I have not blogged in a while. A lot of my writing this past year has been focused on adding to the Sitebolts content library (https://sitebolts.com/blog/). I was digging around my files the other day and found an old assignment from my Business Conditions class in 2021. The class was focused on macro economic ideas and one of the questions we were asked was basically our personal interpretation of a perfect economy. My (old) take is included below.

(yes I realize this is closer to recycling old content than it is actual blogging….oh well)

There is no such thing as a perfect world. Or a perfect society. This is the reality of life. Yet, there is value in striving for perfection. There is value in analyzing & planning in order to try to reach what could be considered a “perfect” economy & society. Throughout history, many economic schools of thought and perspectives have grown with the goal of achieving this perfection. While perfect tends to be a nebulous concept, there is a case to be made for social welfare to be one of the more grounded frameworks of interpreting what a perfect economy could look like. While still subjective to different interpretations, social welfare is essentially the idea that the success of an economy is not measured simply by GDP or some other indicator of production, but it is comprised of multiple factors including a population’s health, the health of its environment, education, safety, and a host of other key parts of society including production output.

With social welfare in mind as the indicator of an economy’s status on a journey to “perfection”, it is important to break down some of the systems and perspectives that have been used in attempts to increase social welfare. One of the leading schools of thought is the Classicalist perspective, which believes in a self-correcting market and limited role of government amongst other things. Another leading school is the Keynesian, who are more aligned with balance between government and the private markets, and their core idea around the market is that it suffers from issues too large to allow for self-correction. While neither has ever reached a utopian level of success in society, there is strength in ideas born from both schools of thought. I prefer to think of them as tools, with use cases for policies from either side, depending on what the situation calls for. It is my stance that the largest issues preventing our current economy from reaching perfection have called for solutions based on the Keynesian school of thought. Our economy’s plagued by monopoly in the technology sector, a growing wealth gap between the different demographics of our society, & the growing specter of automation in the coming decade. These issues will not be solved solely by a free market and will require a give and take between private industry, government, and general society.

One of the leading factors contributing to the some of the largest growth in both productivity on an individual level and production at the societal level in recent history has been the rapid acceleration of technological innovation. Since the 1990’s, productivity has been increasing by close to 2.5% and lowered labor costs per unit, keeping inflation down as growth has exploded. However, technology has not only led to new solutions, it has introduced new problems as well. In the last 25 years, the creators and developers for the products and systems that have contributed to this rapid shift in productivity have grown to companies and organizations with not only huge physical scale, but also enormous influence on society at large. The largest and most powerful of these companies include Facebook, Amazon, & Google, but they are collectively referred to as “Big Tech”. Their defenders will argue that they have created the most innovative technology that humanity has seen. While true, they have also created monopolistic grips on entire sectors of our economy and stifled competition that would lead to growth in not only production, but in social welfare as well. Monopolies cannot be dismantled by the free market alone, and as such, we need the tension between government policy and the private sector to shift closer to the side of government and overall balance, as it has been entirely favoring private companies in the last couple decades. Examples in monopolistic practices by these firms include purchasing competitors before they get large enough to truly challenge the incumbent & using user data to gain advantages in marketplaces where the firm is both the market operator and a seller amongst others. We should be concerned about these firms for the same reasons we were concerned about the monopolies of the past except in our case, steel, railroads, & banking have been replaced by innovation & software. A successful economy based on capitalism needs aggressive competition at the corporate level, in order to create outsized value and social welfare for individuals. One of the reasons that these companies have been able to grow this large is that our traditional defense mechanisms in antitrust policy have focused on simple price control for consumers and have ignored the modern technical products that are “free” to users and monetize said user’s data as opposed to selling a product at a price. Government policy needs to evolve to the new paradigm of the information age and the monopolies that have been born in it. The free market by itself will not be able to do it. We need new antitrust policy and stronger institutions that can hold their own against these massive entities.

In a similar vein, the growing wealth gap in our society has led to effects that will not be fixed by the market on its own. The very incentives that the Classicalist school of thought tends to base their policies on are what has led to the wealth gap we are facing today as a society. Fraud has increased in the private markets as government influence has decreased and the tax policies that have emerged from their school of thought have created a consolidation of wealth at the highest bracket of our system. Social mobility has been shrinking, and the bustling middle class that has characterized the boom moments in our society’s past has dwindled in the same sense. The idea that lower taxes leads to long run growth in the economy because it leads to greater investment in the economy does not seem hold true when the decision on where to invest is held in the hands of one or two individuals with outsized wealth and influence. It is not a coincidence that some of the individuals who have reached this level are the owners or majority shareholders of the monopolies mentioned above. In my opinion, a more Keynesian take is required in the present situation, with government action & tax policy centered on a more aggressively progressive foundation and balance between the different groups that comprise not only our economy, but our general society. We are more than just poor, middle class, or rich, we are all members of the same society and country and should strive to find value that permeates across all lines. We cannot expect our economy to self-correct or for some benevolent captains of industry to be philanthropic to reach this balance.

The final issue that is pulling us away from the goal of a perfect economy and is predicted to be the largest disruptor to social welfare is the automation of labor that has been accelerating since the technology boom of the 90’s. As mentioned earlier, technology solves many problems, but it creates a whole new set of issues. The issue of automation lies in the idea that at some point, a large percentage of the labor done in our society will reach a limit of how much an individual worker’s productivity can be increased, and so the only natural way that growth will come after that will be at the hands of a non-human, technical solution. Economist & analysts have been focused on this dilemma since before the term “information worker” was coined, but we are rapidly approaching where theory will meet reality. The effects can already be felt, as the earliest effects of displacement has been felt by workers in the manufacturing sector. This is just the first wave, as automation and artificial intelligence will disrupt not just labor focused on physical goods, but also for traditionally stable, white collar sectors such as law and financial services. The massive amount of re-education that will be required for the work force and shift in societal values will not be done by the market itself. Humanity as a species places high value on labor and American society especially has long been characterized by our regard for work ethic & production. What will happen when the work that has to be done by our hands and minds has been minimized from a 40-hour week to a 10-hour day? It is not only an issue of economic factors like labor, but also of mental health. Identities created in our present society tend to be based on professional success or ambition in the workforce. When jobs and careers are disrupted or wiped away entirely, we will have a potential mental health crisis that we are not equipped to handle. We are not prepared for these shifts from the labor perspective either, as the demand for technically skilled and digitally savvy workers continues to expand, but the supply does not. Re-training and life-long learning are not concepts that should be treated as luxuries, but as the absolute bare minimum that is expected of our society moving forward. A perfect economy in the future may not be one with an unemployment rate of 4%, since we don’t even know the jobs that will exist in the next decade. The government must continue to invest in education and as a society, we must begin to start considering “radical ideas” such as UBI even as just experiments to expand our repertoire of policies. It is clear is that our economy is shifting quicker than ever before, and it is naïve to think that it will correct itself in a matter that will account for not just worker’s productivity, but also for factors of social welfare like education, mental health, or safety.

While a perfect economy or society may not exist, it is our role to think critically on how we may achieve perfection. The journey to the perfect economy matters and as we have evolved so has our capacity to not only optimize economic output, but also increase the social welfare of our population. This means that the steps we take towards our goal of a perfect society must solve for multiple factors, not just raising GDP or a similarly narrow objective. There is no perfect school of economic thought, but when looking at the issues we face it is clear that our solutions will come from the concepts found in the Keynesian school of thought. As we move forward, our economy faces monopoly at scale not seen in decades, a wealth gap, and automation of labor that must be solved by the collaboration of private companies and the government, with balance as our goal.