Economies fail when we confuse means and ends

⭐ Robert Jameson
Jan 25, 2019 · 5 min read

(Introduction to Economics, Lesson 21)

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A lot of economic activity is not an end or an achievement in itself — it is a means rather than an ends.

We build cars and fill them with fuel. This, however, is not, in itself, much of an achievement. The achievement comes when we do something valuable with that car and that fuel. You might use that car to get to work — but that still isn’t a meaningful achievement. Whether you achieve something will depend on what you do at work.

Suppose you use your car to get to the factory where you work making computers. Still, we haven’t really achieved anything. Whether we’ve achieved anything will depend on what those computers are used for.

Suppose that some of those computers are used in a marketing department for a cola company. Still we haven’t achieved anything. Even if that marketing department successfully manages to convince some people to buy their cola, we’ve probably achieved nothing of any real economic worth, because the consumers of the cola would probably have been better off drinking water anyway.

Suppose, however, that some of the computers you made are used by the design department of a toy company. They use them to design some toys that eventually get played with by children. The children enjoy playing with those toys. Perhaps now we have actually achieved something worthwhile. A child’s enjoyment doesn’t have to be justified by what it will lead to or result in — it may be considered to be a positive result in itself.

However, we would then have to look at the huge resources that went into developing, manufacturing and distributing that toy — and ask if those resources could actually have been used in a different way and produced even more enjoyment as a result.

For example, there would be a lot of parents involved in the production process of a toy — either designing and making the toy itself, or building and maintaining the factory it was made in, or making the computers or machinery that are used in the factory and its offices — and so on. Perhaps we could have brought a great deal more enjoyment and benefit if those parents had simply stayed at home and spent time with their own children.

So, it is important to repeatedly remind ourselves that a lot of ‘economic activity’ simply enables other economic activity to take place, but does not, in itself, produce any real achievement — and may well not, in the end, even so much as contribute to any real achievement.

In addition, a lot of the ‘economic activity’ our politicians rejoice in is actually just maintenance activity. It is about maintaining our infrastructure, maintaining our equipment and maintaining the skills of the population. It is about standing still rather than getting anywhere. Roads are mended and cars are serviced. These may be important tasks, but they are ‘standing still activities.’ They just keep us where we are. This doesn’t mean this activity is wasteful activity, but it is only really useful if these maintenance activities do eventually lead to something important actually being achieved.

In order to judge the value of an activity, it makes sense to ask what that activity was or is supposed to achieve. What was the ultimate objective? So, what is all our production leading to? What should it be leading to? What is the point of it all? This is where we could go off into a long debate as to the meaning of life. Should we be seeking scientific advancement, to do good deeds or just to have a good time?

Clearly, we’re not likely to all be able to agree on what the ultimate purpose of all our work is supposed to be — it will be different things to different people — but surely we ought to be achieving something? We shouldn’t just be blindly making one thing so that that thing can help us make something else which helps us make other things and so on. What is to be the end product of all our rushing around?

The trouble is that, in our constant mithering about the state of the economy, it can be easy to forget that the economy is supposed to be achieving things — achieving various things that we, collectively and individually, consider to be important and of value.

We spend vast amounts of energy supposedly trying to measure the value of all our economic activity. We then spend even more energy obsessing about the statistics we produce as a result. Yet, how can we meaningfully measure the value of all our economic activity if we haven’t thought about what all this activity is supposed to achieve?

Mankind is a remarkable species and has achieved many great things. We have learnt to fly, split the atom, begun to unravel the secrets of evolution and genetics, travelled to the moon and created music of a standard that would possibly impress even the most advanced alien species.

There is, however, so much more left still to achieve. There are many huge problems and great challenges that lie before us. We have poverty and disease to eradicate. We have to learn to look after the planet we live on. There is so much more we can learn about science and technology and art. There’s a lot of space to explore. Rather pathetically, we haven’t set foot on another planet yet, despite having Mars so conveniently near by!

Taking on many of these great challenges often comes down, essentially, to a problem of resource allocation. To get great things done, sufficient amounts of the right resources have to be allocated to the cause. Today’s scientific advancements are the cumulative result of hundreds of years of studying and research by many millions of people — not just in science itself, but in developing advanced communication systems, such as the English language.

The advancement of mankind is, in one sense, a great project in resource-management — and when resources are wasted on things that do nothing to advance mankind, that is a great missed opportunity. If we waste our resources and fail to allocate them wisely, the advancement of mankind will be slowed or brought to a halt. Indeed, our society might even regress if we don’t allocate enough resources to advancing or even just maintaining it. Some people would even argue that this is already happening — as we waste our time and resources chasing empty dreams of economic growth with no purpose.

It is a very fashionable disease — especially amongst politicians — to obsess about economic activity for economic activity’s sake, without ever really stopping to properly consider what all this economic activity is supposed to achieve. People with this disease fail to distinguish between means and ends, get confused and start regarding means as ends in themselves. It is the job of a skilled economist to be constantly aware of this error, to avoid it and to encourage other people to avoid it. We can then concentrate more of our efforts on actually achieving things of real value.

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