minus) -15 Thousand Buks
Tailor - 20 Thousand Buks
Movie Producer (minus) - 20 Thousand Buks
Repairman (minus) - 25 Thousand Buks
Baker - 15 Thousand Buks
Total: (135,000 – 75,000) = 60 Thousand Buks
“That amounts to a gross national product of 60 thousand Buks a year. For six working people it turn out their standard is now 10 thousand Buks each. Now, students, what kind of shape is Noz in? Tom, you first.”
“Well, Professor, I’ll play this game but I’ll till you right now I have a lot of questions and doubts. What you’re saying is that sooner or later there has to be a line drawn on what the government dos or it’s going to break the country.”
“Jeff?”
“Doesn’t look like the people of Noz are any better off than the people of Roz… and Roz got that way because of drought, revolution, and corruption. Noz got that way by the government doing good deeds for the people.”
“Carol?”
“Noz is dead.”
“And, students, what happens as the government gets bigger and bigger?”
“Well, Professor, it seems as the government gets bigger certain people seem to be better off. The farmer used to work really hard and now he’s paid a living wage just to do nothing, and the unemployed artist doesn’t have to paint pictures anymore…all he has to do is get his government check each month. Being movie producer is tough work; being a bureaucrat doesn’t pay that well but on the other hand it’s security for life. And, of course, Wiz doesn’t make any more than he did before, but the power satisfies him.”
“Let’s not go to the trouble to make non-producers out of any of the remaining producers, but can you see what would happen if we did it with maybe two more producers? Pretty soon the non-producers outnumber the producers and the number of non-producer votes…assuming Noz is a place where there is voting…are going to outnumber the votes of the producers. Then wouldn’t you say it’s reasonable to expect the non-producers, the recipients of tax money, are certainly not going to vote themselves less money…that just isn’t the way people tick.”
“Professor?”
“Yes, Tom.”
“I have a lot of trouble with one concept. What you are saying for our model Noz is absolutely clear. But in real life, if for instance the artist is out of work, isn’t it reasonable that somebody else should come along and be an artist and replace the lost production? And isn’t somebody going to replace that farmer who is paid not to produce…and won’t somebody come along and make movies, the position vacated by our new bureaucrat? And won’t there be somebody trained in repairing things who can take up the slack left by The Wiz?”
“Tom, you are essentially right, and we are probably able to handle that concept at this point. Let’s stop a minute and take a look at Noz’s working force. In Year 1 we had ten people producing 250 thousand Buks a year and a healthy standard of living of 25
thousand Buks each. Then in Year 5 we had six people working and four people not working. Let’s suppose the four people that weren’t working are replaced by new additions to Noz, so let’s put that gross national product for Year 5 back to 250 thousand
Buks a year…but remember we now have four other non-producers drawing a total of 75 thousand Buks a year out of the economy. Now, where must these Buks come from Tom?”
“Well, they must come from the producers, Professor, out of the 250 thousand Buks, since there’s nowhere else they can come from.”

Carpenter - 20 thousand Buks
Doctor - 40 Thousand Buks
Automaker - 30 Thousand Buks
Janitor - 10 Thousand Buks
New Farmer - 15 Thousand Buks
Former Farmer (minus) -15 Thousand Buks
New Artist - 25 Thousand Buks
Former Artist (minus) - 15 Thousand Buks
Tailor - 20 Thousand Buks
New Movie Producer - 50 Thousand Buks
Former Movie Producer (minus) - 20 Thousand Buks
New Repairman - 25 Thousand Buks
Former Repairman (minus) - 25 Thousand Buks
Baker - 15 Thousand Buks
Total: 250 Thousand – 75 Thousand Buks = 175

“Correct. So now let’s take 75 thousand away from the ten producers in order to subsidize the four non-producers, and that leaves 175 thousand Buks per year for the ten producers or an average of 17,500 Buks for the ten workers as an average standard of living for Noz…down from 25 thousand in order to support the government and its programs. Same results, Tom, just a little slower process.”
“Professor, are you saying a government and its programs are bad?”
“Calling it bad is a moral judgment, Tom. Economist don’t make these judgments…politicians make them. All I’m trying to show is that: AS GOVERNMENT GROWS FOR WHATEVER REASON, IT WEAKENS THE ECONOMY. IT LOWERS THE STANDARD OF LIVING OF THE PEOPLE.
“Tom, remember the old saying about putting straws on a camel’s back?”
“I hear you loud and clear, Professor. But needy people are still needy, and a nation can’t exist without a government.”
“Carol?
“And it certainly needs an army, and I mean a strong army.”
“Jeff?”
“But where do you draw the line, sir?”
“That, my friend, is the BIG ONE! And that is not decided by economists, it is decided by politicians. Now, students, let’s go back and review, just briefly, what we all agreed to…and that is: Production up – things get better; production down – things get worse. It looks like we are ready for our second vital economic principle: THE LARGER THE GOVERNMENT GETS, THE MORE IT WEAKENS THE ECONOMY.
“Tom?”
“Professor, I think I would probably disagree with Carol on where that line should be drawn, but there is no question, as you have explained it to us, the line has to be drawn.”
“Do the rest of you agree with Tom?”
“Yes, sir, I do.”
“Yes.”
“Students, I would say you now know more about economics than ninety-nine percent of the people in the world, and at least more than ninety percent of the politicians and probably more than a great number of economists…only because you understand
that: production is the key to economic health and that government, unless restrained, will sap a nation.
“Tom, suppose you had a brother who would die unless he had a kidney transplant. Would you give him on of yours?”
“Without hesitation I would, Professor.”
“Suppose now you had two brothers and both of them were going to die unless they had a kidney transplant. Would you give them each one of your kidneys?”
“Professor, that’s an unfair question.”
“Try to answer it.”
“I would definitely give one…and I just don’t know about the other.”
“Would each be worthy causes?”
“Yes.”
“Would each be of equal need?”
“Yes.”
“Is it fair to say if you resolved both their need it would kill you?”
“Yes, sir.”
“What right do you have to live and let your brother die?”
“Gosh!”
“Now suppose you had three brothers…”
“Professor, I wouldn’t have three kidneys to give.”
“If you had three brothers, all with the same problem, and you decided to give up one of your kidneys, which one would you give it to?”
“That’s impossible sir, please don’t ask me that.”
“Wouldn’t each have a real need?”
“Yes, but…”
“Well, let’s look at it a little different way. Let’s say you are a passerby and there’s an accident. The medics come and discover that unless one of the victims has a pint of blood now, that victim will die. Would you volunteer your blood?”
“Yes, sir, I would.”
“Suppose there are two victims and they are both about to die unless they each have a pint. Would you give two pints?”
