The Seen and the Unseen

I just posted a tribute to Ron Paul, so in that spirit, here's a quote from French economist Frédéric Bastiat from his essay in 1850 entitled "That Which is Seen and That Which is Unseen".

In the economic sphere an act, a habit, an institution, a law produces not only one effect, but a series of effects. Of these effects, the first alone is immediate; it appears simultaneously with its cause; it is seen. The other effects emerge only subsequently; they are not seen; we are fortunate if we foresee them.

There is only one difference between a bad economist and a good one: the bad economist confines himself to the visible effect; the good economist takes into account both the effect that can be seen and those effects that must be foreseen.

Yet this difference is tremendous; for it almost always happens that when the immediate consequence is favorable, the later consequences are disastrous, and vice versa. Whence it follows that the bad economist pursues a small present good that will be followed by a great evil to come, while the good economist pursues a great good to come, at the risk of a small present evil.

Portrait of Frédéric Bastiat from Wikipedia

The Federal Reserve

I recently read a book called "The Creature of Jekyll Island" by G. Edward Griffin. It offered a really interesting analysis of the history of banking and the effects of fractional reserve banking and central banking's monetary policies. The title refers to a secret meeting that took place on Jekyll Island off the coast of Georgia with several bankers and politicians to craft a plan for creating a central bank in the US patterned after European central banking. The ultimate result of this was the creation of the current central bank of the US, the Federal Reserve. The meeting was later documented by participants, but it was kept secret at the time because public knowledge of the banking industry's involvement in the creation of the draft plan would have killed the political possibility of it being passed as legislation.

I've dabbled in economic theory, but as any economist can attest, I'm no economist. It was helpful to have some economic background going into that book, but I found my understanding of money was dramatically improved by reading it. Griffin gives historical examples of governments that enforced a policy of money backed by precious metals and the resulting stability of the money supply and value.

If Griffin is to be believed - and I think his research is pretty thorough, though I may not be in the best position to critique his analysis - the United States has had only one brief period near the beginning of its existence in which the money supply was truly tied to a precious metal - silver. In other eras, although we haven't had central banking during many of those years (we've actually had three central banks - four if you count the bank of the colonies prior to the revolution), we have allowed publicly-chartered and/or regulated private banks to employ fractional reserve banking, which allows banks to inflate the money supply by a fairly large multiplier depending on the reserve percentage.

In other words, even when we had a gold standard, fractional reserve banking allowed our money system to be inflated by the banking industry with new money generated by debt. If a fractional reserve percentage of 10% is enforced, then as much as 90% of the money supply could be based solely on debt with the other 10% based on precious metal. That's sort of a hybrid between a gold-standard and fiat money. Now, of course, we have total fiat money with no backing by anything of value.

The stability of a gold- or silver-backed money supply, Griffin argues, comes from the fact that the money is itself something with intrinsic value. This money, then, when it becomes less valuable, can be converted into other things of value and taken out of circulation, which bolsters the value of the remaining money. When it becomes too scarce (and consequently more valuable), individuals and firms will be more motivated to conduct mining operations or find some other method by which to obtain some of this more valuable money. Those activities bring the value of the money back down. Thus, traditional market forces tend to stabilize the value of the money itself just as they do with any other commodity when there is no government interference.

With a fiat system, the government indirectly dictates the value of the money through various control mechanisms. The idea that a central control mechanism would offer greater stability is a very socialistic idea. Why would a group of bankers/economists in Washington be more capable of stabilizing the vast financial system than millions of individuals operating within the framework of a free market?

According to Griffin, the brief period following the ratification of the Constitution in which the US money supply was truly tied to silver generated an incredible period of growth and prosperity. As I said, I can't really critique his analysis, but if it's true, it begs for a closer look at the virtue of a sound money supply with value controlled by a distributed market instead of centrally controlled by bureaucrats.

Call me crazy, but I'm more and more convinced that freedom is a key ingredient in the formula for prosperity. Thanks to Mr. Griffin, I have a few more ideas solidified in my mind that give me a stronger theoretical foundation for that belief.

