Category Archives: Movies for Conservatives

Movies that understand Economics #25: The Fifth Element

Fifth ElementOkay, taking The Fifth Element seriously might be a stretch but there is a great moment where the movie gives a perfect recounting of Keynesian economics. The idea that disasters and catastrophes lead to economic growth and prosperity because cleaning up the mess is good for the economy. It is at the heart of all Keynesian principles—the market can’t exist on it’s own it needs outside stimulus.

Now you may be wondering why I would view this as understanding economics as Keynes and all his disciples are, at best, out of their minds and at worst functionally retarded (seriously given the absolute stupidity of every word out of Krugman’s mouth it’s a miracle the man is able keep from drooling all over himself)…but I point to this as an understanding of economics because this filth is put in the mouth of the movie’s villain, Zorg (played by Gary Oldman, although as with most Oldman parts you wouldn’t recognize him if you were told) and it is meant to be the words of a villain.

Zorg: Where are the stones?
Priest Vito Cornelius: I don’t know. And even if I did know, I wouldn’t tell someone like you.
Zorg: Why? What’s wrong with me?
Priest Vito Cornelius: I try to serve life. And you seem to want to destroy it.
Zorg: Oh, Father. You’re so wrong. Let me explain.
[Puts and empty water glass on his desk]
Zorg: Life, which you so nobly serve, comes from destruction, disorder and chaos. Now take this empty glass. Here it is: peaceful, serene, boring. But if it is destroyed
[Pushes the glass off the table. It shatter on the floor, and several small machines come out to clean it up]
Zorg: Look at all these little things! So busy now! Notice how each one is useful. A lovely ballet ensues, so full of form and color. Now, think about all those people that created them. Technicians, engineers, hundreds of people, who will be able to feed their children tonight, so those children can grow up big and strong and have little teeny children of their own, and so on and so forth. Thus, adding to the great chain of life. You see, father, by causing a little destruction, I am in fact encouraging life. In reality, you and I are in the same business. Cheers. [chokes on a cherry]

What Zorg is talking about is called the broken window fallacy. That destruction brings about prosperity. Now for people with a functioning cerebral cortex it only takes a few seconds to realize that the money spent to rebuild could have been spent somewhere else…but hey, as I’ve pointed out Keynesians are special kind of crazy/stupid/evil. And yes evil is appropriate, because as shown in the film, this argument is just a cover for a wish to destroy (or you’re really stupid if you actually believe that).

And the movie shows that at some level the writers understood economics because within 30 seconds they tear down Zorg’s entire philosophy when it is not destruction (in the case of a cherry Zorg is choking on) that brings about results but rather human action to prevent destruction.

Father Vito Cornelius: Where’s the robot to pat you on the back? Or the engineer? Or the children, maybe? There, you see now, how all your so-called power counts for absolutely nothing now, how your entire empire can come crashing down because of one… little… cherry.

It’s nice to see Keynesian idea so perfectly destroyed as they deserve to be.

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Movies that understand economics #22: The Company Men

Copmany Men“[Next year] I’m worried about our stock price tomorrow.”

The Company Men is probably one of those films you missed. It has terrible publicity and was rolled out in a January (probably the worst month for movies). It’s the story of several mid to high level executives at a ship building construction firm (Ben, Affleck, Chris Cooper, and Tommy Lee Jones) as they are each downsized by the failing company and how they react to the problems of living in a recession. As you can probably guess this movie is a bit of a downer for most of the film. But in amongst the almost melodramatic moments, it does illustrate some of the economic facts and principles of the current world.
The first, as Milton Friedman was wont to point out, is that business is often the worst enemy to the defense of the free market. What do I mean by that? Well the fact is that the free market is run by three things: self interest, long term planning and competition. Self interest drives us to want the most out of what we can get, and since we want things in a free market we have to offer other people things. Competition causes us to offer the best product at the best price for both ourselves and our customer. And long term thinking causes us to create companies, products, and systems that will keep the money pouring in for years; that will grant us prosperity through prosperous times and security through the down turns. And it is this last one that the business and business in general often fail at. In general business will often foolishly push for things like tariffs or legislation that helps them and puts up barriers against their competitors…never stopping to ask what will happen in the long run after we have helped to give government the power to regulate business (despite the fact that I would say almost everyone has heard the warning “A government big enough to give you everything you want, is a government big enough to take away everything that you have.”) In this film the company at the center of the film keeps making stupid short term mistakes, constantly undercutting its ability to make anything by repeatedly downsizing all in the interest of short term gains in stock price (ignoring the fact in the long run you can only downsize until you hit rock bottom and then your stock price doesn’t go much of anywhere). Not to say that all downsizes are merely the result of short term thinking, they’re not always, but this company had no long term plans, or even desires, to keep going long term, only the short term concern for stock price.

Now the fact that people are short sighted may be disappointing, but it’s hardly surprising. That’s why the free market is great; it chews up the people without only short term thinking and rewards those with long term thinking. But the problem is that when looking at any particular business you don’t see the beauty of the free market that creates new jobs and new opportunities. (Remember this recession is more due to piles and piles of government intervention more than anything else.) Otherwise there are always ups and downs in life, only government intervention makes them worse and more obvious.

Another simple fact of economics is that people who look to the stock market as a perfect marker of the economy are really dumb. The stock market is based more on emotion and hype than any reality. Throughout the movie we see a company move its stock price up as it further and further destroys its long term prospects. I’d like to say this is just something relegated to movies and pre-Great Depression stock markets…but right now when business is about to collapse under the weight of Obamacare and all the other BS this idiot is shoveling the stock market has never been higher. And liberals keep telling me the economy is doing great… after all the DOW is above 16,000…yeah, let’s see how long that lasts. Insurance companies right now are an example of short term thinking – they are going along with Obamacare as government has promised money but this can not continue forever and so this is very short term thinking and the long term result will be exactly what government wants and insurance will be destroyed and annihilated. Wonder what that will do to the stock market?

And of course, as with all things economic it shows that the ones who survive and thrive are the ones who adapt…in this case the employees who start a new, smaller company that fills the space left by the fact that, low and behold, just firing people without any long term plan did not prevent a buyout and liquidation. Adapt or die. Adapt or die. It is the central rule of economics that can never be ignored.

“We work as hard in here every day as we did when we were trying to get a job, we’ll be alright. What’s the worst thing they can do, fire us?”

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Movies that understand economics #20 and 21: Atlas Shrugged & The Fountainhead

Review of Atlas Shrugged Part ISomehow I would be remiss not to mention the movies based on Ayn Rand’s novels when discussing movies about economics. The problem here is that while the movies, like Rand herself, have a solid understanding of the broad strokes of economics (liberty, limited government, low taxes and regulation lead to innovation, adaptation and prosperity), they don’t seem to actually get why this actually works. Rand’s understanding of economics is a lot like most people’s understanding of how the CPU of a computer works (“uh…uh…there’s some ones and zeroes and, and, and it translates into ons and offs and…um…uh…it just works. Why do I need to know why it works it just works.”) And, granted, that could make Rand seem really ignorant…but keep in mind that there are people who don’t even get that it works. How stupid do they have to be? (Krugman, I mean you and your mentally challenged drivel.)
But for all of her flaws she does have some correct ideas.
Probably because they seem to be having one problem after another with Atlas Shrugged (I am holding out zero hopes for part three, so I hope I won’t be disappointed…) it might be best to turn to The Fountainhead. Where, though somewhat shorter than in the book, the case for intellectual property is made in very clear terms. (It’s particularly interesting that some modern libertarians seem to be against the very necessary protection of intellectual property rights.)

