Thursday, April 7, 2011

Americans Like the Taste of Snake Oil Epilogue (110113)

Economic fallacies are the substance of the “snake oil” that Americans like to taste. In this series, I have tried to expose some of the snake oil. I hope that by approaching the subject in a logical manner, but in the form of a conversational give-and-take preserving an emotional base, I have managed to convey a meaningful message.

Unfortunately, if the past is any indicator, no matter how sound the logic in my message, there is still a very good chance that the message will fail. It may not be accepted nor, in some cases, even be understood. There are sound reasons for this, a number of them, in fact. You’ll have to have higher than average persistence to find out what they are, though. If you can stick with me for a bit, you’ll see what I mean.

Humans haven’t found a way to expand time, yet. As the volume of information available for public consumption has expanded, peoples’ attention spans have grown shorter and shorter. Television has its sound bites. The Internet has a vast array of information resources. These communications resources have been converging for a long time and they have produced an information overload condition.

Fact is, people don’t deal with that kind of overload well. They do, however, try to cope with the problem. Twitter and the like are responses to the overload. Bullet points now substitute for detail. Peoples’ thinking processes are getting a mile wide and an inch deep. Anything requiring deeper thinking causes them anxiety. They recoil from anxiety. They surf television channels and scan pages on the Internet for just a few seconds before they flash off to another channel or page.

Economists have traditionally approached the subject of human behavior as if it followed the rules of physics and mathematics, i.e., as if the people behaved the way inanimate objects do. They believed that people make decisions based on logic, i.e., a rational analysis of facts and figures. This is an underlying misperception that allows economists to feed people fallacies.

Without delving too deeply into psychological principles, suffice it to say, the economists are wrong. People do not follow the rules of inanimate objects. People do not make decisions based on logic. People may think they do, and even swear to it as fact, but it is not so.

One of the first principles I learned in Salesmanship classes is that people make their decisions irrationally. This means that people base their decisions on the way they feel about something, not the way they think about it. (This principle is not limited to the marketplace. It is in constant play, in every decision people make.) It is after they have made their decisions that people use rationality, or logic, to justify their decisions.

The fact is, feelings are fleeting emotions. People are fickle. They are always looking for novelty. A major proof of this is in the field of marketing.

People involved in marketing not only accept irrationality in buyer decision-making as a fundamental principle, they depend upon it. It is on the basis of this principle of irrationality that marketers try to figure out how to differentiate their product or service from their competition’s. Thus, marketers are constantly involved in the process of trying to find ways to make prospective buyers develop a greater positive bias toward their product or service than toward their competitions’ almost identical product or service.

Irrational does not, however, mean random, i.e., without a pattern. On the contrary, irrational behaviors form patterns that are discernable. Marketers know this and take advantage of the phenomenon. They delve into population demographics and psychographics to detect these patterns of behavior, especially the irrational basis people use in making their buying decisions. Analysis of these patterns can lead to reliable predictors of buying behavior. Using these predictors of buying behavior, marketers can then frame their marketing rhetoric to match the predictors effectively. Billions of dollars are spent each year to prove that people make decisions irrationally. In most cases, the expenditures return tremendous dividends to the firms doing the marketing.

Now, let's shift gears and get closer to the underlying message of this series. Picture that all capital comes from the government. In this case, obviously, no capital can come from private enterprise. If no capital can come from private enterprise, there can be no private enterprise. If there can be no private enterprise, there can only be public enterprise. If there can only be public enterprise, the government must own everything. If the government owns everything, individuals own nothing. If individuals own nothing, they have no freedom of choice. If individuals have no freedom of choice, they are slaves. Ergo, when government owns everything, all individuals are slaves. Rocket science? Nah!

Am I advocating “no government?” Of course NOT! If I am NOT advocating “no government,” what am I advocating? I am advocating just the amount of government needed to protect the individual from mob rule, the criminal, the corrupt politician and others who would do us harm.

For about a thousand years, until it was outlawed in 1905, the Chinese used to perform a kind of torture/execution called, “ling chi,” or “slow slicing.” In the West, it was called, “death by a thousand cuts.” Actually, that’s a misnomer, but it gets the message across. So what? you ask. “Life is in the blood,” is what.

Ponder this: rounded off, it is a fact that, on average, an adult human body holds about 100,000 drops of blood. There are roughly 20,000 drops of blood in one quart. (For those of you who are not mathematicians, this means that such a body holds about five quarts.)

It is also a fact that, whether it be quickly, as in cutting an artery, or slowly, as in a few drops at a time from paper cuts, if you withdraw blood from a human body at a rate greater than the rate the body can create the blood, the organs of the body fail and the body dies. Either way, fast or slow, the body is still dead.

But, what does that have to do with the current subject? It is this: Capital is the lifeblood of the economy. Collection of taxes (expropriation of capital) by government is very much like withdrawing blood from the human body. If an attempt is made to withdraw capital faster than it can be created, the economy will die. Essentially, the nation falls apart. This basic principle is well recognized by America’s enemies. In fact, one of the elements of al-Qaeda’s basic strategy is to “bleed America to bankruptcy.”

I hope the material kept your attention and has raised your level of awareness and understanding. If you have stuck with me this far, well done; you are one of the persistent ones.