Towards a new economic model

The year is 1986 and a young MBA student at Georgetown is listening to a Lecture on macro economics and market economies.  The noted professor has just finished explaining that excluding certain unquantifiable variables, the models attributed to Friedman Economics can predict market cycles and provide the insight necessary to adapt conditions to those favorable for growth and stability.

The student, innocently enough, poses the question: “Can’t we make any model work if we exclude the variables that don’t fit?  Moreover, social welfare, quality of life, community dynamics and happiness are not simple, optional variables to be discarded so easily.” The student is asked to leave the class, only to return when he learns respect.

Fast forward 33 years.

The student is now an experienced investment banker, market economist and journalist…and he still has the same questions.  How can any economic or market model exclude 50% of the values we hold important in our lives?  How can we accurately judge the cost of constant growth models if we do not consider intangible factors negatively impacted?

A case to consider: the majority of families in the western world include two working parents.  With the shops and their supporting services open 14 hours a day and seven days a week to satisfy consumer spending at any hour on any given day, in many cases these parents have completely different work/home schedules.  Children are left to build their own community separate from a nuclear family unit.  Those same children find refuge in their rooms (obviously, since everyone else is busy) often spending hours on the internet in vitrual communities.Parents don’t know what the children are doing and children don’t understand what there parents must do to maintain a family.

The weekend community activities of the past no longer have housewife’s to maintain their cohesion and often one or both parent is working for all or part of the weekend.  The mall becomes a community center requiring more labor and compounding the issue.  Social problems due to a lack of community education, cohesion and values break down…personal isolationsim increases, people seek quick relief from discomfort through spending or substances and egocentrism becomes the norm.

What is the real cost to society of consumerism, constant growth and variable work schedules? Without a model that is as complex as weather prediction and understands that the butterfly effect is even more true in this context…we will never be able to solve the current endemic financial instability that is currently plaguing all developed nations.  The model is broken and always has been…the effect of that flaw has taken time to compound into critical collapse.  Saving the model through government debt and intervention will only prolong the damage and augment the ultimate price to be paid.

A new model based on complex, adaptive networks and valuing intangible economics must be found that allows for equilibirum economics not constant growth.  Resources are not unlimited, labor is not merely an input resource and intangible culture is not merely a history lesson.