Home Economic Trends Genuine Recovery Is Up to Investors, Producers, and Consumer Choice – James...

Genuine Recovery Is Up to Investors, Producers, and Consumer Choice – James Anthony

So-called recession and recovery are false metrics. The falsity comes from focusing on the total earned by all people, not the total earned on average by a given individual.

If in total, people earn one percent more, but in total, the population is two percent more, then on average a given individual earns one percent less. On average, a given individual is in a recession if the total earnings per person are decreasing. On average, a given individual is in a recovery only if the total earnings per person are increasing.

The false metrics of so-called recession and recovery push individuals’ expectations lower. With expectations lower, government people can more easily claim to have made us beat these expectations. (“Don’t believe what you see around you, believe what we tell you.”) This helps enable government people to continue to mess with our earnings and mess with us.

A genuine measure of economic performance would be the real net voluntary value-added per capita:

  • Real to roughly correct for inflation, so inflation doesn’t make earnings seem larger when purchasing power isn’t larger.
  • Net to correct for increasing debt and for capital equipment consumption, so debt-fueled spending doesn’t make earnings seem larger, and so wearing out of capital equipment doesn’t make earnings seem larger.
  • Voluntary to focus on the earnings that individuals spend or save themselves, so the earnings that governments take and spend for their cronies don’t make earnings sound larger.
  • Per capita to correct for population changes, so in migration of less productive people doesn’t make earnings seem larger.

So then this mouthful—real net voluntary value-added per capita—is, on average, roughly the real value that’s added by a given individual and that’s controlled by that individual. In short, this is roughly, on average, people’s genuine, personally useful earnings.

Note that these measured earnings don’t count all the value added, but are only lower-bound minimums. The actual value added is higher. From the start, every customer values essentially every product he purchases more highly than the price he pays. Over time, every customer also ends up 7learning more about a product’s attributes as he uses the product, and on average ends up valuing the product even-more highly. And every customer fully benefits from innovations only sometime after they’re first created, once the innovations get used in as many products as will benefit from the innovations.

And although all such unrecorded added value goes unquantified, qualitatively it’s plausible to expect that the total of such unrecorded added value will tend to decrease when the added value decreases, will tend to remain constant when the added value remains constant, and will tend to increase when the added value increases.

After all, economic growth always reflects change. Change always is driven by opportunities. Opportunities largely are seized by innovating. And innovations cost customers less than they’re worth to customers.

When people earn more, individuals on average get wealthier. When people earn less, individuals on average get poorer.

For people to earn more, individuals have to add more value in each of their roles:

  • Individuals acting as investors have to choose to place more of their money at risk up front in order to generate returns in the future.
  • Individuals acting as producers have to choose to direct more resources to projects that will be at risk upfront in order to earn profits in the future.
  • Individual workers have to prepare themselves to succeed in these projects and in the resulting production, and have to succeed in these projects and in this production. They have to earn more.
  • Individuals acting as customers have to choose sooner or later to buy more products.

Each such action of individuals takes adequate information, skill, and effort. This information is limited, these skills are limited, and these efforts can only be supplied at limited rates. As a result, these efforts have to extend over consequential durations of time. True recovery takes time.

There are no shortcuts to taking the required actions, and to having these efforts extend over consequential durations of time. Learning curves are real. After all, if everyone already knew what to do to add more value and already had the capital equipment in place to add more value, then everyone would already be adding more value. In this case, wealth would chiefly be increasing only incrementally due to saving, not substantially also due to significantly adapting and reconfiguring.

Government officials lack information comparable to what individuals as a whole possess. Government people also lack skills comparable to what individuals as a whole will have. Government people have fewer resources and less time than individuals as a whole have.

Even if government people had comparable information, resources, and time, government people would lack the right to substitute their wishes for individuals’ wishes. Individuals are sovereign over their own actions. Government people are not sovereign over individuals’ actions.

These circumstance hold true now, and these circumstances will hold true for all time. In these circumstances, government people can do only one thing that will help individuals get wealthier: get themselves out of individuals’ ways, and get their colleagues out of individuals’ ways.

Borrowing and spending doesn’t increase wealth. Adding value increases wealth.

Increasing wealth requires letting less-economic producers fail, letting more-economic producers use more resources, letting people move to where they will add more value, letting people add more value, and letting people choose to buy products that they value more.

All together, increasing wealth takes less government, and increasing wealth takes time. The less government, the less time it takes to increase wealth, and the greater the rate that wealth increases.

THIS ARTICLE ORIGINALLY POSTED HERE.