Before asking what the economy should do, shouldn’t we know what the economy is?

Yesterday I tuned into Chris Hayes’ Up with Chris. He and his guests were addressing the question, what would we like to see our economy do. There were various answers, but none of the responses addressed the most basic issue: what is the economy.

Most Americans summarize the economy as the unemployment rate or their income. They confuse their personal financial positions with a matrix of rules that determine the growth, output, and productivity of our economy.

Chris Hayes and his posse made the same mistake as well.

I like the Bradley Schiller definition of the economy. The economy is us, not something spinning out there in outer space, separate and undefined. The economy is about how we decide to use our resources, capital, and equity in order to produce more and raise our standard of living. We want to eat better and enjoy better health.

It’s a straight-forward definition, but more complex than an unemployment rate or level of income. The definition requires we step outside of ourselves.

About Alton Drew

Alton Drew brings a straight forward and insightful brand of political market intelligence. Alton Drew graduated from the Florida State University with a Bachelor of Science in economics and political science (1984); a Master of Public Administration (1993); and a Juris Doctor (1999). You can also follow Alton Drew on Twitter @altondrew.
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2 Responses to Before asking what the economy should do, shouldn’t we know what the economy is?

  1. Kenneth Ciszewski says:

    “I like the Bradley Schiller definition of the economy. The economy is us, not something spinning out there in outer space, separate and undefined. The economy is about how we decide to use our resources, capital, and equity in order to produce more and raise our standard of living. We want to eat better and enjoy better health.”

    This is an interesting comment. The “…how we decide…” is problematic for me. Who are “we”? Is this an expression of improving the “common good”? Sounds socialist!!!!!!!!! Or maybe, communist!!!!!

    Certainly, the economy is about decisions. The thought that the goal of economic decisions is “…to produce more and raise our standard of living..” is interesting, but the evidence I see suggests that the economic decisions made by big businesses, which carry a lot more weight than those of the average consumer, are not that generous or benign. Big business, in fact, all business, cares mostly about profit. An improved standard of living for “us” is not in the mission and vision statement of any corporation that I am aware of. If it were, the recent Great Recession would not have occurred. Jobs would not be moved off shore. CEOs wouldn’t walk off with billions while workers don’t get pay raises.

    Even average consumers, in my opinion, don’t necessarily make decisions that improve everyone’s standard of living. Buying bigger house just to feed one’s ego and show off for the neighbors has very little to do with improving everyone’s standard of living. If the buyer has trouble making the payments, his standard of living is diminished, not improved.

    Look at all the opposition to Universal Health Care, which is a form of economic decision. If we made decisions that “…raised our standard of living..” everyone would be applauding Universal Health Care.

    Bradley Schiller is an idealist and an optimist on this topic. Talk about spinning in outer space.

  2. Kenneth Ciszewski says:

    I just posted on your “Is the Administration doing its best to leverage our oil resources?” question, before I posted on this one, and my comments about the middlemen who purchase oil and don’t care how much they pay, because they can always sell it and get paid, is an example of economic decisions that benefit the middlemen, but not the US economy as a whole.

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