Mauldin on Health Care

I read a weekly email from an economist named John Mauldin ... at least, I occasionally read it when I can find the time. I pulled from one of those letters for my previous post and I think I'd better do it again.

John had some very interesting things to say about health care that I think are an important contribution to the debate about how to handle the problems in our system. As he says near the end, the problems are more complex that most of us would like to admit.

John Mauldin, Economist

This post will be really long, but I couldn't cut it shorter and still convey the complexity of his ideas, so, refraining from further comment, here's what John has to say about health care.

... [my] good fiend Mark Yusko ... noted that an acquaintance of his, who was worth north of $10 million, had just had four stents put in his arteries. The hospital bill was $288,000. As he was over 65, Medicare paid everything. He paid nothing. Yet he is worth $10 million. I am not judging, by the way. My mother gets veteran benefits and Medicare, as well as Social Security. I will most likely take Medicare and Social Security when the time comes, if it is still there for me, even though I could afford not to. If my income were of the same stripe as Mitt Romney's, you can bet I would pay just 15% of it in taxes. Hold that thought.

On the same panel, Rich Yamarone said he had a stent put in last year. The bill was $90,000, and he was also nothing out of pocket, as insurance paid for it. His employer had paid for that insurance, so he used it. Just as I use my insurance when I need it. Hold that thought.

A good friend of mine recently had hip surgery, for a problem known of in advance by his insurance company. So they are not paying, saying it was pre-existing. And will not pay for the follow-up costs that are now looming, as it looks like he will need a full hip replacement. And he can't afford it. So he lives with steadily growing pain, while an attorney tries to get the insurance company to pony up. Hold that thought.

Two weeks ago my #2 daughter (in birth order - otherwise they are all #1) had some medical work done and mentioned a lump in her throat. The scan came back, and it was not good. The growths on her thyroid were almost as big as the thyroid. I called my doctor (Mike Roizen ...) and asked what to do, and he gave us a referral to what he said would be the best doctor in Dallas for this type of thing. We went to see him last Monday, thinking we would schedule a biopsy and hoping we could do it soon.

He said we could do a biopsy, but given the scan we already had, if it were his daughter he would remove the thyroid as soon as possible, whether or not the growth was malignant, and then do the biopsy. He had an opening a week later and she is scheduled for this coming Tuesday. Both he and Roizen agreed, and both told us the odds are quite high that it is benign, although complicated by the fact that Melissa's mother had thyroid cancer some 20 years ago.

Why talk about this with you? Here is the rest of the story. She is the one child I have with no insurance. I knew it and kept hoping she would get a job that included insurance. Now that looks like a bad economic choice.

I gently asked the doctor about costs. It was not as much as I feared, but definitely not cheap. As maybe in the mid-range of tens of thousands of dollars. His fee was the minor part. (I was actually surprised at how low as it was. I make more than that for an hour-long speech, and what skills and training do I have? Just saying.) But then he quietly said that the costs would go up a lot if it was malignant, as just the drugs to kill a thyroid cancer would be $25-30,000. The good news is that if it is a thyroid cancer, there is a proven therapy to beat it. Actually, the exact same treatment (radioactive iodine) as her mother had some 20 years ago.

I didn't bother to call other hospitals to negotiate a better price, or find a less expensive doctor. I simply had them schedule it. This is my daughter. It is her life, not a new car. Time seems to be of the essence. And life has blessed me that I can afford it.

But that's the point. How many people find themselves in that situation and their father can't step in? Or there is no father? You then go to a free clinic or an emergency room and try to get someone to help you, even though it's not an emergency. Or you put it off until it is an emergency, or it's too late.

Talk to your friends in the health-care world. And especially the nurses, who are the real soldiers on the front line. The stories they tell us about how broken our medical system is have shocked even me at times. And it is not just a system that has no money. It is a system that we expect to take care of all the needs that, in my youth, were considered as minor. And that is expected to take care of the homeless and the mentally unstable. Drug users. And a lot of people who do not take care of themselves with a simple, healthy diet and exercise, but expect full service when their bodies rebel, crowding out the service and driving up the costs for those who are in real need.

