Sufficient affluence/sustainable economy: Economics for ­everyone (episode four)

By John F. Sase, Ph.D.
Gerard J. Senick, General Editor
Julie G. Sase, Copy Editor
William A. Gross, Researcher

“The possession of Knowledge, unless accompanied by a manifestation and expression in Action, is like the hoarding of precious metals — a vain and foolish thing. Knowledge, like Wealth, is intended for Use. The Law of Use is Universal, and he who violates it suffers by reason of his conflict with natural forces.”
— The Kybalion, attributed to Hermes Trismegistus (Yogi Publication Society, Chicago, translated and printed 1908)

In Episode Three of this series, we explored the basics of Behavioral Economics in order to refurbish a sustainable economy with sufficient affluence for all of Metropolitan Detroit and beyond. We considered the concepts of Nobel Laureates Robert Shiller and Richard Thaler and others in order to understand the archetypal demons within ourselves that thwart our efforts to maintain renewed prosperity. Ultimately, we hope that this series of articles helps to redirect any negative energy that affects Detroit and to foster a spirit of positivity for the region.

Economics requires that we perceive our needs and wants—our requirements and desires. Consequently, we must understand the difference between what we need and what we want in order to allow them to work together by prioritizing the elements of each in respect to themselves and to one another. In this month’s episode, therefore, we will discuss human needs and wants from a polymath perspective.

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Human needs

Let us begin with our needs and their degree of priority. As an exercise, let us visualize our hierarchy of needs as a pyramid from the bottom up. The American psychologist Abraham Maslow provides us with an effective model of this pyramid from base to peak. He outlined his thoughts on the matter in order to include the following strata: physiological needs for breathing, eating and drinking, physical stability, sex, sleep, and excretion; security and safety of body and property, employment, resources, morality, family, and health; our social need for love and a feeling that we belong through family, friendship, and physical intimacy; the need for self-esteem, which includes confidence, achievement, and respect for and by others; and self-actualization through spontaneity, creativity, and problem-solving as well as a lack of prejudice and our acceptance of known facts (Maslow, “A Theory of Human Motivation,” Psychological Review, vol. 50, no. 4, 1943, pp. 370-96).

Within this visualization, our basic survival needs rest at the bottom of the pyramid and our transcendent needs of mind and spirit sit atop it. We often exaggerate the importance of time devoted to the wide, largely materialistic base of the pyramid while foregoing opportunities of reaching our highest needs at the peak.

The Nineteenth-Century American industrialist Andrew Carnegie stressed that only the highest and most important forms of wealth satisfy the needs that nurture our peace of mind. The wealthiest individual in Nineteenth-Century America, Carnegie placed financial security in the twelfth out of twelve places while not diminishing the importance of our basic needs. This placement underscores the simultaneous fulfillment of our highest needs, which empower us to address our basic ones in a more effective way. In descending order, Carnegie lists 1) a positive mental attitude, 2) sound physical health, 3) harmony in human relations, 4) freedom from fear, 5) the hope for future achievement, 6) the capacity for applied faith, 7) the willingness to share our blessings with others, 8) engagement in a labor of love, 9) open-mindedness on all subjects toward all people, 10) complete self-discipline, 11) the wisdom with which to understand people, and, finally, 12) financial security.

We may ask ourselves if we should fulfill our needs from the highest aspirations downward through vocation, from the middle through a career, or from the bottom by way of the most fundamental activities for physical survival. Such a fragmented approach results from our specialization of skills in modern society. A “generalist” of the Pre-Industrial Age may suggest that we address all strata of needs simultaneously while attending to abilities that fulfill our most pressing needs. In taking such an approach, we strive to understand, categorize, and prioritize our needs along with those desires that we consider as wants.

Whatever the optimum number and sequence of our needs, this suggested path leads us toward a balanced fulfillment of our goals. We achieve them through the economic process of orchestrating resources that satisfy our requirements and desires as members of a community. In order to find fulfillment in life, we should need what we want and want what we need.

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Point Zero

The process of economic attainment begins at Point Zero—the origin that embodies nothing and everything. To illustrate, let us draw a circle with a pencil. Upon completion, we find a space inside that appears to contain nothing. However, completion of the circle produces a symbol with neither a beginning nor an end.

