Once upon a time there was a farmer. While he worked long and hard every day, he grew everything his family needed and wanted. His larder was full of food, his woodpile stacked high for winter. His animals ate and drank what nature intended and so did he and his family. Life was good.
Then one day a sharp looking fellow arrived on his doorstep. “Good sir, would you be interested in improving your life?” he said.
The farmer, looking startled, replied “why, of course, one always wants to improve himself if he can. But my life is good now. How would you improve upon it?”
“Well sir, I am an Economist by trade and we economists specialize in analyzing ways to produce more for less. By looking carefully at how you use your time and manage your resources, we can suggest ways for you to minimize your input and maximize your output, thus enlarging your profit and making your life better.”
“I don’t know . . .” the farmer, looking puzzled, started to say. “I’m not sure I understand quite what you mean . . .”
“And that’s exactly where I come in,” the Economist interjected. “I do. Just let me follow you about on your chores and make suggestions on how to do things better. You can do whatever you would like about the suggestions, take them or leave them, up to you.”
“Well, okay, if that’s all this amounts to,” the farmer agreed.
And so they set off for the barn. Spying a henhouse, the Economist counted twelve chickens and a rooster. “Are these all the chickens you have?”
“Yes,” the farmer replied. “That’s enough to provide plenty of eggs for me and the wife and kids and we have a couple of dozen or so a week extra to trade for apples and cherries from my neighbor with the fruit orchard and for honey with my neighbor who keeps bees. It’s also enough to provide us a flock of pullets every year that we eat for fresh meat and we have chicken stew when the layers get too old to lay any more.”
“And so how much time do you take with managing this flock, my good sir” the Economist asked. “How do you feed them and maintain their health?”
“Why, I let them out into the fields and eat the bugs off the crops. In winter I feed them from the corn and hay I have stored up and with fresh greens grown in the hothouse. They also get tomatoes and seeds from vegetables we can’t eat or swap or sell out at our stand by the road.”
“And how long does all this take you to accomplish?” the Economist asked. “Include your time cutting, storing and taking down the hay and corn as well as time growing the vegetables, getting them to the chickens and the time you take protecting them in the field—you do protect them from predators while they roam about, do you not? We need to account for all your labor inputs in order to figure out your real cost of keeping chickens,” the Economist said.
“Why, I never thought of all these tasks as ‘labor inputs’ but I suppose they must be,” the farmer replied.
“And at how much per hour do you value your labor?” the Economist asked, pulling a pen and pad from his pack. “Let’s put a few figures down so we can calculate your costs exactly.”
And so they did.
At the end of the day the Economist said, “Good sir, by my calculations, if you value your labor at $20 an hour you are spending a huge amount of money on keeping those chickens. You either need to increase the number of chickens you keep or you need to quit keeping chickens and focus on more productive uses of your time.”
“But if I expand my flock what shall I do with all the extra eggs,” the farmer said. “And wouldn’t that mean that I must grow more corn and hay to feed them all?”
“Why of course it does,” the Economist laughed. “Your life improves as your amount of profit per unit of production increases, and you do that by gaining efficiency in producing each unit. You can feed 100 chickens in almost the same time it takes you to feed 10, and you can guard 1000 chickens in even less time if you kept them indoors instead of exposing them to predators and letting them wander about unguarded. You need to adopt modern methods of farming, concentrate on what you can produce at the lowest cost and let others produce everything else you want the same way. By this approach, everyone ends up with more at less cost.”
“That does seem to make sense,” the farmer remarked, looking thoughtful. “But it would take me several years to get up to a thousand chickens by breeding from the small flock I have now. And what do I do for eggs in the meantime if they are all hatching out into new chickens?”
“Of course you can’t do it that way,” the Economist agreed. “And the slaughter houses wouldn’t want a handful of chickens at a time anyway nor would the big grocery stores be content to buy a few dozen eggs at a time. They too must economize and concentrate on volume production and volume sales and controlling cost per unit.”
“So what can I do?” the farmer asked, looking perplexed and discontent.
“My friend the Banker could help,” the Economist replied. “He specializes in providing loans to entrepreneurs and those who want to grow their business. I’m sure he could provide you a loan which you could use to buy those 1000 chickens now and get them into production almost immediately.”
“But shouldn’t I first increase my corn crop and hay crop so I can feed them all?” the farmer asked.
“No, I wouldn’t wait to do that,” the Economist said. “I would get the loan, get the chickens, and buy their feed corn for now. That way you can get an immediate start on improving your life by cutting your costs per unit, in this case, of eggs. Sell the eggs, buy the feed you need. You can increase your crop planting at the same time and pretty soon, you’ll be able to feed them and that will then lower your costs per unit—provided, of course that you can grow your feed corn more cheaply than you can buy it.”
