His tales provide moral examples of what happens to those who do right. And what happens to those who do wrong.
And because he is such a unique and wonderful storyteller, he becomes known as Ver the Great Storyteller.
The villagers are willing to give him food and drink and other goods in order for him to keep telling his stories.
People who are free from constant labor may write a song or a book, or may paint a picture that someone else wants. These provide pleasure. They may not create something that saves time and labor, but they may still create something that others want.
Something others value. Something that enhances their lives.
Great music, great art, great literature, great storytelling: these are all kinds of wealth that, when created with noble ideals, can uplift, improve, and generally better people.
Leisure-enhancing wealth.
When someone like Ver the Great Storyteller creates something that others value, they have created wealth. Not necessarily labor-saving wealth, but it is still a kind of wealth. It has value, or at least someone sees value in it.
Wealth has intrinsic value;
that is, wealth has value in and of itself.
Ten salted fish have value when others know that they have to work four hours to catch a fish. Even if no one else wants the fish I have, I can eat it. It has intrinsic value, not just an official value that some authority, like government, declares it to have.
The same is true of gold or silver. If someone has it, they can make jewelry out of it. The value is intrinsic, in the thing itself.
People use their imagination and develop skills to create, out of thin air in a sense, things with intrinsic value. Wealth. Both labor-saving wealth, and leisure-enhancing wealth.
Like debt, wealth is a habit.
Wealthy people realize
that life is more than luck.
Life is action. Life is imagination.
Active, hardworking people create wealth.
As imaginative and hardworking people create wealth, they often create more than they need.
What can they do with their extra wealth?
Deep Dive: Logical Fallacies
Some things are believed because they are demonstrably true. But many things are believed because they are consistent with a widely held vision of the world—and this vision is accepted as a substitute for facts.
Thomas Sowell, Economic Facts and Fallacies
Never underestimate the difficulty of changing false beliefs by facts.
Henry Rosovsky, The University: An Owner’s Manual
First, a question: Can you name any logical fallacies without Googling them? If not, you may be prey to con artists who can offer you an apparent truth that is in fact a lie.
The most common and known include:
Ad Hominem: Rather than addressing the argument, the person’s character is attacked. “Well, you know that she is from Texas, so you can’t trust what she says.”
Straw Man: Rather than addressing the argument, something unrelated is attacked. “I bet you think we can solve all of our environmental problems by driving electric cars.”
Circular Reasoning: A circular argument assumes what’s being argued. “The Bible is true because it says that it’s true.”
When it comes to economics, there are several logical fallacies worth considering, as presented by Thomas Sowell, the pre-eminent scholar of economic sanity:
The Zero-Sum Fallacy: The belief that economic transactions always mean that when one person gains something, another person must lose something.
This is the biggest fallacy many people commit when talking about economics. Chapter 2 on Trade goes into some detail on how free trade can actually create wealth and everyone involved benefits.
Listen when someone makes an argument about economics. Do they assume there are only winners and losers? It’s an easy mistake to make.
Most people, especially young people in college, have yet to experience how wealth is created, and understand how free trade can be a most valuable activity.
Free trade occurs most often between two people. The transaction benefits both, since both will only choose to trade if they feel they are getting more value than what they are giving.
However, distortions begin to occur when government gets involved. Government suddenly becomes the third party to the transaction. The two parties to the trade may no longer be free to choose, and, in fact, the third party, government, may create through force a winner and a loser.
When government fallaciously assumes a zero-sum standard, then government uses that as an excuse to create a zero-sum standard. And in the process government may actually create a negative-sum activity, by taking money from the two parties in order to force both to trade the way government wants them to trade.
The Fallacy of Composition: The belief that what is true of a part is also true for the whole.
You may be at a football game, and in order to get a better view you decide to stand up. Yes, you get a better view, but what if everyone wants a better view? If everyone stands up, nobody gets a better view. What is true for one is not true for all.
When people claim that government spending benefits the economy, looked at in part, yes, it appears to be true. If government subsidizes corn growers, yes, the corn growers benefit, they get more money and they spend more money.
But if that money remained in the hands of the taxpayers, it’s usually the case that those taxpayers would also have more money and spend more money. When government taxes and spends, it creates a negative-sum process, reducing incentives for businesses and taxpayers to generate economic activity.
The Chess-Pieces Fallacy: The belief that human beings are just like chess pieces that can be moved around strategically to enhance the economy.
This fallacy is common among professors and academics who love to plan without having to directly experience the results of their planning.