Howard Roark: Thousands of years ago the first man discovered how to make fire. He was probably burned at the stake he had taught his brothers to light, but he left them a gift they had not conceived of, and he lifted darkness off the earth. Throughout the centuries there were men who took first steps down new roads, armed with nothing but their own vision. The great creators, the thinkers, the artists, the scientists, the inventors, stood alone against the men of their time. Every new thought was opposed. Every new invention was denounced. But the men of unborrowed vision went ahead. They fought, they suffered, and they paid – but they won.
No creator was prompted by a desire to please his brothers. His brothers hated the gift he offered. His truth was his only motive. His work was his only goal. His work, not those who used it, his creation, not the benefits others derived from it. The creation which gave form to his truth. He held his truth above all things, and against all men. He went ahead whether others agreed with him or not. With his integrity as his only banner. He served nothing, and no one. He lived for himself. And only by living for himself was he able to achieve the things which are the glory of mankind. Such is the nature of achievement.
Man cannot survive except through his mind. He comes on earth unarmed. His brain is his only weapon. Howard RoarkBut the mind is an attribute of the individual, there is no such thing as a collective brain. The man who thinks must think and act on his own. The reasoning mind cannot work under any form of compulsion. It cannot not be subordinated to the needs, opinions, or wishes of others. It is not an object of sacrifice.
The creator stands on his own judgment. The parasite follows the opinions of others. The creator thinks, the parasite copies. The creator produces, the parasite loots. The creator’s concern is the conquest of nature – the parasite’s concern is the conquest of men. The creator requires independence, he neither serves nor rules. He deals with men by free exchange and voluntary choice. The parasite seeks power, he wants to bind all men together in common action and common slavery. He claims that man is only a tool for the use of others. That he must think as they think, act as they act, and live is selfless, joyless servitude to any need but his own. Look at history. Everything thing we have, every great achievement has come from the independent work of some independent mind. Every horror and destruction came from attempts to force men into a herd of brainless, soulless robots. Without personal rights, without personal ambition, without will, hope, or dignity. It is an ancient conflict. It has another name: the individual against the collective.
Our country, the noblest country in the history of men, was based on the principle of individualism. The principle of man’s inalienable rights. It was a country where a man was free to seek his own happiness, to gain and produce, not to give up and renounce. To prosper, not to starve. To achieve, not to plunder. To hold as his highest possession a sense of his personal value. And as his highest virtue, his self respect. Look at the results. That is what the collectivists are now asking you to destroy, as much of the earth has been destroyed.
I am an architect. I know what is to come by the principle on which it is built. We are approaching a world in which I cannot permit myself to live. My ideas are my property. They were taken from me by force, by breach of contract. No appeal was left to me. It was believed that my work belonged to others, to do with as they pleased. They had a claim upon me without my consent. That it was my duty to serve them without choice or reward. Now you know why I dynamited Cortlandt. I designed Cortlandt, I made it possible, I destroyed it. I agreed to design it for the purpose of seeing it built as I wished. That was the price I set for my work. I was not paid. My building was disfigured at the whim of others who took all the benefits of my work and gave me nothing in return. I came here to say that I do not recognize anyone’s right to one minute of my life. Nor to any part of my energy, nor to any achievement of mine. No matter who makes the claim. It had to be said. The world is perishing from an orgy of self-sacrificing. I came here to be heard. In the name of every man of independence still left in the world. I wanted to state my terms. I do not care to work or live on any others. My terms are a man’s right to exist for his own sake.

As I said she gets the broad strokes. That liberty, limited government and the human mind should be valued. But anything more detailed than:

My name is John Galt. I live in a place we call Atlantis, and I think you’d fit in there. It’s a place where heroes live; where those who want to be heroes live. The government we have there respects each of us as individuals and as producers. Actually, beyond a few courthouses there isn’t much government at all. Bottom line, Mr. Wyatt; if you’re weary of a government that refuses to limit its power over you, if you’re ready at this moment to claim the moral right to your own life, then we should leave, and I’ll take you there. I’ll take you to Atlantis.

And you’re really pushing it. She understood capitalism and individualism worked and any form of collectivism and socialism didn’t. And if you’re looking for a moral pick me up, her quotes can work quite well…if you’re looking for a technical answer as to why they work…you might want to dig into other economists and movies.

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Movies that understand economics #17, 18 and 19: A few movies with only a couple lines of understanding



Okay so there are a few movies with a brief glimmer of understanding about economics that I wanted to cover.  It’s not that the rest of the movie doesn’t understand economics…it’s that it really isn’t an issue so it felt better to just lump them all together.



#17 The Count of Monte Cristo

Count of Monte Cristo Cavill CavizelWhile digging out of the Chateau Dif Edmund Dantes is taught among other things, economics, which results in this little bit of banter:


Abbe Faria: Define Economics.

Edmond: Economics is a science that deals with the production, distribution, and consumption of commodities.

Abbe Faria: Translation?

Edmond: Dig first, money later.


It’s not a lot, but it has both the technical and the pragmatic side of economics, and most importantly, that nothing is free…so dig.



#18 The Dark Knight Rises


The Dark Knight Rises, in fact the whole series, has some wonderful things to say about ethics, politics, sociology, and human nature…but it doesn’t often deal explicitly with economics, except in this one place, right after Bane has taken over the Gotham Stock Exchange.


Exchange Security Chief: You’ve gotta get in there!

Foley: This is a hostage situation.

Exchange Security Chief: No! No! No! This is a robbery! They have direct access to the online trading desk.

Foley: I’m not risking my men for your money.

Exchange Security Chief: It’s not our money, it’s everybody’s!

Police Officer: Really? Mine’s in my mattress.

Exchange Security Chief: You don’t put these guys down, that stuffing in your mattress might be worth a whole hell of a lot less.


It wonderfully takes on the idiocy of the mentality that economics isn’t a massive single thing.  That what happens in one place doesn’t happen elsewhere and that what affects one sector is completely unrelated to others.  Economics is a single mass where everything is connected, and to think that isolationism or just hiding your money in your mattress (both equally stupid) are going to protect you is absolutely foolish.*


#19 Casablanca

Casablanca Rick's Cafe

Again a great movie more for politics than for economics, but which in one brilliant moment understands economics than most of Washington D.C.


Woman Selling Her Diamonds:  But can’t you make it just a little more…?

Buyer:  Sorry, madame, but diamonds are a drag on the market:  everyone sells diamonds; there are diamonds everywhere …Two thousand four hundred.

Woman Selling Her Diamonds:  All right…


I love this scene because it shows something very realistic.  Nothing has intrinsic value.  Diamonds are only as valuable as they are rare (and that is only because the cartels keep the supply very fixed).  But if the market is suddenly flooded the price of diamonds, or gold or silver or anything valuable, drops. One only has to look at the massive inflation in Spain during the days the Conquistadors where they were shipping gold back by the ship-full to know this.


