UNDERSTANDING ECONOMICS

Not many people have an inclination towards what is called the dismal science and yet economics is something that effects peoples lives on a daily basis. When I looked up the definition for economic or economical in Noah Webster’s 1828 Dictionary, I found out why I am an economist. Economic means "managing domestic or public pecuniary concerns with frugality; frugal; regulated by frugality; not wasteful or extravagant."

An economist is one who Webster defines as, "one who manages domestic or other concerns with frugality; one who expends money, time or labor judiciously, and without waste." Webster renders economize as, "to manage pecuniary concerns with frugality; to make a prudent use of money, or of the means of saving or acquiring property." Frugality and prudence are linked together when dealing with economics.

The theme of the Frugal Accountant is that frugality is always a virtue, so an economist is by definition virtuous. However, in our day and age, most economists are far from being frugal. Most economic policies are profligate. They are not wise and most economic policies are short term without considering the long term consequences. Henry Hazlitt wrote about when instituting any economic policy what must be consider is not only the short term consequences but also the results of the policy in the long term and its logical conclusion. This, of course, requires understanding economics.

For instance what happens when the government institutes rent control. In the short term, renters are going to pay below market prices for rent. This is good for the renters and there will be more renters than the supply of rental property, in this situation, because more will be demanded at less price. However, in an exchange, there are two sides to the transaction. What is not considered in rent control is the landlord of the rental property.

The landlord is forced to charge a set amount of rent by government decree. Since there will be more demand than supply of rental units, the landlord has no incentive to build more rental properties. When the rent is fixed below the market, the landlord will potentially be operating at a loss. There is no incentive on his part to maintain the property because he will be losing more money. Thus, we have the creation of slums and the derisive title given to the landlord of a slumlord. The cause was not the landlord, but the government’s economic policy of rent control.

Yes, people need a place to live, but it is not the government’s place to provide people with

housing. This is a family responsibility. This is where being an economist comes into play and a use of the spiritual quality of frugality. Welfare is an inescapable concept. Welfare is to be accomplished by the family, not the government. This is one of the reasons that the welfare state is an example of the opposite of economics. An economist who is worth his keep will vehemently oppose all rent controls, or he is a charlatan.