Simple Economics

..either immediately or ultimately every dollar of government spending must be raised through a dollar of taxation. Once we look at the matter. In this way, the supposed miracles of government spending will appear in another light. -- Henry Hazlitt

Economics as a field of study is often misunderstood. So much misunderstood that it is often blamed for our sad economic condition.  This is a little like blaming the scale for the failure of a diet. The core of economics describes with brutal precision the nature of an economy. People trade labor for goods, just as they did at the beginning of history. It is happening on an ever increasing scale, and the more people interacting with an economy, the more complexity we have.

People tend to dismiss economics as being abstract, almost a philosophy rather than a science. It's not surprising that many would reach that conclusion. You can hear the words "if economics was a real science, our economy would be steadily improving, like medical science". If economic science and medical science were practiced equally well, we would still be in the blood-letting phase.

The other difference that occurs to me is that bacteria behave rationally.  My argument here is not to advocate for economics as science, but for economics as a fundamental aspect of human nature. And every time we ignore core human nature, there is bad trouble.

"I think almost every economist would agree that government gets itself in trouble when it tries to interfere with voluntary behavior." — Milton Friedman 

Economics is misunderstood. Consider that government sometimes creates false impressions of economic conditions, for the purpose of manipulating public sentiment. for example, Austerity and Stimulus. Austerity we understand as low government spending, and Stimulus has come to mean high government spending. In Europe right now, there is discussion about reversing the course of austerity, and going to stimulus instead.

The fallacy in this argument is that real austerity, and austerity as it is practiced in, say, Greece are not the same thing. Further, real stimulus, and stimulus as practiced in, say,  shovel ready form, are also not the same thing. In fact, the two "economic" approaches are probably not much different in execution. The political party in charge makes sure it's friends are taken care of whatever the new scheme is called.

But real economics offers real solutions. Real austerity takes the size of government down to the point where the economy can sustain itself without borrowing. Simple, right? Easy to define. Easy to visualize. Easy to achieve. Mountains of data show that the amount of federal revenue that can be created is no more than about 19% of GDP. It is an immutable law. So, we should tune our government to exist on that number. If we want to grow the government we should accomplish it by growing the economy.

So, rather than trying to parse what everybody means by austerity, stimulus, and voodoo economics, we should start looking at simple, real economics.