Unsolved Gloom vs. Timesizing®
© 1999-2002 Phil Hyde, Timesizing Assocs, Box 622 Cambridge MA 02140, USA (617) 623-8080 - HOMEPAGE

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The Many Names and Faces of the Economic Puzzle

The Economic Puzzle has many other names and faces -

1. "The Economic Problem" - title of a book by economist Robert Heilbroner (3rd Ed.,1972 - Prentice-Hall: Englewood Cliffs, NJ). The habit of thinking of economics in terms of "problem" rather than "solution" started with Malthus (see below). It was what moved Thomas Carlisle to dub economics the "dismal science." The economic problem is often identified in standard economics as shortage or scarcity, as in Heinz Kohler's 1968 introduction to economics titled "Scarcity Challenged." But shortage is not the economic problem, it's the economic tool that every well-off profession or skill-group uses to keep its pay high and its lifestyle comfy. American nurses, fed up with long hours for low pay, have just created a shortage of their skills by closing down most non-degree hospital nurse-training programs, forcing any would-be nurse to spend more time and much more money on a university degree program. But some of these well-off professions take considerable trouble to keep other skills in surplus and away from shortage. For decades, physicians, for example, succeeded in doing it to nurses - until just recently. CEOs, on the other hand, are still doing it to almost everyone by introducing work-saving technology followed by layoffs instead of hourscuts, and by shifting jobs to over-populated, desperate, low-wage nations.

2. "To him that hath, more shall be given, but from him that hath not, even that which he hath shall be taken away." This is how Jesus of Nazareth captured the economic puzzle - an early version of our own familiar "the rich get richer and the poor poorer." It focuses on what happens to the individuals in each case.

3. In astrophysical terms, it may be said that the centripetal (gravitational, concentrational) forces upon wealth are stronger than the centrifugal forces, despite the rhetoric of trickle-down (i.e., in Buckminster Fuller's terms, "trickle-out" - from the center, bearing in mind that in the economy there are many concentrational "centers" just as in a solar system, there are many gravitational centers).

4. The standard economist's name for it is the marginal efficiency of wealth (or the diminishing utility of concentrated money at the margin). This is still an extremely under-discussed and under-researched aspect of standard economics. Phil Hyde has expressed it like this - a million dollars in the hands of one man works a lot less hard in terms of providing employment than a thousand dollars in the hands of a thousand people, or indeed, any smaller division of the amount. FDR put it this way in 1934, "Ninety percent of our people live on salary or wages, ten percent on profits alone....People in this country whose income is less than two thousand a year, buy more than two-thirds of all goods sold....If these people are not assured of an income, the goods produced cannot be sold." Nor can the jobs involved in producing the goods be maintained. (FDR quote from p.316, Will Rogers - A Biography by Donald Day, published by David McKay: New York, 1962.)

5. "Scarcity." Many economists, such as Amherst's Heinz Kohler, capture the economic problem in this one word. *Buckminster Fuller also targeted scarcity and the stupidity of running the world on a scarcity basis. Another engineer, Arthur Dahlberg in his super-thesis masterpiece, Jobs, Machines and Capitalism (1932), got more specific - he said we should quit running our economy with a scarcity of jobs and business opportunities and switch to running it with a shortage of labor, for whom jobs and business opportunities would be plentiful (the shortage was to be engineered by cutting the workweek to 20 hours). Scarcity of jobs and business opportunities is exactly what you would expect in the context of concentrated wealth because the rich have too little time to spend their astronomical claims to wealth, ergo the "marginal utility of wealth" aka the inefficiency of the state of concentration. In other words, it does not matter how rich a country is in terms of absolute amount of wealth, however astronomical - if 1% of the population owns 99% of the wealth, that country is still a miserable, dirt-poor, third-world nation. See Kohler's book, "Scarcity Challenged - An Introduction to Economics" (Holt, Rinehart & Winston: New York, 1968).

6. How do we split apart "political economy." With its stress on rhetoric and diplomacy, politics will always be an art, despite the unrealistically named "political science." But economics has a chance of moving to a hard-nosed scientific basis along the lines suggested by its founder (no, not Adam Smith), Sir William Petty, the title of whose masterpiece says it all, "The Political Arithmetick" (1690). Petty was a statistician (like W. Edwards Deming, the postwar savior of the Japanese economy). How do we get politics out of economics, and politicians out of the economy? Economists have been trying to do this by simple-mindedly quantifying everything and developing econometrics far beyond all its qualitative underpinnings, but those quantitative underpinnings are precisely the problem. Their narrowness and vulnerability to blind, narrow, and short-sighted self-interest are precisely the problem. They are making maximum investments of time and energy at points of minimum return. They cannot forecast much longer than 25-30 years (one generation) with any confidence because the qualitative aspects of the economy change enough to make key economic variables as currently defined irrelevant. Witness our current outdated unemployment rate.

