New Ideas from Dead Economists(Todd G. Buchholz)

 

1. The Paradox of Selfishness: A Path to Equality

"Human selfishness can, paradoxically, create a more egalitarian world. The government should not suppress selfish individuals or human selfishness because it is a rich natural resource. Conversely, over-reliance on human compassion or altruism can lead people to become foolish and the nation to become impoverished." (Mobile e-book: 117p)

People desire to become wealthy. Companies operating under capitalism leverage their "selfishness" to gain wealth by creating better products or services than their competitors, all to acquire consumer wealth. If the government or national laws impede this, it could lead to economic contraction, similar to North Korea or China, where corporate ownership and wealth creation are controlled. While excessive monopolization is certainly an issue, even monopolies arise because there are no comparable substitute goods or competitors. For example, Apple and Samsung, Samsung and LG, Google and Microsoft—these companies compete fiercely to produce better services and products. However, if government policies or laws, aiming for social equality, stifle corporate selfishness, it will disrupt this competitive dynamic. This disruption is akin to losing the top spot. Such stagnated companies would lose money and jobs, leading to increased unemployment and reduced tax revenue. This would be like killing the goose that lays the golden eggs for the nation.

2. Every Enterprise Had a Beginning

"Amazon and Walmart are global retail giants. Walmart was founded by Sam Walton, a native of Arkansas, USA. He was a diligent entrepreneur but also incredibly frugal. The cost of fully spelling out 'Sam Walton's,' the name of his initial store, was too much, so he shortened the name to Walmart. Jeff Bezos started Amazon by selling books from his garage. At the time, he warned investors that he had a 70 percent chance of going bankrupt. Bezos went on to become the richest person in the world." (Mobile e-book: 178p)

All the major corporations we know today were once humble and filled with passionate beginnings. We often only see their success, disregarding their pasts. These companies constantly challenged themselves, never stopped, and nurtured their businesses with ever-newer ideas to solidify their positions. They realized good ideas, attracted investments, and grew their companies. Instead of merely envying the wealthy, we should continually challenge ourselves, think about how to effectively realize our ideas, and learn and cultivate our own ventures. By doing so, we might one day become the heads of large corporations ourselves.

3. The Pitfalls of Public Housing

"Legislation to control housing rents can only worsen housing conditions due to poor management and a decrease in supply. Such control methods usually devastate cities rather than helping the poor." (Mobile e-book: 847p)

Governments in Europe and South Korea, among others, are implementing policies like public housing to stabilize home prices and improve the lives of ordinary citizens. However, these policies come with numerous problems. There are strict eligibility criteria (income, assets, etc.) that exclude those with other opportunities. The limited supply means people often have to wait for someone to vacate or pass away to get a spot. Furthermore, public housing can diminish a city's investment value.

Why do we want to live in Seoul? We desire good transportation, infrastructure, food, culture, and environment. But if all of Seoul's housing were public housing, would people still want to live there? Residents spend money, and in response, small businesses and corporations invest to provide services. But would small businesses and corporations invest for the sake of public housing residents? I believe not at all. Money needs to circulate for a city to thrive. The difference in real estate prices between Seoul and rural areas ultimately boils down to whether there are many or few people who want to live there. In the end, all prices are determined by supply and demand. The idea that government policies can solve everything is, in my opinion, utterly unattainable.

4. The Value of Currency is Shaped by Government Policy

"For Keynesians, the national economy is like a car. Pressing the accelerator means 'increasing government spending and cutting taxes.' Conversely, pressing the brake means 'reducing government spending and raising taxes.' A government that skillfully manages the accelerator and brake according to the situation can achieve both economic growth and price stability." (Mobile e-book: 971p)

During the recent COVID-19 pandemic, many countries stimulated their economies by printing money, which resulted in a decrease in the value of money and a rise in inflation. As a result, prices increased. To counter this inflation, the United States is raising interest rates to reduce the money supply. Similarly, South Korea also printed a lot of money during COVID-19, and the increase in the minimum wage, among other factors, led to a depreciation of the Korean Won and higher prices, prompting an increase in interest rates to respond. As a result, we are now living in an era where kimbap costs 4,000 won, and this trend continues. Turkey drastically lowered its interest rates, leading to a collapse in the value of the Turkish Lira and hyperinflation. Consequently, the average monthly salary there is around 700,000 won, while a kebab costs 30,000 won, a situation they are still experiencing. As such, government policies can have a profound impact on our lives, so I hope policymakers always give careful consideration to every single policy.

5. Inflation's Shadow Looms Over Us All

"Venezuela possesses the world's largest oil reserves, but a corrupt government extracted wealth from its citizens and tried to compensate them by distributing worthless paper money. One lesson from this is that those who gain money easily lose it easily." (Mobile e-book: 992p)

The hyperinflation phenomenon in Venezuela stemmed from the following reasons:

  • Currency issuance to cover deficits: Reckless issuance of currency without tax revenue or foreign exchange reserves led to a decrease in its value.
  • Nationalized oil industry: With the state controlling the oil industry, corruption and underinvestment led to a loss of competitiveness.
  • Exchange rate controls: Exchange rates are not meant to be controlled, which is why most capitalist economies currently use a floating exchange rate system. However, exchange rate controls in Venezuela led to a further decline in value.
  • Price control policies: When prices rose, the government controlled the prices of daily necessities, resulting in even more severe supply/demand imbalances and further price increases.
  • Political instability: A breakdown of law and economy led to a loss of trust in the country and intensified capital outflow.

As a result, approximately 8 million Venezuelans, largely from the middle class, have emigrated overseas, and the Venezuelan population is rapidly declining. This population decrease has been a direct consequence of Maduro's long-term rule since 2013. South Korea is a country with very few natural resources, relying on exporting human talent and technology. I hope that certain policies do not cause the collapse of the Korean economy, and that we do not follow the path of Venezuela.

6. Continuous Learning and Adaptation

"The world today may be more materially abundant than 200 years ago, but it has become a more difficult place to live mentally." (Mobile e-book: 1324p)

The world today is made up of countless interconnected elements: information, economics, culture, politics, and society. While we are experiencing immense material benefits compared to 200 years ago, human thinking seems to have changed little. Therefore, we must continuously learn, adapt, and seek understanding to enrich our lives. As I've observed from reading about Socrates and the lives of the Greeks 2,000 years ago, humanity itself hasn't fundamentally changed much; only the objects they hold have. If the objects have changed, so too must the thoughts of those holding them. Only then can we truly find our essence and understand what we should do.

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