Four-Letter Economic Words

Four-letter economic words by Mark Thornton.

Four-letter words get your attention,

but some of those familiar with the work of George Carlin

might not think this is necessarily a good thing.

The economic version of four-letter words

are also things that people would rather avoid thinking about,

but they are pivotal to human existence

and personal success.

This is especially true in times of personal difficulties

and social chaos.

I'm going to limit my discussion here

to seven of the most important four-letter economic words.

Most of them are traditional and familiar,

but one might seem out of place.

This one exception is only out of contact

from the mainstream economic perspective

and a failure to understand economics as Ludwig von Mises,

postulated and thought of the foundational motivation

of psychic profit.

The seven-word referred to actions

and the actions are fundamentally mental exercises

that anyone can do.

These action categories are basically timeless

and without specific context.

In other words, they apply to everyone at all times.

A re-examination of the words is a good reminder

to find your focus on the top seven.

This would be especially true for difficult economic times.

They are an anchor to rational action

in the current whirlwind of government chaos

being inflicted on us.

Work.

Working is the most important and basic

of all economic activity.

In the Robinson Crusoe story

after a moment's reflection,

the actor starts working in pursuit of his goals,

whether that is gathering water, coconuts or firewood,

fishing, building a camp, et cetera.

Most people wake up in the morning and go to work

or go to school.

Even billionaires work hard.

And if you don't understand how billionaire capitalists

have a justification for their wealth and resulting income,

see the recent episode of Bob Murphy's Human Action Podcast.

Work is the least controversial category,

and we all think about work or how to avoid it.

Work is much more expansive than a typical job category.

House cleaning, washing your clothing and cooking

count as work.

Repairing your appliances as well as interior

and external painting of your house count as work.

Working in your gardens and landscaping

for aesthetic purposes counts as work

just as is toiling in your anti-government victory

garden to produce food.

Even if you have plenty of money and don't work for wages,

you still do a great deal of work.

Working out at the gym is work if your purpose

is to remain healthy and vibrant,

to enhance your physical stamina and mental acuity,

or to increase your productivity.

If you exercise because you are committed

to staying away from the medical care complex

and reduce sick days, then it counts as work.

If you just like riding your bicycle

or prefer to read your phone at the gym,

that probably does not count,

but working crossword puzzles might.

Work can be directly satisfying.

It can provide monetary benefits and fringe benefits.

All work gives at least a psychic profit.

Working hard is thought to be personally satisfying.

And that is because it means we are achieving more

of our subjective ends.

People who don't work or work much

or who specialize in avoiding work

are not necessarily better off or happier than those who do.

Austrian economics teaches that we cannot

compare satisfaction between individuals,

but social indicators paint an ugly picture of sloths

and those who live their lives on welfare.

Read.

A special category of work and one that I am well aware

of is reading.

It is an activity that does not involve

strenuous physical activity like typical labor.

However, reading in a modern capitalist society

has become a substantial in activity as traditional work.

It is also an activity that can qualify as work or leisure.

Reading associated with taking classes

or doing research is obviously work related.

Reading poetry and novels is typically considered leisure

for most.

Looking up the scores of sporting events is leisure

unless you are a professional gambler

while looking up stock prices and commodity prices

is typically work related.

Reading contributes to your work and your productivity

and this contributes to maintaining

and improving your marginal value product.

How much does your work contribute

to the overall economic health of your employer and your wages?

This highlights that reading is not just

a mechanical process, but a skill in terms

of how much you learn from the mechanical process

of visualizing various combinations of words.

People who are good readers are typically

people who have developed the skill of being good learners.

You can learn without reading, but it

is more difficult and limited.

Followers of Austrian economics have

an incredible advantage over other people

because they have a basis of analysis

to properly interpret what they read.

In particular, Ludwig von Meises and Murray Rothbard

have provided comprehensive theoretical treatment

of economic and social theory, with which

the reader can interpret the history, policy, and events

they read about.

Meises' treatise is human action, PDF, EPUB audio, Rothbard's

treatise is man, economy, and state, PDF, EPUB audio,

and everyone should have a copy of my quotable meises

where you can find Meises' thought about topics

and a reference to the original source.

Plan.

Overall, learning is the most important prerequisite

to successful planning, and planning

is widely thought to be key to overall success.

Planning is part of all categories

of economic action in all environments,

while planning does not have the final say in our actions

in the current environment.

It takes on added significance to prevent inaction

an excessive unplanned action.

Moreover, contingency planning takes on added significance

in an economy with heightened uncertainty regarding currency

values, price inflation, as well as input and asset prices.

There is little doubt among experts

that planning is a critical aspect of success in endeavors,

especially your choices, costs, and uncertainty conditions.

