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Eureka: The game of economics
by Jay Gutman
2017-09-17 09:48:31
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Bank loans people money. Bank examines the files very carefully, takes collaterals, signs guarantees and if there's a slight doubt or feeling the loans won't be repaid, the loan will be rejected.

Pec01_400eople start paying back their loans, banks earns decent interests from the loans and get all excited. The emotional people examining the files when lending money suddenly see good in human nature and start thinking that human beings have the natural tendency to repay their loans. Files start being examined more carelessly, collaterals and guarantees are more of a formality. Banks see good in human nature and start making loans they shouldn't have made. Banks start collapsing or having trouble breaking even because human nature isn't that good at repaying loans after all. Then the country hits the recession.

When handing out loans timing is one thing, the ability to fructify the business is another. Is the business recession-proof? Does the person have the kind of passion and commitment it takes to get the business done?

Now to government regulation. It is clear, simple, short, ambiguity-free regulations that don't change without consensus and that don't need teams of lawyers for interpretation that make business thrive. Unfortunately, a lot of governments actually take the advice of such and such business to insert regulations that make competitors fall or collapse.

Football, soccer, tennis, basketball or any other sport have clear, simple regulations that rarely change. That's what makes the game fun, then the players thrive or fall usually depending on how much effort they put on and off the court and how lucky they get away from injuries or personal drama. If the game had ambiguous regulations, or if it was up to the referees to decide what the regulations are, then the game would probably be rigged. Referees are trained to implement the rules of the game. In the business world the referees are called the justice system.

The heart of any economy tends to be big business, the kind that needs huge investments, then the lungs of the economy tends to be the small shops, workshops, restaurants, pubs, cafés where a lot of investment is made. I spend a lot of time in university campuses, where I see a lot of groups of six, seven, sometimes more students decide that they'll try to put gather money and start a café or a pub. Where the government could regulate or intervene is with laws saying that no more than two or three people can be the owners of small, little-profit generating ventures like cafés and pubs. “Oh but the profits will be good then we'll start a franchise then we'll be the next Starbucks!” The government's response could be “if you make 6,000 dollars in profits, and good luck with that, you only get to keep 1,000 dollars a month as your salary, not to mention the myriad of expenses your business is going to need.”

In the end it's not government regulation that's bad, nor are taxes that bad. I pay taxes so the government can prevent the mafia from asking me for their piece of the cake at gunpoint. Among other things. Those kinds of incidents are frequent when taxes are too low. Politicians lower taxes for election purposes, and then it's public safety, education and health that take a hit.

Regarding taxation. That's what keeps schools, public hospitals, roads and security running. If private-owned businesses are winning, the government is winning. If private-owned businesses are losing, the government is losing. The idea for the government is to help business win, win, win. Simple regulations, few changes, no changes without overwhelming consensus, and preventing one business or the other from rigging the game. And then with banks loaning wisely, that's partly how you win at the game of economics.

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Emanuel Paparella2017-09-17 10:10:59
Indeed, it looks like a big game being played with people's lives with winners and losers and to hell with ethical concerns and the common good.

We now have a U.S. President as prime example of that attitude, the populist deal maker in chief who will fix all our social problems and drain the swamp of greed and unconcern. Good luck!

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