Equilibrium

I have been trying to find a bright patch in this economic crisis.  My undergraduate degree is in economics so I often think a lot like an economist as well as an accountant.  I have been thinking about this crisis a lot in terms of an equilibrium.  This economy just got too out of hand for too long...spending too much, taking on too much debt, people getting into career fields and starting businesses in areas (real estate, mortgage lending) that they had no business getting into, investing in financial instruments (complex derivatives) they had no business investing in.  Things are just trying to equalize...revert back to the mean...become more in line with how they should be.  People buying homes that are more in line with their resources and saving money for a rainy day like they should be.  Those with strong balance sheets and fundamentals will survive this and we will all learn better habits in the process.  I truly believe that this is a good wake up call for everybody and hopefully we will all learn something from this.  How's that for making the best out of a bad situation?

An Experiment in Socialism

I am not by any means implying that our country or leaders are “socialist”, free market principles and private ownership of property do still drive this country for the most part, but all the talk during this last election and the bailout fiasco got me thinking about the concept of socialism. My bachelor's degree is in economics and that is really my first love. Because I have had formal training in the subject, I think I approach it with a good background of knowledge. Just remember, what has made this country great and prosperous is not our government policies and programs, but FREEDOM. The freedom to pursue our own happiness as long as it does not encroach the liberty of others. as the Declaration of Independence so well stated. You just can't tax and re-distribute your way into prosperity, I don't care who is getting taxed. Yes, there are people who have a large piece of the pie, but the fact that they do have a large piece means that we all have a chance to obtain a larger piece ourselves. I know that the new administration will keep this in mind because we are still a center-right country in terms of our philosophy.

My clever husband has devised the following classroom socialism experiment. I really think it illustrates the concept of socialism in a way that is simple to understand. It would be cruel and unfair to implement...but that is exactly what socialism is...cruel and unfair.  I think it would work!  Here is his idea:

If I were a teacher or professor, I would first let the students take the initial exam. Then, I would tell those with the higher than average grades on the exam that it is unfortunate and unfair to those who made below average scores so I am going to take the extra points of the higher scoring students and give them to the lower scoring students so that essentially everyone would have an average score on the exam. Obviously, the students who scored higher on the first exam would no longer have the motivation to work and study for the subsequent exams and would thus score average or worse. The students who scored low to begin with would still not do well because they would be expecting those extra points, and certainly would not gain anything from this system because there would not be extra points to dole out on subsequent exams. Everyone would be worse off!