A Simple Lesson in Economics

Ok, clearly we are in need of a simple lesson in economics. Even though our economy is full of businesses and individuals, running an economy is FUNDAMENTALLY DIFFERENT from running a business or running your personal finances.

From the perspective of a business or individual, income and expenses are COMPLETE OPPOSITES. Income is money coming in, while expenses are money that is going out.

From an Economic perspective, income and expenses ARE THE SAME THING. One person’s income is ALWAYS another person’s expense.

Because people mistakenly believe that the economy should be treated like a business, they are constantly being misled into pursuing economic policies that are doomed to fail.

In general, the Republicans mistakenly believe that we should try and lower expenses in order to improve our economy (i.e. cut taxes, reduce government spending, decrease corporate expenses, etc.). But you cannot decrease expenses without also decreasing somebody else’s income.

The Democrats mistakenly believe that we should simply try and raise incomes for the middle and lower class (i.e. raising the minimum wage, increasing spending on social programs, etc.). But you cannot raise incomes without raising somebody else’s expenses.

THE ONLY THING THAT CAN TRULY GROW OUR ECONOMY IS PRODUCTIVITY!! Unfortunately for all of us, most people are obsessed with things that have nothing to do with productivity (prices, taxes, profits, incomes, etc.). Thus our productivity growth has been very lackluster for several decades now. The only way to turn our economy around is to get everyone focused on the only thing that truly matters: PRODUCTIVITY!!

Please share with friends and family so we can restore some level of sanity to our discussions about the economy J