And if one were very intelligent they would know that this is why just basing currency off precious metals or stones would be foolish.  Any new discovery of a large mine could cause massive inflation, any industrial need for that metal could cause a massive shortage that would in turn result in massive deflation (which can often be worse than inflation).  Anyone who has read Friedman and Schwartz’s A Monetary History of the United States 1867-1960 knows that the gold standard was no guarantee against inflation or deflation (and often the cause of it) and thus anyone who argues returning to such practices knows nothing about basic facts of monetary policy.


And it’s all shown in that little moment where diamonds are not worth as much as they were a few years before.


*Okay what this movie does with Wayne’s stock trades makes no sense, but I’ll forgive it because it was something required to move the plot forward.

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Movies that understand economics #16: A Beautiful Mind


A Beautiful MindIt is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest. We address ourselves, not to their humanity, but to their self-love, and never talk to them of our own necessities, but of their advantages. —Adam Smith, Wealth of Nations



A lot of A Beautiful Mind doesn’t deal with economics…but there is that one beautiful scene…



Nash: Adam Smith needs revision.

Hansen: What are you talking about? 

Nash: If we all go for the blonde…we block each other. Not a single one of us is gonna get her. So then we go for her friends, but they will all give us the cold shoulder because nobody likes to be second choice. Well, what if no one goes for the blonde?  We don’t get in each other’s way, and we don’t insult the other girls.  That’s the only way we win.  Adam Smith said the best result comes from everyone in the group doing what’s best for himself, right? That’s what he said, right?

Others: Right. 

Nash: Incomplete.  Incomplete, okay?  Because the best result will come…from everyone in the group doing what’s best for himself…and the group.

Hansen: Nash, if this is some way for you to get the blonde on your own, you can go to hell

Nash: Governing dynamics gentlemen. Governing dynamics. Adam Smith…was wrong.” 

Now I will forgive them a little that they’re wrong about ““In competition, individual ambition serves the common good.”  I can’t find that anywhere in Adam Smith so it’s clearly made up by the writers, but it is the general impression of the quote that started this blog.  Even if in all actuality, Adam Smith both implicitly and explicitly said that we are at our best when we act out of self-interest AND concern for others in both Wealth of Nations and The Theory of Moral Sentiments.  But let’s ignore this small part (Hollywood is full of idiots, and besides it makes for more impressive drama if he figures out something new rather than just proving it mathematically).

The central argument is two-fold.  The first is that competition leads to better results. When guided by rational self-interest people create things that benefit not only themselves but everyone else.  It’s just that when we act out of self-interest AND concern for others, when we look for win-win solutions as opposed to just win-lose ones we all do better.

Now as I said, you could already find this in Wealth of Nations but it’s nice that this movie showed that not only is it a philosophical and economical fact but also a mathematical one.

Now compare this to most politicians today who suggest that self-interest is wrong or needs to be tempered.  Or that only when subjugating our self-interest to the interest of the whole works.  Or worst of all that some have to suffer for progress to be made so let’s pick the rich, or this or that group to suffer.  They’re not only looking at a win-lose scenario it’s one where the person who produces wealth is the loser.  And if that didn’t kill innovation, keep in mind that in reality their plans always turn out to be a lose-lose.

The basic facts of reality is that self-interest is needed to progress in society.  It is even better if we look for the win for ourselves as well as others…but we must always be looking for the win for ourselves.

Oh…and here is the full quote from Adam Smith…it’s a little more thoughtful than just the sentence taken out of context:


It is not from
the benevolence of the butcher the brewer, or the baker that we expect our
dinner, but from their regard to their own interest. We address ourselves,
not to their humanity, but to their self-love, and never talk to them of our
own necessities, but of their advantages. Nobody but a beggar chooses to
depend chiefly upon the benevolence of his fellow-citizens. Even a beggar
does not depend upon it entirely. The charity of well-disposed people,
indeed, supplies him with the whole fund of his subsistence. But though
this principle ultimately provides him with all the necessaries of life
which he has occasion for, it neither does nor can provide him with them as
he has occasion for them. The greater part of his occasional wants are
supplied in the same manner as those of other people, by treaty, by barter,
and by purchase. With the money which one man gives him he purchases food.
The old clothes which another bestows upon him he exchanges for other
clothes which suit him better, or for lodging, or for food, or for money,
with which he can buy either food, clothes, or lodging, as he has occasion.

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Movies that understand economics #15: Dune

Arrakis. Dune. Wasteland of the Empire, and the most valuable planet in the Universe. Because it is here and only here, where spice is found. Without the spice, there is no commerce in the empire, no civilization. Arrakis. Dune. Home of the Spice, most valuable treasure in the universe. And he who controls it, controls our destiny.

DuneNow before we begin I’ll fully admit that a lot of this discussion will be shaded by a knowledge of the book that it is based off of.  I will also be confining my comments to the 2000 sci-if channel miniseries and not pulling anything from the 1980’s film…why?  Because pulling from a miniseries with some questionable production values but where the writers have actually read the book is far better than pulling from a movie that comes off as a bad acid trip that not only makes you wonder if the writers ever read the book, but if they even speak any of the languages the book has ever been translated into.  Also the movie doesn’t seem to understand any of the economic implications of the plot whereas the mini-series did.

For those of you not familiar with the story, shame on you, this is one of the greatest novels of the last century, go read it. But fine, I will give a brief summary of the events of the story.  Over 10,000 years in the future human beings have spread across the galaxy.   A galactic empire is maintained through commerce and the emperor’s elite personal military. Society has regressed into a form of feudalism with noble houses having control of whole planets. And all of this is maintained by faster than light travel made possible through the use of a chemical known as the Melange, or simply referred to as Spice. Without Spice faster than light travel becomes almost impossible, the empire will fall apart and humanity will fall into a new dark age. And Spice can only be found on one planet in the whole galaxy, the desert world of Arrakis. Better known as Dune. And this inhospitable world is populated only by the people who mine the Spice and a group of religious fanatics who live in the deep desert, the Fremen.  (Unless you’ve read the book you have no idea how much I’m leaving out just so I can focus on the economics.)

The fact that the entire universe is dependent on this one planet and its resources make it a contention point for every feudal house to desire control over Arrakis, for as the movie and book make quite clear, he who controls the Spice controls the universe.

So just to recap the entire universe is dependent on a single resource only found in a desert surrounded by religious fanatics. So for all the complicated sci-fi elements it’s just a metaphor for oil, and the stranglehold it has on our economy.  The Spice allows the economy of the future to run, just as our economy is based on cheap energy.  Without either the economy falls apart.

Now one should keep in mind that when this was written in the 1960’s a far greater portion of the world’s oil came from the OPEC cartel when they had the power to act almost as if they were a monopoly. And this is one of the things dealt with time and time again in Dune, the problems of monopolies.  There are lots of monopolies in Dune.  The emperor’s monopoly on military power, the Spacing Guild’s monopoly on interstellar travel, the Arrakis monopoly on Spice.  Lots and lots of monopolies throughout the universe.  And the problem is that when you have monopolies on essential items and services the entire system becomes very unstable. So unstable that one genius and/or lunatic with the power and will to destroy one of these could demand complete obedience from all the other parts—such is the hero of Dune.  But these downsides to monopolies are the ones you learned in high school, the ones designed to make you think the government was supposed to break up monopolies.

