As I keep listening to the discussions about our economy, I am struck by the total absence of a clear "objective". It is impossible to come to the correct decision without having a clear "objective" to judge the results against. This is the idea behind this blog.
If you have read my other blogs on economics and decisions, then you know that my objective is to maximize the "median family income". Notice that this is not the "average" or just the size or growth of the economy. There is a very big difference between these. I could also include "median net worth", but this would complicate the situation. Many would claim that in a democracy, if you total up the objectives of all the individuals, the result would be the best objective for the whole country. Sorry to say, that is not the case. Try this example. If you throw some corn to a bunch of chickens, they all crowd in to get the most that they can. The result is that the strongest ones get most of the food and some weak ones get nothing. It is not much different for us humans.
I listened today to a company president who had many openings that he could not fill. He said that he could not grow his company because of the lack of qualified workers. Further, he was asked if letting in more immigrants would help. He said that he was open to any solution. The implications is that more immigration could be good for the economy. Here are the facts. If the company president adds more workers, he makes more, but his median worker pay does "not" go up. The economy grows, but it has very little affect on raising the median family income. Are you starting to think about exactly how do we raise the median family income? Can we learn from countries that have higher median family incomes? Yes!
Remember that the USA might have the largest economy in the world, but we do not have the highest median family income. We rank only about 35th. We are clearly not the richest people in the world no mater what you might think. As I look at those countries who are better off than we are all seem to be doing it a little differently. The highest countries all seem to get most of their income from the exploitation of their natural resources. In most cases that means "oil". The other side of the equation is the ratio of their natural resources per individual. All practice tight control of the growth of their populations by immigration. The affect is to reduce those citizens who are "below" the median family income. As I have pointed out above, when the president of the company increases his profits, it has "no" affect on raising the median family income. Another way to reduce those below the median or who are not economically productive, it to reduce things like out of wed lock births, school drop outs, criminals in jail or large military. It seems to me that the USA is doing every thing wrong if we want a higher median family income. That is not a very bright picture.
Where do you think we should focus? Which of the points above should we work on?
PS--If our economic objective is to raise the median economic income and thus the median quality of life, what actions would you take to make this happen? Tough challenge isn't it? What we all need to do is to think about what we should be doing? We know that what we are now doing is not working. What I have tried to do with my blogs is to point out the problem and put forth some ways that we could raise the median income. This is not a fuzzy feel good problem. It is a real problem. Back in 1970 after graduating with a master's degree in engineering 5 years before, I could purchase a new Ford 150 pickup truck for less than 10% of my annual salary. To do that today, you would have to be earning over $500,000. Do you see the problem? We are not going forward, we are going backwards.
If you have read my other blogs on economics and decisions, then you know that my objective is to maximize the "median family income". Notice that this is not the "average" or just the size or growth of the economy. There is a very big difference between these. I could also include "median net worth", but this would complicate the situation. Many would claim that in a democracy, if you total up the objectives of all the individuals, the result would be the best objective for the whole country. Sorry to say, that is not the case. Try this example. If you throw some corn to a bunch of chickens, they all crowd in to get the most that they can. The result is that the strongest ones get most of the food and some weak ones get nothing. It is not much different for us humans.
I listened today to a company president who had many openings that he could not fill. He said that he could not grow his company because of the lack of qualified workers. Further, he was asked if letting in more immigrants would help. He said that he was open to any solution. The implications is that more immigration could be good for the economy. Here are the facts. If the company president adds more workers, he makes more, but his median worker pay does "not" go up. The economy grows, but it has very little affect on raising the median family income. Are you starting to think about exactly how do we raise the median family income? Can we learn from countries that have higher median family incomes? Yes!
Remember that the USA might have the largest economy in the world, but we do not have the highest median family income. We rank only about 35th. We are clearly not the richest people in the world no mater what you might think. As I look at those countries who are better off than we are all seem to be doing it a little differently. The highest countries all seem to get most of their income from the exploitation of their natural resources. In most cases that means "oil". The other side of the equation is the ratio of their natural resources per individual. All practice tight control of the growth of their populations by immigration. The affect is to reduce those citizens who are "below" the median family income. As I have pointed out above, when the president of the company increases his profits, it has "no" affect on raising the median family income. Another way to reduce those below the median or who are not economically productive, it to reduce things like out of wed lock births, school drop outs, criminals in jail or large military. It seems to me that the USA is doing every thing wrong if we want a higher median family income. That is not a very bright picture.
Where do you think we should focus? Which of the points above should we work on?
PS--If our economic objective is to raise the median economic income and thus the median quality of life, what actions would you take to make this happen? Tough challenge isn't it? What we all need to do is to think about what we should be doing? We know that what we are now doing is not working. What I have tried to do with my blogs is to point out the problem and put forth some ways that we could raise the median income. This is not a fuzzy feel good problem. It is a real problem. Back in 1970 after graduating with a master's degree in engineering 5 years before, I could purchase a new Ford 150 pickup truck for less than 10% of my annual salary. To do that today, you would have to be earning over $500,000. Do you see the problem? We are not going forward, we are going backwards.