Medicare fraud? It costs us into the hundreds of billions. Doctors who test for everything because they are afraid of being sued if they miss something, running up costs sky-high? An unbelievable lack of technology in this day and age, because of government rules? Insurance and paperwork? Costs that are the highest in the world by a wide margin, yet no better outcomes?

And all staffed by amazing people who care a lot but are overwhelmed and caught up in a system they want to see changed.

The litany goes on and on. So, is the answer to simply to put hour heads down and accept the higher costs and rising taxes? Or let a bureaucracy control costs and require everyone to buy insurance, even if they can't afford it on the $15 an hour the average worker makes before taxes? Or let a "free" market somehow set the price of health care, working with private insurance and safety nets? All in a world of unlimited demand? Because when you or someone you love is sick or hurt, you want the best care you can get as soon as you can get it.

It seems simple. We need to have more-universal coverage. But there is a limit as to what any nation can afford. We look at countries with universal health care, but it is not something that many of us would be familiar with. Could we really ration health care at the end of life, which is where a large portion of our expense in the US goes? Or give up our right to sue if something goes wrong?

We have promised the Boomer generation more health care than we will be able to afford, without major reforms in what we spend our taxes on. And if we raise taxes enough to even come close to what we need, the shock to our economic body will mean recessions, higher unemployment, and fewer jobs which pay less.

.... There are no easy choices. As we will see, raising taxes has consequences in the short and medium term. The transition to where 30%, then 40%, of the economy will be taxes will be wrenching. If we can believe the polls, dialing back health care will not be popular. Raising taxes is no less popular. We want more health care, and we want someone else to pay for it. But there is no one else. It is just "we the people."

And what we do will define our job market for decades. There are no easy choices. We all marshal the "facts" as we see them to support our personal choices on jobs and health care, but it is far more complicated than most anyone wants to admit. There will be costs for whatever choices we make, even if we decide to do nothing at this time.

Creating Jobs

I recently read an excerpt from an interview Forbes did of a guy named Jim Clifton, CEO of Gallup. I pulled it from a weekly letter I get from an economist named John Mauldin. I liked some of the points he made and thought I'd pass them along.

Jim Clifton, CEO of Gallup

When asked the question, "What obstacles do leaders have when trying to create more jobs?", he responded,

There are no real obstacles. Just wrong thinking, bad assumptions. When you build strategies and policies on wrong assumptions, the more you execute, the worse you make everything, which is what we are doing now. There are three wrong assumptions that cause all the current job creation attempts to not work.

1. Innovation is not scarce. Entrepreneurship is scarce. We are spending billions and wasting years of conversations on innovation and it isn't paying off. Great business people are more valuable and rarer than great ideas.

2. America has about six million active businesses. Ninety-nine percent of them are small businesses. An incalculably huge mistake leaders are making now is spending time, money, strategies, and especially policies for those who need 'help' getting a job. A useful way to look at any citizen is this, 'Can she herself create jobs or does she need a job created for her?' We are spending all our time on the cart and doing little or nothing on the horse. We have our assumptions and futurism that backward. 'The horse (small and medium business) stopped, so we fix the cart (jobs).' If we change all our strategies and policies to favor the job creators (small and medium businesses) the horse and cart will get moving again. We have our compassion right, but the logic is staggeringly stupid.

3. It is wrong thinking to imagine that Washington has solutions. Job creation is a city problem. There is great variation in job creation by city in the United States. San Francisco and the greater Valley keep pumping away while Detroit isn't. Austin's cart works while Albany's doesn't. Cities need to look inwardly and say, 'What can I do to create great economy energy, to bring new customers for all existing companies and start-ups?'

