Tariffs. How are you affected?

lol. Yeah, some of them ufcw locals can be downright vicious, I bet. ;p

 

One of the first things you learn in economics is that there are 3 participants in an economy-----government, businesses, and consumers. An economy can only grow by increasing activity. Therefore there are only 3 ways to increase activity--government spending, spending by businesses, and spending by consumers. You can have an economy grow by only one of these factors if the spending is enough to overcome the drop in spending by the others. Clearly government spending is finite, even if you can take on debt and continue to spend, it is still finite without growth in the other areas, because ultimately the money they spend, and use to support and pay for their debt depends on their ability to get money from businesses and consumers by taxing them. More businesses and consumers equates to more entities to tax and this is a function of population growth. Businesses as well, have a finite ability to spend, because they need workers and they have to sell their services or goods in order to have money to spend. If they cannot get enough workers, a function of population growth, then they can't make their goods or provide their services. Likewise, the government is limited in how much it can consume of their product and services, so you need an increase in consumers (a function of population growth) to provide long term growth here too. And again, if you have more population growth you have more businesses. Finally consumer spending is, on the surface, finite. They can only spend as much as they can 1.) earn. and 2.) afford. But of all these 3 factors, the consumers are the only one that can reproduce, and whether you look at them as labor or as consumer, and in the sense that there is technically unlimited population growth, this agent of the economy is the least finite.

So yes, you can produce economic growth just by government spending, but it is not sustainable without an increase in businesses and consumers. You can have economic growth just by business spending, but it is not sustainable without a growth in government and consumer spending. You can have economic growth by both government and business spending, but it is not sustainable without consumer spending and labor. Consumer spending alone can produce economic growth, or with business or government spending or with any combination of the other two, but only consumer spending can be more sustainable by increasing the population, which in turn provides more businesses, more labor, and more taxable entities, not to mention a potentially larger government (which also represents an increase in government spending).

The inputs into all of this is raw materials, money, and people. Raw materials and money are obviously limited. You can export and get more money but this is still limited by the number of businesses and the supply of labor. Certain earth shattering events may change that----the discovery of a new continent with plenty of gold underground, discovery of oil reserves, gold reserves, and other metals, but again that is still limited to the new supply. Raw materials get consumed and stored. Money gets spent and saved. In both cases the impact on growth is limited and by themselves, they cannot grow. Yes there is a multiplier effect on money, and it can and does grow by banking activity, etc. but this in itself is not sustainable. Only people can reproduce and grow, so only the growth of population is the most sustainable factor in increasing economic growth. Everything else, in and of itself is temporary, and in and of itself it is not sustainable in creating endless new activity. Only people can provide sustainable growth---though now we know that this is not necessarily the case in that birth rates seem to be slowing, and now we see that we are not on a path to a Malthusian crisis, but are also not seeing unlimited population growth within the population itself.

Clearly we have learned that population growth is also subject to entropy. Birth rates can slow, people can leave, and people can be deported. But that does not change the fact that population provides the only factor that, if it is sustained, creates sustainable growth in and of itself.

Now that is the basic model----and population growth is the most sustainable part of it---in so far as it can actually grow. This is the econometric model of a complete economy in a nutshell. You said you work with econometric models. You seem to not think that it is a necessary factor to economic growth, or that it just illustrates how the economy is a ponzi scheme. So I assume you have some other genius way to make this model work for a sustained time without population growth? Perhaps something that will allow people to eat and live and have a fulfilling life that is not, as you say, a ponzi scheme?

How do you make this model work in a way that is sustained without consuming itself without population growth? Because if it consumes itself, or stops working, people stop eating and die. This is not rocket science, nor is it brain surgery. So please, enlighten us to how we can do this without population growth.

 

I think you may have missed my point. Backing up a little before I explain: I used to work with econometric models. I no longer do and haven’t since grad school. The math and statistical theory were very enjoyable. I soon learned, “the map is not the territory.” In some cases, the map may as well be of middle-earth.

Back to what I think you missed or I did not clearly communicate. Populations naturally fluctuate. The rates of grown and decline also fluctuate. Why can we not accept this? Why must we continually grow the population and, if this is somehow desirable, what and how is the target rate of growth determined? Why must the economy continually grow? Similarly, if this is necessary, what and how is the target rate determined and also, by whom?

It seems as though we are pursuing the increase of questionable aggregate statistical measures of supposed economic wealth, simply for the sake of the increase of those measures. While I can understand and even somewhat agree with the concept that, “a rising tide lifts all boats,” I’m just not convinced that we’re actually measuring the depth of the water. Keeping with the same analogy, it also seems as though we’re foolishly trying to prevent the tide from going out.

 

Think about it----the economy is an intricate web of transactions. It represents activity or movement, so there is no real point of equilibrium. If you get a dollar and spend it on food, that dollar is gone. You have to eat the food or it will spoil or you will starve. So you need to get another dollar, and so on, in a never ending action of survival. People get ideas and they want to do things, maybe make a new business or create a masterpiece. Life happens. There is no natural point of equilibrium where all activity can stop and everything stays the same.

