So recently, given Australia’s commission of audit, I’ve been thinking about economics in politics and the general problem with ideology. The main problem as I see it is this: economic policies are made based on ideology as an assertion.
For example, the political right is very fond of saying that the way to economic growth, jobs and prosperity is to get government out of the way and let the market get on with it. Deregulation, reduction of taxes, privatisation.
These are not inherently bad things, each of these things can be applied in situations appropriately, it’s when they start being applied everywhere as though they are ALWAYS the best solution that we start running into problems.
The problem is that economic tools are not being used appropriately, like using a wrench to fix all your problems. Sure, a wench is a useful and effective tool, but it is not a hammer or saw and trying to use it as one is not going to end well. This is how economics is functioning. Rather than asking “what are we trying to achieve?” “Use a wrench” is being given as the answer. It doesn’t even address the question.
The other problem is more problematic. On the one hand, many economic decisions are not even being made by economists, often reviews and policy are made by wealthy businessmen who are assumed to have a strong economic understanding because they are successful. If that were the case, every successful retail employee in a shop should be given a phd in economics. The ability to make money in business does not mean someone has a strong grasp of economics.
On the other hand, often the average person, provided they have some understanding of economics, can have a pretty decent grasp of economics because they’re dealing with it on a daily basis- it’s a matter of perspective. So not being an economist does not automatically mean someone has no capacity for developing economic policy.
Then we have the genuine economists who theoretically should be in the best position to develop frameworks and policy. In many ways this is true, however we come up to the same problem as with the politics; many economists subscribe to a particular theory and so apply it regardless of circumstances. “Use a wrench”.
Applied economics is more than just fitting your preferred theory onto the economic structure. The right tools for the situation. That’s why being an economist also does not automatically give their position more credence.
My own view of economics
As for me, I’m not an economist. I don’t claim to be and don’t pretend to be. My degree is in ecology and this colours my views and gives me a certain perspective.
I see economics and a type of ecology where the base unit is dollars rather than energy.
Like ecology, economics is a dynamic system full of complicated interactions and follow on effects. There are niches, different environments, producers, predators, generalists and detritovores. Everything you’d expect to find in a complex ecosystem you’ll find in an economy.
Some of you may, if you haven’t read my previous blogs, think I am about to skirt dangerously close to “survival of the fittest” economics, but that would be a naturalistic fallacy.
No, my view is this: The predominant view of economics appears to be that maximizing profit (the pooling of wealth) is the most important thing and indicator of success and health of an economy.
I disagree with this completely. The most important factor for a healthy economy is the flow of wealth. Pooling wealth is the same as taking that wealth out of the economy. A loss. Money is useless if it isn’t moving. Like the water or carbon cycle, it has to flow through the entire system to be useful. The more is flowing, the more useful it is to the economy. Not just at the top tiers. Moving back and forth between major corporations and banks is not flowing through the economy.
Think of it like a trophic pyramid if you will. At the very top of the pyramid are the wealthiest people and companies, at the bottom are the general populace, from the poor to the middle class.
In between you’ve got various sizes of business and household incomes, industries and producers. Wealthiest at the top, poorest at the bottom.
Money flows up. The problem is it doesn’t flow back down at the rate it flows up, particularly at the top tiers.
If you’ve already taken everyone’s money, and the only money left to get is the money you’ve paid them in exchange for things, how can you gain more? There’s no more to get, you’ve over exploited the system. That’s why it’s not accumulation that indicates health, but flow.
The more money people at the bottom of that pyramid have, the more exchanges you can make and the more you can personally make- improve the amount of money flowing through you.
That’s why when people talk about wages for the disabled, unemployment benefits and social welfare in general being bad because they think those people should work like them, if they’re less capable “too bad”, I think they’re missing a few crucial points.
First: if someone genuinely is content to live on the tiny amount of welfare they get and would prefer that to working for more- if they’re REALLY that lazy, would you hire them? If you were an employer, is that the sort of person you want working for you?
As a consumer, is that the kind of person you want doing things to or for you?
Do you want a cleaner too lazy to clean? A hairdresser that can’t be bothered doing their job? A security guard who isn’t interested in guarding your assets? Repairing your car?
I certainly don’t.
Second- where does that money they get go? They spend it. It goes back into the economy. We’re back to flow. So again. Do you want that lazy person to work for you or provide you services, or would you rather take their money back by getting them to contributes by keeping your business and local businesses open?
Here concludes today’s ramble. Think about it.