I think Jim may not have formulated his answer (most likely delivered verbally) as elegantly as he might have, but I think his points are mostly valid. I admit part of the reason I liked the quote is because his 'staggeringly stupid' comment made me laugh out loud. But I agree that we get our logic backward a lot of times. Fostering job growth has to include encouraging the producers of jobs, which are historically small and medium businesses according to my friend John Mauldin. Mauldin's writings over the years have led me to believe that most large businesses don't create a lot of growth or innovation. There are exceptions. But I'd like to see more encouragement for people to start their own businesses and create economic value rather than seeking jobs from large businesses, hoping that someone will drive the economic growth necessary to create and continually validate the existence of that job.

I think he's probably right about where the solutions should originate. At the local level, people and governments can have a much greater impact. It seems logical to me that many of the solutions should come at the local and possibly state level. I want to see everyone have a job that keeps them meaningfully employed, but I don't think the Federal government is going to solve that problem. I don't believe they can.

Though there are valuable policies that governments can implement that can encourage economic growth, it may be that one of the best things they can do is to stop weighing down the horse. Unfortunately, just how that should be done is not something I can answer very intelligently.

Adam Smith on the Poor

I did a little more reading in Adam Smith's 'Wealth of Nations' last night. Here's what Smith had to say about the poor in times of growing prosperity.

[A] common complaint [is] that luxury extends itself even to the lowest ranks of the people, and that the labouring poor will not now be contented with the same food, clothing, and lodging which satisfied them in former times. ...

Is this improvement in the circumstances of the lower ranks of the people to be regarded as an advantage or as an inconveniency to the society? The answer seems at first sight abundantly plain. Servants, labourers, and workmen of different kinds, make up the far greater part of every great political society. But what improves the circumstances of the greater part can never be regarded as an inconveniency to the whole. No society can surely be flourishing and happy, of which the far greater part of the members are poor and miserable. It is but equity, besides, that they who feed, clothe, and lodge the whole body of the people, should have such a share of the produce of their own labour as to be themselves tolerably well fed, clothed, and lodged.

Well said. I have heard/read people accuse Smith of being unfeeling toward the poor because he advocates freedom of commerce as a means toward building national wealth. Capitalism seems to be harsh at times and would seem to lead to great inequality of wealth. Yet Smith's aim is to study how nations build wealth, not how governments or elites build wealth. As a professor of moral philosophy, he seems to be interested in what is beneficial for the people as a whole, not what is good for the elite.

Whatever might be debated about the validity of his theories, I think the above quote makes his intentions and philosophy pretty clear. I think the man's heart was in the right place. And for what it's worth, I also think there's a lot of value in his theories.

Wealth of Nations

I started reading Adam Smith's 'Wealth of Nations' the other day. I know I have weird tastes, but I love to learn and there are so many classics I haven't had time to read yet. Sometimes I can't get through them (I choked on Aeschylus a few years ago), but if I can get the right perspective on a book and see the beauty of the author's ideas, I usually learn some great things. There's a reason that certain classics endure for centuries.

Adam Smith

One thing that struck me at the very beginning - Smith makes the case that one of the origins of wealth in certain nations derives from the division of labor. When people focus their efforts on a narrower field of study, they can often be much more productive than if they try to master every piece of the process. He looks at several industries (e.g. pin making - who knew?) and cites examples of the productivity achieved by factories that pipeline the process by dividing the labor. Compared to typical production rates achieved by people working alone, the number of products manufactured by the pipeline process per person is hundreds of times greater than the single-person model.

I don't know whether his theory holds up in every industry (I think it does) or if there is some point at which that correlation between increased productivity and narrower fields of study breaks down (I think it may), but according to his studies, that concept makes a big difference in productivity and contributes greatly to the wealth in a nation.

None of that was really new to me, except maybe that pin-making industry :), but then he threw something at me I hadn't thought of before. In order for this division to work, there have to be a large number of people. Towns and cities, for example, would benefit from this model of the division of labor whereas rural settlements can't afford to have 10 people out of a total population of 1,000 specializing to produce thousands of pins a day.

