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The Economy in Action

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The word economics is derived from two Greek words: oikos, meaning “house,” and nomos, meaning “law.” Almost all modern definitions of economics, like contemporary definitions of “government,” assume that the State, civil government, is the starting point in understanding economic theory and practice. To understand economics, so the argument goes, the role of the State must first be considered. On the other side of the economic spectrum, libertarians and anarcho-capitalists contend that “the means of production are privately owned, economic and financial decisions are made entirely privately, goods and services are exchanged in a free market, and there is little or no positive state intervention in the economy.” The role of civil government in economic matters is minimal, limiting itself to the protection of individual rights and property. This follows the older definition of the word “economy” found in Noah Webster’s 1828 An American Dictionary of the English Language: “Economy—Primarily, the management, regulation and government of a family or the concerns of a household.” The use of “political economy” does not appear until the eighth and ninth definitional entries.

In order to understand Webster’s emphasis on the family in the area of economics, it’s important to study his definition of “government”:

GOVERNMENT, n. 1. Direction; regulation. ‘These precepts will serve for the government of our conduct.’ 2. Control; restraint. ‘Men are apt to neglect the government of their temper and passions.’ 3. The exercise of authority; direction and restraint exercised over the actions of men in communities, societies or states; the administration of public affairs, according to the established constitution, laws and usages, or by arbitrary edict. ‘Prussia rose to importance under the government of Frederick II.’ 4. The exercise of authority by a parent or householder. Children are often ruined by a neglect of government in parents. ‘Let family government be like that of our heavenly Father, mild, gentle and affectionate.’ Kollock. 5. The system of polity in a state; that form of fundamental rules and principles by which a nation or state is governed, or by which individual members of a body politic are to regulate their social actions; a constitution, either written or unwritten, by which the rights and duties of citizens and public officers are prescribed and defined; as a monarchial government, or a republican government. ‘Thirteen governments thus founded on the national authority of the people alone, are a great point gained in favor the rights of mankind.’ J. Adams.

For Webster, government is first “self-government” which extends to the government of the family. Civil government has its God-ordained role in our world, but the individual and family are neither defined nor regulated by it. Modern economic theory presupposes that the markets need to be regulated. If there is inflation (an increase in the money supply),[1] interest rates are raised. If the economy is sluggish, governments will increase the supply of money to stimulate growth. Civil government is the problem. It’s the billions of economic decisions made every day by individuals in a free market that brings prosperity to everyone who is willing to work and take risks not the micro- and macro-management of the economy by government-appointed officials and their bureaucrats. Modern economic theorists presuppose an almost omniscient knowledge of the market place.

Endnote:

[1] If you and I attempted to increase the money supply, we would be counterfeiting. When governments do it, it’s called “stimulating growth.”

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