And so the farmer went to the Banker, got the loan, bought his 1000 chickens, and negotiated a contract with the local grocer to provide eggs for all his neighbors. For awhile he prospered, buying a new tractor, a new car, and adding a room on his house. But unfortunately, several of his neighbors took the same advice from the Economist and expanded their chicken flocks. And the Economist had gone far and wide preaching his gospel of more efficient, more profitable production. Farmers in many countries followed his advice and expanded their flocks too.
Before long, the price of eggs fell so much the farmer couldn’t make the payments on his loan. He took out more loans, expanded his flock still more to lower his unit cost and raise his efficiency, but all in vain as all his neighbors in his country and abroad took the same advice.
As the flocks grew, space for corn growing diminished until the farm produced nothing but chickens. The farmer, desperate to lower his unit costs, expanded until he had to buy his vegetables, wood, and everything else he needed but eggs and chicken. His neighbors, following the same advice, had done the same and more, until finally, falling deeper and deeper in debt, the Banker foreclosed on the farm.
The farmer and his family found themselves homeless, jobless, and begging on the street—upon which one day the former farmer encountered the Economist once again.
“Dear Sir!” he implored. “I desperately need your advice to improve my life for I have fallen upon terrible straits!”
“I see that is so, my friend,” the Economist said. “So what do you have to sell in order to improve your desperate circumstances?”
“I am afraid I have sold everything I have—there is nothing left,” the farmer, crying, said.
“So you have no assets to borrow against, no units of production to squeeze more profit from, no savings you accumulated from your years of production, nothing ‘economical’ at all?” the Economist said with a horrified look on his face.
“No sir, nothing. I have nothing, not even a job. My only skill is as a farmer and no one will hire me for I failed at that occupation. Besides, all the food is being shipped in from overseas where the farmers will work for less. There is no work to be had for all the neighbors who produced goods and services in other areas also followed your advice and, when they could no longer compete with foreign imports, they too lost all and came begging on the streets with me.”
“Then,” the Economist said sadly, “I have nothing I can say to you. You have no units of production from which I can squeeze greater profits, no assets to borrow against, no means of production and no saleable skills. There is no demand for you. Your time has no value now—you do not exist as far as economics is concerned and I can do no more for you.”
“But sir,” the farmer implored. “Had I not listened to you I would still have my farm and the life I once had.”
“True,” the Economist replied. “But you entered voluntarily into the free market, and once there, you must respond to free market forces over which no man has control. Your fate is a sad but unavoidable one, for the market respects no man. It rewards and punishes by its own whims and behaviors that no one can predict. Perhaps your eggs were too expensive, or the wrong size, or the wrong color, or not fresh enough, or not organic and ‘natural’ enough to suit your customers. You must have failed to inform yourself, or price correctly, or negotiate your price and costs adequately. Your failure is due to your own faults to respond to the market. It is not my responsibility—indeed—I must not interfere in the operations of the market else I distort it and the overall effect is to increase costs to everyone.”
“But sir, all the eggs now are produced outside our country!” the farmer protested.
“You should have moved your production facilities abroad then,” the Economist shot back. “Or you should have torn down your house, lived in a tent, and reduced your costs equivalent to that of the farmers living in mud huts overseas who have now put you out of business. It is not my fault; it is yours because you failed to do what the market demanded.”
“Then I must beseech the government to help me,” the farmer said, turning away. “You Economists have nothing for me now.”
“No, you must not do that!” the Economist exclaimed, shaking his finger in the former farmer’s face. “Government must be run like a business. That government is best which interferes in the market least. It too must follow free market principles and refrain from interfering with things economical. Taxes are a distortion on the market and must not be raised; indeed, they must be cut and so must regulations lest our costs rise still higher and our country becomes wholly unable to compete with other countries, and we lose all our business to them. We cannot permit failures like you to become a charge upon the public purse. It is, after all, your own fault you lost all,” he said, turning now to address the crowd of beggars forming up around him.
“And so my advice to the government has been to tighten up voting standards so that only those who can afford a permanent address, or buy a driver’s license or other form of identity can vote. And I advised them to make vagrancy and begging a crime, and to remove the right to vote from those convicted of this crime against free market principles. We cannot let your bad management and poor decision-making cause the government to do the same lest we all be dragged into your miserable, well deserved circumstances.”
“Begone, you market failure!!” he cried turning away and waving at the police as they gathered in the distance on their daily task of running the beggars out of town.
“And get a job.”