Of course what Dune makes clear, that your high school economics class did not, is that monopolies can’t exist without the presence of government power helping to sustain those monopolies and keeping competition down. That there are relatively few natural and permanent monopolies, and even they need government to sustain them.  All that is needed to break monopolies are the pressures that are usually provided by a functioning free market.    In reality most monopolies only come into existence with government help and are only sustained by government intervention.  The railroad of the 1800 are often touted as monopolies that needed to be broken up, but they were heavily subsidized and protected by the government in the early day.  Had the government not been involved at all no monopoly would have formed and no justification for government intervention would ever have been present. Even then you don’t need government to break up monopolies, the market will do that for you.  Just look at AT&T.  In the 1980’s it was broken up because it was one those terrible monopolies…the silly point about this is that as we now knew cellphones were just around the corner and would have destroyed the telephone monopoly on their own. OPEC exists only because a group of tyrannies and a few nations they bully hold a large portion of a needed resource…guess what, they over played their hand so much that we developed an efficient way to get at shale and now the US is the world’s largest producer of oil (sorry Saudi Arabia, but you’re still in the running for leading producer of fanatics…).

The fact is that for all the problems they create, monopolies are easily defeated by an unfettered free market. Even in Dune (if you read far enough) it is competition, not government mandates and regulations, that create alternatives to Arrakis, the Spice, and the Spacing Guild.   (In fact the universe is shown to do much better when there is no central empire but rather just free planets dealing with each other on a free market.)* If a market is so desirable that someone would want a monopoly, then by nature I will show you a field where there are multiple competitors who will prevent that very thing from happening. You show me a monopoly and I will show you a string of government acts and interventions that helped to create it.

The movie Dune, and more so the books, show among many basic economic principles** that not only are monopolies terrible things that cause problems but that they are due to the lack of free markets which create competition not because of them.

*Okay yes, the books also make it clear that organization is key when facing large scale evil, like an all encompassing evil empire bent on universal tyranny…but no sane person said the military wasn’t a just function of any government.

**There are at present 17 volumes in the Dune series with at least 4 more expected.   You could probably write volumes on any one of them about what they can show about politics, economics, ethics, psychology, sociology and a slew of other fields.

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Movies that understand economics # 14: The Darwin Awards

The Darwin Awards

I will not be surprised if you missed this movie. While it is based on something we all love, The Darwin Awards, those delightful and often unbelievable tales of idiots removing themselves from the gene pool through gross stupidity, the movie which attempted to follow them comes up a little short.

Since you probably haven’t seen it let me give you a quick summary. The film follows Michael Burrows (Joseph Fiennes) a former police profiler, after losing his job, tries to get a job at an insurance firm by showing them they can refine their models for risk by finding common denominators between the Darwin Award winners who cost the insurance company millions every year.  He is joined by an insurance investigator (Winona Ryder) as they investigate several Darwin Awards cases looking for the common thread between all of them. Sadly most of the Darwins they investigate are the famous urban legend versions of the Darwins (such as the famous JATO rocket incident) rather than real Darwins even though they’re presented as real in the film.

And it is this attempt to create a profile for an insurance company that the economics comes in.   The point of creating such a profile, if one were possible, (I’m not sure one is, but I would almost bet that for the next few years Obama, Santorum, Paul, and Gary Johnson voters will make up a disproportionate amount of Darwin Award winners*), it would be for the creation of an actuarial table.  This table would be used to set new rates for people with these risk factors, rates that would be higher so as to ensure that people with these factors either survive or at least pay enough that they don’t cost the insurance company their profits.

Now, right about now I can hear some people gasping with shock that the evil really mean and bad insurance companies would actually charge the idiots that really insurance more for their insurance. Dry reason that they actually need insurance. To which I respond: duh.   What did you think, insurance was somehow different than every other business in the world. They’re out to make money.  Every business is out to make money.  If it’s life insurance then they’re betting that you will live longer than you’re insured for and you’re betting that if things go wrong your family will be taken care of.  And they adjust your premiums to reflect how much of a risk you are so to ensure that even if they do lose their bet and you die prematurely, they still will make a profit.  It’s the only reason they do what they do.
Now some fool out there is probably thinking, but I have a right to health insurance, it’s not there just for some business to make money.  Again, I respond: No you don’t and that is the ONLY reason they do what they do.  You do not have a right to anything provided by someone else…if it’s provided by someone else you only have the right to negotiate with them trading one thing of value for another.  Health insurance especially because you don’t have the right to tell doctors, nurses, drug companies, medical equipment companies and all the rest you shouldn’t have to pay them for the time and energy and study and research they have put in just because you want something.

But, but, but…those actuarial table make prices so high, the whine goes.  Wrong.  What made those health care prices so high is the HMO’s the government created which ruined the system set down in those actuarial tables**.

The point here, as is made reasonably clear is that the insurance companies aren’t evil.  Just like you they’re trying to make an honest living, and due to that they will hold you to the agreement you made and, just like you, will try to get the most out of it that they can.  And as Adam Smith showed us by both looking out for their own interests everyone benefits.

*Yes I really do think they’re all that stupid.

**And let’s keep in mind those HMO’s were created to solve problems created by the Great Society of LBJ, which were attempting to fix problems that at their core were caused by the New Deal, which was trying to fix problems caused by Hoover and the Smoot-Hawley Tariff, which was attempting to fix problems caused by bad policy by the Fed…notice a pattern here?  Doesn’t solve problems, it attempts to solve problems it created and only ends up creating more problems.

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Movies that understand economics #13: American Gangster

American Gangster“My Company sells a product that’s better than the competition at a price that’s lower than the competition.”

Anyone familiar with the book Freakanomics is well aware with the fact that the black market is a wealth of information about economics. But this is not only limited to one or two books, there are films that allow us to see the economics through illegal markets as well, in this case American Gangster.

American Gangster is primarily the story of Frank Lucas, a New York drug dealer who was able to amass millions in a very short amount of time because he was able to offer a better product at a cheaper price. Specifically heroin. He was able to offer heroin that was almost pure for a fraction of the cost that his competitors in the underworld offered heroin that had been cut with filler on every stage of its journey to the drug users. And this is basic economics, if you can offer a better product or a cheaper product you can compete with anyone in any field. If you can offer that which is cheaper and better, you will control the market for a time. I say only for a time because many competitors, when faced with the alternatives of adapt or die, as we have already repeatedly covered in previous blogs, presented by the cheaper and superior product will likely choose adapt because the threat of being driven out of business is a powerful motivator. And this is true of the illegal sales of heroin or any legal market.