But here's the kicker. Transportation can enable the formation of larger groups of people even if they are spread out geographically. Thus, through trade, groups of people can rationalize even greater degrees of specialization to provide goods and services to people in other places, knowing that other goods and services that they are not producing may be procured from others who are likewise specializing and producing valuable products. So transportation can form larger 'virtual communities' and enable a greater degree of the division of labor, which leads to greater productivity. The advent of cars, trains, and airplanes has probably done more to increase the world's wealth than I had previously thought.

Then I thought that in our age where we place an ever greater emphasis on services, communication may serve as well as transportation when the desired services are based on information. The advent of the internet has probably contributed and will continue to contribute a great deal to our wealth as we seek to provide value through the exchange of information - ideas, solutions, software, etc. These products may have value, but don't require transportation to enable their utility. But they do require communication. And thanks to the internet, we have a pretty large 'virtual community' that continues to grow.

I love it when an idea helps me see things in a new way. As any economist reading this can tell, I'm no economist, but I may know just enough to be dangerous. I've barely started the book, so I look forward to learning more from our friend, Mr. Smith. Maybe I'll share a little more as I get farther along. If you are an economist, or a wannabe like me, please share your thoughts. I like to learn from living people as well as dead ones.

Medical Costs

My family has recently incurred a lot of medical expenses. In the case of my son, we paid over a thousand dollars for an ER visit that resulted in the wrong diagnosis. They told us his knee was sprained when it turned out it was fractured and he needed surgery. Now, I'm not really upset with the ER; I'm sure they do the best they can. They have to deal with a wide spectrum of problems, so they can't afford to specialize too much; they're ridiculously overpriced because they're required by law to treat everyone regardless of their ability to pay; their one virtue is that they're always open, which is why my wife took my son that night. But the expenses have got me thinking more about the reason for those high costs.

When was the last time you went to the doctor and saw a price sheet posted for various examinations, tests, and procedures? Have you ever seen a menu like that published by a medical practitioner? I've heard of a few scattered practices that cater to cash-paying customers who do things like that, but I've never seen one myself. Have you ever asked a doctor after he prescribes a procedure or a medication how much that treatment will cost? Or whether there are less expensive alternatives? I have. The doctors usually don't know. This is an industry that has become unconscious of price and I think I know why.

The unstated argument seems to be that health is more important than money. Now I would agree in general, but only "for the most part". If I had to pay a million dollars to fix an ingrown toenail, I would probably pass. Everything has a price. My own life is not worth a billion dollars and I would not think of saddling my family, or society, with a bill like that just to extend my own little life for an indeterminate amount of time. So that argument can't be universally true.

Given that, I think we have become far too complacent regarding the cost of medical treatment. If there is no awareness of cost, there can be no consumer-driven pressure to keep prices low. On the contrary, we typically accept whatever treatment doctors prescribe because they know more than we do and we are fearful of doing something that will negatively affect our health. And because insurance is there to bail us out, we don't worry about the cost. And then we wonder why our premiums go through the roof year after year.

So, the first reason that costs have become so ridiculous in the medical industry is because of the prevalence of insurance and the absence of mind this safety net gives the consumer, leading us to be unaware of cost. The insurance industry largely takes away the individual consumer's natural incentive to minimize his/her individual costs. Interestingly, we are seeking to fix the problem in my country by expanding the influence of this insurance industry, which is one of the causes of the problem. I have a great deal of sympathy for those who can't afford necessary medical procedures, but I'm afraid we're making the problem worse at a time when we can hardly afford to do so.

The second big reason I see is the impact of medical lawsuits. We love our lawsuits in this nation and so many precedents have been set for malpractice that doctors are forced to prescribe anything and everything that might help the condition of the patient and limit their own legal liability if anything should go wrong under their watch. And of course, the doctors know more than we do, so we accept their advice, unconscious of cost, and undertake every procedure, every test, and every medication they prescribe thinking they are acting in our best interests. No doubt most of them are trying to do exactly that, but they are a bit hemmed in by all the legal precedents.

