Monday, November 16, 2009

Paradise Awaits

Some economists attempt to separate the field into microeconomics and macroeconomics.

I am not one of these economists.

Nevertheless, it is important to understand an opposing argument, so I shall attempt to briefly explain the hypothetical theory behind the creation of these supposed types of economics for those readers whom are unfamiliar with such terminology.

Microeconomics is said to be concerned with households and firms.

Macroeconomics is said to be concerned with national, or regional, economies.

A common metaphor that illustrates the difference between the two fields is that while macroeconomics deals with “the forest,” microeconomics deals with “the trees.”

Although such a metaphor as thus provides a slight amount of clarity, it is important to note that “forests” do not actually exist apart from trees, and that forests are much more than trees to begin with. To be sure, one may understand a certain area of biological activity is a forest, but in order to truly understand a forest, one must actually study the various aspects of the forest itself! Forests are composed of numerous minerals, bacteria, fungi, plants, trees, insects, animals, rain, wind, moonlight, sunlight, etc. One could even break a forest down into molecular, and even atomic elements if they had the time, means, and desire to do so.

Similarly, there is no such thing as a “macroeconomy” in and of itself. A macroeconomy is a collection of individual households and firms: one could not truly learn about a macroeconomy without first understanding its individual components.

It was for this reason that gross domestic product (GDP) was theoretically conceived by macroeconomic central planners; GDP is, by definition (as hollow, and simple, as it may be), “a measurement of the total amount of goods and services produced annually in an economy.”

In other words, if a barber cuts someone’s hair, GDP should increase by the final amount of the haircut. If an engineer builds a bridge, GDP should increase by the final cost of the bridge. If a gold mine is discovered, GDP should increase by the final cost of the gold that is mined (the discovery itself may not necessarily produce any benefits).

Newspapers often reference GDP statistics when they assert the United States’ (if not the world’s) economy is either growing or shrinking. For instance, when new home sales are a large percentage of GDP one year, a subsequent downfall in new home sales the next year may shrink GDP if the prices/units of the other elements of GDP do not increase enough to offset the decline in home prices/units (which is what happened in the United States recently).

The rate of growth, or decline, of GDP over a period of time determines whether or not the economy is said to be in expansion, recession, stagnation, or depression. For many mainstream macroeconomists, even unemployment statistics are not necessarily a major indication of a healthy economy, which is why some have been bold enough to declare the current recession to be over, as GDP increased in the past quarter of the current year, even though unemployment increased.

In any case, there are two enormous problems with the concept of GDP statistics in practice.

The first problem is found in the basic accounting of GDP itself.

It difficult to ascertain how many resources are required in order for the government (the US Department of Commerce is responsible for GDP statistics) to accurately count all of the “final goods and services” of a macroeconomy as large as the United States in the first place.

In fact, the first problem does not matter a great deal, for the second problem is far more difficult to address.

Rhetorically speaking, how do unspecialized economists and accountants qualitatively understand so many unique goods and services after they have counted them?

After all, quality is very important: Toyota did not take over the automotive market simply by building cars—they built better cars for the money consumers were willing to pay!

Of course, the simple answer to the rhetorical question is that even the greatest geniuses among humankind would be unable to understand so many goods and services! Medical doctors must attend school longer than most economists; yet, there are far fewer economists than medical doctors in the world. And even medical doctors specialize in particular areas of study: brain surgeons are commonly thought to be the smartest medical doctors of them all, but one would be unlikely to find too many brain surgeons whom understand dermatology as well as most dermatologists!

The truth is that governmental calculators of GDP do not bother themselves too much learning about actual goods and services, much less the various techniques and processes microeconomic entities use: engineering, chemistry, physics, specialized labor, etc. These intellectual frauds only care about some goods and services people are willing to pay for in monetary units, and bureaucratic statisticians often manipulate the collection of the goods and services they supposedly measure in order that their selections will fit the “mathematical” percentages they wish to report.

GDP does not account for matters such as freely created software programs and/or charity; GDP fails to represent the value of students whom learn on their own from books rather than teachers; GDP fails to measure the entrance of formerly copyrighted books, music, and other forms of intellectual property into the public domain; and perhaps most humorously, GDP does not measure the value of new mathematical proofs, as mathematics does not have a great deal of monetary value directly, since mathematics in and of itself is not patentable, which is quite ironic, since most economists are absolutely infatuated with the subject. And even when GDP actually recognizes elements of the economy, GDP often severely understates inflation in certain industries, while it severely overstates deflation in other industries!

The real estate industry is heavily favored by GDP, while cutting-edge technologists are mostly left to fend for themselves. Of course, this may seem obvious today—given the fact that the recent real estate bubble left many Americans desolate—but even this bubble has not completely burst whatsoever, thanks to the assistance of the Federal Reserve and the United States government. Conversely, the technological investments of the 1990s have produced many real returns people were never expecting during the dot com monetary era; however, the simple fact of the matter is that the benefits of this technology have been ignored by most Americans in favor of complete nonsense according to their purchasing patterns, while the government itself cares very little about the glorious blessings our real intellectuals have bestowed upon us. Indeed, humanity often acts in this matter, as Galileo would surely explain to us if he were alive today.

