You Can’t Fool Economics — And She IS A “Mother”- A Blast From the Past Post April 2012
Pardon me, if this post seems to go near politics. I don’t mean it, except that it’s impossible to talk economics without talking politics – or at least implying them. It’s also impossible to build believable worlds without being aware of the basic facts of economics (which is why so many of the acclaimed science fiction books get thrown against the wall repeatedly and at least two have gotten tossed in the trash can with the requisite “pfui”.) Bad economics – or what I would call economics dreams – are at the basis of most bad policy and coincidentally at the basis of most personal and business economic woes.
First of all, in the interest of full disclosure, I failed economics in ninth grade. Oh, okay, not failed – I never failed a course – but I had a c which to my family was the moral equivalent of failing. (Actually it was the moral equivalent of grand larceny. I got told if I was going to be a c student and squander my parents’ resources, I’d have to move out and work for a living. To be honest this was only because they’d graduated from threatening to send me to reform school.) However I want to point out it’s a good thing I almost failed that economics class, because it wasn’t economics – it was a Marxist fairytale, complete with a finite economic pie and making business decisions on the basis of what was fair. (I’d like to say it made no impression on me, but in fact that c was for giving battle to the teacher on every single beachhead from “mixed economy” being the best to the concept of social justice. Never mind. He was also a LITTLE man, and I liked to stand and watch his bald spot as I argued. Yes, it IS somewhat of a miracle I lived to be here. I attribute it to the fact that, abstracting the enhancements, I fought like Athena. 😉 )
Second, let’s establish economics is a science. What this means is that it studies naturally occurring forces and tries to discern their principles. It is actually a hard science, though no one treats like that. It would occur to no one to legislate the law of gravity, but people seem to think that it’s perfectly all right to legislate minimum wage or – still in Europe – price points. It works about as well as legislating the law of gravity of course.
But Sarah, you say, economics is not at all the same thing as the law of gravity. It affects individual humans. Your writing is devoted to the notion that humans are individuals and you can neither control their behavior completely nor change them into what you’d like them to be.
Right you are. But while humans in the individual are indeed unfathomable, the rules by which humans enter into voluntary exchanges of value aren’t. And those are the rules of economics.
Here it is, in short, everything you need to unlock the wonderful world of economics: Everything has a cost. Everything has a value. These are rarely the same. The cost is what the object, good or service took to produce: human labor, usage of natural resources, negative impact on the other things that could have been done with those. The law of cost can be translated to There Ain’t No Such Thing As A Free Lunch. Everything has a value too. The value of something is what someone is willing to pay for it.
The essential revolutionary nature of Marxism was confusing cost and value and saying that something had the same value as its cost. It doesn’t work. Why doesn’t it work? Because I can spend ten years building a miniature castle out of dog turds, but it’s unlikely anyone will pay me ten years worth of writing money for it. (Unless they’re mental patients, but do you know how hard it is to find a moneyed mental patient.)
These inflexible laws of economics apply to everything, including jobs (we don’t have an illegal immigration problem, we have a legislated minimum wage problem* and an onerous paperwork boondoggle problem. This makes it impossible for many marginal businesses and services to run, which means they HAVE to hire illegal immigrants – no paperwork, no deductions, pay them what their labor is worth to you – or die. When faced with death, both people and businesses resort to the black market. And no, you don’t want me to describe each of these steps. But for the record, as a barely making it writer, I COULD hire an assistant. Hiring an assistant would probably double my production, which means it’s worth the risk of paying 5k a year for a part time worker. What I can’t afford is to pay this person’s social security and to do all the paperwork. And if you just said “Good, then you can’t afford to hire someone!” you must think nothing is better than something. I live in a college town, where five thousand could make a marked difference in some student lifestyle and debt, and oh, yeah, this way they’re just accumulating debt, and they’re also not getting social security.)
