Follow by Email

Monday, November 25, 2013

Another day in the 4th grade

I wish that the president, his cabinet and every member of congress could come to my house for one day.  Just a day, I think that would do it.  In addition to getting their own copy of the page-turner, "The Constitution and You," they would get valuable lessons that they could use each and every day.

Like the lesson we had today.

It was called, "Capitalism and New Wealth."  Really, I could end the blog here, but you know that I won't.

Today, in 4th grade history, we learned about Adam Smith.  We learned about supply and demand.  We learned that if you can sell something for more than it cost to make it, you will make a profit.

We learned that, the way the government operates, it should go out of business.

James Shields, an English businessman purchased tools and clothes from the British.  England had an abundance of clothes and tools because of textile mills and factories.

That is called supply.

Shields took the clothes and tools to the West Indies where he traded them for sugar.  The West Indies had plenty of sugar, but not a lot of clothes and tools.

That is demand.

He then took the sugar back to England where it was quickly stirred into afternoon tea all across her majesty's kingdom and baked into yummy scones, tarts and pies.

Supply and demand.  What if he had wanted to sell sugar in the West Indies?  He would have gone out of business, there is no demand for it. What if he had tried to sell clothes and tools in England?  He wouldn't have done that well either.  In both instances, there was more supply than demand.  Instead, he matched up buyers and sellers in different parts of the world.

Capitalism advanced societies in both parts of the world!  And, it provided all kinds of new wealth.  Both societies prospered from the advancement.  Capitalism and new wealth.  Ah, it brings a tear to my eye.

Let's try to use this information and put it into a real world example.

Hmmmm.  Oh!  I got one.

Let's say that a person has health insurance.  The person is a young, healthy man.  He is not married and he has no children.  Currently, the man pays $50 a month for health insurance.  Now, the free market made that possible.  Using supply and demand, the man found, on the open market, something that he liked and he bought it.

One thing that is very different from the free market, capitalism and the laws of supply and demand is the government.  The government doesn't use any of these principles in its operations.  The government decides who gets what.  It takes by force from some and give to others that it deems worthy.

Back to our consumer.  Say the government decides that he should have pediatric services covered in his plan.  Let's say that the government also decides that he should have maternity care in his plan oh and he should also have mental health coverage and substance abuse coverage.  He could use those things sometime and other people need them and he is going to help pay for them for the greater good.

Now, the plan costs $500 a month.  There is no DEMAND for that product.  The government can't sell that plan because the free market could sell it for $50.

So, what does the government have to do?  The government has to FORCE people to buy that "better" plan.  Furthermore, the government has to PUNISH people who are smart enough to not want to buy the ridiculous 10 times more expensive plan.

Instead of supply and demand, the free market providing valuable goods and services to people, we now have force and punishment, the government deciding who should get what and for how much.

So, come on over guys.  My 9 year old has a little lesson that she would like to teach you.