Practical and Applied Economics

Economics at the academic level is quite challenging. Few things can be proven conclusively. Well-meaning, honest people could disagree about almost any point. It is not that way for you and I.The depth of the subject adds small value.

We need to understand the ideas of economics, maybe be able to dig up some data from time to time, and use what we find to make reasonable decisions.

Economic decisions

Economic decisions rely on three absolutes. They apply to each of us, to every business or institution, and to every government.

The three absolutes, (axioms, a priori facts) are these.

  1. Scarcity – There is never enough of anything (resources) to fully satisfy any desire. Certainly not all desires.
  2. Everything has a cost. The cost could be money, time, attention, or others that change with the circumstances.
  3. The result is trade-offs. You attach your scarce resources to the things you want most and in some sort of time order. Priorities.

That’s how we each run our lives.

You don’t need to know much about treaties, foreign exchange, the International monetary fund or the world bank to get along. Knowing a little about money supply might help you predict the nature of your future, but you can be forgiven if you don’t know the difference between M1  and M2.

Tax rates, and what is taxed, matters some. Few of us miss the effect of taxation.

Our planning will do best when we have a strong strategic view. If we know what we want and what we have to get it with, applying the three principles within our vision of who we are and what we are trying to achieve. becomes just organized common sense.

Some thoughts from Thomas Sowell

Most things happen for a reason. Sometimes we can estimate the reason and behave differently. One that many people wonder about is why do governments spend so much money?

Thomas Sowell is an economist who relies on exquisite research and rational thought. These two thoughts, taken together,  summarize my current assessment of the spending problem with governments.

  1. “The first lesson of economics is scarcity: there is never enough of anything to fully satisfy those who want it. The first lesson of politics is to ignore the first lesson of economics.”
  2. “The fact that so many successful politicians are such shameless liars is not only a reflection on them, it is also a reflection on us. When the people want the impossible, only liars can satisfy.”

Governments spend too much because the people ask them to, and their careers are made better by saying yes. Thomas Sowell thinks and expresses his thoughts clearly. Most activists, and many politicians try not to notice him.

The takeaway

Ironically, as long as the people want unreasonable or unaffordable things, the government can be effective only by ignoring them.When they pay attention and react, it fails. You cannot, and they cannot overspend indefinitely. Irrational doesn’t work.

Ask the governments for less and ideally things that provide a benefit.

Left to their own devices, people do pretty well.

When government plans and spending are done poorly, it upsets the plans people make. Governments can balance their budgets only by unbalancing yours. They have no money of their own.


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I build strategy and fact-based estate and income plans. The plans identify alternate ways and alternate timing to achieve both spending and estate distribution goals. In the past I have been a planner with a large insurance, employee benefits, and investment agency, a partner in a large international public accounting firm, CEO of a software start-up, a partner in an energy management system importer, and briefly in the restaurant business. I have appeared on more than 100 television shows on financial planning, have presented to organizations as varied as the Canadian Bar Association, The Ontario Institute of Chartered Accountants, The Ontario Ministry of Agriculture and Food, Banks – from CIBC to the Business Development Bank.

Be in touch at 705-927-4770 or by email to don@moneyfyi.com

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