Wednesday, October 6, 2010

Sum Economics

Some people think that Economics is zero sum. That is to say, for me to "win," you have to "lose," and it's all a fight about how much of the total "pie" of wealth we each can have. Others think that the "pie" of wealth can be grown, and the people who make it grow need to be rewarded for doing so, lest they stop doing so. The second is the usual belief of business owners, who fervently believe that they're growing the pie. (Some aren't. It's hard to see how, say, spam, or car horns that honk annoying tunes, makes society wealthier on the net.)
I don't think we're doing either model very well. If it is zero sum, then we're losing our wealth to overseas interests. And if it isn't, then we really need to do something about this unemployment problem before it starves the entire system to death. (No employment equals no customers equals no buying, equals bankrupt company.)
I have a business magnet who agrees with me on this too, albeit a historical one who is now dead: Henry Ford. His shareholders called him insane for paying his workers a living wage, and pricing the car cheap enough that the factory line workers could buy it too. And yet this proved a very smart business decision, as they praised it both as the builder of the car, and the owner of the car. He gained at least as much from the ever desired viral marketing as he lost to high wages and cheap product, plus immensely greater productivity as his workers stayed with the job and put their growing experience to work. (The low turnover also saved on Human Resources costs of hiring and firing.) Mr. Ford went on the express less.....savory....opinions.
In any case, consumer's can't rescue this economy. They're broke.

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