Any medical doctor will tell you that it’s one thing to have go to medical school and learn the theories; it’s quite another thing to go into clinical practice for many years. The doctor learns that theories don’t apply equally to individuals, that with experience a doctor acquires professional judgment that tells her how a certain treatment will not work for one patient in the same way as another.
When you view people as chess pieces, you first commit the indignity of turning them in objects. But more telling, you take away choice.
Humans have their own preferences, values, and plans that can conflict with social experiments. Government may spend billions on social experiments that fail simply because people don’t respond as the chess pieces that social experimenters expect.
And the experimenters don’t acknowledge the fallacy because they make their livelihood off of those experiments.
The Open-Ended Fallacy: The belief that resources are not limited.
Who is against health? No one. So doesn’t it make sense that government get involved in insuring health for everyone? And no matter how much government can do to promote health, can’t government do more? Shouldn’t government do more?
What the purveyors of this fallacy fail to see is that resources are limited and, therefore, with limited resources come trade-offs. Resources can have more than one kind of use.
When you take choice away from individuals and mandate a kind of cookie-cutter approach to health spending for everyone, many find themselves having their money spent on services that don’t need or prioritize. People may rather spend that money on something else deemed more important.
If I am forced into a government health plan and taxed, I have less money that may go to help my children in another way, a way that I would have chosen for my family if the choice still rested with me.
This list barely touches the number of important economic fallacies that are commonly on display in public discourse. I heartily recommend Thomas Sowell’s books, which are full of research revealing the facts that blow up so much of
what is believed that is not true.
And don’t be surprised if you mention Sowell to a friend and that friend disparages Sowell’s character. They will not have read his facts, and must attack him personally to avoid having their myths messed with.
Chapter 2
Trade
The principle of a free trade is founded in justice,
and beneficial to the whole.
Edmund Burke,
letter to Thomas Burgh, Esq, Jan. 1, 1780
Extra wealth provides the opportunity for trade.
One woman on Gold Island, Kendra, has a husband who works extra hard to help his family survive and give his wife extra time. She uses that extra time to create new kinds of blankets and clothes that last longer and keep people warmer.
Sophia likes what she sees and begins to trade coconuts and fish for Kendra’s blankets and clothes. They agree that one fish equals one blanket, and that two fish equals one set of clothes.
Pretty soon, other people see Kendra’s and Sophia’s families prospering. They also get ideas to create and trade for other items.
Free trade and wealth creation
are intimately linked.
When the environment allows the freedom for people to apply their ingenuity, a natural creative instinct arises.
People create.
And when they get rewarded for their creations, an inner drive is strengthened to create more, to experiment, to innovate.
They are willing to work for their creations.
The work may be hard, but people who are fired up by a creative idea often work harder than most, late into the night, driven by that creative fire.
Furthermore, when people see something they cannot create themselves, they are willing to trade their labor to acquire the product desired. And both win. They both trade for something they value more.
Sophia sees the blankets and clothes that Kendra creates. Sophia knows that Kendra has special skills for weaving. Kendra also knows that Sophia has special skills using a slingshot to get coconuts.
They both are willing to trade their separate labors to get products that would take much more work and time to create for themselves. So both get value.
Sophia has extra coconuts. The coconuts she gives to Kendra are not as valuable to her as the blankets and clothing.
The same is true for Kendra. She values Sophia’s coconuts more than the extra blankets and clothing she worked hard to create.
So they trade. Freely.
And both are enriched.
Both get more value. Both are happier with what they have after the trade.
The desire to create and the freedom to choose provide an environment for trade, an environment that enriches individuals. But even more is now possible.
Good people who think beyond themselves, who think of their community, begin to have bigger creative ideas.
Soon there is a thriving economy on Gold Island. And more people have more leisure time. More people begin to create.
Tor’s neighbor, Alex, has an idea.
Alex sees everyone setting off each day and walking for hours to get water. He notices that the source of the water is higher than the village.
He gets the idea of building a simple wooden trough. The trough would take advantage of gravity and transport water to their village.
He brings this idea to Tor and they devise a plan.
Using Tor’s fishing pole and Sophia’s slingshot, some islanders will be assigned to catch fish, and others assigned to knock down coconuts. And some others will get water.
All this work will free up the time for a couple dozen laborers. Those laborers, supervised by Alex and Tor, would begin building the wooden trough.
It would take time, but the labor would benefit everyone. Nobody likes walking and carrying so much water.
Inspired by the vision that Alex and Tor present to the community, everyone chooses the role that is best for them. Days go by, and finally the trough is finished.