“I would.”
“How about three, four, five…how about twenty?”
“I don’t have that many pints.”
“How many would you give?”
“Well, I would probably need to know how many I could give and still survive.”
“Is it right that you survive, or should the medics take all your blood in order to… let’s say…let you die in order to save perhaps ten?”
“Professor, you’ve done it again. That’s an unfair question.”
“Is it, Tom? Let’s go back to the land of Noz. Where do we draw that line, Tom? At what point does the government cease doing things for people? At what point does the government stop helping people? What is the difference between what people ‘need’ and what they ‘want’? Should the taxpayers see to it that every unemployed person gets a new car each year?”
“That’s ridiculous.”
“Well, what’s not ridiculous? What is right? When government spends, the economy drinks its own blood, which in turn enhances its thirst. Because it keeps drinking, it must die. So, what’s right?”
“Professor, you’re driving my crazy!”
“I’m talking about the world, Tom. I’m talking about this country. But, let’s touch on one additional point before moving on. Let’s deal a little with, Tom, what you feel was fair. Let’s go back to Year 1 with everybody producing and everybody consuming, which represent the highest standard of living we’ve discussed. As soon as we take someone out of the working force and have the workers taxed in order to support that non-producer…instead of taxing everybody a little, let’s just tax the rich, okay?”
“Thank you, Professor.”
“When we made the repairman The Wizard, and, as in our amended model, somebody came in and also became a repairman, the government needed 25 thousand Buks in tax money. Let’s take if from, for instance, the doctor. Everybody knows doctors
make a lot of money. So now the doctor, instead of making 40 thousand Buks a years, makes 15 thousand Buks a year. Now, how many people are going to put in the 10 or 15 years in school, start at the bottom of the heap and work those long hours for 15 thousand Buks, knowing the government is going to take the rest of their income away from them? Or, better yet, let’s get away from Noz, and be realistic. In real life, if the government took all the money that all the rich people in our country earned and simply gave it to the poor people, contrary to popular opinions, it would barely make a dent in what we call poverty.”
“Is that true, Professor?”
“That’s how the numbers come out. And how much can the government take away from the doctors so that pretty soon there won’t be any doctors?”
“I get your point.


Chapter 6
Where Are We Now?
“Yes, Jeff?”
“Professor, I understand what you taught us about production. I understand what you taught us about how government growth affects us, but where is the country today… where do we stand?”
“Let me make a few observations and then tell me how you feel.
“When social security started, several hundred workers were taxed a very small percent to support one person on social security. These days that number is three workers to support one person, but the percentage out of each person’s paycheck is way up. In
other words, the percentage that each worker is taxed keeps going up. Many expect, in a fairly short time, the number will go from the hundreds it was, to the three it is, to only one. So out of your paycheck you can be expected to support…entirely…someone on social security.”
“My gosh!”
“The national debt is so staggering that just the interest payments are now the third largest part of the budget. They are the fastest growing part of the budget, entirely out of control. A generation ago the entire country…everything… was run on far less
money than just what the interest on the national debt is now.”
“Good grief!”
“Before the Depression, the average person worked only a few days a year representing the tax money taken from him. Today the average person works two days out of every five to pay taxes. That’s Monday and Tuesday for the government, and
Wednesday, Thursday and Friday for himself. At the rate we have been going that number will shortly be three days out of five.
“Before the Depression, the government would borrow a few pennies out of each dollar saved by the public. Today it borrows the majority of each dollar saved. Just a very few years ago, any country showing some of the economic numbers that our country does today would have been called a ‘banana republic.’ No offense to our neighbors to the south, but the term was used as disrespect to any country allowing such numbers. This would certainly make us the largest ‘banana republic’ in the world, and it’s getting worse fast.”
“Professor?”
“Yes, Jeff.”
“I’m scared.”
“As well you should be.”

Chapter 7
History
“Professor, what can we do about this?”
“Tom, the answer lies in the history books.”
“Professor, I teach history…what do you mean?”
“History shows us, time after time, that when a country’s economy weakens, especially through inflation, the economy eventually collapses.”
“What happens then, Professor?”
“It has always meant the loss of freedom…the loss of rights. It usually means dictatorial powers come into play supported by some kind of police or army. People have no choice, they have no rights; they are told what to do, they are told what not to do… penalties are supreme. I’m a teacher too, Tom, and I know those who do not learn from history are condemned to repeat the mistakes of history.”
“Professor?”
“Yes, Tom.”
“I’m scared too.”
“As well you should be.”

Chapter 8
People
“Professor?”
“Yes, Carol.”
“There’s something that’s been bothering me.”
“What is it?”
“Our model, Noz, has just ten people. Is it realistic to keep the same number… don’t countries with large populations have special economic problems? Isn’t the number of people in a country an important consideration?”
“Well, it can be, and often is. Let’s take a look back at our model. As a matter of fact, remember Roz…remember that other country with a standard of living of only 10 thousand Buks? Let’s use Roz as an example. Roz has had some natural disasters and some political upheaval, and it does have plenty of people. And remember what we determined 10 thousand Buks was? It was what we described as minimum living conditions…enough to barely get by. What would happen if their Leader of Roz decided either to paint more stripes down the roads or do some other ‘worthy’ project with government funds? What happens if he takes a substantial amount of taxes…call it Buks, call it goods and services, call it part of the gross national product…out of the economy to paint more lines down the streets? What happens to that average 10 thousand Buks a year income for his people?”
“Professor, it has to go down.”
“Well, you are correct it has to go down, but remember they were already at the barely-get-by level. What kind of shape are the people of Roz in now? What happens to people who don’t have adequate shelter, enough to eat, clothes on their backs? Tom,
you’re the history teacher, what do these people do?”
“They starve, they steal, they plunder other countries or they have a revolution.”
“Exactly, it’s all in the history books…it’s going on today.”
“Professor?”
“Yes, Jeff.”
“Can’t people from other countries help them?”
“Yes, Jeff, they do. But so often that help means not just feeding the people of Roz. Unfortunately so much of the help goes to their Great Leader, who insists on painting more stripes down the roads. Or, the people of Roz go on so long with help from Noz that after a while they expect it, even demand it. Sooner or later the people of Noz say ‘ we’re not going to help you people of Roz, it lowers our standard of living, you help yourself.’ Now let’s get to the question. For the sake of this discussion, let’s suppose that Roz has 100 people in it including its leader, The Great Leader of Roz, and he has decided…knowing it’s a fairly poor country…that everybody is going to make the same amount of money. They all work at their different jobs, but they are all going to make the same amount of money, 10 thousand Buks a year. As a matter of fact, even the Leader only make 10 thousand Buks a year, because he is noble. Then a couple of things happen. Spilling into Roz come 50 refugees from the neighboring warring country and also 50 little citizens of Roz are born, so now the population of Roz is 200, not 100. And let’s suppose the 100 new additions produce nothing. What’s the standard of living in Roz now?”
