Four letter words get your attention, but some of those familiar with the work of George Carlin might not think this is necessarily a good thing. The economic version of four-letter words are also things that people would rather avoid thinking about, but they are pivotal to human existence and personal success. This is especially true in times of personal difficulties and social chaos.
I am going to limit my discussion here to seven of the most important four-letter economic words. Most of them are traditional and familiar, but one might seem out of place. This one exception is only out of context from the mainstream economic perspective and a failure to understand economics as Ludwig von Mises postulated and thought of the foundational motivation of psychic profit.
The seven words refer to actions, and the actions are fundamentally mental exercises that anyone can do. These action categories are basically timeless and without specific context. In other words, they apply to everyone at all times. A reexamination of the words is a good reminder to find your focus on the top seven. This would be especially true for difficult economic times. They are an anchor to rational action in the current whirlwind of government chaos being inflicted on us.
WORK
Working is the most important and basic of all economic activity. In the Robinson Crusoe story, after a moment’s reflection, the actor starts working in pursuit of his goals whether that is gathering water, coconuts or firewood, fishing, building a camp, etc. Most people wake up in the morning and go to work or go to school. Even billionaires work hard and, if you don’t understand how billionaire capitalists have a justification for their wealth and resulting income, see the recent episode of Bob Murphy’s Human Action Podcast.
Work is the least controversial category, and we all think about work or how to avoid it. Work is much more expansive than a typical job category. House cleaning, washing your clothing and cooking count as work. Repairing your appliances as well as interior and external painting of your house count as work. Working in your gardens and landscaping for aesthetic purposes counts as work just as is toiling in your anti-government victory garden to produce food.
Even if you have plenty of money and don’t work for wages, you still do a great deal of work.
Working out at the gym is work if your purpose is to remain healthy and vibrant, to enhance your physical stamina and mental acuity, or to increase your productivity. If you exercise because you are committed to staying away from the medical care complex and reduce sick days, then it counts as work. If you just like riding your bicycle or prefer to read your phone at the gym, that probably does not count, but working crossword puzzles might.
Work can be directly satisfying. It can provide monetary benefits, and fringe benefits. All work gives at least a psychic profit. Working “hard” is thought to be personally satisfying and that is because it means we are achieving more of our subjective ends. People who don’t work, or work much, or who specialize in avoiding work are not necessarily “better off” or “happier” than those who do. Austrian economics teaches that we cannot compare satisfaction between individuals, but social indicators paint an ugly picture of sloths and those who live their lives on welfare.
READ
A special category of work and one that I am well aware of is reading. It is an activity that does not involve strenuous physical activity like typical labor. However, reading in a modern capitalist society has become as substantial an activity as traditional work. It is also an activity that can qualify as work or leisure. Reading associated with taking classes or doing research is obviously work-related. Reading poetry and novels is typically considered leisure for most. Looking up the scores of sporting events is leisure unless you are a professional gambler, while looking up stock prices and commodity prices is typically work-related.
Reading contributes to your work and your productivity, and this contributes to maintaining and improving your marginal value product—how much does your work contribute to the overall economic health of your employer and your wages. This highlights that reading is not just a mechanical process, but a skill in terms of how much you learn from the mechanical process of visualizing various combinations of words. People who are good readers are typically people who have developed the skill of being good learners. You can learn without reading but it is more difficult and limited.
Followers of Austrian economics have an incredible advantage over other people because they have a basis of analysis to properly interpret what they read. In particular, Ludwig von Mises and Murray Rothbard have provided comprehensive theoretical treatment of economic and social theory with which the reader can interpret the history, policy, and events they read about. Mises’s treatise is Human Action (PDF, ePub, Audio), Rothbard’s treatise is Man, Economy, and State (PDF, ePub, Audio) and everyone should have a copy of my Quotable Mises where you can find Mises’s thought about topics and a reference to the original source.
PLAN
Overall, learning is the most important prerequisite to successful planning and planning is widely thought to be key to overall success.
Planning is part of all categories of economic action in all environments. While planning does not have the final say in our actions, in the current environment, it takes on added significance to prevent inaction and excessive unplanned action. Moreover, contingency planning takes on added significance in an economy with heightened uncertainty regarding currency values, price inflation as well as input and asset prices.
There is little doubt among experts that planning is a critical aspect of success in endeavors, especially your choices, costs, and uncertainty conditions. People plan their education, their careers, their families, their investments, their retirements, etc. This involves reading, learning, consultation and asking the relevant questions. Of course, we also plan our day and our meals, but whether it’s short term or long-term planning we know that we will sometimes have to deviate from our plans and make the most of situations.
