I have been thinking for sometime how to make sence of our economic system. I took all the basic Economics courses in college and even taught MicroEconomics at one time, but I still did not feel comfortable about the subject. I was lucky (or unlucky) to have had Ted Kreps as my professor of MacroEconomics in graduate school. He was the chairman of the first Councel of Economic Advisors under President Roosavelt. He was on the gound floor of what many are claiming was the right way for the government to deal with a "Depression". I had differences with Kreps then and I still do. The point is that we still have to make somekind of sense out of our economic system. The basic problem that I have had with all the theories is that they do not seem to be able to support their concepts from the bottom up and connect all the dots. How can something be logical at the top, but not make any sense at the bottom? That is my complaint. If the theory is correct, it should work from the top down as well as the bottom up. Current theories do not seem to me to do that, so here goes my theory.
First, economics is the collective action of individuals or real people. The objective of each individual is to get as much of the pie as he can. Watch a bunch of chickens being fed in the farm yard. They operate individually to get as much of the food as they can. Along with grabing as much food as they can, once in a while one of the chickens attacks one of the other chickens to keep them out of the food. Watch a dog with a bone. He holds the bone for himself and growls at anyone who tries to take it from him. The one thing that animals do is to try to only get the food. They will kill an animal or dig up roots, but they don't do anything to create "more" food. Only us humans seem to be smart enough to "create" food, so in an economic system, there has to be a "Producer" if we are going to get beyond dumb animals. I think you can see that we have several kinds of players in this economic system including "Criminals", "Gamers", "Producers" and "Consumers". In my analysis, I'll see if I can connect all the dots.
I am going to start with "Criminals". I think you understand who these people are. They are the animals who steal food from the kill and go hide to eat it. In animal societies there is often an "Alpha" animal who keeps criminal behavior to a minimum. If the animal like the human society can not control "Criminals" the family can not survive. There will not be food for the young and the society will die out. Look at Haiti and the amount of plain old criminal behavior that is there. This is the one thing all by itself that is enough to kill the whole society. Look at Africa or Russia, most of what we call their economic problems were really just simple criminal activity. The point is that all societies have criminals, but for the society or economic system to survive, the criminal element has to be controlled to a level low enough for the rest of the system to function. Criminals are always just people who work against the system's objectives. If the amount of criminal activity gets too high or gets to "critical mass", the economic system dies. It can not recover. Look at drugs and illegals coming from Mexico. If we do not get control of the situation it could bring down our society and economic system. Don't think so? Look at Mexico. Criminals have killed Mexico, but most people just don't know that Mexico is dead yet. Look at Switzerland. They have a higher per capita GDP than the USA and one of the reason is the low rate of "Criminal" activity. They don't have the Black or Mexican problems like the USA. Look at Italy. They still have the mafia even though they have been working for centuries to get rid of it. This shows what "Criminal" activity can do to a social and economic system.
Next "Gamers". These people are not really criminals, but what they do is almost as bad. Check out AIG and the problems that they created. My guess is that nothing they did was criminal. What they did was to "Game" the system. Gamers get a piece of the pie, but it is clear to everyone that they do not earn a right to a piece. Technically they didn't break the law, but what they have done is either immoral or unethical. You see "Gamers" all over the place. They operate just inside the law but outside moral and ethical standards. The problem is that no society can create exact enough laws to control "Gaming". It often happens that the laws themselves provide the avenue for the "Gaming". I mentioned this before, but the place where "Gaming" is the easiest is with our government. That mean that as the size of government gets bigger, you can expect to see more "Gaming". Now these people are not criminals, but do about the same thing. Look at Russia again. Here we are talking about a society where the government controlled about everything and this is the country where "Gaming" was the most extensive. We all hear about the Russian mafia. There were criminasl alright, but most of their pie came from "Gaming" the system. I was just checking University of Wisconsin catalog for classes in the Business School and many looked like they were designed to teach students how to "Game" the system. I did not see very many classes where the objective was to "Produce" anything. At the UW, the largest number of BA/BS degrees are for Political Science. I don't think these people are all "Do Gooders", I think they are being trained as "Gamers" who will get a larger piece of the pie than they deserve. Well, we have explored two groups of people in our society who are sharing in the pie, but are not helping to produce the pie. This is our system, so get used to it. Now that our health care system has been nationalized by Obama, you can expect a flood of "Gamers" decending on the government treasury with all kinds of "Gamming" ideas that no one has even thought of yet. It should be very intersting. Like "Criminals", most societies can support a few "Gammers", but if the number gets too high it can also bring down the system. It could just happen with health care and the other new government spending programs that Obama and the Democrates have passed. Wait and see.
My favorite group is the "Producers". These are the ones who actually make or produce something. Right now it is China who has the high ground in this area and you can see how well they are doing. China has a "Producer" society compared to the USA who has a "Criminal", "Gammer" and "Consumer" society or economic system. You have to look very hard to find something that is "Produced" here in the USA.
