Economic Insights

Here is another Economic Insight for my loyal readers. President Benson gave this parable in a piece called "The Case for free Markets". It illustrates some important principles in economics:

"Two fathers lived side by side as neighbors. Each had two sons. Each had a good job, a roomy house, and material means to provide the best of life's luxuries. The essential difference between the two fathers was one of philosophy.

Mr. A's objective with his sons was to instill principles that would bring about self-respect, personal responsibility, and independence. His method merits our scrutiny.

When his boys were young, he taught them how to work at simple tasks by his side. When they became more mature, he developed a work-incentive program. The pay scale was commensurate with the quality of the work performed. An "average job," for example, paid fifty cents; "above average," sixty cents; "exceptional," seventy-five cents. A "one-dollar job" was the impossible task, a goal that he soon observed the boys were striving after. He impressed on them that the only limitations to their earnings were their own personal initiative and desire. He emphasized the necessity of postponing wants so they could save for the future. The lessons were well learned over a period of time.

There was an undergirding moral element to Mr. A's philosophy, a principle more "caught" than taught. A simple example will suffice. One day the boys, now young men, were working in his plant. Mr. A observed some sloppy work being done on one of the products. He asked to see the product, and removed the label. One of the boys resisted. "Why are you doing that, Dad?" he asked. Mr. A replied, "I'll not have my name attached to a shoddy product. When my name goes on, my customers must know I've given them my best workmanship. Would you want to own this product?" It was an answer that provided a lesson that would last a lifetime. How could the Golden Rule be emphasized more effectively in business!

Mr. B also had a philosophy, albeit one that was reactionary to the early struggles of youth. "I'll not have my kids go through what I did." His philosophy was designed to remove the struggle from life. His method also merits our consideration.

Regularly his sons were provided with generous allowances. Little work was expected in their formative years. In later years the boys were encouraged to work, but now they were too comfortable in their security. After all, they had all their material wants satisfied. At this juncture Mr. B made a profound discovery: wants always exceed needs and are never satisfied unless disciplined. To counteract the lack of self-discipline, Mr. B embarked on a routine of imposed restraints. To his chagrin, he found his sons embittered toward him, ungrateful, and frequently disobedient to rules imposed on them."

Here is what I get out of it:

1. People respond to incentives. I believe that when the Lord says "I the Lord am bound when ye do what I say, but when ye do not what I say, ye have no promise", he is giving us incentive to do our best. We receive wages from him who we list to obey. Mr. A provided incentive for his sons to do their best by giving them a pay scale and saying "I promise to give you what you earn". Critics of free markets say that it is driven by greed and produces greed. Well we do see that around us. This is why we there must be a moral foundation to capitalism of love and concern for others. Even in the gospel we are taught that doing good without being good inside profits us nothing. (maybe the profit that is equal to total revenue minus total cost, but not the eternal profit :)

2. Work is an eternal principle. Without work we become lazy, feel entitled, lose self respect, and are disobedient.

There are a lot of other principles in there and a lot of application. If you see anything else that strikes you I would love to hear it.