So what if that was our goal----just find a point of equillibrium and keep everything the same. The problem is, people get sick, accidents happen, things break down, and we have to fix these things, heal these people. So in the end, it would be just as hard to manage the economy to maintain this constant state, as it would be to seek growth. In fact it would be harder---near impossible to be exact. The first problem is that without growth, you would suppress people who want to create---new businesses, masterpieces, or whatever. You would suppress people who want to consume more of something they like, or who want to live in a bigger house, or whatever they want more of, because, in the end, we have desires and wants, and needs. Second of all, this impossible state of equilibrium would suppress investment, because, if everything stays the same, then how do we value money? There is no time value to money. And if there is no time value to money, there would be no value for risk. In this theoretical world of equilibrium, the stock market, for example, would stay the same, and so there would be no reason to buy stocks. There would also be no reason to save or to lend money. Again, this would be an impossible goal.

If the economy is not growing then we are facing a drop in investment, in spending, in consumption, and, as I was talking about--in the ability to fix things. If we just let the economy go, this is what happens. When the economy declines, investment slows, people lose jobs, businesses tighten up, people stop spending, things break, and everyone struggles. Without planning and management, the economy slows and there is no good that can come out of that----this is the result of entropy.

So we have no choice but to plan and manage the economy for growth. And when the economy slows, we need to fix the problem and get it going again.

It doesn't make any sense to claim this is a ponzi scheme. Because people starve to death and die when economies stop.

America is a land of immigrants. And it is stolen land. But the thing that has made America the most powerful empire that has ever graced this planet is in large part because it is a land of immigrants----past and present. Trump stupidly thought that our trade deficit was a serious problem. He thought he could bully other countries around and fix it with tariffs. He lacks even the most basic understanding of how trade works in the 21st Century. He also lacks the understanding of why our economy is so strong despite the enormous trade deficit-----because of the services our economy produces, and very important----the very thing that he has attacked-----America has a big surplus in brains and labor-----------and this is due entirely to immigration. Why do other countries---especially 2nd and 3rd world countries, worry about the brain-drain. Because these people come here to America to go to our universities, and then many of them stay here. I don't remember in what study I saw a quantifiable measure of this, but it is an impressive surplus.

But in the world of Trump, education is meaningless. immigration is a cancer, and well... socio-economic suicide is imminent.

 

I am well aware that economic activity creates a complex dynamic - not static - system, with no fixed equilibrium points. I did actually read all of my undergrad Econ textbooks and I understood them and their contents well enough to get a full scholarship for grad school. Time and experience has brought me to a place where, even when/where I still believe and agree with economic theory and measures, I can recognize that they describe a picture of life that has relatively narrow scope and limited accuracy.

I am not convinced that our economy is not a Ponzi scheme or that continual economic growth is necessary or even possible. Our response, on both an individual and societal level, to a contraction would be determined at least as much my our collective culture as it would by the decline in measured economic activity. Given our current culture, I would not bet that our society’s response would be healthy or adaptive. Other, more adaptive, cooperative and cohesive societies could fair much better when faced with the natural ebbs and flows of economic activities.

 

I really enjoy the content of your posts @Mountain Valley Wolf . Not that I agree in totality but they make me think about and sometimes to reconsider my own opinions.

I can't square with reality or history, some people's assertion the immigration is a drain or the it takes people's jobs. You've explained it well, imv. There are those who know there's a whole hill of money to be made by investing in smaller economies and those with relatively lower wages. Some US companies (and others), have effectively migrated to some of those smaller economies. They make a fortune in the process and they help 'lift up' those economies and workers. I suggest that's a good thing.

However, that's a scenario in which the same people do the work, as if migrants to the US, (supposedly taking US jobs), but they've remained in their own country. Effectively, the company has migrated to find workers.

I think the US has a few options, with just one being rational. They can hunker down, restrict migrants and see, at least gradually, companies collapsing, prices spiking and the US becoming a pariah nation.
('no man is an island' and 'a single piece of coal wont burn'). Both spring to my mind.

The other option is to continue to use that workforce but let it relocate to the US. That's migration. They won't be taking US jobs; they'll be working for US companies just as today but living AND SPENDING and in the US.

Much of US problems stem from the education system, in as much as it is one, or its failures.

Too many leave school, thinking or acting as they know everything and through some level of arrogance try to force their opinions as fact, on others.

Too many see life through a binary prism. It's right or wrong; it win or lose; it's all or nothing. That's another demonstration of limited intellect or poor education.

As @Mountain Valley Wolf explained about hos many political discussions, people can have opinions and beliefs, that differ from other people's equally valid opinions.

There's too many people who realise a point of disagreement and on that basis, they trash everything about the other person as though its a "you're on out team or you're on the other one". Actually known as 'othering'.

Thats, neither, good for social cohesion nor making livelihoods better. And whilst many individuals do that, it seems the US, the country, is/has adopted that same naive, self-defeating mindset on a national scale.

America is no more 'great' than the other civilised countries. When Americans visit them, some realise they just have different products, some better, and different values or different ways of living. Some better than in the US.

Isolation is not good for the US. Some bang on about its superiority but, really, its a delusion. The current administration seems fully immersed in that belief of America being supreme. Surprised he's not mad a presidential order naming himself as such.

A couple of things that may waken some up. The United States of Europe, whether called that or living it, is bigger than the US, with over 500million people.

The US is called 'united' when, in reality, it is anything but.

The US may (or may not) have the most military might. Not the most military intellect though. And there are several single points of weakness globally that the current policies ( assuming their is policy rather than whims), show that military might isn't the bog win

Straits of Hormuz - seriously restricted if not actually effectively closed
And theres the Suez canal and Panama canal which if closed hit the US economically Bigly

Isolationism can't work if America truly is to be great. Migration is essentially good and only those who feel threatened by that, consider it bad. That takes this post back to education. And the need for intellect. And the need to respect others instead of looking down at them.