“Well, Professor, it’s the same amount of goods and services, the same gross national product, but spread over twice as many people, so it has to be half as much. Is that right…5 thousand Buks?”
“Right you are, Carol. But remember, Roz was already at the poverty level. Any lessening of the income, because of new economic factors, drives down the standard of living…so we’ve got…what Tom?”
“We’ve got BIG trouble sir.”
“But, Professor.”
“Carol?”
“The fifty little babies really don’t demand that much and why couldn’t the 50 refugees work and add to the gross national product?”
“Carol, they can. What we’ve done is take both extremes. Usually what happens is, yes, babies don’t require much of the gross national product to live. However, babies do have a tendency to grow up. The question then: are there jobs? The significant point
is: should those refugees work and each one earn and produce ten thousand Buks a year, then they would have no effect at all on the economy or the standard of living. And when those babies become adults, if each one were to produce an additional 10 thousand Buks a year, the standard of living for everybody would remain exactly the same. However, this doesn’t happen. What happens is jobs are already scarce and instead of producing these newcomers are usually supported at least in part by the people already there, thereby lowering everybody’s standard of living. And then, in those countries with ‘population problems,’ additional people create problems over and above the ones that were there before these additional people came on the scene.”
“Professor?”
“Yes, Jeff.”
“It sounds like what you’re saying is increasing population doesn’t really mean people are going to be worse off if those that increase the population can contribute to the economy proportionate to their increase.”
“Bingo, Jeff, but it may be helpful to say the same thing but from the other side of the coin. If a country does have a population problem, i.e., too many mouths to feed and not enough food, it would serve the country well if the number of mouths to be fed were limited so the country could get to the business of increasing the amount of food needed.”
“Sir, pardon me. That sounds so elementary I don’t even see why there should be a problem in anybody understanding it.”
“Jeff, the ECONOMIC solution is elementary…the POLITICAL solution is not elementary. People are driven or affected by tradition, by faith, by politics…especially by politics. In any event, Carol, how would you sum up the effect of population versus
economics?”
“Professor, I would say as the number of people are added to an economy, if the gross national product of the economy does not increase proportionately, the standard of living for the country has to go down.”
“You’ve got it. Too bad some countries don’t understand such a fundamental concept. Think of all the starvation that could be eliminated. But…let’s go on.”

Chapter 9
Inflation
“Very briefly now, Carol, what causes inflation?”
“I really don’t know, but I think it has to do with unions asking for more and more money which makes prices higher.”
“Tom, what causes inflation?”
“Well, I think it’s a number of things but what I thought was the biggest contributing factor is businesses crave so much profit that it takes more money out of the working man’s pockets, which makes the prices higher and that gives us inflation.”
“Jeff, how about you?”
“Professor, I don’t know what causes inflation.”
“Jeff, yours is the only accurate answer.
“Let’s suppose one year that Noz had a total of 160 thousand Buks in circulation. And in Noz there existed a total of 10,000 things which we’ll call goods and services. So we have 160 thousand Buks divided by 10,000 things, or each ‘thing average 16 Buks.
“Now let’s suppose in order to pay for another program, The Wiz decides that he’d better not push the people too far. They’ve been taxed enough and he’s edgy…he thinks maybe if they’re taxed much more there might be a revolution, as in 1776.
“So then let’s suppose Wiz goes to the constituency and says ‘folks I’m not all that happy with the lines down the middle of the street. We’re still having some accidents and what Noz needs and must have are wider lines down the street so everybody is safe
and happy.’ However, remember, he’s afraid to tax any more. So he says ‘fine…don’t worry anybody…I’ll get the money.’ Then he goes down to the printing press and runs off, let’s say, 40 thousand Buks need to pay for the project. Now what do we have? We have the land of Noz with wider stripes. But let’s take a look at the economy. Now there are 200 thousand Buks, and
remember, still 10,000 ‘things’; we now have: 200 thousand Buks divided by 10,000 things equals 20 Buks per ‘thing’. So what used to cost 16 Buks per thing now costs 20 Buks per thing because the government printed a bunch of extra Buks. And that, students, is inflation.”
“You’re kidding, Professor, you mean that’s what inflation is?”
“Yes, Jeff, that’s all it is.
“INFLATION IS THE LESSENING OF THE BUYING POWER OF THE BUK CAUSED BY THE GOVERNMENT PUMPING MONEY INTO THE ECONOMY IN ORDER TO FEED IT’S EVER-INCREASING APPETITE FOR PROGRAMS, WHICH REQUIRE MORE BUKS.
“If anyone else prints money, he goes to jail, but the government gets away with it because the people don’t understand. The government is the only winner since, as incomes go up because of inflation, the government taxes a bigger share of your income
because you’re in a higher tax bracket even though your Buk buys less. The devaluation of the country’s currency causes prices to rise and then, Carol, the unions don’t have any choice but to demand higher wages…they have to just to be able to live the way they did before inflation, because things cost more. And, Tom, businessmen then have no choice but to raise prices of their goods and services because things and salaries cost more. If they don’t, they’re out of business. Unions or businesses do not cause inflation, rather, they are victims of inflation. Think of someone adding water to milk with the intention of fooling people into thinking that there is more milk. Yes, there’s more to drink, but one has to drink more than before to get the same nourishment. Students, this is another of the very important fundamentals of economics.”
“Professor, does printing money always cause inflation?”
“Almost always, Carol. There’s only one way it doesn’t, but that doesn’t happen often or for long. Let’s go back to Noz with 200 thousand Buks and 10,000 ‘things’. Suppose The Wiz runs off ten percent more money, or 20 thousand Buks for a project, so
now there’s 220 thousand Buks in Noz. But let’s also suppose in that same year the people of Noz get more industrious and produce an additional ten percent more goods and services, or ‘things’: 10,000 plus 10% equals 11,000 things. On the first hand, 200 thousand Buks divided by 10,000 things equals 20 Buks per thing as the average price of things. Afterward they had 220 thousand Buks divided by 11,000 things equals 20 Buks per thing. No inflation because production went up as fast as the money increased. However, in real life, while such an event occurs for short periods of time, our economy historically has ups and downs called cycles. When the cycle is up with production increasing, inflation is slight; when it’s on the downside, there’s more inflation since production doesn’t keep up with the additional money.”
“Professor, is printing money the only source of inflation?”
“No, Tom, it also comes from credit, from the fractional reserve method of banking.”
