A hot economics story centered on humans

This is the first book published by Yoo Si-min, author of "Economics of the Rich, Economics of the Poor" and host of MBC's 100 Minute Debate for a year and a half, after his return to the current affairs commentator profession.
In this book, the author criticizes the existing economics that lacks human beings, and invites readers to an "economics cafe" where he shares stories of human-centered economics that contain free and fresh ideas.


The author begins this book by thinking 'upside down' from the general definition of economics, in his characteristically calm, yet direct and sharp tone.
Regarding the definition that 'economics is the study of how to utilize scarce resources to satisfy the infinite material desires of humans', it is pointed out that although humans have infinite material desires, they are animals that cannot live on food alone, and therefore must read books and watch movies, that is, they are beings with mental desires.
Also, in an article titled “The Economics of Jackpot,” gambling, which has been dismissed as something only fools without rational judgment do, is examined from an economic perspective.
Rather than simply pointing out how much money is important, it points out the thrill, entertainment, and psychological satisfaction that come with gambling.
He says, "Indulging in risky gambling is a primal human instinct as strong as the passion for an attractive person," and "If you don't protest and demand that the government pay back the money you lost on stock investments and horse racing, it is a reasonable economic person's right to become a moth chasing a dream of a big hit and go down in shame."


In this way, the author approaches economics from the perspective that it is a problem of how humans, who are a bundle of contradictions, make a living, and develops the story by applying or criticizing existing economic theories such as the theory of supply and demand, national debt, monopoly, marginal utility, and the Lorenz curve.
Although it is called an economics cafe, it is not a book written in an easy and haphazard manner, and it contains quite a few graphs, figures, and formulas. Nevertheless, it is a unique book that has a human touch among the dry graphs and mathematical formulas.


At the end of the book, there is a helpful and detailed list of recommended reading materials for readers who want to know more deeply, which will be useful to readers interested in economics.

Taking environmental destruction into account, the true "growth of national wealth" is less than half of each country's economic growth rate.
So don't listen to the sly words of economic experts and politicians who use GDP growth statistics to dazzle the public and hide their own policy mistakes and environmental destruction!

--- p.136

Happiness index = a * (amount of desire satisfied / amount of desire to be satisfied); a is a positive (+) constant

What this equation is trying to say is very simple.
How happy a pig is depends on how many of its desires it actually satisfies.
For pigs to become happier, the left side of this 'happiness equation' must increase.
To do that, we increased the molecule on the right side.
Food, toilets, beds, room salons, and world travel were all means.
But this is just a useless waste of energy and time.
He couldn't be any happier.
It only takes elementary school math to understand why.
Because the amount of resources is finite, the amount of wants that can be satisfied with them is also finite.
This means that the numerator on the right side of the equation has a finite size.
But the desires that we want to satisfy are endless.
The story is that the denominator is infinite.
What do you get when you divide a finite thing by an infinite thing? The answer is 0.
This is a 'mathematical truth'.
The happiness that pigs feel every time they own and consume something new is nothing more than a 'psychological illusion'.
Mathematically speaking, the happiness index of a pig with 'infinite desires' is always 0.
The 'amount of resources' he controls, disposes of and consumes has no effect.
No matter how exquisite the theory of 'choice' some economist may propose, he cannot discard this mathematical truth.
As long as we stick to the definition quoted above, economics cannot make people any happier.
Happiness index = a * (amount of desire satisfied / amount of desire to be satisfied); a is a positive (+) constant

What this equation is trying to say is very simple.
How happy a pig is depends on how many of its desires it actually satisfies.
For pigs to become happier, the left side of this 'happiness equation' must increase.
To do that, we increased the molecule on the right side.
Food, toilets, beds, room salons, and world travel were all means.
But this is just a useless waste of energy and time.
He couldn't be any happier.
It only takes elementary school math to understand why.
Because the amount of resources is finite, the amount of wants that can be satisfied with them is also finite.
This means that the numerator on the right side of the equation has a finite size.
But the desires that we want to satisfy are endless.
The story is that the denominator is infinite.
What do you get when you divide a finite thing by an infinite thing? The answer is 0.
This is a 'mathematical truth'.
The happiness that pigs feel every time they own and consume something new is nothing more than a 'psychological illusion'.
Mathematically speaking, the happiness index of a pig with 'infinite desires' is always 0.
The 'amount of resources' he controls, disposes of and consumes has no effect.
No matter how exquisite the theory of 'choice' some economist may propose, he cannot discard this mathematical truth.
As long as we stick to the definition quoted above, economics cannot make people any happier.

