What is the purpose of an economy anyway?

I heard a reporter on a recent Economist podcast say that, in light of the growing UK economy, creating jobs is a good thing.

It seems to me that creating jobs is not only a good thing, creating jobs is the thing. What other purpose is there for an economy?

Here’s what I mean. An ‘economy’ is a kind of meta-thing that emerges whenever two or more people get together and decide that working together to meet everybody’s needs is more efficient than everyone trying to each meet 100% of their own needs (like, say, some kind of off-the-grid survivalist). Economies emerge in all kinds of places: prison economies, school-yard economies, national economies, global economies. In part, Wikipedia defines defines an economy as follows:

A market-based economy is where goods and services are produced and exchanged according to demand and supply between participants (economic agents) by barter or a medium of exchange with a credit or debit value accepted within the network, such as a unit of currency.

The key phrase here is according to demand and supply between participants. ‘Demand’ is the economist’s word for what people want, need, and are willing to pay for. ‘Supply’ is what people produce or offer to other members in the economy in exchange for what they want and/or need.

In other words, an economy is simply the exchange of stuff between people so that we can earn our livelihoods to buy the stuff we want. And therefore, the purpose of an economy is to make the whole exchange-stuff-so-that-we-can-enjoy-life thing possible. That means, at it’s core, an economy must be about creating jobs. Without jobs there is no demand. Without demand, you got nothing — no interdependency, no scale, no efficient use of labor, no economy.

Similar Posts

  • Consumers Go On Strike

    As the economy continues to sour, consumers have gone on strike. For the past few months, I have been contemplating the following economic and social trends that seem to explain why.

    • American productivity has risen almost 20% in the last decade (Source)
    • Real median income over the same period has declined (Source)
    • Executive compensation has risen astronomically (Source)
    • Consumer debt has risen substantially (Source)
    • Consumer spending comprises 70% of GDP

    Rising productivity is what enables companies to increase employee’s pay. Increases in pay result in the overall rise in our standard of living. However, in the last decade, this relationship between productivity and rising employee pay seems to have been fractured.

  • Be Interesting

    If it weren’t for the rocks in its bed, the stream would have no song.

    Carl Perkins, Rockabilly pioneer

    I have been hesitant to post this quote because of its inclination towards banality. I mean, come on, how corny is “the stream would have no song?” But there is an underlying wisdom to this rockabilly adage. We do not grow if we are not challenged.

    Lately I have been intrigued by the idea of what makes people interesting.

  • FedEx Trumps UPS

    A few years ago Book of Joe inspired me to open a personal FedEx account. His logic was impeccable and extremely practical. Since then I have shipped numerous packages enabled by the wonderful tools on my account at the FedEx web site. Some of the outstanding features include:

    • Create the order online.
    • Print the shipping lable.
    • Send emails to yourself, the recipient, and any third party when the item is picked up, delivered and if there is any interruption in the delivery.
    • Track your shipments based on your account history.

    A few weeks ago we moved to Chapel Hill, North Carolina. …

  • Redefining WMD

    MSNBC ran the startling headline this morning: Man arrested near Capitol faces WMD charge. How intriguing! Was a criminal mastermind skulking through the streets of DC with a nuclear bomb in his trunk?

    [The suspect] tried to manufacture a “weapon of mass destruction, that is, an explosive device capable of causing multiple deaths or serious bodily injuries to multiple persons, or massive destruction of property,”

    At the height of the Cold War, “weapons of mass destruction” meant nuclear warheads that were capable of eliminating broad swaths of humanity with a single explosion. With the onset of the “war on terror” we expanded WMD to include bio-weapons that could infect the water supply for an entire city or chemicals that could poison the air of a local community. …

  • Just Be

    Sometimes the best thing we can do is to stop “doing” and just be. You don’t have to “be” anything. We don’t have to “be” quiet, or productive, or useful, or nice. Just be.

    In his brilliant album that gave music and lyrics to Richard Bach’s Jonathan Livingston Seagull, Neil Diamond wrote:

    Be, as a page that aches for a word that speaks on a theme that is timeless.

  • Man on Wire

    When I see three oranges, I juggle; when I see two towers, I walk.

    — Philippe Petit

    I watched the wonderful documentary Man on Wire last night. It is the inspiring story of Philippe Petit and his lifelong passion to walk a tightrope between the twin towers of the World Trade Center. His dream began even before the towers were built and culminated in a 45 minute walk in the sky on August 7, 1974. The film is especially bittersweet with all of the behind-the-scenes details of the twin towers, knowing their ultimate fate.

    Philippe’s quote above was in response to the incessant pleas by the press for an answer to “Why?” There is no why, he insisted. When he sees oranges, he juggles. When he sees two towers, he walks.

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.