To empirically prove conventional GDP is nonsense to the less enlightened mind, and to also prove that the recent real estate crash did not sink prices nearly enough, let us visually examine the growth of certain technology during the past twenty years, as humans often have a tendency to lose track of the past when it is not relatively recent.

Although computers were already in development well before the 1980s, I would like to show screenshots from video game consoles from the middle of this period until today in order to illustrate some of the technological growth that has occurred thus far, as graphics are much easier to comprehend than technical specifications.

Let us begin with the Nintendo Entertainment System, which was originally released in the United States in 1985.

Four years later, in 1989, the Sega Genesis came to America.

Sony would enter the home video game market in 1995 with the Playstation.

Microsoft followed Sony in 2001 by releasing the Xbox.

Today, current video game consoles consist of the Microsoft Xbox 360, the Sony Playstation 3, and the Nintendo Wii.

And not only are the graphical capabilities of these systems far superior to their recent predecessors, but today’s consoles possess online functionality, they can store thousands of songs on hard drives, and in the case of the Nintendo Wii especially—they have far more advanced controls. In fact, Microsoft is already working on a project that will even leapfrog the Wii’s controls, even though Nintendo has already made their own drastic upgrade in the form of Wii MotionPlus!

Furthermore, interestingly enough, even according to the consumer price index, which is a measure of inflation according to the US Department of Labor, the video games of today are even cheaper in terms of most ordinary consumer products than older games were for the original Nintendo Entertainment System! In other words, not only have video games increased enormously qualitatively, but one could trade in fewer cans of soup (if video games could be bought with soup) for an average modern game. If we used gold as a monetary measurement—especially today (as of November 14th, 2009)—we shall find that an ounce of gold can buy nearly three times as many video games as it could in 1985!

The main point that needs to be taken away from all of the above screenshots of video games, however, is that the video game industry is only a fragment of the technology industry as a whole!

Now, we can access the “morning” paper online (which is updated throughout the day and night), most of the magazines we used to pay for have more free internet content than they used to include in print only a few years ago, Wikipedia has virtually eliminated encyclopedia salesmen, we have video phones that are easy to use (barely anyone cares enough to try to use them), and we even have blogs where we can post ideas fairly easily for the entire world to view (like this one). Yet, all of the stuff in this paragraph alone almost entirely originated in the past ten years—once again—after the dot com bubble burst!

In the meantime, during the past twenty-five years, the average home has not changed a great deal in size, quality, energy efficiency, etc. As for undeveloped land itself—land has barely changed at all in only twenty-five years (unless a supernatural event occurred, such as Hurricane Katrina).

Imagine, for a moment, what would happen if the average video game designer became absolutely infatuated with procuring dollar bills. They would be able to create home designs far faster than the average architect: a $50 Xbox 360 game contains an enormous amount of virtual design—far more than the blueprints for the average home. Also, let us think what would occur if robots built standardized housing frames at more and more rapid rates every year. Pretend the chemists and physicists of Intel worked for a few years designing stronger and more geometrically sound skyscrapers rather than incomprehensibly small structures for microprocessors. If all of this were to occur, the real estate industry would completely collapse (in fact, the real estate industry will collapse sooner or later anyhow).

So, should we kill all of the economists for stealing the profits of these technological pioneers?

Certainly not.

But should we at least abolish the Federal Reserve?

What would be the point?

To even assert that the Federal Reserve needs to be abolished is to admit that they actually have real power and influence to begin with, but reality has already proven otherwise. If the computer industry continues to develop the way it has during the past twenty years, it will not be long before we live in a completely virtual world in tiny boxes in the real world stacked on top of one another.

As for Communism—the only people that are more ignorant, and unfortunately, more “powerful,” than mainstream macroeconomists are professional politicians. In case the reader has already forgotten, GDP is calculated by the U.S. Department of Commerce (more specifically, the U.S. Bureau of Economic Analysis), and the President of the United States is theoretically in charge of such. If the President of the United States does not even understand how the macroeconomic monetary system works, he certainly makes a poor philosopher king—to say the least of the matter.

President Obama is not a medical doctor either; yet, he believes he can fix health care. A common nutritionist has the solution to America’s health care woes—we need to stop eating junk food (smoking and unprotected sex do not help either).

Of course, when I said such people as professional politicians are powerful, once again, I was not speaking of true power; instead, these individuals have merely convinced themselves, and most unenlightened people, that they are as thus. The only thing more hysterical than a lawyer being in hypothetical control of a nation’s economy as complex as the United States is the idea that the average voter is wise enough to select the best individual for the job when they themselves are more than likely even more ignorant than their “leaders!”

It may be sad, or even blasphemous, for some people to admit this, but it is true—I personally find it to be funny.

Instead of feeling distraught, however, at the very least, one should, perhaps, feel an inclination to write plenty of thank you cards to all of the scientists, engineers, and real medical doctors whom have changed the world unknowingly, or unappreciatively, for all of us—they are true angels unto humanity.

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