Economically Speaking

I have not done any justice to ‘economics’ part of my HEAP blog. Not that I ever had any special credentials to brag about. In fact I found it a very boring subject in my college. Though, it is very fascinating as an after-thought.   i.e. after the boom or bust books continue to be published for decades. Every country seems to have a top economic adviser drafting some eclectic policy, which is nowhere visible in ground level activities. I would like to bring forth an alternate view of economics, which of course is very much colored by my performance engineering experiences and perspectives.

To me economics is about generating denominated transactions between living beings and entities. Almost similar but no exactly like standard definition of- the branch of knowledge concerned with the production, consumption, and transfer of wealth.

To generate transactions, living entities need to flog natural resources and somebody else needs to consume them to complete the circle and economy is measured by how fast wheel moves.  To this extent I believe my views are aligned to traditional economics.  Now where my fascination starts is with absurdity of this economics where any random activity can contribute to it.  I got piece of land- I can do agriculture or rear animals or make an entertainment complex, everything will generate motion and contribute towards economics. Of course there are some activities which generate more 'multiplier effect' leading to more motion such as doing building infrastructure, investing in small scale business etc.

So far so good, but where I diverge from economists is how they look at software and virtual products. To me that is a category which is not yet counted among ‘resources’.  As I noted, my assumption is to generate transactions among living entities and not necessarily have any resource production.  This widely diversifies economy. In its rudiment form in earlier ages such resources consisted of books and paid sermons. They are sort of virtual resources where the transaction is generated based on ‘thoughts’ in producer’s mind.  Now this virtual space has exploded with mobile apps generating huge amount of transactions, though many are not yet denominated. Reason I label it virtual because there is infinite production capacity.  Many economist have tied technologies such as cellphone and internet to improving thus improving productivity and thus vastly enhancing economies.  To me that is an incomplete explanation because it does not address the part what living entities do with productivity and time saved. My view is that cellphone and internet largely increased our capabilities generate denominated transactions as when we were not productive in pre-cellphone/internet era we were still doing something but not at same pace. Matching infinite production capacity is increasing money supply by central banks that enables and promotes transactions.   Again innovation such as bitcoin fills in the space should money supply was to ever reduce. Further, massive adulteration and supplementing of ingredients is also creating an almost endless supply of physical goods.

Globalization is helping world economy find that ever new set of resources and markets that were needed to make-up for saturated transaction rates in developed and near-developed economies. High sovereign debt rate and that of household precludes jacking up transactions at any higher rate. That is what I believe causes cycles. One season, there is heavy snow and that dampens transactions. Next quarter with that extra saving, transaction rate is boosted again and sentiment changes again. To an extent virtual resource transactions are saviors as they discourage consumption of physical resources that are devastating to ecology, though it must be said that even virtual resources are backed up by physical resources at some level. Also they are little less prone to climatic condition. That said, their demand is volatile as they are high up in Maslow’s hierarchy model. Still, under peaceful conditions they should hold up.

Looking ahead, while all the hitherto untouched populations and resources will keep generating incremental growth the cost will too high with many of these areas being Oxygen reserves or Carbon dioxides sinks of the world. Further, many such areas being battle zones they will continue to throw up conflict and diseases such as ebola which will serve to slow down transaction rates in developed and developing worlds. Peace is indeed a requirement of better economy.

While I don’t have any invitations to be any country’s economics adviser, if given a chance I would recommend following.

1.  Build low cost transaction system. It would mean supporting payment and trade system that support very low value transactions.  This will for one, start adding figures to economy which are left out. Secondly, it will promote and encourage more transactions.  Grameen bank is famous example for micro-credit.  Low cost/ low value system‘s  derives its potential from inclusion of poor, unemployed, under-employed and commercially underprivileged who do not get opportunity to add to economic transaction rate.

2.  I truly believe we are reaching a population and thus a consumption plateau, in places where biggest economic transactions happen. I don’t see merit in trying to induce further consumption, though in few high savings societies, a little more consumption won’t hurt. Though equitable distribution of wealth could help a little bit further but wealth taxes are in general considered harmful to sentiment. As such sustainable development model may not be a bad thing where we can live with 2% growth.

3. Support geriatric technology innovations to include senior citizens in economy who are currently thrown off the tangent and do not get opportunities to contribute as much as they can.

4. If truly pressed for ideas, a wacky idea I could propose is asset ownership for robots and intelligent devices such as IOTs.  If we could demand them to be intelligent, then we need to be ready to grant them limited rights as well. The idea behind is this to generate an economy of intelligent devices that interacts with human driven economy. At simplest they could barter in intelligence, ie modules of programs that enable them to perform greater range of activities.

Thanks for your interest and patience in reading through my economics musings.