This circle reflects the concepts of endless space (Infinity) and endless time (Eternity). However, we may define these ideas as all spirit and nature coming from and within Infinity/Eternity. Therefore, this entity remains devoid of scarcity.

The principle of Scarcity constitutes a basic condition for all of Economics. Within Infinity/Eternity, both space and time must exist. As bounded, time-scarcity exists within the finite. These limitations of scarcity give meaning to economic thought. The word “Economics” comes to us from ancient Greece. As a word coined by the polymath Plato, it suggests a necessity to manage all of the resources, as they have limited availability within space/time. For example, the scarcity of farmland in Germany in 1939 led to its invasion of neighboring countries.

The term “Resources” describes what we need and choose to use for producing goods and services in order to satisfy our requirements and desires. Resources include everything within space/time that comes either from within ourselves (human) or from beyond ourselves (non-human). Human resources include all that emanates from our humanity: spirit, physical self, skills that we develop, knowledge and wisdom that we acquire, life experiences that we hold within ourselves, and our ability to interact with one another and the rest of nature. We develop non-human resources from the remainder of nature around us. Within this realm, non-human resources exist in their innate form and by our interaction with nature, which transforms matter into useful substances and tools that we employ to meet our needs and wants directly.

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Economic fulfillment

Our next economic step requires that we organize our available resources in order to direct them toward the fulfillment of our needs and wants. We begin with ourselves through our accumulated knowledge and skills that enhance our productivity and our scarcity of time. The value of labor-time that we offer to others reflects our quantity and quality of talents honed through experience. Alternately, the value that our work holds for others reflects upon their needs and wants.

Two major routes exist through which we can direct our human resources. The first route requires that we exchange our time for physical items or human assistance that will meet our needs. However, the larger and more complex that a community grows, the more difficult that it becomes to make exchanges that coincide with our immediate requirements. One form of recourse demands that we accept items for a possible trade with a third party in order to obtain the objects or services that we desire. The other form requires the acceptance of something of substance, one that is appreciated widely and maintains its value, or taking scrip, which is backed by a substance of value or is accepted universally based on faith. Forms of currency used by humans throughout the ages have included objects such as beads, precious crystals and metals, and notes imprinted on animal hide, clay, or paper. Whatever the currency, payment for a fixed amount of labor-time exchanged has evolved in English as the economic term “Wages” (from the old North European words wagier and weddian, which mean to pledge and to gage).

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L’Entrepreneur

Our alternate path for engaging human resources requires that we place our labor-time at risk. We allocate, combine, and otherwise manage this time. When we place our own time at risk, we stand among human and non-human resources, select and orchestrate them, and direct them in order to make or to do something. In describing these actions, the French pair two words: Entre, which means to stand among other people or things and Preneur, meaning to take and use other resources for a purpose. The word Entrepreneur entered our business vocabulary to represent human resources placed at risk in an endeavor. When we act as an entrepreneur, we relinquish any guaranteed profit for our invested labor-time. If we succeed, we profit. If not, we lose. The gamble of entrepreneurship involves a calculable risk. By taking greater risk than a person who accepts guaranteed wages for their labor-time, an entrepreneur hopes to earn a larger reward.

The return for risk-taking comes as a combination of two rewards—extrinsic (outward, such as money) and intrinsic (inner, such as satisfaction and security). Our term “Profit” has developed from the Indo-European roots of Pro (forward) and Facere (make), which then merged into the Latin word Profectus (to make progress). We combine these two forms of human resources, labor and entrepreneurship, with four divisions of non-human resources. These divisions and their payments include “Land” for rent, “Capital” for interest, and both “Technology” and “Intellectual Property” for a royalty (a payment assigned by royal decree in earlier ages).

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Factors of production

Elements of nature exist either as a source of materials or as a place to work. In general, we may refer to them as the earth, sea, core, air, sky, and ground — however, our common approach has grouped all aspects of real estate under the overarching economic term “Land” in recent centuries.

