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#1 2016-05-05 18:14:47

mmm....shiney!
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The dangers of folk economists

A case arguing in favour of educating people so that they don't fall into the trap of folk economics - holding mistaken assumptions about how economic activity operates and giving power and authority to those who would pursue policies that retard economic growth.

folk economics is the economics of wealth allocation, not production. Naive persons or persons untrained in economics think of prices as allocating wealth, but not as influencing allocation or production of goods or services. In folk economics, the amount of a good traded - whether in aggregate or by each individual - is fixed and independent of price. Moreover, each individual is concerned with the distribution of wealth and income (with particular but not exclusive attention to his/her own wealth), not with any efficiency gains from economic activity. The world of folk economics is a zero-sum world, and the primary economic problem for each individual is to maximize his or her own wealth in this world.

http://poseidon01.ssrn.com/delivery.php … 17&EXT=pdf

The authors outline the nature and evolution of folk economics and the implications of maintaining a folk economist's view of the world, they argue to do so would mean arriving at the wrong answers to problems, in contrast, if we learn about economics we learn that cooperative economic activity ie the voluntary exchange of goods amongst individuals and groups in society actually improves social cohesion.

The Labor Party are currently doing their best to incite social division - in part because they are desperate and clutching at straws to help gain an election victory, also in part because that is the nature of the labour movement, but mostly because the LNP is incapable of countering the prevailing view that market transactions create winners and losers.

Folk economists are still making the decisions today.  hmm

Last edited by mmm....shiney! (2016-05-05 18:15:28)


The woolgrower's target shall be the good thriving of his flock and its pastures, and so of himself and those whose livelihoods depend on his enterprise.
"The Woolgrower's Companion", 1906.

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#2 2016-05-08 00:59:22

bordsilver
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Re: The dangers of folk economists

The whole "trickle down economics" nonsense is a good example of folk economics.

It is a term that is completely non-existent across any recognised school of economic thought. It is a furphy, a myth, a totally made up phrase never endorsed by any recognised economist. What free-marketers advocate is actually the opposite - essentially "trickle-up economics" - where a portion of the benefits of improving the value to consumers trickles-up to those that providing the increased value. For example, if one looks at the process of investment stimulated by lower tax rates or other reductions of government's meddling in the economy then the process is to actually pay the workers first with the hope of making a profit later. The capital owners always get paid last (if at all).


The only good tax is a repealed tax.

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#3 2016-05-12 12:39:17

fiatphoney
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Re: The dangers of folk economists

bordsilver wrote:

The whole "trickle down economics" nonsense is a good example of folk economics.

It is a term that is completely non-existent across any recognised school of economic thought.

There are three aspects here.
1) How can folk economics be govt sponsored?

2) It 'trickle down economics' has been the economic objective of mainsteam 'govt' economists since 1981, and understood by Wall St. etc, etc, etc...

3) Classical Real Bills doctrine (gold standard) allowed for funding of wages before goods sold, via a discounted 90 day Bill. So no Bordsilver factory owners could get paid first before production, albeit at a small discount.

O'Dwyer was stating in simple language the theory of supply-side, or "trickle-down", economics. It is the central economic foundation of the great neo-liberal experiment which has dominated Western economies since Ronald Reagan took office in 1981.
http://www.abc.net.au/news/2016-05-12/b … on/7406844


Is the real reason you guys are suggesting us to all go read your recommended materials is so that we can teach you what it means?


Dog+ate+my+paper.jpg


And through his policy also he shall cause craft to prosper in his hand; and he shall magnify himself in his heart, and by peace shall destroy many: he shall also stand up against the Prince of princes; but he shall be broken without hand.   Daniel 8:25

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#4 2016-05-12 18:03:10

bordsilver
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Re: The dangers of folk economists

So your refutation to my statement that trickle-down economics is a myth never endorsed by any recognised economist is to point me to a news article written by a lawyer and post a funny picture of a dog wearing clothes? Interesting.

I guess that means that - as an economics teacher - you don't actually have any journal articles, books or speeches where a free market economist has said that trickle down economics is an actual theory that underpins economic growth? Anyone? Mills, Ricardo, Menger, Bastiat, Friedman, Mises, Walrus, Hayek? No?! In which case my statement still stands. If anything, free marketers advocate 'trickle-up' economic policies.