Getting back to Lucas’s ability to offer a cheaper and purer product, he was able to do this by cutting down his supply chain. Rather than buying from the Five Families who bought from cops who confiscated it from Five Families dealers who bought it from whatever Cartel(s) moved the Heroin from Southeast Asia to America who bought it from the cartel within Southeast Asia who bought it from the producers in Vietnam (and remember it’s getting cut with filler on every step of the way)…Frank Lucas just went to Vietnam bought from the producer, and shipped it along the shipping lines he created. No middlemen, no huge infrastructures to pay off at every level. As most consultants will likely tell you, if you can pay someone to do something (meaning they’re making a profit) you can probably do it in-house for less. Frank rather than dealing with dozens of middle men (all making a profit), he just cut them out. Earlier in the move his previous boss stated, a man who clearly would choose to die rather than adapt, “What right do they have cutting out the suppliers, pushing out all the middlemen. Buying direct from the manufacturer.” And the answer is anyone has the right to do something when it makes more logical sense and will save people money. That’s economics 101. And you will see this in any business, not just the black market, the more middle men you can cut out, the more you have control over every part of the process, then your business will likely thrive.

“Who can afford to sell shit twice as good for half as much?” The answer is the person who can think better than their competition and cut out unneeded costs.

Then of course there is the all-important scene about trademark infringement.

Even with drugs, trademarks are important because they tell consumers about the products you’re buying. You have relative assurance of the quality of a product when it has a certain trademark on the front…and Frank’s protectiveness of his trademark, his intellectual property, is important as he points out because if he lets others use it on inferior products then his reputation, and the economic benefits that come from that reputation are hurt. Again this is basic economics, people buy things they know have the quality and cost they want but if you can’t assure a way to inform your customer of the quality through a name brand your customers have no way to verify the quality and will just buy the cheapest thing around.

And all of this ties into a very subtle implication through the film, and any discussion of black markets. The fact is that black markets often show us why the naïve fantasies of anarchists are rather silly. When business in a capitalist economy are faced with adapt or die pressure they either adapt or die…when this happens in black markets, killing your opposition is a very real option (yes there are business related murders in the regular economy but they are much fewer and far between because the costs of getting caught are rather high, whereas in black or anarchistic markets, the cost of violence is comparatively low compared to everything else you’re already paying). Also we see extravagant protection rackets spring up on black markets, far in excess of what the government usually wants to take (unless you live in France). While government is a terrible necessary evil, black markets tend to show why government is needed and anarchy is terrible (not that government couldn’t use a good deal of heavy pruning with a machete).

“You know I don’t think they want this to stop. I think it employs too many people. Judges, lawyers, cops, politicians, prison guards, probation officers. They stop bringing dope into this country, about a hundred thousand people are gonna be out of a job.”

And course we see the nature of corruption that black markets breed two very unfortunate consequences. One is the massive corruption that springs up needed to keep a black market afloat. If there is a product that people want so much they will go to a black market to get it, it will inevitably lead to corruption in direct proportion to how much people want it. The more you try to stop it, the more profitable corruption will become. And larger the infrastructure to stop it will become. Thus the initial negative costs to society that an unregulated market would cause are just as bad (if maybe not a little better) than the costs of trying to keep the product illegal. And I’m not saying this means that we should just legalize drugs, but we do need to begin to understand that the way we are currently fighting drugs costs us as much if not more than the costs of letting them go unregulated. Also the other problem, as shown by Frank Lucas’s story, is that black markets create stronger drugs, because only those become more economically sound to sell.

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Movies that understand economics #12 Sabrina

sabrinaSabrina, the odd tale of a love triangle between two wealthy brothers and chauffeur’s daughter.  It’s a classic love story, despite being a little non-standard in its setup, but it also has a wonderful understanding of the larger motions of economics.  Now I have talked about Sabrina before, and for this very same reason, but I feel the need to bring it up again as one of the movies that really understands how economics and capitalism actually work.

And this is first and foremost due to one little speech in the early parts of the movie that shows the character Linus Laraby (Humphrey Bogart) , and by extension the writer of the film, understood the true and positive nature of capitalism, outsourcing, and globalization.

LINUS LARRABEE: What’s money got to do with it? If making money were all there were to business it’s hardly worthwhile going to the office. Money is a by-product.
DAVID: What’s the main objective? Power?
LINUS: Agh! That’s become a dirty word.
DAVID: Well then, what’s the urge? You’re going into plastics now. What will that prove?
LINUS: Prove? Nothing much. A new product has been found, something of use to the world. So, a new industry moves into an undeveloped area. Factories go up, machines are brought in, a harbor is dug and you’re in business. It’s purely coincidental of course that people who’ve never seen a dime before suddenly have a dollar. And barefooted kids wear shoes and have their teeth fixed and their faces washed. What’s wrong with a kind of an urge that gives people libraries, hospitals, baseball diamonds and movies on a Saturday night?

Capitalism creates prosperity and wealth where none existed before.


Everyone should read this book.

And while more data is presented even Bhagwati’s book In Defense of Globalization, does not put the power of capitalism so succinctly as Linus’ speech.

Capitalism, business, creation, innovation, this is what rich can bring us through investment and management…
…and occasionally a romantic plot line as well.

This is actually what motivates a lot of people—this is the motivation of Ayn Rand’s heroes that she could never actually articulate in a way that was acceptable to most people—this is why capitalism works, because people love creating things that make the world better AND get paid to do it! You mean I get to do something great AND make a fortune? Sign me up.

The romance, the comedy, the bizarre situations in this movie, for me all is secondary to the beauty of this one little speech. This speech points out quite well that the free market and free trade are what bring prosperity to the whole world.  That in spite of whatever idiotic ramblings of any ignorant leftist, capitalism and investment don’t rob from people they bring what people want and need.

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Movies that understand economics #11: McLintock

Drago: Boss, what’s “reactionary” mean?

George Washington McLintock: I guess he says that anyone who sells at a profit is a reactionary

I could probably find a basic understanding of capitalism in just about every John Wayne film but few do it so well as McLintock. While this Western-Comedy loosely based on Taming of the Shrew probably isn’t Wayne’s best, but it does make some great observations about economics, hard work, and the stupidity of people who don’t get economics.

Within the first few minutes you have a wonderful speech about economics and work:

McLintock: I’m McLintock. You people plan to homestead and farm the Mesa Verde.

Settler: Yes, sir. The government give each of us a hundred and sixty acres.

McLintock: The government never gave anybody anything. Some years back a lot like you come in. Had a pretty good first year. Good summer. Easy winter. But the next year the last rain was in February. And by June even the jack rabbits had sense enough to get off the Mesa.

Matt Douglas: Folks, do you know who that is? That’s McClintock. McLintock.

McLintock: I told them that, Douglas.

Douglas: He controls the water rights on 200 square miles of range. You know that lumber you got? It came from his land. Cut by his loggers and milled in his mill.

McLintock: Douglas, I come close to killin’ you a couple of times when we were younger. Saddens me I didn’t.

Douglas: Can you imagine a man who owns all that, oh and mines too, I forgot to mention those, all that and he’s begrudgin’ poor people a measly, a measly, one hundred sixty acres.

Settler: That right, Mr. McLintock? You begrudge us a little free land?

McLintock: There’s no such thing as free land. You make these homesteads go you’ll have earned every acre of it. But you just can’t make ’em go on the Mesa Verde. God made that country for buffalo. Serves pretty well for cattle. But it hates the plow. And even the government should know you can’t farm 6000 feet above sea level!

