Economic Theory

Posts since about the new year have contemplated the new year the new you and the events of the day as they unfolded.  I still ponder events and the direction I should take my life.  Retirement is on the horizon I seem to work now simply to put money aside for the time my income is reduced and possibly fixed. I joke that I am financially secure as long as I don't plan on spending money.  This post focuses on a particular subject I am interested in.  That subject is economics.  I am not a PhD in economics.  I cannot quote economic theories and the originators of the theory.  Such as " I follow Keynesian Economics"  I really have no idea what that is.  You can google it and memorize it to impress your friends.  I do have an MBA so I have spent some time in a classroom learning micro and macro things.  Most of my memories of the the classes involves an economic professor butchering the simple mathematics of cost elasticities graphs.  It was simple calculus Mr. Professor.

Before I get to into it let me introduce my economic self.  I believe in free markets.  I believe that a business should be able to optimize its return on their investment.  Without free markets and people willing to take risks innovation perishes and we would all be in a bad way.  I guess that makes me a republican.  However at the same time we need good governance.  Laws are needed to protect people, the environment and yes our economy.  To some now I've become a RINO (Republican in Name only).  The radio next to me is tuned to NPR.

So here it sit in my little backyard workshop (I am building a table to sit next to my smoker).  My shop is pretty typical for most amateur carpenters.  I look at the tools that hang on the peg board.  Some tools are close to 40 years old some are new enough to have been amazon purchases.  On the self below an array of power tools.  Basic power tools nothing really fancy.  The most elaborate power tool is my miter saw.  It was great for making the table.

My economic mind begins to try and understand all of the inputs that went into making the item.  My hammer is made from some metal (iron? steel?).  Where did it come from?  The grip is rubber like substance.  Synthetic Rubber is usually made from oil, pure comes from trees.  Who put it together?  Was it a machine or was it put together by hand?

The nexus for this questioning is a need to feel that I deserve this item.  Deserve is probably not the correct word.  I would like to know that when I purchase an item that all of the inputs have been properly priced to deliver the desired level of quality.  Am I getting what I paid for.  If it is too expensive I may choose not to purchase the item.  From an economic perspective I am more concerned if the price is too low.  What?

That is right too low.  If an item is the desired quality and it is priced too low I feel that one or more of the inputs have been exploited.  This is the economic phenomena I am interested in.  The main outcome of this would be sustainability.  If a single input of a product is being exploited and would that not put the entire system in jeopardy?  If we mine all the iron ore and there is none left it would be difficult to continue making hammers.

When you search on line for economic exploitation you get 3 basic responses.  You will get text book definitions, very high profile examples of sweat shops and forced labor, finally a newer field of the psychology of consumerism and forced labor.  For the last one do a google search for

"sweatshop labor is wrong unless the shoes are cute"

 I am not really interested any of these topics.  I am more interested in the degree of exploitation that slowly creeps up on us.  It slowly seeps into the economic inputs until a product cannot be delivered anymore at any cost. 

I call this micro exploitation.  Small and incremental exploitations begin to build and create an unstainable system.  I guess I will start researching.