“Say what?”
“When someone is given credit, all of a sudden money appears from nowhere. But that’s another subject, Tom, and it’s more difficult to understand. We don’t need to understand it right now.”
“But Professor,” said Jeff, “what’s so bad about inflation? If prices and then wages go up, doesn’t that kind of offset things?”
“Jeff, you have hit on one of the sorest points and one of the least understood of all of the fundamentals of economics. Let’s go back to Noz and see what happens.”

Chapter 10
The Poverty Trap
“Let’s look at our latest situation in Noz and try to compare the effects of inflation in Noz to the effects of inflation in our country. In Noz, things that used to cost 4 Buks now cost 5 Buks. Remember, the gross national product went from 160 thousand Buks up to 200 thousand Buks in money, but the actual goods and services stayed the same. 200 – 160 = 40, 40/160 = ¼ = 25% inflation. Now what happens? The first thing that happens is that people like the Doctor say ‘I used to charge 8 Buks for a house call, now I’ll just charge 10; because my costs are up.’ Then the Movie Producer says ‘we used to sell tickets for 4 Buks for one of my shows and now we are going to have to charge 5 because my costs are up.’ So he has the signs changed to show the price increase from 4 to 5. Inflation really isn’t that much of a problem to people in the higher income levels. And, of course, the Baker has to erase the chalkboard which says 80 cents for a loaf of bread and make it 1 Buk. The Tailor, instead of charging 40 Buks for a jacket, now has to charge 50. But as we come down the line, let’s take a look at The Wiz…he’s making 25 thousand Buks a year and says, ‘it costs more now to live than it did before so I am just going to vote myself a raise’ (which he has never hesitated to do in the past). You see he has that authority; the people of Noz gave it to him. Let’s take a look at the people at the bottom of the economic ladder. Let’s look at our artist, now unemployed and receiving 15 thousand Buks a year from The Wiz. Prices started creeping up because of the new stripes and the new money The Wiz had printed, and the artist is finding it more and more difficult to get by on 15 thousand Buks a year. His rent has gone up, food has gone up, services have gone up…first thing you know he can’t afford to go to any more movies because the Buks that used to go to an occasional movie now must go to higher food costs. And things get tough so the artist goes back to The Wiz and says ‘I can’t make it on this. I’ve got to have more.’ So, to
make a long story short, he is finally given more. But, let’s say a year has passed in this process. What’s happened to his standard of living in that year, students?”
“Down, Professor, obviously, since during the year his 15 thousand Buks couldn’t buy what they did last year.”
“That’s right. So inflation causes the people on government assistance to suffer through the process until or if there is a financial adjustment upward, and all that adjustment does is get them back to where they were before…that is, barely getting by… only to find out another round of inflation is going to make them poorer even though they have more Buks than they did before. And the process doesn’t stop as long as there is inflation. Inflation guarantees poverty because it causes poverty. And the government
causes inflation, because it, and only it prints money. Now, students, let’s take a look at our janitor who makes 10 thousand Buks a year…we called that the poverty level. His contribution to the land of Noz is not considered as significant as the others and he is paid accordingly, but what happens now when inflation hits him? What happens with that 25 percent increase because of the new stripes down the road, because the government ‘helped’ someone? Well, let’s see. Prices start to creep up on him. Now the janitor doesn’t buy new clothes; he never goes to a movie because he can’t afford it. When he buys bread from the baker, he buys left-over bread from the day before because the baker gives him a cut rate price. When his back is hurting him, he doesn’t go to the doctor. He can’t afford it. It isn’t a matter like it was with the artist, who gave up going to movies. This man has nothing to give up. He is living on bare essentials as it is. Can he raise his wages? His superiors say ‘what do you mean, you want more money? All you do is sweep up, man. We can’t pay more than we are paying now…our prices are up 25 percent…either you keep your 10 thousand Buks a year or we’ll get one of those people from the land of Roz who would be grateful to have the job you are griping about.’ So the janitor says to himself ‘I’m trapped…what am I going to do?’ Then he sees the artist who was already making 5 thousand Buks more than him and not even working, and also got a big raise from The Wiz. What does the janitor do? He says ‘this is dumb, I’m going to The Wiz’…which he does…and convinces Wiz that he should be unemployed, too, because he simply cannot make it. He is facing inadequate shelter, insufficient food, no medical help…he could literally die. Wiz, feeling bad about this, goes back to the people of Noz and they say ‘sure, let’s help out his poor guy.’ So what do we have now? We have another producer turned non-producer, living on the workers’ Buks, lowering their standard of living. All of this not because he doesn’t want to work, but because he can make more money by not working…and all this because of inflation.
INFLATION SAPS THE WILL OF AN ECONOMY. IT CAUSES AND MAINTAINS POVERTY AND IS RIGHTLY KNOWN AS THE MOST EVIL OF ALL TAXES TO MANKIND BECAUSE IT DISPROPPORTIONATELY HURTS POOR PEOPLE.
“Inflation is not much bother to high income people; it is a definite bother to middle income people; it is a blood-sucker and poverty-perpetuator to poor people. And, only the government benefits because it gets more money to spend on more things.
And history shows that whenever the government gets more money, it just spends more money.”
“Professor.”
“Yes, Tom.”
“I do agree with everything you’ve said, but I’m bothered by kind of an impression.”
“Go on, Tom.”
“It almost sound like poor people are the cause of so many of the country’s financial problems. It’s hard to buy that.”
“Tom, if you think that, I’m not doing my job very well. First, poor people don’t cause inflation; inflation cause people to be poor, which causes more inflation, which causes more poverty. It’s like a dog chasing it’s tail…there’s no end to it. But you must look at the reasons the government prints money, which in turn causes inflation. These reasons are many, and many having nothing to do with poorpeople. Look at the fat cats who deduct their yachts and luxury trips; criminals draining billions from the economy and others not even paying taxes; defense contractors charging scandalous sums for ordinary items; military weapons systems that don’t work or aren’t essential. Things like these are contributing factors to why the government feels it needs to spend more and then justifies the spending by printing. But only the printing press actually causes inflation.”
“Thanks, Professor.”

Chapter 11
The Tool
“Students, now we have to stop for awhile in our learning in order to develop something new…but very necessary.”
“Okay, Professor.”
“When fire was discovered, people’s comfort increased. When the wheel was invented, transportation got better. When the telescope was invented, scientists were able to learn so much more…and so on. Through the ages each of the sciences has discovered or invented tools for the sake of enhancing the science itself in order to better the welfare of mankind. The science of economics has and does use many tools, but in my mind it has always been missing one vital tool. So why don’t we just create that tool today and thereby increase your ability understand economics?”
“Go ahead, Professor, we’re with you.”
