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There's nothing like a trip to Vegas to lift the veil from the world. While sipping a martini and wandering the kiosks of Fremont Street, it occurs to one that life is - as Hobbes once so famously put - nasty, brutish, and short, and that good booze and good company should be enjoyed as often and as much as possible.

Well, supposedly that's how it works. I missed out on this revelation, likely because instead of a martini, I wandered Fremont Street nursing a $7 bottle of water that I drank in conservative 25 cent gulps. Money, being on my mind so much, gave not a vision of short-lived hedonism, but of economics.

I must admit that I know very little of the explicit details of economics, the macros and micros; But, dear reader, I know that the way we so often claim that the economy works is not at all the way the economy actually works. If it were, Vegas and my $7 bottle of water would not exist.

America prides itself on being a capitalist nation and would rather eat soggy pickles than admit to being anything other than a free market economy, a holdover from the Cold War days of capitalism good, communism bad. Listen to any piece of political rhetoric and the nature of our economy will surely be defined in terms of capitalism and free markets (or if not, then our economy is failing because it is not capitalistic and free enough). Any argument to the contrary will be shouted down, simply because Adam Smith said so.

Yet I find that this economic jingoism belittles both Smith and the people in general. It belittles Smith because his argument consisted of far more than just the invisible hand and giving free reign to free trade, and it belittles everyone else because no one in any position of power honestly treats the economy as if it acted that way.

Look at the New York Stock Exchange: After a disaster, like the Kennedy assassination or Sept. 11, the stock market closed to prevent panic selling. Panic? The word never even enters into the conversation of laissez-faire capitalism, as if the conversers never left the 18th century and their search for the precise, mathematical, rational equation to explain everything. Had we truly existed under such a dim Smithean outlook, the stock market would have stayed open because a market is a market is a market and still works under the same principles.

Today's market is about psychology; it's about marketing and advertising. It has to be. Smith's invisible hand requires a noticeable difference between different products of the same type: The invisible hand cannot explain why one car sells better than the other despite equivalent comfort, design, MPG and safety. Instead, companies vie through intangible concepts like prestige and luxury, or else they will compete for your attention on things you can't really test between (like phone companies; who really wants to try and test out every phone company to figure out which is the best one?).

This is why Vegas could not exist if America had a "true" free market economy: Everyone would then know that the expected return on any bet is lower than what you bet. If you are expected to lose money with every bet, then the only reason you would still play is for the entertainment value, and that could be as easily achieved by buying a deck of cards and playing with buddies at home.

Instead people are constantly led to believe, at least subconsciously, that they can beat the odds. And that's why Vegas is so successful (well, that, and some amazing shows, like Ka, where I bought my $7 bottle of water).

Ignoring the reality of economics and the prevalence of psychology within economics is dangerous, more dangerous even than credit card debt or the housing slump. If we as a people do not understand at least roughly what to do, how are we supposed to elect representatives to do any better? Until economic knowledge is general knowledge, politicians will continue to use the same tired economic jingoism, because that will boost the polls and get them reelected.

And it could all be fixed if people just remembered that laissez-faire capitalism is just as bad as control-freak capitalism.

And that Adam Smith didn't want either.

jvandehey@dailyemerald.com

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