They also apply to artistic endeavors. They even apply to your hobbies. For instance, I’ve mentioned I have a basement full of half-started money making endeavors. A lot of them fall under the “Hobby” category. I grew up with a mother who sewed, so I learned to sew as soon as I was old enough to hold a needle – and this summer I need to teach the boys to do it. Their emergency patches on pants when out of the house are… argh – the same way my sons learned to sling story as soon as they could talk. When I was first married, I did a lot of clothing-sewing and I sewed my first maternity wardrobe, from scratch. (This for two reasons – first, because I had a TON of free fabric and vintage buttons from Dan’s grandmother. Second, because we were broke. Oh, yeah, and third, because I could style them as I wanted to, which ended up sort of like the twenties meets fairyland. Unfortunately we accidentally donated the box, in the very mixed up move.) I enjoy sewing. This opens up a whole series of projects, like sewing cloth dragons, which I tried to do for sale way back. So, why don’t I do it? Simple. Because writing right now has the potential to pay me more. So the negative-value applies to my hobbies. I write, I read, and I do art (which serves often to fix up a story. Feeds from the same impulse.) If tomorrow clothing went through the roof (don’t discount it, look at North Korea) it might be worth my time to make the family clothing, again.
And right now you’re saying “So, cost and price. You think all the complex transactions of the world hinge on this?” Yep. Same way that most of the world’s biological complexity hinges on the fact that one atom of oxygen binds with two atoms of hydrogen. Yes, things can get incredibly complex down the line – or up the line – but if you pull back the curtain, moving the levers will be those same two little men, cost and price.
“But Sarah, what about social justice?” What about it? What about the Easter Bunny, while we’re at it?
Yeah, you can pout, but there ain’t no such creature as social justice. Justice is always individual. You can’t apply justice to an entire group (and if you bring up Nazi soldiers, or even brownshirts, a) you’re violating Goodwin’s and b) we can’t be friends anymore. Think of the worst people you can – say the students who engaged enthusiastically in China’s cultural revolution. Then read some bios. Some were fully-cognizant evil doers. BUT a good number were also duped, confused or scared. Even in that extreme you can’t judge collective.) Mostly social justice screams are the equivalent of “It isn’t fair.” Economics isn’t fair or not fair. It just is. Attempts to change it are like attempts to change hydrogen and oxygen bonds. At best unavailing, at worst harmful. At their very worst they result in things like WWII and North Korea.
There is also individual justice, of course. I’m not going to deny some businesses exploit their workers or their suppliers (at a bar, sometime, I’ll tell you about the last ten years of my life.) On the other hand, the thing is, if people are truly exploiting others, they’re already abusing economics, and there’s usually an extra-economic reason things got that bad. (And in most cases the others can move to another job or another industry. Yeah, I chose not to.) Usually things get that bad because of attempts to influence economics to be more “just” or “fair” (which almost always results in misery for all) or alternatively because politicians like to get rich too.
This means in most cases individual justice has about as much to do with economics as a gnu has to do with extra solar physics. Yes, you can strenuously work to find a connection, but your attempt will only distort reality. So, if you want to work for justice do, one on one and on your own time – heaven knows I try – but leave economics and trying to regulate economic laws alone, okay?
So, what does this have to do with our life? And with writing in particular?
Well, lately I’ve been open-mouth astonished by the number of established writers throwing fits that the new model of publishing doesn’t allow them to make the money they were used to. I confess right now I couldn’t live from indie alone, but at least I understand the solution is not to throw fits and demand fairness and certainly not to try to regulate ebook price, by legal or extra legal means. I’m not making as much as I’d like from Indie, because I only have short stories out under my own press. I must finish novels for it. Right now I’m writing them for Baen and a couple other presses, which pays me money up front. Yeah, it over all probably pays me less, but I get the money this year when I’m about to have two kids in college. It is what it is, fairness has nothing to do with it. Once this crunch is past, I’ll write for myself, (and always for Baen, lest you fear) and I think I’ll do okay. Oh, it will require two-three years ramp up and a lot of work, which I’d prefer not to do, when I should be “established” – life is a b*tch all over, isn’t it? (Shrug.)
