Elements of a Functional Economy
Much debate is invested into the health of the economy. However, much of that debate centers on very unreliable and misleading measures of the economy. To have a reasonable discussion we must not only evaluate the quality of our measures, we must reconsider our unasked questions. What is an economy? What would a fully functional economy be accomplishing? Without asking these questions, we don't even know what to measure or how to measure it. Below we address these questions.
So what does a healthy functioning economy do? What are the key purposes of an economy? Let's enumerate the major dimensions.
Draft: January 2013
1: Create Opportunity and Provide Goods and Services: These aspects of a healthy economy seem rather obvious. These are the things we attempt to measure and discuss. Each citizen needs an opportunity to be productive within his community and provide for his family. To ensure this, we measure employment, unemployment, and productivity. Each person needs food and shelter. We measure incomes and GDP. But each of these measures contains limitations and oversights.
Opportunity must be diverse enough to cover the range of personalities, interests, skills, and ages that citizens have. Creating opportunities in sales for skilled mechanics fails to meet real needs. Creating heavy labor jobs for senior citizens fails to meet real needs. When the jobs being offered fail to match the needs and limitations of the workforce, we have short-term dysfunction in our economy.
For the economy to be functional in the long term, workers will need training for new skills, time to train for those new skills, and resources to train with. Even so, the economy will still need to provide diverse opportunities in every community to meet the real needs of that community. But we see our economy failing to provide citizens with the training that will match the changing job market. Many citizens work over forty hours a week at a low pay high stress jobs that don't provide enough spare time or money for retraining. We can not blame the laborer that his job doesn't pay enough or leave him enough spare time to retrain. This is a systemic problem, not an individual problem.
2: Limit Consumption to Sustainable Levels: The need to limit consumption is less obvious, but is just as important. We live on a finite planet. Some resources exist in rather small supplies considering their potential use. Obvious examples include strategic metals. Some resources are extracted and consumed. Once consumed they no longer exist and can never be used again. The obvious example would be fossil fuels. Other critical resources can only be produced at a finite speed. Trying to consume faster than their natural production rate destroys the means of production. The major example here would be food. Failure to limit consumption to sustainable levels is the traditionally attributed to the Tragedy of the Commons.
Unfortunately, we actually tend to interpret consumption reports as if
increased consumption is always positive. A functioning economy must limit
consumption to sustainable rates. This is not happening, nor being measured,
nor popularly discussed. We have no clear measures of sustainable consumption
3: Develop Community, Self & Purpose:
We are social. We have feelings. We desire connection with family and
community. We seek purpose in life. A healthy economy would provide citizens
time to truly connect with family and community, and opportunity to discover
one's sense of self and purpose. After necessities, these social and emotional
needs are more important than goods and services, luxuries and investments.
Yet, these needs do not get measured. These very real human needs are
not admitted into economic debate.
4: Create Stability: People need a sense of stability. A person who has to move every few years, and retrain for new job skills is likely to feel anxiety. He's not likely to feel connected to his community, family, or sense of purpose. As people age, they need to know what they can rely on for retirement and old age. They can't have their investments rapidly dry up, their neighborhood go through rapid decline, or their family move away out of economic necessity. People need a basic level of stability, so stability is a critical measure of economic function. When there is low stability the economy is not really serving the citizens.
Again, no attempts to measure this economic stability really exist. But
America does not appear to be performing well. Most workers have experienced
layoff more than once in the last 20 years. Many factories have been closed
and communities disbanded. Most citizens have had to move from their community
or give up their house out of economic necessity. Many people have seen
their retirement accounts vaporize in the investment bubbles. Even while
no clear measure exists, we see strong persistent evidence that Americans
are severely stressed from lack of stability. By this dimension the American
economy appears to be rather dysfunctional.
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Above we asked what does a functional economy need to do and how can we measure how well it is doing those things? The converse of that would be to ask what do dysfunctional economies do and how can we measure how much the dysfunction? Two historically established answers become quickly evident.
A: Wealth & power concentrated into the hands of a few
Dysfunctional economies concentrate large portions of wealth into the
hands of a few. When this happens opportunities for the rest of the populace
declines. Concentration of too much wealth into the hands of too few is
typically followed by depressions as the investment bubbles burst, or
revolutions as those falling deeper into poverty attempt to rebel against
those who have amassed the wealth and power.
B: Resources depleted & environment destroyed
Another measure of economic dysfunction would be the depletion of natural resources and the destruction of the environment. Environmental destruction is frequently disregarded in economic discussions, but it actually has significant economic costs. When resources are depleted or ecosystems collapse the economy no longer has the ability to provide the citizens with the wealth (food, materials, and opportunities) that the citizens require. Some attempts to measure environmental costs have been created, but none are in common use.
By many of these measures, the American economy continues to move deeper
We want to determine the health of our economy. But we can't really do
that without first examining what we really need. Once we determine our
needs, we can attempt to measure whether the economy serves our needs
while preventing other problems. When we do this we find evidence that
our economy is not really doing what it needs to. Without these considerations,
we can be easily blind-sided by crises that we failed to anticipate, but