Misunderstanding the Economy

I would like to challenge the claim that universal health care and new energy are bad for the U.S. economy, that they are liberal projects motivated by political greed and consequently that they are fatal to our fortunes. This belief has been compelling for so many of my more conservative friends. I know this claim probably doesn’t need to be challenged by lowly old me, a lay person, but I think that if I can make a common-sense argument against it, perhaps this will be more persuasive than a nuanced, expert opinion that someone could claim is influenced by political or financial motives.

The argument as I hear it in its most recent form, alongside the president’s attempt to remove environmental regulations, is that regulations lead to the elimination of coal workers’ jobs and other jobs linked to fossil fuel industries, and therefore environmental regulations are detrimental to the U.S. economy and the life of Americans. The fatal flaw in this argument becomes visible once we look at what a strong economy is and how it creates jobs.

Jobs are created wherever there is a demand for labor. Since there is always a demand for energy, there will always be a demand for energy-related jobs. Whether these jobs are in the form of mining the land for coal and gas, or developing, installing, and maintaining solar panels and windmills, the fact remains that there will always be a demand for energy-related jobs.

This fact destroys the argument that we need to eliminate environmental regulations in order to “bring back” jobs and strengthen the economy. So why, then, does the argument compel so many people? There are a number of factors that might make people susceptible to this fallacious argument. The first would be that we do not want to train ourselves for these new jobs, or that we do not know how to train ourselves for these new jobs, or that we are too lazy to train ourselves for these new jobs. There is also the psychological factor that this kind of adaptation to new jobs and training might mean a new lifestyle or a new location, and these kinds of changes are not easy for many of us to handle. Finally, there is the fact that we might be monetarily invested in the old energy production, and so switching to a new means of energy production would mean a loss of profit.

It seems that what is working against our sound reasoning is a lot of psychology. It’s difficult for us to adapt, to move to new places, to engage in new training, to make new investments. Workers need to be encouraged that these changes could lead to great new lives — new jobs, more income, a renewed pride, new intellectual challenges — the same exhilarations that our ancestors enjoyed as they came to the United States, or moved west, or engaged in the industrial revolution. As for the investors, they need to be encouraged that the money they have made in fossil fuels will enable them to get in on the ground level of investment in new energy, thereby opening them up to a whole new world of profit.

The same sort of mental block exists in the realm of health care as well. Many people are worried that an increase in the number of people covered by health insurance will lead to more expenses, longer waits to see doctors, and an overall congested health care system and burdened economy. But again, if we look at the principle of economic demand, we can see that an increase in health coverage will only lead to a better economy. Insuring more people will cost more money. But it will also create a demand for more health care providers — doctors, nurses, physician’s assistants, orderlies. These new jobs will translate into more people with income, income that they will spend on houses, cars, food, clothes, and vacations. This spending will create a lively and robust economy with plenty of money to go around.

In the end, what these mistakes come down to, in addition to the kinds of psychological factors I listed above, is a misunderstanding of how the economy works. Looking strictly at the health of an economy (putting aside considerations of the environment, or our quality of life, for example), all that matters is the movement of goods, and services. As long as things are moving, the economy is strong. Whether this movement involves gas, coal, and a few health care providers, or solar panels, windmills, and a lot of health care providers, does not matter. What matters is the movement of goods and services. In fact, the only thing that is bad for an economy is stasis. For example, something that would be detrimental to our economy would be the hoarding and hiding of money, especially in off-shore bank accounts.

We don’t think of the amassing and hoarding of money as a detrimental thing, and I think this has to do with psychology too. I am not referring merely to the high place in our value-system that we have assigned the ideas of becoming a millionaire or a billionaire. That also plays a part. What I am referring to is the way in which the existence of money, the concept of it, dupes us into seeing money as something other than a good or a service.

Money first existed as a tool of exchange. Rather than bringing my beans to market to trade with your eggs, we could both exchange our surpluses for money, and we could use that money to buy the things we needed when we needed them. Money quickly become something other than a tool of exchange, however. It soon duped us into thinking it was a commodity itself, that it is something we want to amass for its own sake.

This misunderstanding of money is what I believe has duped us into seeing the economy as what is called a “zero-sum game.” In other words, we see the economy as a game in which there must be winners and losers, and in order for me to be a winner, someone else must be a loser. But if we again look back to what a healthy economy is, we will see that it is not a zero-sum game. If I grow twice as many beans as I need, and your chickens produce twice as many eggs as you need, and I trade you my extra beans for your extra eggs, then we both come out as winners. You and I both increase our quality of life by trading our surpluses.

It’s kind of silly, but if we use our imaginations to see through the illusion of money, we can avoid this mistaken understanding. For example, as a teacher, I am an hourly worker who trades his expertise, knowledge, and time for a certain amount of money. But what if I imagined that I were trading this knowledge and time for goods and services? For twenty hours a week, I will teach the children of the people who built my house. For ten hours a week, I will teach the children of the people who grew the wonderful food I eat. For five hours a week, I will teach the children of the people who own that extra house on the beach, so that I can take my family there for a week in the summer. And I will teach five hours a week to anyone who doesn’t have anything I need, as community service. How ignorant would it be of me to hoard and hide some of those hours of teaching? What would I gain by sitting in a room by myself, improving my knowledge and teaching expertise, and not using it to anyone’s benefit? What would I gain by that? Isn’t it obvious that my knowledge, expertise, and time would just die there on the vine? And yet this is precisely what is happening to money that is not put to good use, and to time and labor and potential expertise that is being wasted while we grieve for the jobs of the past instead of engaging the jobs of tomorrow.

If we could see that money is a kind of surplus good or service, something to be spent and traded rather than to be hoarded and hidden, then our economy would move again. We would courageously invest in products and services both new and old. We would see that our economy will flourish whether we invest in fossil fuels and in illness, or in new energy and in health care. Given this choice, what would you choose?