The other thing getting under my skin is this jobs fund or whachmacallit. People are supposed to contribute five dollars and then they use this to give loans to small business startups. (Rolls eyes.) This intruded on my consciousness twice yesterday. First, because the newly-rented (I’m betting I’ll get more done. It’s why I’ll be unavailable during the day. Office-ish is out of bounds right now, and my production plummeted, so this is worth it at least to try) office doesn’t yet have a coffee maker, but is a block from Starbucks (yes, I know, but it was time-saving) and second because I happened to sit with husband through The Voice (okay, I was reading a mystery. But we could cuddle.)
I might be wronging the jobs fund, but I don’t think I am. It seems like one of those things people do with other people’s money, which means it will make bad economic decisions. Look, for instance, suppose I ask for contributions to a fund and from that fund I’m going to give advances to a hundred indie writers. At best – supposing I screen – I’m going to screen those books according to MY tastes, which are not necessarily the PUBLIC tastes. Will it result in bestsellers? Uh… Only by accident. Because you see, if all the hundred books fail, it means nothing to me. So my guess is that this is what the jobs fund will do. New businesses, even funded by people with a vested interest, fail by the score. With this… I’d guess there will be no survivors and the money will be squandered. But hey, donors get to feel good.
And this brings me to the book business as I’ve known it. Dave at Mad Genius Club in comments mentioned something about most publishers/editors being no more evil than anyone else. This is absolutely true. BUT they were put in a situation that encourages and fosters evil, because the economics of publishing are screwy. They’re screwy for several reasons, one of them the fiction that there is no money in books (go look at the publishing houses offices. Those weren’t bought with bottle tops); the other is that it is something people do “for the love.” People do a lot of things for the love, but even sex has a cost, even if it doesn’t have a price.
HOWEVER the capstone of screwing up publishing was the ability to play with other people’s (most the company and its many, anonymous investors) money AND to divorce results from actions.
Over the last thirty years, increasingly, publishing houses have discovered that they could exert control over what got shelved, which means what got seen, which means what got sold. At the same time, they held on full throttle to the convenient fiction that EVERY failure of every book is because it is a bad book, and therefore the author’s fault. (This wouldn’t stand logical analysis, because, how are you going to sell a million books, if no one knows your book exists – and yes, their answer is that the author should publicize it… because the author has a publicity department, of course.) This fuzzy uncoupling of cost and price allowed the publishers/editors/whoever to choose books that pushed their world view and to feel virtuous about it. Part of the reason Baen is different, is that it is a family business and it still needed to mind the bottom line. So they took care what they bought was likely to sell.
And that’s also an illustration, btw, of “economics always wins.” The publishers thought they could control both supply and demand, and therefore totally defeat the market. (They probably took the same economics class I took in ninth grade. The teacher would have adored that idea.)
Instead, as always when the market is regulated in a way that violates economic laws, it is flowing around them and finding another pathway. You can see this with illegal immigration, with illegal narcotics sales, with illegal toilet sales (with the larger tank), with the black market that appears around every regulated good or service. And you are seeing it in publishing with the ebook revolution. It is entirely possible ebooks would have gone nowhere, if traditional publishing still had a functioning market that minded supply AND demand. But it didn’t.
Like everyone else who thinks they can abolish economic laws, they are finding economic laws abolish them.
* I am not proposing that people should starve if they have no economic value. I’m proposing that’s what charity is for. Confusing charity and economics only leads to everyone needing charity because the economy – or a part of it – collapses. Is this ideal? Isn’t it demeaning for people to get charity? (Rolls eyes.) What about economics says it has to be ideal? We’d probably all do better at slightly less than 1g, particularly as we age. Does that mean we should legislate gravity? Because it works about as well. “Whaaa! Unfair!” is a preschooler’s cry, not an economic argument.