Sheriff Jeff Lord: Any trouble here, Mr. McLintock?

McLintock: No trouble, Sheriff.

Sheriff Jeff Lord: How about you, Douglas.

Douglas: Douglas. Just plain Douglas, eh. And you call him Mr. McLintock. Why?

Sheriff Lord: Well, Douglas, I guess that’s because he’s earned it.

Here is a clear point that about the fact that there is no such thing as free stuff–even if the government tells you it’s free, it’s not, actually especially if the government tells you it’s free. And it also shows that the government knows nothing about anything. Although they do mention earlier that the local government agent will make a healthy (and ill-gotten fee for every plot sold to these settlers, doesn’t matter that he’s selling them a bill of sale for faulty goods). Notice also that it is the government official who tries to cover up the truth of the in ability to farm that far above sea level with class warfare and jealousy. The use of jealousy and envy of honestly earned wealth seems to be a very old trick used by inept bureaucrats.

The film also clearly shows that the way most people view jobs, as a gift or some form of servitude…but luckily this move lays both of those bizarre ideas to rest and shows correctly that everyone is merely an independent agent who earns only what they work for.

Devlin Warren:I should have been grateful that you gave me the job.

McLintock: Gave? Boy, you’ve got it all wrong. I don’t give jobs I hire men.

McLintock!Drago: You intend to give this man a full day’s work, don’tcha boy?

Devlin: You mean you’re still hirin’ me? Well, yes, sir, I certainly deliver a fair day’s work.

McLintock: And for that I’ll pay a fair day’s wage.


McLintock: Every so often Dev, you spell the strangest ideas. Everybody works for somebody. I work for everybody in East United States that steps into a butcher shop for a T-Bone steak and you work for me, it is not much difference.

Finally in amongst all of this is the very clear picture that people elitists idiots who have never earned anything but have a pointless Ivy League degree to their name


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Movies that understand economics #10: Moneyball


“I know you are taking it in the teeth, but the first guy through the wall… he always gets bloody… always. This is threatening not just a way of doing business… but in their minds, it’s threatening the game. Really what it’s threatening is their livelihood, their jobs. It’s threatening the way they do things… and every time that happens, whether it’s the government, a way of doing business, whatever, the people who are holding the reins – they have their hands on the switch – they go batshit crazy.”

Not only is this one of the best films of the last few years…It understands economics.   It understands basics concepts of economic reality that much of the world does not.  For instance the basic truth of “adapt or die” in business. When, as Brad Pitt’s Bille Beane observes, “There are rich teams and there are poor teams, then there’s fifty-feet of crap, and then there’s us” playing by the same rules that everyone else does, in the same way it’s always been done without any variation will lead only to being under fifty feet of crap and nothing else.  So, as in any competitive system, when you’re loosing you need to change the rules and ways you operate by…something that the American public and government might want to take into account when they make their demands that we return to be being an industrial superpower.  (I particularly like that when I looked up the real Beane, his biography on Wikipedia says that now that all of baseball has adopted his moneyball offensive strategy in picking players, he has refocused on defensive skills…adapt or die).

This movie even goes as far as to state, “adapt or die.”  The capitalist in me couldn’t have possibly been more in bliss than when I heard Brad Pitt state, “Adapt or die.”

This movie shows that you need to go for what works not what people think will work.  People counted steals (and a whole of other bizarre data as shown from the first recruiting scene…like if you have an ugly girl friend) when, as it is shown, actually getting to base is more important.  It’s similar to modern companies bizarrely caring more about stock price than profit, short-term profit more than long-term profit, the immediate revenue more than a product that will actually sell.

We also see that while this is in some ways kind of obvious as an idea in retrospect (yeah you need to care more about winning than anything else) people will fight it.  People will fight change even if it makes sense. Doesn’t matter that the current system isn’t working (as it wasn’t for the A’s) they will fight for the old way and refuse to even try anything new.  Beane had to fire people, trade valuable players, and constantly fight up hill just to prove that trying something that in some ways is kind of a no-brainer just to show it works.

It shows that the past is something to be learned from not lived in.  In fact Beane rewards Brand for saying that he was a terrible ballplayer.  He has no illusions about what his skills were and what mistakes he made, but, unlike most people, he learned not to repeat those mistakes in his own life nor would he try to help others repeat those mistakes.

And most importantly Beane (and the director of this film)  understand the importance of character and relationships over money.  I know I emphasize money a lot in this blog, because it is important than a lot of things liberals consider important…but he cares more about achieving something than money which is a correct outlook (I’d tell you what

Beane fought, and luckily won, against a system that was making all the same mistakes that are helping cause our current economic problem.  This should be one of those movies that every American goes to see and you should take notes.

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Movies that understand economics #8: Million Dollar Baby

Million Dollar Baby

Characters who take risks.

No it’s not the title that has anything to do with economics. While all of Clint Eastwood’s films have a strain of conservatism running through them, this tale of a father-daughter relationship in boxing understands two key concepts in economics: Risk and Incentive.

The issues of risk comes into play with Eastwood’s character Frankie Dunn shows both the sides of risk. Early in the film he is afraid to take risks. He holds back fighters from title fights, fearing that they might get hurt, that they aren’t ready, that if something goes wrong they will lose their one chance for success. Because of this refusal to take risks he loses one fighter after another for his whole career. And he had failure time and time again. Economics tells us that real economic growth only comes from taking risks…anything else will just lead to hundreds of year of stagnation. Of course while growth and success can only be accomplished by risk…the film also shows that risk, comes, with, well, risk. In this case tragedy when Frankie’s fighter Maggie Fitzgerald Hillary Swank is paralyzed and ultimately dies.

Frankie Dunn: It wasn’t fault. I was wrong to say that.
Eddie Scrap-Iron Dupris: You damn right. I found you a fighter. You made her the best fighter she could be.
Frankie: I killed her.
Eddie: Don’t say that. Maggie walked through that door with nothing buts guts. No chance in the world of being what she needed to be. It was because of you that she was fighting the championship of the world. You did that. People die everyday, Frankie – mopping floors, washing dishes and you know what their last thought is? I never got my shot. Because of you Maggie got her shot. If she dies today you know what her last thought would be? I think I did all right.

But the movie makes it quite clear that risk and the tragedy that may come of it, are better than stagnation.

How does it really drive this point home? Through a look at Maggie’s family. The embodiment of welfare trash.

