Economic Multipliers (5)

Do you know what these are?

Economic multipliers determine whether we CREATE wealth in systems.

I just finished reading The Foundations of Non-Equilibrium Economics: The Principle of Circular and Cumulative Causation (Sebastion Berger, Ed., Routledge, London, 2009). For a theoretical economist, this very enjoyable book would be 'light' reading because it is a summary of the works of a LOT of other people.

Sebastion Berger might not agree with me but I believe I can sum up the whole book in one sentence (for those of you who would tend to say: 'gag me – who'd want to read a book like that?') Now appreciate, when I summarize it, you still might say 'gag me' – so – be patient.

The summary: 'If all of nature and organization tends to be entropic, all economic systems and applications / ideas follow a path of degradation leading to reduced economic multipliers.'

For those of you unfamiliar with the term 'entropy,' let me enlighten you because it's a FUN term that explains a LOT of things.

My New Oxford American Dictionary defines entropy (the physics portion) like this: 'a ... quantity representing the unavailability of ... energy for conversion into mechanical work, often interpreted as the degree of disorder or randomness in the system.' They note figuratively that it is the 'lack of order or predictability' – the 'gradual decline into disorder.'

To put this book in layman's terms: 'Houses tend to get messy.' If you care about whether you have a messy house, you have to figure out a way to keep it clean.

Economic systems are like that. A great idea today that creates a LOT of wealth for a particular generation (or a particular nation) may not have the same economic value (in terms of building bases of wealth) for the next generation. We have to constantly pay attention to how our actions are BUILDING bases of wealth – not just for ourselves but for future generations.

This is particularly critical because the population in the world tends to INCREASE. I once wrote: 'we must create new wealth to accommodate a rising population (new people) or on the whole we all feel poorer.'

I've always thought that I tend to err toward the lazy side (although I don't consider myself to be lazy). As a result, I will tell you the three things I believe people, businesses, communities and nations cannot go wrong on (even in the midst of 'entropy') when they invest in 'things' if they care about BUILDING those bases of wealth:

    • education which teaches people HOW to do things

    • books and technology which teach people HOW to do things (readily available in communities in ways where people are not 'locked out' of the knowledge if they are motivated)

    • tools and resources which allow people to DO things

Now 'entropy' is in many ways about laziness so I've decided to create a photo album dedicated to 'laziness.' There isn't much there yet (and I hope every single idea is seen as 'wealth creating'). The first photo is merely a picture of an artificial flower basket for a person who would have difficulty keeping a bed of flowers maintained in a well-maintained neighborhood. (You keep your neighbor's property values up if you maintain your own property ... THAT is a piece of wealth creation and retention).

Artificial flower basket: (OPEN)