ECONOMICS FOR ENTREPRENEURS

by Joseph P Hawranek

I wanted to put a course together that could have been helpful to students and to others who are entrepreneurial. I searched for a proper textbook and came across one by Robert P Murphy. It was called Lessons For The Young Economist. It was published by the Ludwig von Mises Institute and accordingly follows the Austrian school of economics. I have learned to prefer that school in contrast to that taught in most schools of economics – John Maynard Keynes – Keynesian. I do not like the Keynes theory in today’s world since it applied to a depression and uses only government to get one out of the depression - - - spend, spend, spend! We are currently in a major debt cycle and we have 320 million people who are creative, productive and free. Many think of creating and starting their own businesses because they instinctively know that they would be better off by producing for oneself rather than relying on the state. This course was created for them. It assumes no knowledge of economics. It only assumes that the reader is intelligent and interested in learning something that may help him create or run a business. The course does cover all the main tenants of economics.

Let’s see what it contains. It is broken into four sections with a bonus section at the end for investors. The sections are

1. PART I – FOUNDATIONS – Thinking like an economist, How we develop Economic Principles, Economic concepts implied by action (observe to make laws); Robinson Crusoe economics (capital goods, consumer goods, created goods, income, saving and investment); Studies how Robinson Crusoe survived and explains most of the principles of economics in a one person economy.

You will learn what it means to “think like an economist”; the types of questions that economics can help explain; and why it is important for everyone to understand basic economics.

1. CAPITALISM: THE MARKET ECONOMY – Explains private property; direct exchange and barter prices; indirect exchange and money; division of labor and specialization; entrepreneurship and competition; income, savings and investment; supply and demand; interest, credit and debt; profit and loss accounting; the stock market.

You will learn the reasons society requires institutions to deal with scarcity; the three main institutional settings in which this course will apply economic analysis; the essential features of the capitalist system known as the market economy. Society requires rules. The reason is simply called scarcity. There are not enough goods to go around for everyone, accordingly society tries to organize in a manner to maximize the benefits of most individuals in that society. The market economy has demonstrated over 200 years that it is the best solution. It provides for individual freedom, freedom of choice, private property, maximization of the resources available in the economy and through pricing allows efficient uses of capital.

1. SOCIALISM: THE COMMAND ECONOMY - Explains the vision of pure socialism; socialism’s incentive problem; socialism’s calculation problem.

In this section you will learn the definition of socialism and the command economy; the incentive problem of socialism; the calculation problem of socialism. Socialism does not work because its theory is flawed. Socialism always ends as a dictatorship and with the worst people at the top. There comes a time when force must be used to get the people is to obey instructions. At that time the leadership becomes a dictatorship and force is used to keep the leadership in power. A command economy requires that someone must make decisions as to allocate jobs, prices, industry priorities, and resources but not based on any moral principles. This person must be amoral. These jobs attract amoral people. Accordingly, the worst of society ends up ruling society. Think of Nazi Germany if these statements appear to be confusing. These amoral leaders will do anything to keep themselves in power, including killing their constituents. A brief history of the number of people killed by socialist leaders follows when their jobs got threatened follows:

• USSR – 20 million

• China – 65 million

• Vietnam – 1 million

• Cambodia – 2 million

• Eastern Europe – 1 million

• Latin America – hundred and 50,000

• Africa – 1.7 million

• Afghanistan – 1.5 million

Anyone who says that socialism is right for America does not know history, nor do they understand socialism and where it leads. It leads to death, dictatorship and serfdom for the people.

PART FOUR: INTERVENTIONISM: THE MIXED ECONOMY - This system includes a market economy with government intervention. It is what we in America live under today. For instance, the airline industry is free only if they obey government regulations. This section explains price control, sales and income taxes, tariffs and quotas, inflation, government debt and the business cycle.

In this part, you will learn about the definition of interventionism; see examples and consequences of price ceilings and price floors; how to understand and analyze price controls using supply and demand graphs.

Interventionism is introduced by government because they feel that they can avoid the flaws of pure capitalism and pure socialism. In fact, they usually create more problems.

PART FIVE: GEOPOLITICAL ANALYSIS AND INVESTMENT OPPORTUNITIES

This section teaches the reader how to spot geopolitical hotspots which become investment opportunities. In the first lecture, we examine geopolitical hotspots and identify two. These are war and economic energy shortages. In the case of war, military industrial stocks that focus on war - making ships, airplanes, guns and munitions - will grow and their earnings will be paid to stockholders. As such, 10 stocks which are noted his defense stocks have been selected in the defense industry and in the energy industry. The 10 stocks in the energy industry are destined to grow based on mining and pumping oil. Each of these 20 stocks are analyzed using Value Lines investment methodology. In this manner, the reader can select among the top 20 stocks into the hotspots in geopolitics on earth and intelligently select investment opportunities. Since writing, some of the stocks of already begin to advance.