In terms of (3), raising capital in anticipation of production is not paying the capitalist first. It is simply shifting who is the ultimate supplier of capital and they still get paid last (or often not at all). But if you are discussing the originator of a government-mandated fiat currency in the presence of a central bank being able to effectively "print money" then - as I have already said - we are in vigorous agreement but that is hardly a "free market".


The only good tax is a repealed tax.

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#5 2016-05-14 04:12:16

mmm....shiney!
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Re: The dangers of folk economists

bordsilver wrote:

I guess that means that - as an economics teacher - you don't actually have any journal articles, books or speeches where a free market economist has said that trickle down economics is an actual theory that underpins economic growth? Anyone? .

It's easier to use metaphors than to cite academic material.

It also gets more "thank yous" here rather than posting boring old theories. lol

Last edited by mmm....shiney! (2016-05-14 04:13:34)


The woolgrower's target shall be the good thriving of his flock and its pastures, and so of himself and those whose livelihoods depend on his enterprise.
"The Woolgrower's Companion", 1906.

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#6 2016-05-20 17:50:58

mmm....shiney!
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Re: The dangers of folk economists

On the topic of "trickle down economics":

when people deal with one another as traders, on mutually beneficial terms or not at all, they enjoy a harmony of interests. And this is true regardless of their level of income or ability. In fact, it is those with less ability who benefit the most from the arrangement: the productive efforts of those at the top raise everyone else's standard of living.

This isn't what is sometimes disparagingly called "trickle-down economics", the theory that wealth will magically trickle down from rich people to poor people in a free market. What actually happens is when trade is voluntary is that those with greater ability radically magnify the productivity of everyone, especially those with less ability. This is what Ayn Rand calls the Pyramid of Ability. The higher the most able producers rise, the more they contribute to the productivity of the less able.

A factory worker makes a real contribution: he helps turn a pile of parts into a TV or a toaster. But the end product of his work goes no further. It provides particular goods for particular customers. But the man who supplies an idea is able to raise the productivity - and the standard of living - of an unlimited number of other men. It was his contribution that created the factory, that invented the television, that designed the assembly line, and that made it possible for a factory worker of modest ability to produce TVs, earn a wage, and live better than kings did a few hundred years ago.

Equal Is Unfair: America's Misguided Fight Against Income Inequality, by Don Watkins and Yaron Brook, 2016


The woolgrower's target shall be the good thriving of his flock and its pastures, and so of himself and those whose livelihoods depend on his enterprise.
"The Woolgrower's Companion", 1906.

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#7 2016-05-30 18:22:19

mmm....shiney!
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Re: The dangers of folk economists

12 articles everyone should read, grouped under:

1. Political economy
2. Microeconomics
3. Macroeconomics
4. Methodology

Steven Horwitz wrote:

this list is most emphatically not "the" 12 articles people should read. I can think of another dozen important reads that I left off this list. So I am certainly not making a definitive statement of the 12 best, or only, articles one should read. These are simply 12 that I think are important to read to understand sound economics, ideally before one heads off to grad school in economics.

https://fee.org/articles/12-articles-ev … ould-read/


The woolgrower's target shall be the good thriving of his flock and its pastures, and so of himself and those whose livelihoods depend on his enterprise.
"The Woolgrower's Companion", 1906.

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#8 2016-05-31 18:33:15

mmm....shiney!
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Re: The dangers of folk economists

753_screen_shot_2016-06-01_at_80643_am.png


The woolgrower's target shall be the good thriving of his flock and its pastures, and so of himself and those whose livelihoods depend on his enterprise.
"The Woolgrower's Companion", 1906.

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#9 2016-06-03 05:39:02

mmm....shiney!
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Re: The dangers of folk economists

Chris Berg wrote:

Government failure is endemic because government is a monopoly. It lacks the two features that make markets, by comparison, so successful. There is no mechanism for information provision - governments are not informed by prices......And there is a lack of competition.

The Libertarian Alternative, 2016

Both of these fundamental flaws in government were being addressed by Turnbull when he attempted to pull the rug out from under the States with his threat to return the power to tax income to the Premiers.

Unfortunately for freedom loving individuals, Turnbull's plan was in reality a stunt. And one that was short lived, maligned and only revisited by labor party strategists attempting to drum up fear in the electorate. I'm not sure if they fall under the banner of "folk economists", but the opposition to Turnbull was not based upon sound government or freedom, but upon fear of being accountable.