Maggie: Not anymore. It’s all yours, Mama. For you and Mardell and the kids.
Earline (Mother): Mary M., you bought this for me?
Maggie: Yeah, all yours, free and clear. Darling….
Mardell (Sister): There’s no fridge. No stove neither.
Maggie: They’ll be here before you move in.
Earline: How much money did this cost you?
Maggie: Never mind that.
Earline: You shouldn’t have done this.
Maggie: You need a decent place.
Earline: You shouldn’t have done it. You should’ve asked me first. Government’s gonna find out about this, they’re gonna stop my welfare.
Maggie: Mama, no, they ain’t.
Earline: They are. You’re fine, you’re workin…but I can’t live without my welfare.
Maggie: Mama, I’ll send you money.
Earline: What about my medicine? Medicaid gonna cut me off. How am I supposed to get my medicine?
Maggie: I’ll send you more money.
Mardell: I hope you don’t expect J.D. to move in with us. He’s getting out, you know.
Why didn’t you just give me the money. Why’d you have to buy me a house?
Maggie: I didn’t have to Momma, but it’s yours. You want the money, sell it.
Earline: Find a man Mary M. Live proper. People hear about what you’re doin’ and they laugh. Hurts me to tell you, but they laugh at you. [Laughs]

Her family has no aspirations, has no drive, no goals, no virtue, and no redeeming characteristics. I would like to say they are merely a bad caricature of welfare dependency…sadly they are a far too accurate depiction of a far too common truth. When you have no incentive to do better because welfare and Medicaid and a dozen other programs can get you up to the income of about $45,000 a year, why would you even bother starting minimum wage job only on the hope (the risk, if you will) that through hard work, personal sacrifice, and long hours you’ll get something better. When people have no incentive to do better (and no one is going to pay you $45,000 out the door) it’s only human nature to not want to work that hard.

Even then, it is only that Maggie has a different incentive other than money that drives her to push herself, self respect and happiness. It is the incentives for these things that push her, making her not an exception to the idea that incentives are what drive people, but rather stark proof of this economic fact.

Maggie: Momma, you take Mardell and JD and get home ‘fore I tell that lawyer there that you were so worried about your welfare you never signed those house papers like you were supposed to. So anytime I feel like it I can sell that house from under your fat, lazy, hillbilly ass. And if you ever come back, that’s exactly what I’ll do.

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Movies that understand economics: #7 Morning Glory

Morning Glory

“Daybreak needs what I need, someone who believes that it can succeed. Trust me, I know you don’t have any reason to believe in me, but I work harder than anyone else. I’m in first, I’m out last. I know a shitload more about the news than someone whose daddy paid them to smoke bongs and talk semiotics at Harvard and I devote myself completely to my job. It’s what I do. It’s all I am. I… You can ask anyone.”

At this point I’m pretty sure you think I’m losing my mind (or that I am really desperate to find movies with economic premises)*–how is a silly comedy (that has a romantic subplot, but not enough of one to call it a romantic comedy) going demonstrate economics? Just trust me that I do know what I’m talking about. For those that don’t know the film, Rachel McAdams plays Becky Fuller an inexperienced executive producer who has been given the very undesirable job of bringing the worst morning news show in history up in the ratings…and her genius idea is to bring a veteran hard news anchor, played by Harrison Ford, who doesn’t want to be there, on to the very light news morning show. Hilarity and infighting ensues. But buried in this pure entertainment story are a few economic truths.


On the left are industries that live under the rules of adapt or die. On the right are organizations that don’t live with that fact…see the difference.

The first is the most basic of all economic principles at the heart of capitalism: adapt or die. The entire central plot is about brining up a failing TV show in the ratings. And the only way this happens is by throwing out old rules and changing the format of the show. This includes more sensationalism, making deals with celebrities that no other show would ever make, having the anchors bicker on air because it brings in more ratings. Adapt or die. Every company on earth (when they’re not being bailed out by morons who don’t understand capitalism) faces this basic principle. And it’s a good thing. As shown in the movie it forces the people on the TV show to adapt, to innovate, to come up with new things that work. It forces the show and the people, people who had previously given up, to come up with new ways of doing things, to be better and create things that work. Adapt or die, it is what turns $50,000+ worth of equipment in 1985 taking up probably half a ton of mass, into your smart phone that cost you $300 and about a pound of mass.

And this ties to the last two movies and the idea of creative destruction. As most companies try to avoid being the victim of creative destruction they have the choice to grow and not die. Which the show in this movie does. It is what drives a healthy economy, the need to survive forces us to grow and produce better and cheaper products.

And tied to this is this principle of adapt or die is the idea of being a leader. No organization or person can grow without being willing to make decisions.

One of the best descriptions on leadership goes as follows:

The difference between a good administrator and a bad one is about five heartbeats. Good administrators make immediate choices … [that] usually can be made to work. A bad administrator, on the other hand, hesitates, diddles around, asks for committees, for research and reports. Eventually, he acts in ways which create serious problems … A bad administrator is more concerned with reports than with decisions. He wants the hard record which he can display as an excuse for his errors … [Good administrators] depend on verbal orders. They never lie about what they’ve done if their verbal orders cause problems, and they surround themselves with people able to act wisely on the basis of verbal orders. Often, the most important piece of information is that something has gone wrong. Bad administrators hide their mistakes until it’s too late to make corrections … One of the hardest things to find is people who actually make decisions.—Frank Herbert, God Emperor of Dune

jimmy carter sex offender

The movie covers the importance of reporting the truth when others won’t.

And the character of Becky Fuller displays this trait perfectly. Within minutes of taking her new job she is bombarded with not only a huge amount of choices but also a grossly inept employee…but rather than saying things like “I’ll get back to you” and consult others she makes choices right there based on her own judgment. And rather than deal with a clearly toxic and useless employee she just fires him because he is absolutely worthless. She makes judgment calls and works with the fallout rather than blaming others. No company, no organization, no individual can progress without this; making immediate choices and working with the fallout. No economy can survive or grow without such leaders. A shame we don’t have anything like that on Pennsylvania Avenue.

*both may be correct to one degree or another, but that doesn’t negate my point about this film.

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Movies that understand economics #5 and #6 Other People’s Money and Pretty Woman

Movies that understand economics #5 and #6 Other People’s Money and Pretty Woman

Now I have covered both of these movies before, but Pretty Woman and Other People’s Money, so no need to waste your time on a summary of the plots, cover one of the most important economic concepts that people tend to misunderstand: Creative Destruction.

Other People's MoneyIn general, creative destruction is when a company that is not producing as well as its competitors is removed, for one reason or another, from the economy, and the resources it once had are taken up by more innovative and productive members of the economy.  In more practical terms it is when a company begins to fail and stops making profits, when it no longer has any new way to innovate and refuses to change with a changing economy, that investors or venture capitalists come in, buy up the company and sell the pieces to companies.  In short liquidation.