“Remember when they shot down Flight 007?”
“This is economics?”
“Bear with me. Their immediate response was they didn’t shoot down that plane. What were they doing?”
“I guess they were lying, sir.”
“Right, Tom. Because a few days later they said ‘yes, we did shoot it down but the Americans made us do it.’ Now what were they doing?
“Jeff?”
“Lying, sir?”
“Probably, but not totally necessarily. Carol?”
“Deceiving, sir?”
“Probably, but you couldn’t prove it. Tom?”
“Couldn’t it be, sir, that the person making the statement really believed he was telling the truth?”
“Possible also. Let’s look at it this way, students. Take that same statement: ‘yes, we shot down that plane, but the Americans made us do it.’ Suppose this is told to ten average Americans, how many do you think would believe it?”
“Probably none.”
“What if the same statement were told to ten average Russians, how many do you think would believe it?”
“All of them?”
“Well, Tom, probably not all of them, but certainly some of them. And this is the effect they wanted.
“Now, this is the problem…what do you call it when a person makes a statement that maybe sounds like a lie but there is no way at the time you can prove it’s a lie, but he makes it because he wants you to believe him and do as he wants you to do?”
“Let’s see, Professor, you’re asking what do you call it when somebody tells you a big lie but there is no way in the world you can prove it’s a big lie, and he might not even care if you find out later, as long as he was able to get you to do what he wanted you
to do at the time. Also, he might not even know at the time it was a lie. Is that about it?”
“That’s very close.”
“I can’t think of any descriptive word.”
“Well, students, it’s my opinion that the science of economics has suffered for centuries because it does not possess that word, a tool which adequately describes that situation, since understanding that situation and recognizing it is of PARAMOUNT
IMPORTANCE to the science of economics. So, why don’t we just create one.”
“Okay, Professor, should it be a long word?”
“Student, our Native Americans had a good way of saying it when the white man made promises or treaties.”
“You mean ‘white man speak with forked tongue’?”
“Right, Carol. Now is there any typical occasion or circumstance where we hear that kind of talk? And especially from politicians?”
“You bet,” said Jeff, “when they’re campaigning.”
“How about using ‘campaigning’?” said Carol.
“That’s already a word,” said Tom, “We need something new.”
“Well, how about just ‘paigning’? Paign kind of has a double meaning, and it’s sure a new word.”
“And,” beamed Tom, “it rhymes with chain, disdain, drain, feign, pain, stain, vain, profane and insane. It’s a winner. Do you agree, Professor?”
“I do. Let’s try it Tom…let’s see how it works. When they said ‘we didn’t shoot down 007,’ what were they doing?”
“They were lying.”
“Now, Tom, when they later said ‘we shot down 007 but the Americans made us it.’ What were they doing?”
With a grin…”they were paigning us.”
“How did that feel, Tom?”
“It felt right, sir, this is going to work.”
“Let’s try a few of these, students. Let’s go back to Noz and look at some of the things that happened, but look at them now with the knowledge you’ve gained, and with your new tool. When The Wiz said to the people Noz…’that poor farmer, he’s worked all
these years, harder than anybody else, it’s only fair and right he now be supported by the government of Noz’…what was he doing, Carol?”
“Professor the was paigning the people.”
“How do you know that, Carol?”
“Because first of all Noz was deprived of the farmer’s production, and we know if production goes up, Noz gets better and if production goes down, Noz gets worse; not only does Noz lose the farmer’s production, it loses the added Buks to support the farmer. So the standard of living for the country went down, but The Wiz didn’t explain that up front to the producers. What he probably wants is the farmer’s vote.”
“So the people got what, Carol?”
“They got paigned¸ sir.”
“What do you suppose The Wiz got?”
“He probably got the farmer’s vote for life.”
“Jeff, how about when Wiz told the good folks of Noz the streets need wider stripes on them but don’t worry he’s not going to tax them anymore, he’s going to print some money and they will be okay?”
“That sounds like classical paigning, Professor, because we know printing that money leads to inflation and inflation is just another tax, except it’s probably the worst tax of all because it hurts poor people the most.”
“And, Tom, when Wiz tells the voters how interesting it would be to finally find out if hoot owls hoot more on hot nights or cold nights, what did he do?”
“Well, Professor, he paigned them.”
“Why Tom?”
“He paigned them because, yeah, when he told them it would be interesting…that much is probably so…but be didn’t say it was going to cost them. He didn’t tell them their standard of living would go down a bunch of Buks to find out those things. Had the voters thought about it that way they might have said ‘ let us continue in ignorance a little more with respect to the hootability of our night creatures in order that we may have adequate necessary things for our everyday lives’.”
“Now, students, we are ready to debunk economics.”

Chapter 12
The Debunking
“Students, I remember one man who ran for President during very trying times for this nation. When he ran for office, he did so under the banner of ultra-fiscal conservatism whereby he would cut back the size of the government and its programs. But instead, after being elected, he created massive government programs. Some criticize him for changing this country from a nation of enterprising, self sufficient people into a welfare state where hardworking producers have to support all kinds of non-producers. Then you have other people who view him as something of a savior who rescued this country from economic disaster. Students, let’s not get taken up with either side of this argument. The point I’m making is the man said he would do one thing…he gets elected on that and then turns around and does something else.”
“Sounds like a little paigning went on there, Professor.”
“Then, students, along came another President who was determined to wage war on poverty, to do away with poverty. As a result, hundreds and hundreds of billions of dollars were bled from the economy to wage the war on poverty, with the bottom line
being that today we have all the debts of this ‘war’, but we still have the same portion of our country in poverty. What a ripoff. Why don’t they stop doing that? What’s it going to take for them to see it hasn’t worked? Seems like we’d be way better off now had we not spent all that money. Everybody…especially poor people…would have been better off because of the inflation it caused. Then, students, along comes another President who says what this country needs is to restore its fiscal integrity, to cut taxes, to cut deficits, to reverse the growth of government.”
“And then what happened, Professor?”
“Then he outspends all the others put together!”
“Our own President! That’s terrible.”
“That’s insane!”
“Paigned again!”
“Now, don’t misunderstand me, students. These Presidents are thought of as very honorable people…all fiercely patriotic, wanting nothing but the best for the United States and its people.”
“But, Professor, it doesn’t sound like they were above paigning the people, too.”
“The history books say you’re right, Jeff. Why do you suppose that is, Carol?”
“Maybe they think they know what’s right for us and can therefore justify any kind of method at all.”
“Possibly. Tom?”
“Maybe they do it out of some kind of greed. I’ve noticed some politicians seem to come into office poor and leave very rich.”
“Possibly. Jeff?”