Water begins flowing to the village.
The trough creates even more wealth, but this time the entire village benefits. No one needs to spend hours each day walking to get water.
And a community is born based on labor, choice, ingenuity, and trade. The entire community shares in the wealth.
All without money.
It’s crucial to understand that free trade is good only when both sides have a choice in the exchange.
Trade happens when all participants in the trade feel they have more after the trade than before.
True trade works only when there exists choice.
When nobody forces the trade,
then both sides get the value they seek.
Kendra will only trade with Sophia if Kendra believes that what Sophia offers is of equal or greater value to Kendra’s work, and to the things that she herself produces.
The same goes for Sophia.
The members of the community get together to build the trough, or support those who do, because they all benefit. They all see how they will have greater wealth after the trough is built.
And since everyone lives on Gold Island, there is no fraud, no lying, and no stealing. No desire for crime of any sort.
Of course, these virtues are not held by the people on one of the neighboring small islands, Iron Island.
The people on Iron Island have a very different view of the world. (We will see how this plays out later, when we talk about the need for a government.)
With the idea of trade comes the idea of trade-offs.
Understanding trade-offs is crucial
to understanding different economic systems.
Suppose I love crafting warm coats, which people only tend to want during three cold months out of the year. By choosing to do what I love—be a crafter of warm coats—I must accept that there is a trade-off.
The trade-off is this: I get to do what I love, but I may have to go without trade (or with reduced trading value) the rest of the year.
I accept responsibility for understanding that there is a trade-off with my chosen craft.
But the idea of trade-offs extends further.
If the community chooses to engage in a free trade economy, they accept the fact that people have to work to participate in the community. People have to have something to trade, either by creating something themselves, or by agreeing to help produce something that another person has created.
In other words, as trade increases and people choose a free trade economy, the door opens to another beneficial activity that helps individuals and the whole community—jobs.
Deep Dive: What Is Economics?
Economics is the study of the use of scarce resources which have alternative uses.
Many people do not want to admit that they can’t have everything. Or that some people should not have everything.
It’s true that all of us, all of us, no matter our income or social status, have desires that exceed what we can comfortably afford.
In the United States, people who have Xboxes and smartphones, resources that exceed the imagination of people in many countries, are regarded as poor.
You know you are beginning to understand economics once you grasp that there is never enough to satisfy everyone.
In short, this is what is meant by scarcity.
Scarcity defines human history. No matter how much wealth is created, there is still scarcity. The economic system doesn’t matter. Scarcity rules all.
Productivity concerns decisions on what to do with scarce resources, decisions made about using land, labor, capital, and other scarce resources.
The key to keep in mind is: Every resource has multiple uses. Think of petroleum. What do you get from it? Gasoline, yes, but also heating oil and asphalt and plastics, and… the list goes on.
How much of each resource should be allocated to each of its possible uses? Who should decide? Who could possibly know enough to decide.
That is the basic question of economics: How do we
most efficiently and effectively use scarce resources?
People propose many kinds of economic models in order to make those decisions. History shows what happens with each of those models.
No model appears perfect, but some cause more misery than others because of the inefficient and ineffective use of scarce resources.
Please don’t make the mistake of thinking that economics is about money. No, it’s about goods and services. Productivity.
As stated by Thomas Sowell in Basic Economics, “It is not money but the volume of goods and services which determines whether a country is poverty stricken or prosperous.”
Chapter 3
Jobs
Don’t be afraid to give your best to what seemingly are small jobs.
Every time you conquer one it makes you that much stronger.
If you do the little jobs well, the big ones
will tend to take care of themselves.
Dale Carnegie,
from How to Win Friends and Influence People
Extra wealth and trade provide the opportunity for jobs.
Our inventor, Tor, realizes that he could put the wealth he has already created to work and increase the amount of wealth he has to trade.
He makes his neighbor, Jay, an offer. Tor will teach his neighbor how to fish with his fishing pole and let him fish for ten fish each day, five days each week.
In exchange, each day Tor gets six fish and his neighbor keeps four. They both see this as fair, since Tor invented the fishing pole and taught his neighbor a skill.
Tor has created a job for Jay, a kind of working trade.
Jay trades his time and effort for learning a skill and receiving extra fish. More fish than he could catch on his own.
As a result, Tor is now busy with a business, a free enterprise.
Why free?
Because Tor is free to sell and trade what he wants, and Jay is free to trade his labor for what he wants.
Money and Wealth Page 2