--- p.21

What special problem exists in industries like railways, electricity, gas, water, telephones, and postal delivery that warrants the creation of state-owned monopolies? Astute readers will likely recognize that these are all "transportation businesses," somehow connected to "roads," "pipes," or "lines."
Yes, that's right.
This belongs to the industry called 'logistics' in modern economics and management.
'Logistics' refers to the temporal and spatial movement of people, objects, and information.
All of the public corporations mentioned above are responsible for 'logistics' that takes place through pipes, electric lines, telephone lines, railroads, etc.
Postal delivery has nothing to do with such facilities, but it does involve the 'travel path' of the mail.

Let's take the railway as an example.
If several competing companies each lay their own railroad tracks and do business, these companies would have to make huge initial investments in facilities.
The cost of laying track is independent of the number of passengers or amount of freight that will be carried later.
So, if there are 100,000 passengers traveling from Seoul to Busan per day and 10,000 passengers per day, the average cost of transporting one person is obviously much less for the 100,000 passengers.
Therefore, companies that have a lot of passengers can survive by charging lower fares than companies that do not.
Railroad companies will fight a bloody war to secure customers, but the end of this war is anyone's guess.
One company drives out all other competitors and establishes a monopoly.
Once this happens, it becomes permanently impossible for new companies to enter the field.
If the emergence of other competitors is completely blocked, this monopolist will set fares as it wishes in order to maximize profits.
This is where you really start hitting your customers on the back.
Consumers have no choice.
There is only one choice: take this train or not.
What special problem exists in industries like railways, electricity, gas, water, telephones, and postal delivery that warrants the creation of state-owned monopolies? Astute readers will likely recognize that these are all "transportation businesses," somehow connected to "roads," "pipes," or "lines."
Yes, that's right.
This belongs to the industry called 'logistics' in modern economics and management.
'Logistics' refers to the temporal and spatial movement of people, objects, and information.
All of the public corporations mentioned above are responsible for 'logistics' that takes place through pipes, electric lines, telephone lines, railroads, etc.
Postal delivery has nothing to do with such facilities, but it does involve the 'travel path' of the mail.

Let's take the railway as an example.
If several competing companies each lay their own railroad tracks and do business, these companies would have to make huge initial investments in facilities.
The cost of laying track is independent of the number of passengers or amount of freight that will be carried later.
So, if there are 100,000 passengers traveling from Seoul to Busan per day and 10,000 passengers per day, the average cost of transporting one person is obviously much less for the 100,000 passengers.
Therefore, companies that have a lot of passengers can survive by charging lower fares than companies that do not.
Railroad companies will fight a bloody war to secure customers, but the end of this war is anyone's guess.
One company drives out all other competitors and establishes a monopoly.
Once this happens, it becomes permanently impossible for new companies to enter the field.
If the emergence of other competitors is completely blocked, this monopolist will set fares as it wishes in order to maximize profits.
This is where you really start hitting your customers on the back.
Consumers have no choice.
There is only one choice: take this train or not.

--- pp.165-166

For the automobile industry, which is a 'symbol of the country's modernization,' the government made it possible for even people without parking to buy cars.
As a result, parking wars rage day and night on the city's main roads and back streets.
The exhaust fumes from cars that stand still make the city air dirty, which not only makes laundromats profitable, but also increases the number of customers at ENT clinics and cancer centers.
Automobile production increases, gasoline sales increase, and laundromats and hospitals increase their sales, leading to a steady increase in the gross national product. However, unfortunately, it cannot be said that the welfare of the people has increased accordingly.
For the automobile industry, which is a 'symbol of the country's modernization,' the government made it possible for even people without parking to buy cars.
As a result, parking wars rage day and night on the city's main roads and back streets.
The exhaust fumes from cars that stand still make the city air dirty, which not only makes laundromats profitable, but also increases the number of customers at ENT clinics and cancer centers.
Automobile production increases, gasoline sales increase, and laundromats and hospitals increase their sales, leading to a steady increase in the gross national product. However, unfortunately, it cannot be said that the welfare of the people has increased accordingly.

--- pp.132-133

Although it has been 200 years since free trade theory dominated the world of economics, numerous institutional obstacles to free trade still exist in the real world.
This is a reality created by a combination of the public's intuitive judgment that sees international trade as a zero-sum game, like a soccer match, where one side wins and the other side loses; the lobbying of domestic companies trying to avoid competition with foreign companies; and the strategies of politicians trying to gather votes by exploiting public resentment and industry demands.
Although it has been 200 years since free trade theory dominated the world of economics, numerous institutional obstacles to free trade still exist in the real world.
This is a reality created by a combination of the public's intuitive judgment that sees international trade as a zero-sum game, like a soccer match, where one side wins and the other side loses; the lobbying of domestic companies trying to avoid competition with foreign companies; and the strategies of politicians trying to gather votes by exploiting public resentment and industry demands.