“Maybe they think we’re too dumb to understand economics. Or maybe they didn’t understand economics themselves.”
“Well, that’s probable. The point is…they do it. But remember, students, don’t spend your time pointing fingers at Presidents. Presidents can’t authorize one dime…it’s the members of Congress who do the spending. Sure, the President has influence, but
only Congress has the legal right.
“Carol?”
“Professor, I seem to get the feeling you feel this country is in a world of hurt and that it’s Congressmen who put it there.”
“WHO ELSE COULD HAVE PUT IT THERE? Yes, Tom?”
“So it sounds, sir, that for the price of a vote a Congressman will do something to hurt the country…either deliberately or out of ignorance…paigning away like crazy, making believe it’s for the ultimate benefit. And that there’s nothing at all difficult to understand about economics, but it’s the politicians who screw up things.”
“Tom, you have debunked economics.”

Chapter 13
The Remedy
“Professor?”
“Yes, Tom.”
“Are you saying that’s all there is to economics?”
“Not at all, Tom. What you have learned are some of the basics which have a direct effect on the welfare of each person in the world; basics that apply everywhere and at all times, basics that do not change. Basics that apply to any economic entity. Yes,Jeff.”
“Professor, is our country being destroyed from within?”
“That’s what the President’s Council of Economic Advisors has concluded, Jeff.”
“Well, Professor, a couple of things become very clear to me. I understand the politicians keep passing laws and spending money resulting in lowering production, and they keep passing laws and spending money increasing the size of government, and this results in the constant weakening of our country. And I also understand the way they’re able to get away with all this by paigning. But what I can’t understand, Professor, is how we got into this mess in the first place.”
“Jeff, you may never ask a more important question in your life. The answer goes back over two centuries.
“When our forefathers wrote the Constitution they produced one of the most ingenious instruments in the history of the world. What developed from that document was a land of freedom and prosperity, the likes of which had never been seen on earth.
But remember, Jeff, it was developed by people…not by magicians…it was developed by men who could see only the world around them, certainly not the world of the future. They could envision the future, but they couldn’t see it. In no way were they perfect! Evidence this by the many amendments to the Constitution. And think, if you would, of one graphic example of their imperfection…the leaders of our country in their day condoned slavery and today we despise it. When the Constitution was drafted it was supposed the government would be made up of volunteer politicians who would do their politicking on a temporary basis and then return to their original businesses. In other words, the farmer who became the Representative would serve for a few years and then go back to the farm. The lawyer who was elected to the Senate would serve his term and then go back home to be a lawyer. Never in their wildest dreams could our forefathers have imagined the career politician, much less the career bureaucrat, who today control our country. The unfortunate truth of the matter, Jeff, is that most of our politicians, their first
day in office and the following days of their term, are preoccupied with being elected for another term, and another term, and another term. And the longer they are in office, the better they get at paigning.”
“But can’t the people see through this, Professor?”
“Jeff, let me draw an example. Let’s say a drug addict is talking with Doctor A. The drug addict says ‘doctor, I’m hurting bad,’ and the doctor says ‘my advice is to go to a drug rehabilitation clinic…this program will take many months. The first thing you do is go through withdrawal and you will be completely miserable, but in the end there will be a decent chance of kicking your dependency on drugs so you may straighten out your life.’ Now, Jeff, let’s suppose this same addict is talking to Doctor B who says ‘you’re
hurting bad…oh you poor thing…would you like me to give you a fix?’ Jeff, which doctor do you think he would choose?”
“No contest, Professor.”
“Now let’s look at the ECONOMIC ADDICT who is addicted to government checks. He talks with politician A who says ‘you vote for me and I will show you how, if you are willing to bite the bullet, to wrestle with initial hard times so we may strengthen the country by increasing production and seriously roll back the involvement of government in order to reduce spending…part of which is your paycheck…and thereby raise the gross national product in order to make the country more prosperous so you will
be able to get away from your dependency and be your own person.’ Then he talks with politician B who says ‘vote for me. I know you’re hurting and I will see to it that the government gives you bigger checks.’
“Jeff?”
“I see, Professor. Politician B wins in a landslide.”
“Politician B wins, the checks get bigger, the inflation gets worse, the economic addict is back where he was before because his bigger check won’t buy as much as his smaller check bought before. And all the while he’s waiting to get back where he was, his
check buys less and less, and poor people can’t afford anything less! To the economic addict politician A is evil because he won’t get a fix from him and he will no doubt vote for politician B again, and again, and again.”
“But, Professor, couldn’t we do something so the addict would understand?”
“Jeff, I’ve learned from this stay on earth that people listen to what they want to hear.”
“Are you saying people are bad or dumb, Professor?”
“Not at all, Jeff, I’m only saying people are what they are.”
“Professor, do all politicians paign?”
“No, Tom, just the overwhelming majority; and it’s amazing how many sincere, non-paigning campaigners learn the art of paigning their first day in office because that’s when they start running for their second term.”
“What makes politicians what way, Professor?”
“Tom, I’ve got them down to three categories: Category 1 is the politician who is not only a confirmed liar but may even be crooked. His purpose for being in politics is self-serving. He will do or say anything to serve himself first, regardless of the cost to
others. We’ve seen many of them. Some of them come to office poor and leave rich, some get indicted and go to jail, some even resign under fire. They say ‘I will help you’, but what they are thinking is ‘I will help you because it will help me…I don’t care who I
hurt…but what I want is you vote.’ I would guess this represents a small minority of politicians. The second category will say: ‘I will help you’ but what they really mean is ‘I will help you…I am oblivious to any harm it might do,’ and should something arise
whereby ‘helping you’ looks like it may lose votes for him, he will then change accordingly.”
“In other words, Professor, he is basically a good guy with good intentions until the situation looks like it may take some votes away from him, and then he will act like the fellow in category 1.”
“I would guess, Tom, that the majority of our politicians are in this category. The third bunch are the ones that say ‘I will help you’ and they do. They will even help you if it kills you or someone else. Helping is akin to breaking; stop helping and you might as well stop breathing. Don’t ever evaluate what harm all this helping may do to others as long as you help, help, help…because it’s right, right, right. These, Tom, are also in the minority but by far are the most dangerous.”
“Why, Professor?”
“Well, Tom, they believe so fervently and act out of such strong conviction and they are so dedicated that sometimes the sheer force of their beliefs of what is right and what is fair carries through to government programs, and more government programs,
and more government programs.”
“I understand, Professor. Taken alone each of these things seems to have merit, but put them all together and the camel’s back breaks. And, in order to give someone something, it first has to be taken away from somebody. In order to help someone, they
have to hurt someone else.”
“Tom, YOU UNDERSTAND. So now, students, how do you feel about economics.”