The woolgrower's target shall be the good thriving of his flock and its pastures, and so of himself and those whose livelihoods depend on his enterprise.
"The Woolgrower's Companion", 1906.

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#10 2016-06-03 17:37:23

CriticalSilver
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Re: The dangers of folk economists

Trickle-down economics is just an obfuscating term for "government economic manipulations by the granting of monopolies".

There is no free trade or capitalism in government granted monopolies, just force and the wielding of power for the privileged. Indeed, it is Control replacing Freedom and the monopoly of counterfeiting granted to Central Banks is at the very root of the Controlling edifice that masquerades as Freedom under all the double-speak terms used to hide Freedom's loss, like "trickle-down" economics.

Last edited by CriticalSilver (2016-06-03 17:41:06)

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#11 2016-09-26 18:29:55

mmm....shiney!
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Re: The dangers of folk economists

On "trickle down" economics:

There is No Such Thing as Trickle-Down Economics

Critics of liberalism and the market economy have made a long-standing habit of inventing terms we would never use to describe ourselves. The most common of these is "neo-liberal" or "neo-liberalism," which appears to mean whatever the critics wish it to mean to describe ideas they don't like. To the extent the terms have clear definitions, they certainly don't align with the actual views of defenders of markets and liberal society.

Another related term is "trickle-down economics." People who argue for tax cuts, less government spending, and more freedom for people to produce and trade what they think is valuable are often accused of supporting something called "trickle-down economics." It's hard to pin down exactly what that term means, but it seems to be something like the following: "those free market folks believe that if you give tax cuts or subsidies to rich people, the wealth they acquire will (somehow) 'trickle down' to the poor."

The problem with this term is that, as far as I know, no economist has ever used that term to describe their own views. Critics of the market should take up the challenge of finding an economist who argues something like "giving things to group A is a good idea because they will then trickle down to group B." I submit they will fail in finding one because such a person does not exist. Plus, as Thomas Sowell has pointed out, the whole argument is silly: why not just give whatever the things are to group B directly and eliminate the middleman?

https://fee.org/articles/there-is-no-su … economics/

Last edited by mmm....shiney! (2016-09-26 18:31:53)


The woolgrower's target shall be the good thriving of his flock and its pastures, and so of himself and those whose livelihoods depend on his enterprise.
"The Woolgrower's Companion", 1906.

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#12 2016-09-29 20:00:10

radiobirdman
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Re: The dangers of folk economists

Ok I agree you're probably not a socialist.

Anyway I decided to lower my wage to $5 an hour to compete with the O/S workers
lucky me I got a job next door so no need of a car,
40 hrs a week gives me  $200 no rent but rates are $40 a week, smoko and lunch aren't supplied make me own $40 a week
need electricity to cook food and heat/cool the house $40 a week
$80 left should cover everything else, food, clothes ,dunny paper.
Now if all us with less ability did the same think of the wealth we would create

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#13 2016-09-29 21:01:22

mmm....shiney!
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Re: The dangers of folk economists

Sorry mate, but that's against the law. wink

I'm curious why you would willingly lower your wage though?


The woolgrower's target shall be the good thriving of his flock and its pastures, and so of himself and those whose livelihoods depend on his enterprise.
"The Woolgrower's Companion", 1906.

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#14 2016-09-29 22:29:24

Clawhammer
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Re: The dangers of folk economists

^^^ I've called the police,
They were already here after I tried pronouncing the word "obfuscating" from Critical Silver's post aloud,
while on the bus
and eating a sandwich hmm

Last edited by Clawhammer (2016-09-29 22:30:03)


Specialisation is for insects

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#15 2016-09-29 23:03:46

Killface
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Re: The dangers of folk economists

radiobirdman wrote:

Ok I agree you're probably not a socialist.

Anyway I decided to lower my wage to $5 an hour to compete with the O/S workers
lucky me I got a job next door so no need of a car,
40 hrs a week gives me  $200 no rent but rates are $40 a week, smoko and lunch aren't supplied make me own $40 a week
need electricity to cook food and heat/cool the house $40 a week
$80 left should cover everything else, food, clothes ,dunny paper.
Now if all us with less ability did the same think of the wealth we would create

For whom, exactly?


All that glitters is not gold...
...but all that is gold glitters!

