Strange Economics

As you all know and I freely acknowledge, I'm not always the brightest bulb in the chandelier. But I like to think that the difference between me and many other dim bulbs is that I'm willing to acknowledge the areas where my wattage is low, and try to educate myself better on them.

Economics is such an area.

The "science" of economics is one that has never made much sense to me, as I think the whole concept of economics is based more on herd psychology and greed than on any immutable laws of the universe. Take our current economic situation, for instance ...

The most recently released data show that the US economy has added new jobs at an astounding rate over the last three months. This is considered by economists to be amazingly good (if unexpected) news, and a sign that the economy is strong and its recovery from the pandemic slump is moving ahead very well. But nevertheless, everywhere you look are "help wanted" signs pleading for new employees. Service in restaurants and many stores is slow and/or hours have been reduced because of a lack of staff. Whyzat?

There's a fairly simple explanation, but one that seems to be minimized by economists and conservative politicians: there are plenty of jobs, but they don't pay enough to allow a worker to support a family. This indicates to me that the problem is not the availability of jobs, of which there are hundreds of thousands, it's the ability of workers to make ends meet when they take them.

This, in turn, underlines the central paradox of the capitalist system and the market economy: a business exists not to produce goods or provide services, but to earn money by doing so. For a business to thrive, it has to make enough of a profit (income after expenses) to pay three specific groups of people: (1) the owner of the business, who wants (and deserves) to earn his living; (2) the shareholders of the business, who want a return on their investment in the business; and (3) the workers who actually make the business generate revenue, who need to be able to support themselves and their families. Each of these groups approaches the business from a different perspective:

The owner wants to maximize profit so that he or she obtains maximum personal economic benefit from the business;

The shareholder wants the largest possible return on his or her investment as a reward for underwriting the business; and,

The worker wants the largest possible salary consistent with his or her investment of time and energy in the job (including paying off the education and training that were required to obtain the job in the first place).

These three perspectives are, of course, inconsistent with each other.

Workers want the lowest possible prices for the things they need to buy. In order to keep prices low and profits high, business owners must minimize their operating costs. How are costs minimized? By, among other things, employing the smallest possible number of workers and paying them the lowest possible salaries consistent with getting them to sign on in the first place. Shareholders care about workers only to the extent that they keep businesses operating at maximum profit.

And the ugly economic circle goes round and round.

I have more (borderline coherent) thoughts and ideas about economic issues and the motivating greed and herd psychology that masquerade as economic law, but I need to stop now, because my head hurts and I don't see any way to make an American-style capitalist economy satisfy the needs of everyone in the current environment.

I really worry about the economy that my grandchildren are going to inherit, and the people who believe it's the best of all possible worlds.

Have a good day. More thoughts coming. 

Bilbo