“I think it’s easy to understand, Professor.”
“So do I.”
“Me too.”
“And how would you feel about the politician, students, who says ‘economics is far too complicated to understand…don’t try to be simplistic…trust me, I know what’s best for you…vote for me.’ Tom?”
“He’s paigning.”
“Carol?”
“He probably doesn’t understand economics himself so he says to everyone who does that they are being too simplistic.”
“Jeff?”
“All he wants is the vote.”
“All right, students, we have come to a crossroads. We understand that:
1. When production goes up, people are better off; when production goes down, a few persons may or may not be better off but people in general are worse off.
2. As Government grows, the economy weakens and people are worse off even though a certain few people, due to the programs, could be better off.
3.Government programs are like straws on the camel’s back.
4. Each government program is like taken blood from one’s body and there comes a point when the body cannot survive.
“So tell me, students, what do we do about it?”
“Good grief, Professor, you don’t mean a revolution!”
“Carol, this is just what happens in many countries. We’re not at that point. Why don’t we just figure out what our options could be? Tom?”
“Professor, I understand there is a serious movement going on to amend the Constitution so Congress must maintain a balanced budget all the time. Would that work?”
“Tom, in reality this is something of an effort made out of futility by people who are sick and tired of government irresponsibility. But, in reality, I don’t think it will help.”
“Why, sir?”
“Well, first of all, the attempt now is only to convene an assembly where such an amendment would be considered. No way does that mean an amendment would be adopted, only considered. And let’s suppose it is adopted, Tom. Chances are the economy
would collapse before this rather long and tedious process was consummated. And even if it were consummated before a collapse, you can be pretty well assured there would be enough loopholes to allow the politicians to get their pet vote-getting programs enacted. And a balanced budget is NOT the central problem. A budget can be balanced by simply raising taxes, but we’ve learned that raising taxes…that is taking money from workers for any reason…lowers their standard of living. And history shows everytime taxes are raised, the politicians just spend more. However, balanced budgets would indeed halt inflation because, as we saw before, inflation comes when the government spends more than it taxes and borrows, and then has to print money. Nice try though, Tom, but there are no solutions unless Congress rolls back spending.
“Yes, Carol.”
“Maybe we should only vote for politicians who promise to balance the budget and never to paign us.”
“Well, Carol, the thought is fine. However, in real life most politicians promise just that and then revert to doing whatever it is they wanted to once they get in office. Seems to be quite a difference between what’s promised and what’s delivered. Jeff?”
“Sir, it seems like the problem with our economy is politics. I wonder if there isn’t some way we could change the system so as to prevent what’s been going on.”
“What do you have in mind, Jeff?”
“Professor, could it be possible to make it so politicians could only serve one term? That way they wouldn’t need to go through the paigning process to get re-elected once they got in office, and could put their energies into doing something good for the country, instead of for themselves.”
“Not a bad idea, Jeff. That’s a step in the right direction. Our country used to be something like that. Tom?”
“But it seems, Professor, our country is so much more complicated these days. A man who has been in office several terms has gained so much knowledge and experience, and you would lose that knowledge and experience if politicians could serve only one
term.”
“Tom, you’re right. But on the other hand, would you rather have economic ruin with lots of political expertise, or economic health sacrificing some expertise?”
Case dismissed, Professor.”
“Now let’s develop this, Jeff. Suppose we had politicians who could serve only one term. It’s obvious much good could be derived from this. What else, Jeff, do you suppose we could do to avoid a collapse?”
“Well, Professor, could be we should never elect anybody who wants to spend more than the country takes in, in order to stop inflation, so we can get poor people out of the trap they’re in.”
“Well, Jeff, that’s fine. However, just by saying a budget must be balanced certainly isn’t the whole answer. You do understand that politicians can keep increasing the budget and yet balance it with more taxes.
“Carol?”
“That’s right, Professor. Instead of just balancing the budget it also need to be limited or else the national debt will keep going up.”
“Carol, did you ever think about those words?”
“What words, sir?”
“NATIONAL DEBT.”
“Not really, sir.”
“What’s a debt, Carol?”
“Well, a debt is something…it’s an obligation to repay something.”
“Do we have a national debt, Carol?”
“I don’t understand.”
“The money the government borrowed…is it going to pay it back?”
“I never thought of that, sir.”
“Students, have you ever heard in all your lives a single politician say he is going to see to it the government repays its debt? It borrowed money, the money is to be repaid. If the government said it wouldn’t repay its debts, the economy would immediately
collapse because its health depends in part on people’s confidence in its integrity. Money is a notion backed by confidence; no confidence, no money, so defaulting is not an option. But, have you ever heard even a mention of how it’s going to be repaid?”
“Come to think of it, sir, the only talk seems to be on paying the interest.”
“Yes, and remember how the amount of interest we pay today could have run the entire nation just a generation ago? And how the interest is the fastest growing part of the budget…entirely out of control.”
“Yes, sir, it’s a scandal.”
“But don’t we just owe that money to ourselves, sir? What’s the harm?”
“No, we don’t owe it to ‘ourselves.’ The debt is owed to specific people, specific banks, specific foreigners or foreign nations. Should the government say it won’t repay, the economies of those people, those banks, those nations would collapse. And anyway, if we just owed it to ourselves, we certainly wouldn’t charge ourselves interest and be in this mess.
“So, do we really have a national debt, students?”
“No sir, we don’t because debts are things that get repaid and it doesn’t look like anybody has ever even considered repaying it.”
“Well then, it’s not really a debt, is it sir?”
“Well, what is it, Professor?”
“It’s your children’s and grandchildren’s legacy.”
“Would you explain that, sir?”
“Sure. The government borrows money for one of its pet projects, spends the money and passes the debt on to future generations.
“Tom?”
“Sounds like politicians don’t give a hoot about kids, Professor.”
“Oh, that’s a little strong, Tom. Apparently it’s just that your votes are more important than your children.
“Well, let’s see where we are, students. If we envision our country whereby politicians could serve only one term, are there any other remedies you can see?
“Carol?”
“Professor, you know I’m an accountant and it occurred to me that almost everybody in our country is accountable for their actions…”
“Go on, Carol.”
“Well, simply this, Professor. In most situations if Person A agrees to do something and Person B in turn agrees to do something and then if Person A does not do as he promised, then Person B can drag him into court and get relief.”
“That’s right, Carol.”
“And if they nab some crook robbing a bank, he goes to jail.”
“Go on, Carol.”
“Well, sir, it just doesn’t seem right that a politician can say ‘vote for me and I’ll do so-and-so,’ then he gets into office and does something else. Or that he can paign us at will and get away with it. It just doesn’t seem fair, sir, that politicians are just about the
only people in our country who are not accountable.”