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#16 2016-12-10 20:59:33

mmm....shiney!
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Re: The dangers of folk economists

It's not really folk economics, but the ghost of Keynes is alive and well, expect the following to gain more and more prominence as mainstream economists look for the answers to the bubbles that cause malinvestment - which they created.

The great 'living within our means' con: Why you're more in debt than ever

The greatest lie ever sold is that the Australian Government can run out of Australian dollars.

This is exactly the lie Treasurer Scott Morrison wants you to believe as he rolls out the same old deception — deficit bad, surplus good — ahead of next year's budget.

snip

When the Government tells you that a social safety net for our most disadvantaged is a drain on the economy, it wants you to believe it can run out of the currency it creates.

It implies that the Government is just like a household, which can only spend what it earns, while in practice it is closer to the truth to say that households can only earn if the Government spends.
Spending isn't always bad

Investing for the future at a time of record low interest rates and low national income is vital, writes Ian Verrender.

It is based on the myth that markets were once perfectly free until governments came along and interfered, and that as far as possible we should be getting back to that libertarian dream.

But such a world never existed. There is no such thing as a free market. All markets and all economies have rules and regulations. The important thing is who sets those rules, and in whose interests are they set.

I lol lol at that last bit.

Last edited by mmm....shiney! (2016-12-10 21:14:05)


The woolgrower's target shall be the good thriving of his flock and its pastures, and so of himself and those whose livelihoods depend on his enterprise.
"The Woolgrower's Companion", 1906.

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#17 2016-12-10 23:45:26

Old Codger
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Re: The dangers of folk economists

"Folk" = MSM?

Never read them.

OC


"The Australian Labor Party is a democratic socialist party and has the objective of the democratic socialisation of industry, production, distribution and exchange, to the extent necessary to eliminate exploitation and other anti-social features in these fields."   -  ALP Constitution.

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#18 2016-12-10 23:54:11

mmm....shiney!
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Re: The dangers of folk economists

Old Codger wrote:

"Folk" = MSM?

Never read them.

OC

Folk = not having any basis in theory nor being justifiable eg Keynesian government stimulus spending is not folk economics, Austrian business cycle theory is not folk economics, the term "trickle down economics" is folk economics.

And you're right, most folk economists can be found writing in the MSM.

Last edited by mmm....shiney! (2016-12-10 23:54:38)


The woolgrower's target shall be the good thriving of his flock and its pastures, and so of himself and those whose livelihoods depend on his enterprise.
"The Woolgrower's Companion", 1906.

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#19 2016-12-10 23:56:51

mmm....shiney!
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Re: The dangers of folk economists

Murray Rothbard wrote:

It is no crime to be ignorant of economics, which is, after all, a specialized discipline and one that most people consider to be a "dismal science." But it is totally irresponsible to have a loud and vociferous opinion on economic subjects while remaining in this state of ignorance.


The woolgrower's target shall be the good thriving of his flock and its pastures, and so of himself and those whose livelihoods depend on his enterprise.
"The Woolgrower's Companion", 1906.

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#20 2016-12-21 19:49:11

bordsilver
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Re: The dangers of folk economists

Antony P. Mueller wrote:

Ten Fundamental Laws of Economics
In the midst of so many economic fallacies being repeatedly seemingly without end, it may be helpful to return to some of the most basic laws of economics. Here are ten of them that bear repeating again and again.

1. Production precedes consumption

Although it is obvious that in order to consume something it must first exist, the idea to stimulate consumption in order to expand production is all around us. However, consumption goods do not just fall from the sky. They are at the end of a long chain of intertwined production processes called the "structure of production." Even the production of an apparently simple item such as a pencil, for example, requires an intricate network of production processes that extend far back into time and run across countries and continents.

2. Consumption is the final goal of production

Consumption is the objective of economic activity, and production is its means. The advocates of full employment violate this obvious idea. Employment programs turn production itself into the objective. The valuation of consumption goods by the consumers determines the value of production goods. Current consumption results from the production process that extends to the past, yet the value of this production structure depends on the current state of valuation by the consumers and the expected future state. Therefore, the consumers are the final de facto owners of the production apparatus in a capitalist economy.

3. Production has costs

There is no such thing as a free lunch. Getting something apparently gratis only means that some other person pays for it. Behind every welfare check and each research grant lies the tax money of real people. While the taxpayers see that government confiscates part of one's personal income, they do not know to whom this money goes; and while the recipients of government expenditures see the government handing the money to them, they do not know from whom the government has taken away this money.