--- p.
279

The explanation that combining a larger amount of capital with a given amount of labor leads to higher productivity and that interest is paid on the invested capital as compensation for such productive contribution is not a scientific theory but merely a fable.
The explanation that combining a larger amount of capital with a given amount of labor leads to higher productivity and that interest is paid on the invested capital as compensation for such productive contribution is not a scientific theory but merely a fable.

--- p.150

The market ignores all these differences and rewards only according to contribution.
To justify this, two conditions must be met.
First, everyone must have the opportunity to compete and have an equal starting line.
Second, everyone must compete fairly while following the rules.
However, reality does not meet these conditions.
If we believe that most members of society are not given the opportunity to compete fairly under equal conditions, we do not recognize the legitimacy of the resulting income distribution.
But as long as there are constitutions and laws protecting private property, there can be no fair competition starting from completely equal conditions.
Therefore, unequal income distribution should be considered as unjust income distribution.
The market ignores all these differences and rewards only according to contribution.
To justify this, two conditions must be met.
First, everyone must have the opportunity to compete and have an equal starting line.
Second, everyone must compete fairly while following the rules.
However, reality does not meet these conditions.
If we believe that most members of society are not given the opportunity to compete fairly under equal conditions, we do not recognize the legitimacy of the resulting income distribution.
But as long as there are constitutions and laws protecting private property, there can be no fair competition starting from completely equal conditions.
Therefore, unequal income distribution should be considered as unjust income distribution.

--- p.120

There are several reasons why income distribution inequality occurs.
The first is inequality of talent.
It is an undeniable fact that there are people who are born with natural talent and those who are not.
There are many people who are born with congenital disabilities.
The second is inequality of opportunity.
While some people are born to wealthy and intelligent parents and are provided with a good educational environment where their abilities can flourish, others live their entire lives as pearls in the dirt.


Third is inheritance.
While some people inherit their parents' companies and become CEOs of large corporations in their 30s, there are many people of the same age with better abilities who work as salarymen earning 50 million won a year.
The fourth is discrimination.
The phenomenon of men and women working in the same profession receiving different treatment in promotions and salaries is difficult to explain without discrimination.
The fifth is coincidence.
Life doesn't unfold according to a blueprint.
It is not at all uncommon for business people to encounter various fortunes and misfortunes that are completely unpredictable.

The market ignores all these differences and rewards only according to contribution.
To justify this, two conditions must be met.
First, everyone must have the opportunity to compete and have an equal starting line.
Second, everyone must compete fairly while following the rules.
However, reality does not meet these conditions.
If we believe that most members of society are not given the opportunity to compete fairly under equal conditions, we do not recognize the legitimacy of the resulting income distribution.
But as long as there are constitutions and laws protecting private property, there can be no fair competition starting from completely equal conditions.
Therefore, unequal income distribution should be considered as unjust income distribution.
There are several reasons why income distribution inequality occurs.
The first is inequality of talent.
It is an undeniable fact that there are people who are born with natural talent and those who are not.
There are many people who are born with congenital disabilities.
The second is inequality of opportunity.
While some people are born to wealthy and intelligent parents and are provided with a good educational environment where their abilities can flourish, others live their entire lives as pearls in the dirt.


Third is inheritance.
While some people inherit their parents' companies and become CEOs of large corporations in their 30s, there are many people of the same age with better abilities who work as salarymen earning 50 million won a year.
The fourth is discrimination.
The phenomenon of men and women working in the same profession receiving different treatment in promotions and salaries is difficult to explain without discrimination.
The fifth is coincidence.
Life doesn't unfold according to a blueprint.
It is not at all uncommon for business people to encounter various fortunes and misfortunes that are completely unpredictable.

The market ignores all these differences and rewards only according to contribution.
To justify this, two conditions must be met.
First, everyone must have the opportunity to compete and have an equal starting line.
Second, everyone must compete fairly while following the rules.
However, reality does not meet these conditions.
If we believe that most members of society are not given the opportunity to compete fairly under equal conditions, we do not recognize the legitimacy of the resulting income distribution.
But as long as there are constitutions and laws protecting private property, there can be no fair competition starting from completely equal conditions.
Therefore, unequal income distribution should be considered as unjust income distribution.