This last point distinguishes the real-world planning of entrepreneurs, builders, and homemakers from the engineering mindset of government planners. The latter expect everything to fall into place as ordered, that optimal ingredients are always available, and that the world will comply with the plan. In the real world, uncertainty is omnipresent, the availability and prices of inputs are never given, and in the end our consumer can be fickle. Plan accordingly. The role of the market entrepreneur is to bear the burden of all this uncertainty.
You can read about the differences between government planning and private planning in F. A. Hayek’s article “The Use of Knowledge in Society” in the Mises Institute’s free book, Hayek for the 21st Century.
SAVE
As hinted above, most planning is about building up and improving over time. The key here is saving. Saving is consistent working and earning more than you spend. Saving is a key to personal economic success as measured by individual wealth which the accumulation of savings and entrepreneurial profit. It is also the key ingredient in the success of an economy as measured by our ability to consume, our standards of living, and the accumulation of capital.
In contrast, the phalanx of Keynesian-style economists considers consumer spending and government borrowing to be the engine of economic growth and saving to be a dangerous “leakage” from the economic system akin to an oil leak in your automobile.
The problem with saving in a Keynesian-run economy is that savings income is seen as negative and is discouraged through taxation and currency unit depreciation via inflation. Debt, rather than saving, is encouraged, and—as a result—increasing household instability. Some people try to avoid these problems by “stacking” real money outside the banking system by exchanging government currency for silver and gold bullion. This approach is said to be advantaged rather than disadvantaged by the policy of inflation because money tends to appreciate in purchasing power versus currency and it avoids the problem of taxation until the bullion is converted to currency, often being subjected to steep capital gains taxes. Intergenerational transfers can sometimes avoid this tax incidence.
SHOP
Of all the types of four-letter economic activity that we engage in, the most fun is considered by many to be shopping, buying, and consumption! In fact, many people report shopping to be enjoyable and even consider it a leisure activity. There are really two notes that I would like to make on this topic.
The first is that all the above four-letter words are prerequisites for shopping. Being successful at those four-letter activities is important to success with this activity and overall success, economically speaking. Working and earning an income or enhancing your ability to earn income is a prerequisite for shopping. Reading and planning are also prerequisites for successful shopping and overall economic success because it enhances budgeting and prioritization. Many people who get into economic difficulties related to shopping or even just regret purchasing a particular item will lament that they just weren’t thinking or that they certainly were not planning to go bankrupt. Saving increases your ability to consume in the future and is a buffer against faulty purchases, emergencies, and contingencies.
Second is that success with shopping is dependent on saving, saving is dependent on budgeting, and budgeting is dependent on reading and planning. Many people report overall satisfaction with shopping because they have preplanned and prioritized their saving and giving, often making them automatic deductions from their revenues and accounts so that shopping is a residual. This residual approach enforces a type of budgeting.
GIVE
This is extended even further by the amount of fun reported by the buying, giving, and receiving of gifts. Buying and giving gifts is a consumption activity whereas the receiving of gifts is a windfall to the receiver, even if the benefactors don’t have your short-term utility function in mind.
You see, mainstream economists treat gift giving in a mechanical fashion. The generous person makes or purchases a gift and bestows it on the beneficiary. The mainstream analyst remarks that it is always better to give cash so that the receiver can maximize their utility by purchasing what they want. But of course, that is an elementary mistake in that the giver is trying to maximize their own utility through gift giving. Therefore, the gift might be a Bible, a vacuum cleaner, or a Christmas tree ornament, or it might be cash! Suffice it to say that we should recognize the reality of the two different “utility functions” and indeed, the two different time preferences. Gifts and charity are essentially the same type of action.
PRAY
Suffice it to say that prayer is a part of all these actions in an intangible way, whether or not you invite God into the deliberations, conversations, hopes and wishes in your head. It is elemental that the above six activities are basic to our lives and that each of them comes with uncertainty and doubt, large and small. It is important to have a process to mentally enunciate your goals, purposes, and aspirations of your action planning, to evaluate them against your basic urges, priorities, and principles, and to review your results. Having a higher power of some sort is useful in that respect, and—given all the natural uncertainty we face—it is reasonable to want guidance and inspiration, whether that is an informed person, trusted source, or some immaterial moral standard.