Related to that are the costs of malpractice insurance that every doctor has to have to avoid the risk of going out of business when slapped with a multi-million dollar lawsuit. Every time you go to the doctor, you're subsidizing those insurance premiums, which are necessary thanks to the army of lawyers who have helped to take money out of the system.

I have no doubt that there are many legitimate malpractice cases and some people, whose lives have been damaged or ruined because of the negligence of medical professionals, should justifiably be compensated. But I believe there have been far more suits over the years that have not been justified and have led to the necessity and high premiums of this interesting form of insurance and have served to cage doctors in to some extend in what they prescribe out of fear of a lawsuit.

There are high costs associated with both of these factors, but it seems to me that if consumers would become conscious of the medical costs they incur and seek to minimize their own costs, it would go a long way to keeping those nosebleed costs in check.

I'm afraid I have little hope that will happen in the current environment. But maybe I'm wrong.

Since writing the above, we've received bills for my initial orthopedist visit and my son's surgery.

• Total cost of surgery: about $22K. No kidding.
• Most ridiculous item in my opinion: almost $200 for some pre-surgery medication ... two pain pills.

• Total cost of my visit: about $1500.
• Most ridiculous item: about $1100 to set my ankle. This consisted of the doctor painfully forcing my ankle into position while the nurse cast it. The cost of the casting material was separate.

The lady in charge of the billing at that office told me that about half of that $1100 would go to pay for malpractice insurance premiums. For insurance purposes, that setting was basically considered the same as surgery and any complications that arose from it could potentially subject their office to malpractice suits. I really am in awe of the miracles of modern medicine, but I think we've broken the medical industry with selfishness and greed.

The Scarlet Pimpernel, the Weather, and the Economy

I read 'The Scarlet Pimpernel' last week and came across the following passage near the beginning of the book:

"It do seem more like April than September, don't it?" continued Mr. Hempseed, dolefully, as a shower of raindrops fell with a sizzle upon the fire.

"Aye! that it do," assented the worthy host, "but then what can you 'xpect, Mr. 'Empseed, I says, with sich a government as we've got?"

"Mr. Hempseed shook his head with an infinity of wisdom, tempered by deeply-rooted mistrust of the British climate and the British government."

This seemed like such an appropriate passage to read just after the elections. It's such an obviously ridiculous correlation drawn here between government policy and the weather. It made me think of the correlation we often draw between government policy and the state of the economy. I have no doubt that bad policy can hamper prosperity and good policy can encourage it, but we tend to lay all the blame and/or praise at the feet of the ruling political party. The truth, I believe, is much more complicated.

Policy, if it does have an impact on the economy, may not make a visible impact right away. It might take years for some effects to be seen. That makes it really difficult to scientifically dissect the impact of individual policy decisions ... maybe impossible in some cases. That means that the mess of one era may have been created jointly by decisions made over the course of multiple Congresses and multiple Presidential administrations. Blaming or praising the current government for the current state of affairs is very short sighted.

I'm no economist and I would quickly get in over my head if I started arguing my viewpoints in too much detail, but in addition to that problem of latency, I also believe that our elected officials have much less influence over the economy than the unelected officials of the Federal Reserve, which, as I understand it, is neither 'Federal' nor associated with any type of 'Reserve'. But even those officials don't wield as much power as we'd like to think they do.

Our national market is made up of millions of individuals making individual choices every single day. That is far too complicated a system to be 'controlled' by such a small group within that system. We, as participants in the market, are the ones with the most power, though we're a terribly unorganized force. Failing to recognize our own power and placing the blame on someone else makes us feel good, but it also takes away our power to change anything.

I'm a big fan of the Austrian school of economics and though I don't think they have all the answers, I am convinced that they have the beginnings of the right formula for a perpetually healthy economy, though natural booms and busts will always be with us. The formula is based on freedom, but it must also include virtue, which I'm not going to define right now, but I might clarify that someday.

