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Why Are Our Economics In Trouble?

Author : Harold Richter   Top Author

There is a mathematical pattern that has been slowly applied to almost all areas of life on Earth, since the late 1950s. The creator of this equation that was originally used in game theory, is a man named John Forbes Nash, Jr. You may recall a movie called “A Beautiful Mind.” That was about Mr. Nash. The movie was about the trials and eventual success of a brilliant young economic math student who just happened to have severe schizophrenia.

It was in 1948, when John Nash was a student at Carnegie Institute of Technology he developed an idea, and worked out the associated math equations to substantiate his theory. He did his thesis based on the business strategy that he created. In essence, the idea was that two competing businesses would have more success, if they maintained a certain amount of cooperation between themselves.

Most of us have heard of, and some of us older seniors have witnessed, the gas wars of the 40s and 50s. The common story goes that the only two gas stations, in a town, just happen to be located across the street from one another. They go back and forth, lowering their prices in their attempts to attract the lion’s share of the town’s business. Their challenge would be to lower the price of gas enough to beat their competitor while still keeping it high enough to make a living.

This was a healthy business competition layout that ultimately benefited the general public, and therefore was good economics. Our nation’s forefathers recognized this when they included, in our constitution, laws against owning a monopoly, where one corporation’s service, or product, was the only choice that could be made. When a corporation can’t demand an unfairly high price for their product, or service, for fear that the public will go to a competitor, the bulk of the available money remains in the possession of the general public and not in some clever CEOs pockets, and the public remains prosperous.

John Nash’s theory changed all that. It offered large business entities a way to effectively bypass the monopoly law. And, the theory could be modified to fit almost any organization, with any self-serving mission conceivable. With this theory in place, the two gas station owners would secretly meet and agree to a mutual five-cent increase. If someone asked about the price increase, or complained, they could make up any excuse they wanted, like “It is costing more to ship the gas here,” or “The local oil companies are asking more for the gas.” In this way, the town’s people would be forced to buy their gas at the newly inflated price because that was all that was being offered in that town and to drive to the next town was a waste of both time and more gas. As the gas stations in neighboring towns joined the conspiracy, it got harder and harder to find a gas station that was selling gas at a price set just to make an honest living. Eventually, this plan would be used nationwide, with the oil companies joining in for their share of the higher profits. Pretty soon, they would use any excuse available, like “There’s trouble in the oil producing nations,” or “There was a storm over some refinery and until they certify that it is safe, the gas prices will have to remain high. Sorry.” Sound familiar?

As long as a show of competition, for the public, was maintained, the monopoly law couldn’t penalize them and their motivation was that every time they came up with a new excuse, they got a raise. If they couldn’t think of a new one and no earthly disaster was happening, they could use and old one, like “Research costs have increased,” while all the time their one consistent mission was to gleam every penny from the public as humanly possible.

Mr. Nash’s theory has proven to be quite flexible. Not only have the oil companies found success and profits beyond belief, the banking organizations, transportation industries, credit card companies, automobile manufacturers, insurance companies, medical institutions, and utility companies, are now applying this theory to various extents. Even governments have gotten in on the action. All they have to do is maintain a show of competition, while denying any collusion, and they profit. It’s like professional wrestling. They put on a good show, but backstage they’re all friends.

Do you really think that Republicans and Democrats fight over issues as enthusiastically as they make it look? With their hidden monopoly, they can vote themselves raises, pass laws that benefit their supporters and make themselves exempt from the less desirable laws that they enforce on the general public. They vote themselves exempt from social security and provide themselves with retirement plans reserved for the privileged few. Their benefits and healthcare plans are untouchable. All they have to do is turn their backs on the morals and ethics demonstrated by the authors of the original constitution, and then just maintain the show. What a country!

Mr. Nash’s theory is so flexible that it has crossed the boundaries between governments and corporate businesses, far beyond what the average citizen might expect. How many corporations are supporting the re-election efforts of congressmen, these days? With the number of lobbyists that are supplied with incredible amounts of money and told to sway the positions of our congressmen to favor the interests of their clients, I’m sure that’s just barely scratching the surface.

In an enclosed environment, like a town, or a country, or a planet, when the finite wealth and resources are collected from the public, and kept by just a few privileged profiteers, eventually, the majority of the people are forced closer to poverty. As Mr. Nash’s theory is refined and the fleecing of the population is made more and more efficient, then it becomes obvious how an economic catastrophe can be created.

Mr. Nash’s theory of business strategy has been successful because there’s very little that anyone can do to counteract it. No one that drives a car can reasonably boycott overpriced gas if all gas is overpriced. The government is firmly in place and will stay there, unless there’s some kind of revolution. And, I think as long as the show that is being performed for the public is somewhat believable, the profiteers of this strategy are relatively safe from a revolution.

Of course, there’s no way to prove beyond a shadow of a doubt that the ethics and morals of all these corporations and organizations have been bypassed in favor of the profit made available with Mr. Nash’s strategy. The corporate executives would obviously not be wise to leave proof of unethical practices just lying around. It happens, but rarely. But there are signs of it everywhere. This explanation of our modern economic problems might only be theory, but it fits the obvious facts like a glove, and you might want to keep it in mind the next time you see a new political candidate promising to fix the economic crisis if he gets elected.

I’m sure that John Nash couldn’t have imagined the almost limitless potential for misuse of his unique business strategy, but his personal participation was not necessary, once corporations that placed more value in profit than ethics, got hold of it. I think it has snowballed out of control ever since, and for right now all we can do is to be as aware of the situation, as possible. God, help us.

Author's Resource Box

Harold K. Richter, author of “Love, Life, and Laughter in Limericks,” is an enlightened, 61 year old, retired computer technician. In 2002, he moved from Delray Beach, Florida, and is now living in Floral City, Florida, where he enjoys building and repairing computers for his friends and neighbors, but occasionally he takes time out to do some deep space stargazing. He and his wife, Teresa, find comfort in relaxing on their back porch, where he writes some of his poetry and she watches the wild deer.

Harold has a degree in electronics and has done some flying. He has been a cook, a painter, a professional scuba diver, and an electronics technician. He has worked for small companies as well as large corporations, but prefers the more family like atmosphere of the smaller companies.

Harold is a mild mannered and generous man, who says he now lives in paradise. If asked, he will tell you that the best, and most rewarding, path a man can take, is to be of service to others

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Tags:   Economics, Nash, Business, gas wars

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Submitted : 2012-07-31    Word Count : 1258    Times Viewed: 1387