And never have I seen such a perfect description of what economists call creative destruction than in Other People’s Money:

Amen. And amen. And amen. You have to forgive me. I’m not familiar with the local custom. Where I come from, you always say “Amen” after you hear a prayer. Because that’s what you just heard – a prayer. Where I come from, that particular prayer is called “The Prayer for the Dead.” You just heard The Prayer for the Dead, my fellow stockholders, and you didn’t say, “Amen.” This company is dead. I didn’t kill it. Don’t blame me. It was dead when I got here. It’s too late for prayers. For even if the prayers were answered, and a miracle occurred, and the yen did this, and the dollar did that, and the infrastructure did the other thing, we would still be dead. You know why? Fiber optics. New technologies. Obsolescence. We’re dead alright. We’re just not broke. And you know the surest way to go broke? Keep getting an increasing share of a shrinking market. Down the tubes. Slow but sure. You know, at one time there must’ve been dozens of companies making buggy whips. And I’ll bet the last company around was the one that made the best goddamn buggy whip you ever saw. Now how would you have liked to have been a stockholder in that company? You invested in a business and this business is dead. Let’s have the intelligence, let’s have the decency to sign the death certificate, collect the insurance, and invest in something with a future. “Ah, but we can’t,” goes the prayer. “We can’t because we have responsibility, a responsibility to our employees, to our community. What will happen to them?” I got two words for that: Who cares? Care about them? Why? They didn’t care about you. They sucked you dry. You have no responsibility to them. For the last ten years this company bled your money. Did this community ever say, “We know times are tough. We’ll lower taxes, reduce water and sewer.” Check it out: You’re paying twice what you did ten years ago. And our devoted employees, who have taken no increases for the past three years, are still making twice what they made ten years ago; and our stock – one-sixth what it was ten years ago. Who cares? I’ll tell you. Me. I’m not your best friend. I’m your only friend. I don’t make anything? I’m making you money. And lest we forget, that’s the only reason any of you became stockholders in the first place. You want to make money! You don’t care if they manufacture wire and cable, fried chicken, or grow tangerines! You want to make money! I’m the only friend you’ve got. I’m making you money. Take the money. Invest it somewhere else. Maybe, maybe you’ll get lucky and it’ll be used productively. And if it is, you’ll create new jobs and provide a service for the economy and, God forbid, even make a few bucks for yourselves. And if anybody asks, tell ’em ya gave at the plant. And by the way, it pleases me that I am called “Larry the Liquidator.” You know why, fellow stockholders? Because at my funeral, you’ll leave with a smile on your face and a few bucks in your pocket. Now that’s a funeral worth having!

Creative destruction is often depicted by people who don’t understand economics as evil.  But as shown in both movies, the victims of liquidation are not just randomly picked companies that are targeted just because some evil businessman wanted to hurt someone.  In both films it is made clear that companies that become victims of the kind of takeovers that end in liquidation are not the victim of the investors and liquidators…but victims of failing to change with the time, victims of bad managements, victims of not adapting as any business must to survive because, with the exception of Coca-cola, no company has discovered a recipe for success that should never be changed and subject to innovation.

And both speak to the fact that the goal is not just to hurt people (in Other People’s Money, as shown above he points out pretty-woman-1how creative destruction leads to investments that will benefit people, and in Pretty Woman in describing how the employees are not just going to be thrown out).

And while creative destruction usually works by allowing more productive companies to use the equipment, land, and human capital more effectively, both of these movies show that it can take other forms.  In Other People’s Money it is in the form of changing the operations of the company to fit the new economy, in Pretty Woman is it putting the company under new and more competent management (don’t kid yourself, that’s what happened—old management was destroyed and new creative management under Richard Gere’s company was taking over, if the owner’s name on the letter head wasn’t changing is irrelevant).

Economies are a lot like ecosystems. In both the rule is adapt or die.  And in both you need carrion feeders who can allow the dead material to work its way back into the cycle of birth, death and rebirth.  Some people who don’t understand his important function may view the work of liquidators in economics, or carrion feeders in nature as repulsive, but only because they don’t understand the valuable and needed process that they perform. If you do not have something that can take the dead and dying companies and move their resources to where they can be of more help (like, oh, by saying this or that company is too big to fail, and thus preventing it’s needed death) you only get systems that continually get worse and worse and a drain on the economy and as it so happens the taxpayers and it will fail again given time because it did not change – sometimes smaller works out better – more competition more innovation.

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Movies that understand economics #4 Grosse Point Blank

Grosse Point Blank


Grosse Pointe Blank, the story of a depressed contract killer going home for his 10 year high school reunion, may not initially seem like an economically based film, but really that is all it is about.

Ostensibly Martin Blank, hitman, only goes home because he is required to do a job for one of his larger clients after bungling a previous contract.  I’m going to skip how this could be an argument about good customer service.  And besides having to win the heart of the woman he foolish left behind, his biggest problem is dealing with another assassin who wants to unionize all the independent killers to ensure that the price for their skills remains high.  Most of the action of the film comes from the fact that, like most unions, the assassin’s union uses violence to take you out if you don’t comply with their demands.


In fact the movie begins with this rather lengthy discussion of unions, supply and demand, and right to work issues:


Grocer: Kid, I’m putting together a little concern, which would enable those of us in our, uh, rarified profession to avoid embarrassing overlaps.

Martin Blank: What, like a union?

Grocer: More like a club. You know, work less, make more.

Blank: Wow, sounds like a great idea, but… thank you, no.

Grocer: No? You remember Burma?

Blank: Yeah, I do.

Grocer: That nut, General Kwang? You were like a… colonel in that army, weren’t you?

Blank: Yeah, yeah, he sold you all those tanks, you shipped ’em to Alabama…

Grocer: T-34s, I took a bath on that.

Blank: Yeah, that was fun.

Grocer: That’s what I’m talking about, kid, we could be working together again, for God’s sake! You know, making big money, killing important people!  I want to structure an arrangement where you get like shares, original shares on the ground floor.

Blank: And you would be the President of this organization or maybe just a father figure to me.

Grocer: Hey if you want a father I’ll give you a spanking.

Blank: Yeah, I’ll think about it.

Grocer:Look the employers are getting us a lot cheaper.  There are so many more of us.

Blank: Well after the Berlin thing what can you do?

Grocer: Soviet Bloc Collapse

Grosse Point Blank TV

If only dealing with unions was always this easy.

Blank: The market’s flooded.

Grocer: Okay, that’s what I’m looking at, I’m looking at consolidated bargaining.  Okay. Look, I don’t want to play against you! This thing is real.

Blank: How real?

Grocer: Maranga Brothers, them, uh, East German ex-Stasi guys…

Blank: Oh, I don’t like those guys.

Grocer: Them butch Filipino ladies…

Blank: What, the dwarf, maid…

[makes stabbing motion]

Grocer: Stabbers! Queens of the hotel hit, you know.

Blank: You got a great crew.

Grocer: Everybody’s in!

Blank: Yeah well, not me, so don’t paw at me with your dirty little guild?

Grocer: Alright, well, life’s full of second chances. And here’s chance two for you, you think about coming in with me. You ponder.  Because either way I’m going to get you kid.


And this is a great insight in to the modern union.  Yes, there may have been a time when company stores and union busters may have made needing to organize a necessity…and we still need the right to organize to prevent this…but the modern union isn’t about doing what is best for the people in the union.  As shown quite clearly modern unions are only about maximizing profits through forcing everyone into their club…and those who don’t comply get whacked.


Think that’s an exaggeration?  Just look at this story of a Michigan teacher who was told that trying to leave her union would result in the union destroying her credit score.


Michigan Union Threatens Teachers’ Credit Scores




The fact of the  matter is that no matter what the history, the modern union is only about bilking whoever their employer is for maximum costs at the least amount of service and using force and intimidation to ensure they have an illegal and unethical monopoly on the market.  And to have a functional economy you need to break the power of these bullies.


And just consider that federal workers are unionized…yeah that results in some great work don’t you think.  You’re getting your money’s worth there, aren’t you?

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Filed under Capitalism, Economics, Movies, Movies for Conservatives