Concerning Economic Value and Growth

Value, in terms of economic and financial growth, can only be created in a society up to a certain point.  I believe that the aggregate demand function for a society is, in fact, nonlinear just as everyone’s individual demand curves for goods and services may also be nonlinear.  I believe that they start off going up exponentially.  But I also believe that, as the diminishing marginal utility kicks in, the curve evens out or maybe goes down, possibly spiking back upward at a certain point (depending upon the good or service in question).  It makes sense to say that demand may shift from goods, as people come to a limit of the amount of stuff that they can want, and moves into service and services, as people demand the already excellent products delivered in a more effective and customer friendly format.  As such, the market will slow down in growth, unless costs can be cut in production (this may be rendered moot, as we’ll need to pay people from the profits to have demand if there is a permanent loss of jobs), or unless new technology and methods of production can be explored and invented.  This can create a cycling of products as goods become obsolete and new ones come into being.  However, and this is critical, people need to be able to spend, innovate, and buy the new products and services, in addition to have enough savings to sustain themselves through shocks and retirement.  As such, we have a dynamic flow happening in the market where growth will naturally even off, bound by technological limits and the environmental resources needed to support.  This carrying capacity is about as close to a macroeconomic equilibrium as we will likely get.  It will be highly sensitive to external and internal shocks, and there will be periods of oscillating around the carrying capacity as people see that there’s no more room for money production, divest in the economy, and then cycle back up as they find that there is room for “growth” again.

It should be pointed out that this is not absolutely likely to happen, especially if wealth is more equitably distributed and more agents have a greater capacity to innovate, spend, invest, and save in the market economy.  By democratizing the economy through wealth redistribution, many other goods, services, and innovations may happen which can destabilize the existing social, political, economic, and environmental systems.  This can be a bad thing, in the sense that we get destructive goods, services, and innovations which hang around and wreak havoc in our societies and environments.  It can also be a good thing as we get new products, services, and innovations which are more healthful and helpful to us.  It will be critical to link peoples’ costs and benefits to themselves as individuals, in order to ensure that they select those goods, services, and innovations which are healthful to society.  Should that not be possible, the government may have to intervene in the market to encourage people to avoid negatively affective products and services and take up positively affective ones.  The goal is to preserve the actual (not perceived) health and well-being of society for the individuals’ who live in society’s sake.  Anything short of that leads to problems in the society and for the government in question who would, accidentally or purposefully, harm the society and the people who live in the society.

Therefore, we are left with a picture of a dynamic, flowing economy with multiple possible and highly fragile equillibria.  Some of these quillibria states are more beneficial for the society and for all the individuals in the society than others.  It is the government, through its power to create and enforce laws in the society, who determines the legal and social environment in which the market comes into being.  The environment also has a powerful check on market growth in terms of its size, nature, and composition.

See on Scoop.itIt Comes Undone-Think About It

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