Likewise, we group useful tools that we find or develop from nature under the term “Capital” (from the Indo-European root “Kaput,” meaning head or money laid out). Many of us tend to equate financial Capital with money. Economists consider money as transitory capital because currencies serve as useful tools in the trade of goods and services. Money-transfers serve as a commonly understood measure of value and provide a form of storage that generally retains value over time. We can include physical Capital as well—useful tools such as hammers, saws, fifty-ton hydraulic presses, and laptop computers, to name but a few. Also, we consider products of the human mind as the various forms of Intellectual Property that patents and copyrights protect.

In respect to improvements made to various forms of Capital that serve as tools, we have created a new category for these non-human resources—“Technology.” Let us consider two inventions that have helped to change the world, as well as how we work. The first invention—the wheel—has left its tracks across the millennia, while the second one—the electric light—has glowed for little more than a century. The development of the electric light in the late 1800s has enabled skilled-trade production to take place at any hour, day or night. For many ages, sunlight limited production to the hours from dawn to dusk—hence, scarcity by time. We can appreciate the technological improvements derived from these developments by considering their effect on our lives. The wheel has led to advancements of trade, allowing humankind to move freight and passengers over long distances with relative ease. The electric light has emerged as the most recent major game-changer; it effectively has doubled the productive day to twenty-four hours.

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Molar Mics?

The social philosophy and social science of Economics has developed rapidly throughout recent centuries. Generally, economists consider three resources—Land, Labor, and Capital—as the major Factors of Production. However, I (Dr. Sase) prefer to embrace six resources—Land, Labor, Entrepreneurship, Technology, financial/physical Capital, and Intellectual Property. The interplay exists among all of these resources. For example, an independent woodcutter (Entrepreneur) may take his/her ax (Technology) into the forest (Land) to gather wood (physical Capital). Subsequently, a woodworker who is an employee (Labor) may use the designs of his/her employer (Intellectual Property) to shape the lumber into the consumer good of a piece of furniture for a customer who pays money for it (financial Capital).

However, with industrialization and globalization, society has changed rapidly while becoming more complex. By expanding the field of resources to six factors, the number of interplays increases exponentially from three to fifteen. For example, a Volleyball team has six players. In order to avoid errors such as double-touching, lifting and carrying, or throwing the ball, the players may pass the ball to another team member. Only six possible ways exist to hit the ball over the net at any given moment. However, we can count fifteen combinations for skillfully passing the ball between any two members of the same team. The richer the variety of strategies and plays, the greater the number of possible points made.

 Let us conclude by moving full circle to our basic goal of satisfying our needs and wants by applying the Volleyball example to activities of economic life. When we delineate resources into a greater number of factors, we may expand our insight, which allows us to produce increased quantities and varieties of goods of greater quality. The possibilities for producing what we need and enjoy include gathering goods readily available in nature, such as apples picked from a tree. At the other end of the spectrum, our products include more complex manufactured goods, such as health-care equipment (e.g., an X-ray machine), modes of transportation (e.g., hybrid cars) and communication devices (e.g., the Molar Mic, a miniaturized traditional headset that clips to a back tooth).

All of us have needs and wants that we seek to satisfy. In order to do this, we seek to separate, to define, and to prioritize our needs and wants in our process of satisfying them. Therefore, we start with both everything and nothing within Infinity/Eternity. However, we live finite human lives within space/time. Space/time has boundaries. Therefore, all human and non-human resources (aka Factors of Production) remain scarce. We use these factors in various combinations to produce physical goods and services to satisfy our needs and wants.

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Takeaway

Scarce Resources in the form of Factors of Production allow us to produce Goods and Services that satisfy our Needs and Wants. We have developed a set of Patent and Copyright Laws that allow us to protect ownership of our Factors of Production as well as the Goods and Services produced with these factors. Attorneys have a duty to protect the value of inputs and outputs within our economy. Furthermore, we need more attorneys to step up to the plate of Congress. In order to shape and enforce laws, it is imperative that Senators and Representatives have education and experience in the field of Law if they are going to make new laws and enforce them (currently, two-thirds of U.S. Senators and one-third of Representatives have a background in Law).

In future episodes, we will “take the floss to the mill.” We will discuss other economic concepts that include Marketplaces, Profit and Loss, and Cost-Control as we apply them to the economics of everyday life.

Inquiries: drjohn@saseassociates.com, 248.569.5228