Having said that, I would prefer to see the government stop meddling in the economy and "leave us alone", as the French phrase "laissez-faire" implies, but even if they don't, we are the ones who have the true power over the economy. Let's do what we can to encourage government to do what we think is best for the economy, but having done that, let's then turn our attention to our own lives and do all in our power to improve our own situation and the situation of those around us.

And let's try to stop blaming the ruling government for everything that goes wrong, whether that be the economy ... or the weather.

Individual Morality

I heard recently of an initiative for large banks to develop extremely fast information technology equipment to enable them to profit from market trades. As it was explained to me, it goes something like this. Many market trades are now done electronically. A seller puts out an offer to sell at a certain "ask" price. A buyer puts out a bid for the same shares (though likely a different number of shares) at a certain "bid" price. If those prices overlap (bid is higher than ask), the market server executes a trade. If they don't overlap, they just sit there until they find a partner they can make the deal with.

From what I was told, these large banks are trying to beat the speed of the market servers by putting out a bid and somehow by doing so, they learn whether there is an ask price that matches. When that happens, they retract the bid so quickly, the market server doesn't have time to execute the trade. They then lower their bid and repeat until they reach the seller's ask price. Now, I'm no economist and I may have misunderstood some of the details, but based on my understanding of this, I have a problem with it.

These banks that want to pull this little trick are obtaining a little extra wealth without generating anything of value. That means they are sucking money away from those poor schmucks (like me) who don't have this trick up their sleeves. Economics is not generally a zero-sum game, but when no one is generating value, it becomes a zero-sum game. It's not quite theft, but it's similar.



I have long believed that in business, if it's not a good deal for everyone, it's simply not a good deal. Let me explain what I mean by that. Developing trust is how we grow business. I develop trust with customers and partners by acting honestly and honorably. At work, we have a list of organizational values. The first value on that list is "integrity" and one of the reasons I love my job is that we take that value seriously. There have been times when we have reported unfavorable results from our research to our customers, knowing they would not be happy with the product. But we have done it because it was the honest answer. This has sometimes hurt us in the short term, but I believe it has always been good for us in the long run because our customers see us as an honest broker. They know they can trust us to do the right thing.

Integrity is a key in doing good business in the long run. There are other morals and ethics that feed into running a good business, but I'm not going to try to list them all because I know I'd leave some out. The execution of these virtues while seeking to earn a living is what Adam Smith called "enlightened self interest." That phrase does not mean that you seek to get whatever you can out of the world (as many have assumed), but rather that you seek to make your living within a moral framework, recognizing that those morals ultimately come back to benefit you. You act with honor and integrity in business and your business will grow, giving you more opportunities to provide valuable goods and services to those who may want or need them. Within a free market, this type of economy actually blesses the poor by making products more widely and less expensively available. It also encourages people to be free to pursue their own interests and keep the fruits of their labors.

Adam Smith, by the way, was a professor of moral philosophy. He is regarded as the father of modern economics.

An economy as described by Smith should be based on freedom, but operating within a moral framework on an individual level. Without such a moral framework, this system can deteriorate into subjection of the poor, not by political tyrants, but by the wealthy. In our government, Republicans often extol the benefits of the free market system, but without a moral code applied on an individual level, that market can quickly become a means of economic tyranny fueled by greed. Democrats are more likely to condemn the whole system and then try to compensate for the failings by redistributing wealth to benefit the poor. That sounds laudable, but it's ultimately coercion and ends up harming both the poor and the wealthy.

Freedom is precious. It can't be forced or legislated. It has to be earned. Joseph de Maistre wrote in 1811, "Every nation has the government it deserves." I think governments around the world are becoming more invasive and tyrannical because those internal controls on an individual level (a moral compass or true self-government) are lacking in many of us today. In 1798, John Adams said, "We have no government armed with power capable of contending with human passions unbridled by morality and religion .... Our Constitution was made only for a moral and religious people. It is wholly inadequate to the government of any other." No government can force us to act honorably and no external pressure can change who we are on the inside. See my previous post on A Pure Heart.

There is simply no good substitute for individual morality.