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Tuesday, March 31, 2015

Thinking Economics

Economics, that dismal science, provides us ways of thinking about human livelihood by identifying the resources for and means of production and distribution for consumption. It defines systems of economies and their development: e.g. hunting and gathering, agriculture, trades, services, industrialization, information. It defines the means of distribution and exchange: tribal communalism, barter, monetarism, mercantilism, laissez-faire capitalism, state run socialism, state regulated social democracy, government aggregate-demand stimulation. Economics also defines the social groupings and order within the various systems.

The category economy is distinguished from politics and culture in order to develop an understanding of human behavior related to three basic desires or drives: to biological life, to social recognition, and to transcending meaning. Many of the problems humans face nationally and internationally are due to the confusion of these categories and how they are related to one another.

These essays, I repeat, are not to tell you what to think or even how to think. They are meant to foster thinking in me and in you. My purpose arises from the conviction that thoughtlessness is the root of all evil and the disease of the world and that thoughtfulness is the remedy. We have already stipulated that how we "cut" the world, the categories and models we use to construct and understand especially our social world, determine how we act in the world. It is important to accept that there are different ways of patterning, singing, explaining the economy and to question them all. It is important to recognize our constructs, our categories, words, designs, and ideas so that we can criticize, refine, expand, redefine, or dismiss them. We must keep thinking to stay alive, enjoy respect, and have meaning.

To understand the politics of a situation, community or nation, we do a power analysis. Who are the factions that shape the political order and its policies? To whom, individually or corporately, are the governing agencies ultimately accountable and through what institutions? Who are recognized and respected?

To understand the culture of a situation, community or nation, we do a value analysis. What are the dominant values by which a society or nation holds itself together and achieves meaning? What are the various ethnic, religious, ideological, sexual, and other identity groups? How do they interact to achieve a common identity and morality and standards for inclusion and exclusion?

To understand the economics of a situation, community or nation, we do an interest analysis. What are the various interest groups in the gathering, production, and transfer of resources to maximize health, housing, education, nutrition, fecundity, wealth and all the necessities of biological life? Which groups achieve more or less of these resources?

Production, consumption, transfer--related to supply, demand, and distribution--have been the staple categories of economic theory. The definition of classes based on material or physical interests, related to supply, demand, and distribution, has been a key part of economic analysis. Also the distinction between public and private and the role of the key public institution, government, vis-a-vis the key private institution, the corporation, has been a matter of major controversy since the beginning of the industrial age. Or in Marxist terms, the State's power over the means of production and the States role in the distribution of wealth.

In the analysis of capitalism by Karl Marx, there are three major classes: capitalists (owners of the means of production), bourgeoisie (trade, service professional, artisan, small business leaders), proletariat (workers selling their labor for less than its worth to create a surplus). But world war, nationalism, state accommodation to labor unions, and new technologies changed the situation that Marx encountered and that required a change in categories. Without such a change, socialism becomes a fixed ideology or dogma as does its rival laissez-faire capitalism.

Class analysis today focuses on the "middle class" as solution for the problem of low or no-income poor and for equality in distribution of the surplus wealth gathering rich (either through taxation or trickle down). Both American political parties recognize the importance of the middle class to a stable liberal democracy and the strength of the nation. Both see that a shrinking middle class is a problem. Each has strategies to claim, expand, and recruit the middle class, one more by stimulating wealth that accrues more to the higher-income who can then distribute it more widely through investment in industry that creates more supply, the other more by stimulating capacity of the lower-income so as to achieve wealth and create more demand. Both parties, except those on the far right or far left, are not considering a more total restructuring of the present economic system. A few new thinkers and practitioners, who avoid both left and right categories, are experimenting with projects for a "new economy" which promotes personal initiative and communal participation and results.

How we define the middle class significantly influences how we define or construct the upper and lower classes. One way is to simply lay out the median income (same number of persons or households below and above) and set up percentiles averaging the persons in each percentile determining the percentiles that achieves the income for attaining basic necessities for life. Or lay out the present population, determine the average wealth in percentiles, and identify the percentiles that meet the average of all wealth. This also demonstrates the range of equality or the lack thereof. Another is to consider the source of income and wealth and so uses factors of occupation, education, neighborhood, social status, and perhaps even age and gender. Or we can use a mix of the three.

For example:

or

But this presumes historically constructed categories like surplus value, profit, margin cost, self-interest, national interest, producer and consumer, free market, capital and labor, class, trade, money. These are categories of a money (sometimes backed by precious medals) economy that makes human worth and power a matter of individual private financial assets and the worth and power of human society a matter of the sum of these private financial assets.

But a new paradigm with a new narrative with a new measure of value may be emerging that may change our categories and models of thinking.

To be continued.

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