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WHAT’S THE
ECONOMY FOR,
ANYWAY?
Part 1 of 3
Two Competing Views
of the Economy
The Private Ownership Society
Vs.
The Public Good Society
The Logic of the
Ownership Society
• “If you own something, you have a vital stake in
the future of our country. The more ownership
there is in America, the more vitality there is in
America, and the more people have a vital stake in
the future of this country.” -- George W. Bush.
• We need an “ownership society [in which]
individuals are empowered by freeing them from
dependence on government handouts. . ., patients
control their own health care, parents control their
own children's education, and workers control
their retirement savings.” -- The Cato Institute
Criticisms of the
Ownership Society
Criticisms of the
Ownership Society (cont)
• Some call it the “You’re on Your Ownership Society.”
•
Others call it “The Risk Society.”
“Before they can join the ‘Ownership Society’
they…[Americans]…have got to pay their credit card
bills, their rising variable-rate mortgages and their
auto loans. After that, there’s no money left…” -Robert Reich
The Logic of the
Public Good Society
Supporters of the public good society envision an
economic system that provides:
• Fair and Decent Wages
• Good Healthcare
• Affordable Housing
• Secure Communities
• Good Education
• Efficient and Clean Transportation
• A Healthy Environment
• Time for Family
• Time for Friends
• Retirement Security
Criticisms of the
Public Good Society
Criticisms of the
Public Good Society (cont)
• “The larger the slice taken by government, the
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smaller the cake available for everyone."” -Margaret Thatcher
”… And you know, there is no such thing as society.
There are individual men and women, and there are
families. And no government can do anything
except through people, and people must look to
themselves first. It's our duty to look after
ourselves…” -- Margaret Thatcher
“Government is not a solution to the problem, it is
the problem.” -- Ronald Reagan
Evaluating Current Policies
Before evaluating current policies we
need to ask a fundamental question:
What’s the economy for,
anyway?
The Conventional View
of the Economy
• The American economy's "ultimate purpose is to
produce more consumer goods." - Arthur F. Burns,
Chairman of President Eisenhower's Council of
Economic Advisors, 1953
• "Our enormously productive economy demands that
we make consumption our way of life, that we convert
the buying and use of goods into rituals, that we seek
our spiritual satisfaction and our ego satisfaction in
consumption. We need things consumed, burned up,
worn out, replaced and discarded at an everincreasing rate. - Victor Lebow, Retail Analyst, 1955
Conventional Measures of
Economic Well-Being
• The various stock market averages
(DIJA, NASDAQ, S & P 500, etc.)
Housing Starts
The Inflation Rate
The Unemployment Rate
Consumer Confidence
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• Gross Domestic Product (GDP)
The World Bank’s GDP
Rankings (2006)
U.S. Millions of Dollars
Rank
Rank
1 United States (13,244,550)
11 Russia (979,048)
2 Japan (4,367,459)
12 India (886,867)
3 Germany (2,897,032)
13 South Korea (888,267)
4 China (2,630,113)
14 Mexico (840,012)
5 United Kingdom (2,373,685) 15 Australia (754,816)
6 France (2,231,631)
16 Netherlands (663,119)
7 Italy (1,852,585)
17 Turkey (392,590)
8 Canada (1,269,096)
18 Belgium (393,590)
9 Spain (1,225,750)
19 Sweden (385,293)
10 Brazil (1,067,706)
20 Switzerland (377,240)
Some US States Have Bigger
GDPs Than Most Countries
The IMF’s GDP
Per Capita Rankings (2006)
Purchasing Power Parity (PPP)
Rank
Rank
1 Luxembourg ($80,471)
11 United Kingdom ($35,051)
2 Ireland ($44,087)
12 Finland ($34,819)
3 Norway ($43,574)
13 Belgium ($34,478)
4 United States ($43,444)
14 Sweden ($34,409)
5 Iceland ($40,277)
15 Qatar ($33,049)
6 Switzerland ($37,369)
16 Australia ($32,938)
7 Denmark ($36,549)
17 Singapore ($32,867)
8 Austria ($36,031)
18 Japan ($32,647)
9 Canada ($35,494)
19 Germany ($31,095)
10 Netherlands ($35,078)
20 Italy ($30,732)
An Alternative View
of the Economy
•
Gifford Pinchot was the first
director of the US Forest Service
(1905-1910) and a Republican
governor of Pennsylvania.
•
According to Pinchot, the purpose
of the economy is to promote
1) the greatest good
2) for the greatest number
3) over the longest run
How Might We Measure
the “Greatest Good”?
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Wealth
Income
Health
Family Life
Community Life
Security/Safety
Education
Life Satisfaction
Freedom
Etc.
How Might We Measure
the “Greatest Number”?
• Gap Between Rich &
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•
•
Poor
Poverty Rate
Social Mobility
Access to Health
Care
Access to Education
Etc.
How Might We Measure
the “Longest Run”?
• National debt
• Personal savings rate
• Pension security
• Health security
• Environmental sustainability
• Etc.
Time Series of the
U.S. Personal Savings Rate
Americans now have a net personal
savings rate of -1%, lower than
any European country except Greece!!!
Please Continue with Part 2:
What’s the Economy for, Anyway?