4. Value is subjective

Valuation is subjective and varies with the an individual's situation. The same physical good has different values to different persons. Utility is subjective, individual, situational and marginal. There is no such thing as collective consumption.

5. Productivity determines the wage rate

The output per hour determines the worker's wage rate per hour. In a free labor market, businesses will hire additional workers as long as their marginal productivity is higher than the wage rate. Competition among the firms will drive up the wage rate to the point where it matches productivity. The power of labor unions may change the distribution of wages among the different labor groups, but trade unions cannot change the overall wage level, which depends on labor productivity.

6. Expenditure is income and costs

Expenditure is not only income, but also represents costs. Spending counts as costs for the buyer and income for the seller. Income equals costs. The mechanism of the fiscal multiplier implies that costs rise with income. In as much as income multiplies, costs multiply as well. The Keynesian fiscal multiplier model ignores the cost effect. Grave policy errors are the result when government policies count on the income effect of public expenditures but ignore the cost effect.

7. Money is not wealth

The value of money consists in its purchasing power. Money serves as an instrument of exchange. The wealth of a person exists in its access to the goods and services he desires. The nation as a whole cannot increase its wealth by increasing its stock of money. The principle that only purchasing power means wealth says that Robinson Crusoe would not be a penny richer if he found a gold mine on his island or a case full of bank notes.

8. Labor does not create value

Labor, in combination with the other factors of production, creates products, but the value of the product depends on its utility. Utility depends on subjective individual valuation. Employment for sake of employment makes no economic sense. What counts is value creation. In order to be useful, a product must create benefits for the consumer. The value of a good exists independent from the effort of producing it. Professional marathon runners do not earn more prize money than sprinters because running the marathon takes more time and effort than a sprint.

9. Profit is the entrepreneurial bonus

In competitive capitalism, economic profit is the extra bonus that those businesses earn that fix allocative errors. In an evenly rotating economy with no change, there would be neither profit nor loss and all companies would earn the same rate of interest. In a growing economy, however, change takes place and anticipating changes is the source of economic profits. Business that does well in forecasting future demand earn high rates of profit and will grow, while those entrepreneurs who fail to anticipate the wants of the consumers will shrink and finally must shut down.

10. All genuine laws of economics are logical laws

Economic laws are synthetic a priori reasoning. One cannot falsify such laws empirically because they are true in themselves. As such, the fundamental economic laws do not require empirical verification. Reference to empirical facts serve merely as illustrative examples, they are not statements of principles. One can ignore and violate the fundamental laws of economics but one cannot change them. Those societies fare best where people and government recognize and respect these fundamental economic laws and use them to their advantage.

Full article


The only good tax is a repealed tax.

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#21 2016-12-22 02:27:30

radiobirdman
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Re: The dangers of folk economists

mmm....shiney! wrote:
Murray Rothbard wrote:

It is no crime to be ignorant of economics, which is, after all, a specialized discipline and one that most people consider to be a "dismal science." But it is totally irresponsible to have a loud and vociferous opinion on economic subjects while remaining in this state of ignorance.


Classic, it would be very quite on this thread if that was the case

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#22 2017-03-19 00:55:54

mmm....shiney!
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Re: The dangers of folk economists

Before you listen or read the next news report about Australia's balance of trade deficit, read this and be prepared:

Trade Deficits Don't Matter; Understanding Deficits Do

Donald Trump has demonstrated his profound misunderstanding of the basic economic principles of international trade for several years now, and perhaps reached a pinnacle when he told the New York Daily News in an interview last August that "we're getting hosed by the Chinese — and that we've done it with our eyes wide shut." Here's more of Trump from that interview, further demonstrating his clueless and child-like misunderstanding of international trade:

"What China has done to America?" he raged. "The money and the jobs they've taken from us? It is the greatest single theft in the history of the United States." In other words, China is to the United States as Bernie Madoff is to investors. "And Japan is almost as bad," he stormed. "Japan sells us millions of cars — and we sell them wheat!"

More here: https://fee.org/articles/trade-deficits … ficits-do/


The woolgrower's target shall be the good thriving of his flock and its pastures, and so of himself and those whose livelihoods depend on his enterprise.
"The Woolgrower's Companion", 1906.

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