You would teach Muhammad Yunus economics?

And you would teach your grandmother to suck eggs?

Sunil Nair wrote, in a Google+ conversation with Muhammad Yunus: Profit is always at the expense of someone or something (read natural resources).

I replied:

Can it be true that both sides always take more than they give? Let us see.

It is true that

Everything for ourselves, and nothing for other people, seems, in every age of the world, to have been the vile maxim of the masters of mankind.

Adam Smith, Wealth of Nations, 1776

However, it turns out not to be the case that profit is always exploitation. Certainly it is the intention of kleptocrats to operate in that way, but that is not what economics teaches. Certainly not the economics that Prof. Yunus has taught us. If it were, Grameen Bank would have been impossible, and indeed the history of economic development in the last several thousand years of recorded history and archaeology would also have been impossible.

Economics properly understood (not what the kleptocrats call a Free Market: Free for them but not for us) is not a zero-sum game. It must necessarily operate by creating new value out of existing materials and ideas. Not new money (which is at best a means of keeping track of promises, and at worst a snare and a delusion) but actual value to users of what is produced. More food, housing and other useful buildings, clothing, transportation, communication, more business and job opportunities, the arts, more of the equipment and training to produce more, and so on, produced using land, raw materials of various kinds, natural sources of energy, and labor, none of which we can eat.

The best example of producing value is of course planting a single seed and getting (from DNA, stored food, air, water, soil, and solar energy) a plant that produces more seeds, and also leaves, stems, roots, and flowers, any or all of which may have value to us, to our domestic animals, or to the yeasts, molds, and bacteria that break it down into humus in the soil and assist us to grow more.

My own unassisted labor cannot provide me with much of what I need. However, if I trade my labor by joining with others to make something that I cannot make alone (division of labor, the very first topic in Wealth of Nations) I can buy much more of what I need than I can make. Similarly, the company I work for makes something of greater value to its customers than what it pays for raw materials and labor, which the customer cannot use directly.

Thus in a free and fair exchange both sides profit, and in a truly free and fair market every participant benefits. In a free and fair society there is also no objection to paying taxes to provide to everybody what markets cannot do well: education, safety, health care, public infrastructure, courts (again assuming a sufficiently strong public interest in justice, human rights, and the like) and much more.

History teaches us that in an unfree and unfair society, working toward freedom and fairness has an even higher value than manufacturing and trade. This is of course only possible for those who enjoy giving more than they take, or are otherwise impelled to do so.

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About mokurai

Generalist; End poverty at a profit for all
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