People plan their education, their careers,

their families, their investments, their retirements,

et cetera.

This involves reading, learning, consultation,

and asking the relevant questions.

Of course, we also plan our day and our meals,

but whether it's short-term or long-term planning,

we know that we will sometimes have to deviate from our plans

and make the most of situations.

This last point distinguishes the real world

planning of entrepreneurs, builders, and homemakers

from the engineering mindset of government planners.

The latter expect everything to fall into place

as ordered, that optimal ingredients are always available,

and that the world will comply with the plan.

In the real world, uncertainty is omnipresent.

The availability and prices of inputs

are never given, and in the end, our consumer can be fickle.

Plan accordingly.

The role of the market entrepreneur

is to bear the burden of all this uncertainty.

You can read about the differences

between government planning and private planning.

In F.A. Hayek's article, The Use of Knowledge in Society,

in the Mises Institute's free book,

Hayek for the 21st Century.

As hinted above, most planning is about building up

and improving over time.

The key here is saving.

Saving is consistent working and earning more than you spend.

Saving is a key to personal economic success,

as measured by individual wealth,

which is the accumulation of savings

and entrepreneurial profit.

It is also the key ingredient in the success of an economy

as measured by our ability to consume our standards of living

and the accumulation of capital.

In contrast, the failanks of Keynesian-style economists

considers consumer spending and government borrowing

to be the engine of economic growth

and saving to be a dangerous leakage

from the economic system akin to an oil leak

in your automobile.

The problem with saving in a Keynesian run economy

is that savings income is seen as negative

and is discouraged through taxation

and currency unit depreciation via inflation.

debt rather than saving is encouraged

and as a result, increasing household instability.

Some people try to avoid these problems

by stacking real money outside the banking system

by exchanging government currency

for silver and gold bullion.

This approach is said to be advantage rather than disadvantaged

by the policy of inflation

because money tends to appreciate

in purchasing power versus currency

and it avoids the problem of taxation

until the bullion is converted to currency,

often being subjected to steep capital gains taxes.

Intergenerational transfers can sometimes avoid

this tax incidence.

Shop.

Of all the types of four-letter economic activity

that we engage in, the most fun is considered

by many to be shopping, buying, and consumption.

In fact, many people report shopping to be enjoyable

and even consider it a leisure activity.

There are really two notes that I would like to make

on this topic.

The first is that all the above four-letter words

are prerequisites for shopping.

Being successful at those four-letter activities

is important to success with this activity

and overall success economically speaking.

Working and earning an income

or enhancing your ability to earn income

is a prerequisite for shopping.

Reading and planning are also prerequisites

for successful shopping and overall economic success

because it enhances budgeting and prioritization.

Many people who get into economic difficulties

related to shopping or even just regret purchasing

a particular item will lament that they just weren't thinking

or that they certainly were not planning to go bankrupt.

Saving increases your ability to consume in the future

and is a buffer against faulty purchases,

emergencies, and contingencies.

Second is that success with shopping is dependent on saving.

Saving is dependent on budgeting

and budgeting is dependent on reading and planning.

Many people report overall satisfaction with shopping

because they have pre-planned and prioritized

their saving and giving,

often making them automatic deductions

from their revenues and accounts

so that shopping is a residual.

This residual approach enforces a type of budgeting.

Give.

This is extended even further by the amount of fund

reported by the buying, giving, and receiving of gifts.

Buying and giving gifts is a consumption activity

whereas the receiving of gifts is a windfall to the receiver

even if the benefactors don't have your short-term utility

function in mind.

You see mainstream economists treat gift giving

in a mechanical fashion.

The generous person makes or purchases a gift

and bestows it on the beneficiary.

The mainstream analyst remarks that it is always better

to give cash so that the receiver can maximize their utility

by purchasing what they want.

But of course, that is an elementary mistake

in that the giver is trying to maximize their own utility

through gift giving.

Therefore, the gift might be a Bible, a vacuum cleaner,

or a Christmas tree ornament, or it might be cash.

Suffice it to say that we should recognize the reality

of the two different utility functions

and indeed the two different time preferences.

Gifts and charity are essentially the same type of action.

Pray.

Suffice it to say that prayer is a part of all these actions

in an intangible way, whether or not you invite God

into the deliberations, conversations,

hopes and wishes in your head,

it is elemental that the above six activities

are basic to our lives and that each of them comes

with uncertainty and doubt, large and small.

It is important to have a process to mentally

enunciate your goals, purposes and aspirations

of your action planning to evaluate them

against your basic urges, priorities, and principles

and to review your results.

Having a higher power of some sort is useful in that respect

and given all the natural uncertainty we face,

it is reasonable to want guidance and inspiration,

whether that is an informed person, trusted source,

or some immaterial moral standard.

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