"It is what you do that defines you."

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I recently watched the movie "Batman Begins". In one scene Rachel sees Bruce enjoying his playboy life with two European mistresses. He is embarrassed and tells her "Rachel, this is not me...I am different inside." Responds Rachel: "It's not what you are inside, but what you do, that defines you".

I think this is a fascinating statement and pretty much sums up all problems and fallacies we often have to face in political and economic discussions.

Having established that economics ultimately depends on human action, it only makes perfect sense:

It's what you DO that defines you.

It is NOT

• what you call yourself.
• what other people call you.
  
• what you claim to be.
• what label is attached to you.
• how you got to doing what you do.

The only way to properly categorize individuals or organizations in economic analyses is to do it based on their actions, because economics is ultimately a science of human action.

That being said, I want to outline some of the implications:

• A Mafia makes money by extorting people and by forcing them to pay. There is no contractual bond that states that the Mafia victim has to pay money to the Mafia. It is generally agreed that this behavior is unjust and illegal. A government makes money by forcing people to pay taxes. If you don't they will make you. There is no contractual bond that you have entered that states that you have to pay money to the government. For some reason it is generally accepted that this is an ethical/correct/unavoidable/reasonable/just way of conduct.
• In the Soviet Union, the basic good food was produced by government. Private production of food was outlawed. We saw the implications of this procedure. Inefficient bureaucracy led to poor quality and misallocations. It is generally accepted that this system has failed and that food should be produced in a competitive market. In the United Stated, the good money is produced by government. Private production ("counterfeiting") of money is outlawed. We see the implications of this procedure. Inefficient bureaucracy leads to poor quality (inflation) and misallocations (stock market/real estate bubbles, budget deficits, wars, boom bust cycles, unemployment, corruption). Yet, for some reason we accept this way of conduct and call it a necessary/reasonable/proper/standard procedure.
• A government entity makes money based on budgets allocated to it which again depend on the amount of tax money received by the IRS. Government contractors, such as Halliburton, Boeing, Westinghouse, Bechtel, Lockheed Martin make money based on budgets allocated to them which again depend or the amount of tax money received by the IRS. Yet, people tend to mistake these for private entities and impute the ensuing corruption to fierce, chaotic free market capitalism. It is unnecessary but nonetheless interesting to point out that the more government a country has, the more corruption prevails.

These are just a few examples to think about. Again, if one wants to thoroughly understand economics, it is crucial to understand and accept the absolute principles and rules of human action.

There is not a single reason deprecate the fact that men always act because they want to attain an improvement of their perceived condition and remove perceived uneasiness.

All other deductions need to be based upon that logic. All acting entities, organizations, people hence need to be categorized based on their actions, not on their names or labels.