Tuesday, May 16, 2006

Kindergarten Economics

A cute saying is, “Everything I know, I learned in Kindergarten.” That may indeed be the case for some, but learning doesn't always imply useful knowledge. Sometimes the item learned becomes an axiom of errant logic and false conclusions. These conclusions then drive economic policy toward the -isms of socialism, egalitarianism, utilitarianism, environmentalism, etc., the often-prized third way. But in actuality, Ludwig von Mises showed that the direction provide by these conclusions leads down the one-way street to the socialist cul-de-sac.

The classroom poster reads, “There are no wrong ideas here.” Is this apodictically true? If it is not, where does this false statement lead? What conclusions and actions result from a saying so apparently innocuous? You might be surprised.

Future educators are being indoctrinated by college professors adhering to progressive and socialist educational utopian ideals – just as current educators were indoctrinated during their college years. Mises in Human Action noted that Charles Fourier, the French utopian socialist, believed that man could create a world where the seas are made from lemonade. Mises also quotes Trotsky’s belief that the world in the 1920’s was about to witness the birth of the ideal super human as “the average human type will rise to the heights of an Aristotle, a Goethe, or a Marx. And above this ridge new peaks will rise.”

These Utopian ideals are certainly powerful statements, but they are a too outrageous for the typical education major. Keep the utopian ideal, but spin the rhetoric into the less offensive Kindergarten concept that no ideas can be wrong and you've hooked the teachers, parents and school board. And, more importantly, you've inculcated a new generation. Gramsci was right, why fight in the streets when patience and time will bring about socialism through lectures and textbooks as each subsequent generation is taught party-line thoughts and ideas at state-run schools.

There are many in my generation who believe that all ideas are good. Failure is not the product of a bad idea; failure is instead the product of market flaws and the sign that government intervention is required.

In reality most ideas are not worthy of consideration; they're inefficient, wasteful and just plain wrong. In Kindergarten and throughout the public K-12 system that statement is politically incorrect.

A little history is in order. Otto von Bismarck’s dream of state socialism was given birth decades before his rise to power when the calls for compulsory public education were heard soon after Napoleon defeated the Prussian army at Jena. The Prussian system supposedly began producing the best and the brightest, at least that’s what Horace Mann, the father of public education in the US, believed. Later, John Dewey, the father of the current pedagogy, was enthralled by what he saw during a 1928 visit to the Soviet Union. Trotsky’s Utopian man was envisioned by the Progressives as the product of public education.

This has left us with a free and compulsory school system that is convinced that five 7th graders sitting around a table can construct the concepts that required the brightest intellects hundreds of years to conceive. It took the likes of Carl Menger and the passage of a century to overthrow Adam Smith’s Classical School and institute the Marginalist Revolution. The discovery of marginal utility, considered the mark of a genius, is now supposed to be replicated by less-than-eager adolescents within a 40-minute class period. The utopian man has arrived.

“No wrong ideas here.” Every thought uttered by any child or adult has to be given equal standing. Consensus, an ideal adhered to by the education monopoly, is the blending of these ideas into an Hegelian synthesis [1] that becomes truth. Synthesis can then be tested using the latest tools of the econometrician. That this new truth stands outside a priori logic is of no consequence. Without a system built on a priori logic to test ideas, anything can be deemed possible. Polylogism is certainly alive and well.

The empiricist’s test of the statement, “No wrong ideas here,” is a view of two snapshots of a local strip mall taken one year apart. Most of the stores open in year one are gone in year two; bad ideas.

Weren't these ideas entrepreneurial dreams? Certainly, but not all dreams lead to viable concerns. Mises considered the consumer a heartless taskmaster. The statement in the Kindergarten classroom fails the empirical test and thus must be concluded as false.

Not so fast. Wasn't the test the result of a flawed system? Didn't the statistical noise from the market cause a false reading of the results? Aren’t we confounding correlation with causation since the market caused the failures? Such ideas are hard to refute since they spin faster than anyone can apply logic to them.

Unlike the Kindergarten teachers who may truly believe that all ideas – dreams – should be allowed to germinate and bloom, the consumer does not see the dream, only the product. We see Wal Mart but we don't see the thousand other stores that opened in the 1950’s that, while being the dreams of entrepreneurs, did not provide for the most urgent wants of the customers. These businesses failed. Their business model was incorrect and inefficient.

But, wait. Failure means that an idea was wrong. We have been taught that ideas are correct; it is the market that fails. Your snapshots from above shows different store fronts because the free market suffers the inherent flaw that the passing fancies of consumers trump the dreams of the child, now entrepreneur. This conclusion is what we were taught in Kindergarten as impressionable and malleable children. It’s the evils of the market that steal the dreams of the Utopian man.

The market didn't steal the dreams, the dreams still exist. But consumers – you and I – shouldn't have to pay for another man’s dream. The dream must simply remain one man’s dream. Under a system of interventionism, the dreams of the entrepreneur are exchanged for the dreams of the elected official or bureaucrat. The entrepreneur that dreamed of building a store on the premise of “always high prices” is now sitting behind an agency desk commanding the economy. Instead of fully stocked Wal Marts carrying fresh foods from all around the globe, the consumer is stuck with the drab, dirty Soviet-quality stores stocked with Vodka, cookies and little else.

Saying an idea is wrong does not mean that ideas shouldn't be tested. IBM thought Gates was off the mark trying to peddle computers for home use. Other examples abound where ideas considered crazy brought innovation to the market and eased the urgent wants of the consumers.

Unlike a lab where all conditions must be controlled for an experiment to work, the market allows someone with an idea, enthusiasm and some financial backing to test that idea at the local strip mall. Should the concept align with the needs of the consumer, the next Subway-style success will begin opening franchises in strip malls throughout the US.

Better the foot-long turkey on wheat served with a smile than the slice of salami on stale bread coming from the scowling apparachik wearing a faded Babushka. The more productive an idea, the more efficient the economy will run. We all benefit when ideas that are wrong are allowed to be discarded in the waste pile.

I will contend that all truths I know about the market I learned through studying Human Action and Murray Rothbard’s classic, Man, Economy and State. Since these books reconstruct economics around solid a priori logic, they are irrefutable. These books deliver conclusions will challenge all that was learned in Kindergarten and beyond, but those very conclusions must be understood as the guiding lights to a brighter future for all.

Jim Fedako

[1] The common usage is Hegelian while this usage is more along the lines of Fichte's system, the predecessor of Hegel. Though even this fits the common usage of Hegelian.

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