From time to time, I nickname basic concepts for my own reference as a way to easily catalog, document, and understand the world.
Joshua Kennon’s Seven Laws of Fair Economics:
Rule #1: In a free and just society, if a man wants something, he must either create it himself or exchange with other people for something they desire or need. Upon reaching adulthood, no man is entitled to anything but freedom over the body and mind God gave him.
Rule #2: How, and where, money accumulates throughout a free civilization represents what the people actually value most, not what the elite thinks they should desire. Therefore, a man should be free to determine how his own money and time is allocated, even if that means making sub-optimal decisions that result in his ruin or death.
Rule #3: No man has the right to outsource his costs while in-sourcing his profits. This is not capitalism. This is theft. For example, buying a piece of land and destroying the environment is effectively forcing the next generation and society as a whole to pick up a portion of your operating costs.
Rule #4: Beyond a basic standard of living, all income should be taxed equally and fairly regardless of source. This ensures that the poor do not suffer under the burden of taxes they cannot afford and that successful enterprising individuals who work in productive fields such as engineering, manufacturing, and medicine don’t pay a higher tax rate than those who work in support industries such as banking, money management, and private equity.
Rule #5: The total amount of wealth inequality in a society is not nearly as important as the standard of living experienced by the majority of families, provided there are electoral protections against undue influence of capital on politicians. Our measures should be absolute not relative. It is our responsibility to find ways so that each successive generation lives better in real, inflation-adjusted terms, than their parents did. For example, we should consider the 20th century United States, during which wealth inequality exploded but lifespans increased and the standard of living for the average man rose 600%, an enormous success.
Rule #6: The primary roles of government economic policy should be designed to level the playing field not the final outcome. Policies should include:
- Maintaining a stable currency and full employment.
- Building bridges of upward social mobility that make it possible to move beyond the class into which you were born.
- Creating and maintaining escape, or “game over”, mechanisms such as fair bankruptcy laws, that make it possible to start over in the event of poor decisions or bad luck.
- Rewarding and incentivizing capital formation and accumulation by industrious and entrepreneurial individuals so that rags-to-riches stories are possible.
- Creating and maintaining mechanisms that prevent the accumulation of wealth in the hands of those who did not earn it, avoiding a modern day manifestation of the feudal system that exited in Europe prior to modern civilization.
- Preventing price fixing and unfair barriers to market by those in monopoly positions.
- Establishing an education system that provides literacy and basic job skills as a fundamental human right for all children regardless of the socioeconomic background of parents.
- Enabling open and fair free trade between any two consenting parties.
Rule #7: No single institution should be allowed to grow to be so complex or vital that it is “too big to fail”.
Steve Jobs Principle: Knowledge alone isn’t sufficient for a good living. Steve Jobs studied liberal arts, calligraphy, philosophy, and religion. These subjects provided personal enrichment but they did not translate into wealth for his family until he converted that knowledge into tangible products and services that other people wanted or needed enough they wanted to trade with him. In our society, we trade little pieces of paper called money.