Hello again,
Our fictitious yard sale showed a simple trade or barter as a small business so I think we'll continue the analogy into a simple partnership.
A neighbor watched the yard sale and approached me suggesting we go together the next time and sell from his things and mine (our merchandise). He has two kids and they will join mine to help (create a larger labor force).
We post sale signs together and purchase another ad in the newspaper. We split these "cost of doing business" expenses equally.
All goes as before but we have more left due to inclement weather. When it comes time to tally up the results, my neighbor objects to deducting the cost of sale expenses as too much trouble and says we should just split the proceeds and forget the charity donation. This is unfair since I have paid for the hamburgers which he didn't acknowledge as necessary and his kids ate more than mine. Not doing the charity donation makes the sale quite close to a loss.
I have made a glaring error in the partnership by not discussing and agreeing on the total idea. By following his plan, I will be out more of the cost than he is since I paid the lion's share. I explain this to him and he grudgingly acquiesces but I feel sure we will not be partners again because his ideas of equal are not the same as mine.
That's the scenario and it illustrates a number of points not shown in the original yard sale.
As you can see when a second party enters the business picture, the simple element of trade becomes more complex. Contracts, both verbal and/or written become a necessity to clarify each person's understanding of what is agreed to as the final result. If things like the weather, location and various other physical things can interfere, the partners must decide beforehand what result is to be chosen. And they must agree on what is to be considered expense to be deducted from profit as well as the kind of profit. I considered donations a profit in the first yard sale since they are deductable help for others. Because of my oversight, I have lost a partner maybe a neighborhood friend and wound up with a less than successful venture.
Plural interaction shows how simple trade suddenly becomes complicated as more elements are added to the situation. Rules form and must be articulated or written. This is a very simple example of how something called Economics comes into being.
Economics becomes a dictionary of terms for the interactions that go on between people and nations. Not understanding these terms and what kind of agreement is being made can result in loss and/or disaster.
In the United States we depend on our Congress to read, understand, and sort out the type of agreements that will be beneficial to the taxpayers. However, that doesn't excuse the taxpayer from being at least knowledgeable since the game of politics can often set in place a representative or senator who is not qualified, has a personal "ax to grind", or is not educated into the intricacy of Economics. Then it becomes the taxpayers responsibility to point out the error(s) and make sure to replace the politician with one who can handle the issues. It probably should be a requirement of leadership to have some background in high finance or Economics although that too has its downside.
Just knowing that 10-20-30-trillion dollars is too much to spend on anything is not enough to sway a politician particularly if upteen million dollars winds up in his state. The Senator from Nebraska showed us that example when his vote was procured for the 2009 health initiative. Did he realize what he was really bargaining away? I think he got a "loaf of bread" for his vote compared to the debt to the taxpayers that his vote could have caused. I hope he'll undertake an understanding of the economics of this nation not just his state.
This then is the reason I have decided to unravel Economics. Not to run for political office. I am too old for that, thank goodness, but to see as a writer if I can put Economics in perspective so that a great many of us can understand. As I said we'll see if I can do it.
By the way, don't scold me for not being erudite. If that's what you need, there are plenty of books out there with that bent. I am after clear, precise information that even a young person can read and understand. Again, we'll see how I do.
CHEERS, CONNIE
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