7. We've nearly completed the separation of Church and State, of religion and politics. How do we build on that and separate State from Market?

8. How do we establish economics on a solid engineering basis, as both engineer Herbert Hoover and the man he should have listened to, engineer Arthur Dahlberg, wanted?

9. How do we get our economic technology caught up with our computer technology? Clearly this takes automation and cumulatively improving programmed balance rather than error-prone, politically vulnerable, necessarily repeatable acts of discretion.

10. How do we make economics a fitter tool for ecologists than for politicians?

11. "The marginal utility/efficiency of wealth" - this is the basic identification of the core problem à la standard neoclassical economics. In other words, when it comes to wealth - the more concentration, the less circulation - and v.v. This version focuses on what happens to the "velocity of money" and by implication, general domestic markets. This area is carefully neglected in standard economic research, which has tended to jump to quantification and make a maximum of investment at points of minimum return.

12. "An unknown theory of dynamic economic equilibrium." This is how Keynes' mentor, Alfred Marshall, thought of the economic puzzle. Marshall (1842-1924) "made many original contributions to static equilibrium theory and yet hankered all his life for a dynamic theory that he was unable to produce...." This is reminiscent of John Kenneth Galbraith's search for the great economic synthesis (see below) and of Albert Einstein's search for the unified field theory (which we also have in a simple, elegant, and blindingly obvious version, but we will not be announcing this until a couple of weeks before the November election). Marshall even goes "so far as to claim that biology and not mechanics is 'the Mecca of the economist.'" Mark Blaug, Great Economists Before Keynes (Wheatsheaf Books: Brighton, England, 1986), p. 150. Timesizing® constitutes a description of a near-term dynamic equilibrium theory where, by design, the length of the workweek (and therein an automatic trigger of reinvestment in human capital) varies inversely with the comprehensive unemployment rate. Timesizing thus provides a dynamic equilibrium theory based on the model of biological (specifically, physiological) homeostasis. The deep-structure design of timesizing provides for the successive fine-tuning of the equilibrium by mapping the predefinitions and regulatory phases from the employment-per-person dimension (timesizing proper) onto more general variables such as income-per-person (moneysizing1), thus providing longer-term dynamic equilibrium theories. (Here, each "term" may last as long as a century and the "fine-tuning" is propelled by rising public expectations relative to living standards or quality of life.)

13. John Kenneth Galbraith expressed the economic puzzle as follows in the somewhat wistful last segment of his 1976 TV series, The Age of Uncertainty: "We remind ourselves of the number of people who are still poor in the poor countries and also in the rich. We reflect that, two hundred years after Adam Smith, economists have achieved not the control of inflation, not the prevention of unemployment, but the ability to have both at the same time" [i.e., "stagflation" - ed.]. The TV series was written up in a book by the same name and published by Houghton Mifflin, Boston in 1977 (this quote is on p. 324.)

14. Other economists have referred to the economic problem as the "Malthusian trap" since its roots go all the way back to 1798 and Parson Thomas Malthus. It was he who, in his "Essay on the Principle of Population," explained scarcity by the tendency of human population to outgrow its food supply. He compared population growth to a geometric function (2, 4, 16, 256,...) and food supply growth to a merely arithmetic one (2, 4, 6, 8,...). Malthus gives us two points of in the ultimate balance: population and food supply.

15. Here's another "take." Business wants something for nothing. It wants to produce stuff to sell without producing people to sell it to. It wants government to take care of that - without taxes. Yes, business wants government to supply the people to buy everything it produces - OR for government to buy it itself - without taxes. Business is near-sighted and short-sighted. It whines about big government and taxes. But by ignoring the need to maintain its own markets - indeed, by shrugging that task off onto taxpayers - it pushes the center of society from the private to the public sector and shrinkwraps itself in red tape.

16. And another. As it is now, [industrialists] are just manufacturing dice for Wall Street to shoot craps with. -- Will Rogers

17. Here's a new wrinkle on the economic puzzle:
    1/04/2000  Uncertainty follows 1999's broken rules, Boston Capital column by Steven Syre and Charles Stein, Boston Globe, C1.
    Stock prices and interest rates are supposed to work like kids on opposite sides of a seesaw: When interest rates go up, stock prices are supposed to come down. In 1999, this relationship broke down. Interest rates rose steadily all year, but stocks shrugged off the news and turned in another spectacular performance. Could the same thing happen in 2000 or is this the year reality, and interest rates, start to bite. "That is going to be the dominant question for the market in the first few months of the year," said Jim Weiss, chief investment officer for equities at State Street Research....
    [The real questions are: why did this corelation happen in the first place, and why has it stopped now?
    This situation is parallel to the breakage in the mid-1970s of the seesaw between inflation and unemployment.]