This is a follow-on from yesterday when I suggested that economics could benefit from more of a qualitative take on things. And not just because most economists have failed to get things right lately. Nothing much new there. No, this is about a more fundamental problem. The very definition of “the economy”.
Economics, as defined in most basic textbooks, is about the allocation of resources, REAL resources. It is not about the allocation of money, or the Gross National Product, or how well the DOW is doing, or even job losses. But these measurable things have become what we understand by economics. The “Economy” has become about what can be counted. What can’t be counted, according to economists, simply doesn’t count.
Gross National Product, the yardstick of economic growth, only takes account of product that has a defined monetary value. If I buy and eat a can of Campbells Tomato Soup from the store, then the price of that can becomes part of GNP. It is a consumable. But if I make soup from tomatoes that I grew myself, simmered in rainwater in a solar oven in my backyard, nothing counts. Not my labor, not the ingredients, not the energy used to cook the soup. And yet, I am still nourished. I still consume.
Ok, this is an extreme example. But you get the picture. And as consumers pull back, as they begin to adapt to shrinking incomes by doing more cooking, gardening, childcare, home repairs for themselves, we will see a shift from the market economy that measures everything in money to this “other” economy that is not easily measured. And if we expand our definition of “the economy” to include these real unmeasured consumables, then things may not feel quite as dire.
photo: thanks to sonicwalker on flickr
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