“Well, Carol, in a sense they are accountable at the next election.”
“Yes, Professor, but slick paigners can survive elections as we’ve seen today.”
“Well, go ahead, Carol. What do you have in mind?”
“Professor, if we could limit our politicians to one term, why can’t we make them accountable during that term? Now, I’m just thinking off the top of my head, but we have a civil court and a criminal court. Why couldn’t we have a political court so, if a
politician promises one thing and then does something else or if he can get nailed paigning us, he could be ejected from office by the court?
“How about branding his forehead with a scarlet ‘P’?”
“Carol, you’ve really said a mouthful. Wouldn’t it be great if politicians were accountable like the rest of us! Wouldn’t that really put a damper on what’s going on?
I’m an economist, Carol, not a lawyer, and especially not a Constitutional lawyer, so I don’t know if such a thing is possible, but it sure does sound intriguing, doesn’t it?”
“Yes sir, Professor.”
“Well, carry on students…you progress is my reward and I’m delighted with your thoughts. Yes, Jeff?”
“I have another idea, Professor, for what it’s worth…”
“Go on.”
“Each year Congress convenes and each year it passes a ton of new laws. For a couple of centuries now we’ve more laws, more laws and more laws. It seems there ought to be a saturation point, or maybe again, like our friend the camel with straw on his back, there’s so many laws people won’t know what to do, or won’t care.”
“Good point, Jeff. What do you have in mind?”
“Well, if we are going t suggest one-term politicians and politicians that are accountable, couldn’t we also suggest…as an example…that politicians spend every other year in getting rid of old laws or re-evaluating old laws?”
“Carol?”
“Boy, I’d go along with that, Professor. Just the income tax laws weigh about twelve pounds. You need to be into body building these days to be an accountant.”
“Tom?”
“As a history teacher I know there are a zillion laws on the books that might have been OK in the pilgrim days or the days of the wild west, but today they are just stupid sitting there and should be removed.”
“Jeff?”
“And maybe in those alternate years, especially if they are only serving one term
and are not so worried about votes like they are now, maybe they could evaluate all these government programs that are sapping the strength of the country and do away with programs that don’t work. It seems that if they could look at every law or program and ask ‘if it causes production to increase, it’s good; if it causes production to decrease, it’s bad and what can we do about it’?”
“Great idea, Jeff. Students, let’s see where we are. Remember, I must go to the President and report my findings. Do I understand I can tell him that ‘yes, it is possible in the course of a single day to have people with differing political view understand basic concepts of economics’?”
Students (in unison): “You can sir, because we do.”
“And do I understand further that it’s your recommendation because just knowledge of economics is pointless unless politicians be limited to a single term, that politicians be held accountable for their promises, and there be a freeze in alternate years
so politicians can evaluate, improve or remove laws and programs of the past?”
“Yes, Professor, those would be our recommendations.”
“There would be problems, students, for a country doing these things.”
“AT LEAST THERE WOULD BE A COUNTRY, SIR. We understand.”
“Students, I’ll hurry over to visit with the President. I’ll report my findings and I’ll report your recommendations. I thank you. Your country thanks you.”
“Good-bye, Professor. Godspeed!”

Chapter 14
The Reality
“Come in, Frankum, come in,” said the President, getting up from his desk. “You know Woodley, of course, and this gentlemen to my left is our party’s leader in the Senate. And here, to my right is our party’s leader in the House. The Senator and the
Congressman are meeting with me this morning to develop a strategy for the upcoming election…it’s only eight months away, you know.”
“Good morning, gentlemen.”
“We’ve all read your report, Frankum, and by gosh it’s not even lunch time yet. It looks like you proved beyond a shadow of a doubt that economics can be taught and understood in a single day…less than a day. Congratulations, Frankum, you’ve done this
country a real service.”
“Thank you, Mr. President. Now as far as the recommendations of my students?”
“Uh, very interesting, Frankum. We’ll certainly keep them in mind, but Woodley has come up with an incredible idea the three of us are kicking around. Would you like to hear it?”
“Certainly, sir.”
“It look like this next election is going to be a real barn-burner. That clown on the other side has come up with something that could tip the scales his way, but I think Woodley has saved the day.”
“Just doing my duty, sir.”
“That clown had the nerve to go into six states with good year ‘round weather that have millions of swimming pools in them, and you know sooner of later most every voter will swim in one of those pools. I’m talking about millions of votes! Do you know that
jerk has promised those people that if they vote for him, the government will paint stripes on the bottoms of all the pools so the swimmers won’t bump into each other.”
“Outrageous!”
“Unbelievable!”
“Why didn’t we think of that?”
“He’ll bankrupt the country.”
“I heard he’s a pervert.”
“Well, whatever he is, it looks like he’s going to take those states. And, I’ll be honest with you, Frankum, we were almost ready to throw in the towel when good-ole Woodley came to the rescue.”
“Oh?”
“Yeah, Woodley found out there were seven states where the farm vote would swing the election. Think what happens when the farmer drives from town back to his farm and then drives around his farm.”
“What do you mean, sir?”
“Well, let’s say he’s driving home, opens his gate and drives through.”
“I don’t understand, Mr. President.”
“Come on now, Frankum, use your brain. What’s he driving on?”
“Well, he’s driving on what we call a farm road, Mr. President.”
“Right, and what does that farm road NOT have, Frankum?”
“I don’t understand, sir.”
“Stripes, man, stripes! That road has no stripes!”
“They are usually dirt roads, Mr. President.”
“Come on, Frankum, don’t try to confuse things. Woodley has found something farmers don’t have that the government can give them. Stripes…just think…if every farm road had stripes on it, the farmers would vote for us. We’d win!”
“Mr. President, did you read my report?”
“Yes Frankum, we all read your report. It was a great report. Production up, things get better; production down, things get worse! Larger government programs sap the nation and lower the standard of living! Politicians need limits!”
“Yes, sir. Now about these stripes.”
“Frankum, stripes mean votes. Votes mean everything! It doesn’t matter what it takes to win this election. If that clown should win, this country goes down the tubes. Frankly, we suspect he’s a Commie. This country needs ME in office. It needs a man of experience, a man of vision, a patriot to preserve its greatness.”
“The report, Mr. President?”
“We’ll get to it, Frankum. Right now we have to direct every ounce of our strength, every fiber of our bodies, every drop of our blood to the greatest event in the history of civilization!”
“What’s that, sir?”
“The election in eight months, Frankum.”
“Good-bye, Mr. President.”
“So long Frankum, your country thanks you. And Frankum…”
“Yes, sir?”
“Have a nice day!”
* * *