--- p.120

Since the birth of the socialist revolutionary movement in the 19th century, people have long been at odds over the 'market economy' and the 'planned economy'.
In particular, with the emergence of a socialist planned economy in Russia through the Bolshevik Revolution in 1917 and the subsequent red flag sweeping over Eastern Europe and China in the aftermath of World War II, leaders of the socialist world boasted of the "inevitable downfall of capitalism."
However, it was not capitalism but the socialist planned economy that was destined for collapse.

So, can we call this a complete victory of the "market economy" over the "planned economy"? No.
This is because the diagram of a confrontation between a ‘planned economy’ and a ‘market economy’ is nothing more than an ideological exaggeration.
In fact, all economies are planned economies.
There can be no national economy in which no one makes a 'plan'.
The collapse of the Soviet Union and Eastern European socialism around 1989 meant the end not of the 'planned economy' in general, but of the 'centrally controlled planned economy'.

So what is a "market economy"? It's simply another name for a "decentralized planned economy."
The difference between what are commonly referred to as a 'planned economy' and a 'market economy' is due to the different relationships between the different plans established by the state, enterprises, and households, and the different ways in which the social and technological division of labor is organized.
A ‘planned economy’ is centralized and a ‘market economy’ is decentralized.
Since the birth of the socialist revolutionary movement in the 19th century, people have long been at odds over the 'market economy' and the 'planned economy'.
In particular, with the emergence of a socialist planned economy in Russia through the Bolshevik Revolution in 1917 and the subsequent red flag sweeping over Eastern Europe and China in the aftermath of World War II, leaders of the socialist world boasted of the "inevitable downfall of capitalism."
However, it was not capitalism but the socialist planned economy that was destined for collapse.

So, can we call this a complete victory of the "market economy" over the "planned economy"? No.
This is because the diagram of a confrontation between a ‘planned economy’ and a ‘market economy’ is nothing more than an ideological exaggeration.
In fact, all economies are planned economies.
There can be no national economy in which no one makes a 'plan'.
The collapse of the Soviet Union and Eastern European socialism around 1989 meant the end not of the 'planned economy' in general, but of the 'centrally controlled planned economy'.

So what is a "market economy"? It's simply another name for a "decentralized planned economy."
The difference between what are commonly referred to as a 'planned economy' and a 'market economy' is due to the different relationships between the different plans established by the state, enterprises, and households, and the different ways in which the social and technological division of labor is organized.
A ‘planned economy’ is centralized and a ‘market economy’ is decentralized.

--- pp.31-32

Any business that benefits future generations can be financed with debt.
If the so-called infrastructure such as schools, universities, and transportation networks are built solely with taxes, the burden will be borne by the current tax-paying generation, while the benefits will primarily be enjoyed by the next generation.
This is clearly unfair.
Such businesses must partially borrow investment funds, so future generations will also become taxpayers and share the burden of principal and interest repayment.
The same goes for the cost of supporting North Korea.
The accusation of 'giving to North Korea' is short-sighted and ignorant.
Any business that benefits future generations can be financed with debt.
If the so-called infrastructure such as schools, universities, and transportation networks are built solely with taxes, the burden will be borne by the current tax-paying generation, while the benefits will primarily be enjoyed by the next generation.
This is clearly unfair.
Such businesses must partially borrow investment funds, so future generations will also become taxpayers and share the burden of principal and interest repayment.
The same goes for the cost of supporting North Korea.
The accusation of 'giving to North Korea' is short-sighted and ignorant.

--- p.225

This is because university professors often ask questions like the following in the midterm exams of their introductory economics classes.
'Discuss the definition of economics' This is actually an absurd request.
After giving a lecture for just over fifteen hours to students who came to learn economics without knowing what it was, I suddenly asked them what this difficult subject was.
Isn't it like asking a kindergartener who can barely understand to discuss 'what is life'?
But in any case, this sentence is worth pondering deeply because it contains an unconscious confession that economics cannot make people any happier.


Economics is the study of how to utilize scarce resources to satisfy the infinite material desires of humans.


To put it simply, let's say you only have 10,000 won (finite resource) but you want to do so many things (infinite desires).
What will you do with that money? Have a bowl of jajangmyeon and head to a video room, head to a pub for a draft beer, or give it to a homeless person in the Seoul Station underpass. Either way, you have no choice.
At this time, economists observe what choices people make.
And I spend countless hours worrying day and night trying to figure out why he would do something like that.
This is what it means to say that economics is the study of choice.
This is because university professors often ask questions like the following in the midterm exams of their introductory economics classes.
'Discuss the definition of economics' This is actually an absurd request.
After giving a lecture for just over fifteen hours to students who came to learn economics without knowing what it was, I suddenly asked them what this difficult subject was.
Isn't it like asking a kindergartener who can barely understand to discuss 'what is life'?
But in any case, this sentence is worth pondering deeply because it contains an unconscious confession that economics cannot make people any happier.


