Econ 101

Thursday November 2, 2006 - 3:20PM EDT

Economics is a strange thing sometimes. That statement is a horrible way to start this.  Lets just get right to it. There seems to be only a few people in the history of economic study that had poignant paradigm shifting ideas that actually worked out in real life. The rest of the clowns are simply following the example of these few as if they have been given the key to all economic reasoning. That is a major gripe of mine when it comes to economics. Particularly those clowns on all those cable TV shows touting their learned methods as the way things are. Maybe it is simply the nature of the field that gives people such blind confidence in certain concepts. Understanding the wide ranging effect that economics has on even the most mundane of things in our life is hard to grasp. I don't think it is something that the majority of people recognize. On the flip side there are people who are so utterly enamored with the world of economics that they only think within it confines and ignore reality. They believe that the economic solution is the solution to all ills.

What I am trying to get at is how there are so many people today who look at our current system and think it holds the solutions to the problems we face today. I look at the system and see something wholly inadaquate to move us forward much farther then we are now. This whole post came up when I read an article today entitiled "Productivity slows, wage pressure mounts". I then thought about the so called "good" economic news that comes out that certain people like to tout as signs of stability and progress. I also thought about a comment Al Sharpton made in an article saying that while some would view certain economic news as signs of prosperity he asks why 11% of African Americans are still unemployed and why little progress has been made on social issues in the black community. Although he is looking at just a subset of America it gives him a hold on reality and a pragmatism in interpreting economic signs that I think a lot lack. Some people have such faith in the numbers to reflect what is really going on that when the numbers look good they assume that it is also reflect in the reality of the people's situation. What I think history has taught in reference to economics is that you can't soley really on your formulas and numbers to be accurate all the time. You need to be prudent in comparing numbers to reality because they really are two different things.

One thing that isn't taken into account many times in this kind of economic discussion is the changing standards of the populace. The collective psyche of the people has major impact on economics and you can't codify that in a formula easily. While a level of progress may have satisfied the people at one point it may not be so effective the second  time and third and forth and so on. What I see though is that some economic experts will stick so close to formulas and numbers that when dissatisfiaction with the progress the numbers shows is voiced those that are dissatisfied are criticized for being ignorant of whatever the popular or prevailing economic thinking is. They are seen as not looking at the numbers correctly. Which is correct. But the real issue is that the formulas no longer reflect reality accurately.

I am no economic expert obviously but I am going to try and give an example of what I am referring to when I say the numbers don't reflect reality. Every once and  a while I'd hear about better than expected unemployment figures and some would point to it as a sign of economic recovery. Unemployment figures have become a major indicator of the economy and you often hear them quoted.  Besides the fact that I think there is some major issues with how those numbers are determined I ask myself a few questions when I hear unemployment statistics touted as some kind of realiable indicator of anything. I first ask myself  what segment of the population do those numbers refer to. Is it a diverse cross section or does employment affect disproportionately certain groups? Secondly with the stagnation of the minimum wage for so long does lower unemployment rates have as much effect it had in the past. Just because those people are working doesn't mean that they have that much more economic power. I think the significance of unemployment numbers in relation to economic strength would probably become diluted with lower wages and maybe even more diluted with lower wages on the lower end of the spectrum (low minimum wage).  Alright enough of this. I need food.