Economics is the study of how to utilize scarce resources to satisfy the infinite material desires of humans.


To put it simply, let's say you only have 10,000 won (finite resource) but you want to do so many things (infinite desires).
What will you do with that money? Have a bowl of jajangmyeon and head to a video room, head to a pub for a draft beer, or give it to a homeless person in the Seoul Station underpass. Either way, you have no choice.
At this time, economists observe what choices people make.
And I spend countless hours worrying day and night trying to figure out why he would do something like that.
This is what it means to say that economics is the study of choice.

--- p.18-20

The fable of the ant and the grasshopper is true.
To prepare for the future, we must reduce current consumption and increase savings.
But this is only true for individuals.
What is right for an individual is not always right for society as a whole.
For example, let's think about 1998, right after the foreign exchange crisis broke out.
As unemployment soared, wages were cut, and anxiety grew about how long the crisis would last, most housewives tightened their belts and increased their savings.
To prepare for the bigger challenges that might come in the future, I cut back on eating out, stopped sending my kids to private academies, and even cut my husband's allowance.
I avoided going to the hair salon, put off buying new clothes, and even fixed my broken washing machine.
All of these were personally inevitable and wise choices.

But there is one issue that even wise individuals cannot consider.
The fact is that I have to spend something for someone else to earn an income, and someone else has to spend something for me to earn an income.
If everyone cuts back on spending, there will be literally no business left.
The company I, my wife, or my husband work for is no exception.
When a company determines that a product is not selling and will not sell in the future, it cancels investment plans, reduces production, and lays off employees.
Even if the government lowers interest rates, companies will be reluctant to invest.
If this happens, the leakage of savings will increase and the injection of investment will decrease, the water in the reservoir will dry up, and the people will become poor.
Moreover, our government implemented a high interest rate policy of nearly 30% per annum due to the IMF's demands.
So it was natural that the Korean economy recorded an unprecedentedly large negative growth rate.

(Omitted) When we understand that saving is always a personal virtue, but can also be a serious social vice, we see many things.
For example, in the spring of 1998, then Prime Minister Kim Jong-pil opposed the construction of a World Cup soccer stadium in Sangam-dong, saying, “Should the government be spending money like crazy at a time when the people are tightening their belts?”
This amounts to arguing that the state, which must increase spending by borrowing to offset the "social vice" of saving by intelligent individuals, should instead act like private households and thereby fuel that vice.
The road to hell is sometimes paved with good intentions.
The fable of the ant and the grasshopper is true.
To prepare for the future, we must reduce current consumption and increase savings.
But this is only true for individuals.
What is right for an individual is not always right for society as a whole.
For example, let's think about 1998, right after the foreign exchange crisis broke out.
As unemployment soared, wages were cut, and anxiety grew about how long the crisis would last, most housewives tightened their belts and increased their savings.
To prepare for the bigger challenges that might come in the future, I cut back on eating out, stopped sending my kids to private academies, and even cut my husband's allowance.
I avoided going to the hair salon, put off buying new clothes, and even fixed my broken washing machine.
All of these were personally inevitable and wise choices.

But there is one issue that even wise individuals cannot consider.
The fact is that I have to spend something for someone else to earn an income, and someone else has to spend something for me to earn an income.
If everyone cuts back on spending, there will be literally no business left.
The company I, my wife, or my husband work for is no exception.
When a company determines that a product is not selling and will not sell in the future, it cancels investment plans, reduces production, and lays off employees.
Even if the government lowers interest rates, companies will be reluctant to invest.
If this happens, the leakage of savings will increase and the injection of investment will decrease, the water in the reservoir will dry up, and the people will become poor.
Moreover, our government implemented a high interest rate policy of nearly 30% per annum due to the IMF's demands.
So it was natural that the Korean economy recorded an unprecedentedly large negative growth rate.

(Omitted) When we understand that saving is always a personal virtue, but can also be a serious social vice, we see many things.
For example, in the spring of 1998, then Prime Minister Kim Jong-pil opposed the construction of a World Cup soccer stadium in Sangam-dong, saying, “Should the government be spending money like crazy at a time when the people are tightening their belts?”
This amounts to arguing that the state, which must increase spending by borrowing to offset the "social vice" of saving by intelligent individuals, should instead act like private households and thereby fuel that vice.
The road to hell is sometimes paved with good intentions.

--- pp.157-160