Economics for everyone (episode five)
By John F. Sase, Ph.D.
Gerard J. Senick, general editor
Julie G. Sase, copy editor
“In the final analysis, the question of why bad things happen to good people transmutes itself into some very different questions, no longer asking why something happened, but asking how we will respond, what we intend to do now that it happened.”
—Pierre Teilhard de Chardin, S.J., twentieth-century French philosopher, paleontologist, geologist, cosmologist, and evolutionary theorist
In last month’s episode, we continued our discussion of the economy of Detroit, which we hope will benefit those of us who reside in the Metropolitan area. This month, we extend this sub-series, which focuses on the basics of Economics for Everyone, by viewing our subject from the nosebleed balconies to the brawling orchestra pit. Our discussion will focus on the economics of resource allocation for producing goods and services.
In our initial foray as strangers in this strange land of Economics, we addressed the challenge of resource-scarcity in terms of time and space. We followed this topic by delineating resources as either human or non-human. Given a focus on our needs and wants, we further delineated human and non-human resources defined as factors (inputs) used to produce goods and services to satisfy our requirements and desires, our needs and wants.
An Upper Balcony View of Economic Theory
Before we delve into Production Theory, one of the tersest topics in the field of Economics, we will begin at a lofty level to develop a revised theoretical model of Economic thought in order to understand the matter at hand. From there, we can begin our descent from the esoteric to the mundane.
In respect to all of the resources that we may discuss, we turn first to the work of two Twentieth-Century polymaths, the French philosopher and scientist Pierre Teilhard de Chardin, S.J., and Vladimir Ivanovich Vernadsky, the Ukrainian mineralogist who is one of the founders of the fields of Geochemistry, Biogeochemistry, and Radiogeology. This pair of thinkers has influenced philosophy and science in both the Twentieth and Twenty-First Centuries.
De Chardin, in his “The Phenomenon of Man” (1955) (Harper Perennial, 1976), and Vernadsky in his essays of the 1920s (Essays on Geochemistry & the Biosphere, trans. Olga Barash, Synergetic Press, 2006) continue to influence new generations in the area of Applied Complexity Theory. In order to develop the concept of the “Noosphere,” de Chardin and Verdansky draw upon ideas introduced by the Nineteenth-Century Austrian geologist Eduard Seuss.
In order to define the Noosphere, let us think as economists. We may express the concept of the Noosphere in terms of a three-phase model that parallels, though transcends, our traditional concepts of human and non-human resources, which we discussed in our preceding episode. In brief, our approach considers the development of Earth and the Cosmos through three phases: 1) We consider the development of the Geosphere. This sphere contains all inanimate matter, a major portion of what we term non-human resources. 2) We turn our attention to the development of the Biosphere, the entity that includes all biological life—non-human through proto-human. Life emerges in the form of the Biosphere transformed fundamentally by the Geosphere. 3) We view the development of the overarching Noosphere that emerges from transformative human cognition. This cognition continues to transform the Biosphere. Concurrently, our Biosphere transforms our Geosphere. Our Noosphere emerged when humankind began to create resources through elemental transmutation and nuclear/sub-nuclear processes. In short, we are three cross-transitive coexistent spheres—the Egg of Life.
De Chardin explains that the Noosphere has emerged by the interaction of human minds. By implication, our Noosphere develops synchronously with human economic, political, and social organization as we continue populating the Earth and reaching beyond its limits into the Cosmos. As our economic/political/social networks grow more complex, our Noosphere expands in awareness to higher meta-levels. Our concept of Noosphere extends the Laws of Complexity/Consciousness put forth by de Chardin to one that helps us to describe the nature and evolution of the Cosmos. De Chardin argues that the Noosphere continues to progress toward greater integration and unification. Eventually, our Noosphere culminates at the Omega Point. De Chardin describes this concept as one that reaches the apex of human consciousness and thought.
Human and Non-Human Resources
However, in our present time and place, we recognize that inanimate geospheric matter forms the Geosphere, intersecting with biological life as Non-Human Resources. Remaining biological life, coupled with the transformative human cognition of the Noosphere, constitutes Human Resources. In Economics, we can divide the Cosmic oneness into six factors of production: Land, Labor, Entrepreneurship, Technology, Capital (Financial/Physical), and Intellectual Property.
Let us define these six factors: 1) Land appears as seemingly inanimate matter combined with less-animated non-human biological life. 2) We may define Labor as biological life transformed through human cognition directed by other cognitive biological life. 3) Entrepreneurship combines and directs resources in order to produce goods and services. 4) Technology constitutes human cognition that is manifested via inanimate matter and energy to provide new useful tools or ways to improve existing ones. 5) Capital (Financial/Physical) exists as inanimate matter/energy created through human cognition or existing useful tools. 6) Intellectual Property is the the creation of and product owned by the human mind, with rights protected through copyrights and patents.
We can identify a seventh element as the human mind/seal, collective or non-collective, which acts as our sentient-cognative inner being. This seal/soul enforms the physical aspects of each of us and encompasses the six enumerated factors.
Through the Noospheric process, we continue to create and to use resources in order to produce goods and services that “satisfice”—a newer Economic term that is a portmanteau of satisfy and suffice—our mortal needs and wants. This term was introduced into the mainstream by the American economist, political scientist, and cognitive psychologist Herbert A. Simon in 1956. In Economics, Satisfice implies behavior that achieves maximum or near-maximum satisfaction while being subject to specific rational constraints. For example, a corporation has the primary fiduciary responsibility to maximize profits for its stockholders.
However, short-term profit maximization may endanger long-term stability of growth and overall risk to the company. In this case, economists define the concept of Profit Satisfication as profit maximized while remaining subject to maximization of long-term stability and the minimization of risk—a Mini-Max problem.
Descending to the Orchestra Pit
Bavarian-born Theoretical Physicist Albert Einstein developed his General Theory of Relativity in the first quarter of the Twentieth Century. Moving beyond Eighteenth-Century Newtonian Mechanics, Einstein gave the world one of our most famous equations: Energy equals mass times the speed of light squared (E = mc2). This theory, coupled with Quantum Mechanics, forms the two pillars of modern Physics. Rearranging the terms produces a model that includes a resource-constraint allocation for subsequent use in the production of goods and services that satisfice our needs and wants.
Entertaining the theory of the Variable Speed of Light (VSL), Einstein explains that parameter “c” constitutes the speed of light. This idea implies that light travels at a constant rate through the Cosmos. Therefore, c-squared (c2) also must be constant. Rearranging the energy equation by dividing both sides by mass (m), we find that the speed of light squared must equal the defined ratio of energy to mass (E/m). Energy can change among different forms of itself, though it cannot be destroyed. Energy can be transformed into matter and vis-à-vis, though a relative balance needs to be maintained.
What do these concepts mean to economists in respect to the allocation of resources and production? If Einstein is correct, they mean that, whenever matter transforms into energy, a corresponding amount of energy transforms into matter, lest the entire balance of the universe goes out of whack! Furthermore, this concept of Mass-Energy Equivalency means that the removal of energy is accompanied by the removal of mass in the process of Entropy.
A Simple Example of Entropy
On a cold winter eve, we place a log atop some kindling on our fireplace grate and light a fire in the hearth. As the log burns, heat radiates from the fireplace as the log disintegrates slowly into various components of smoke and ash. A portion of the released energy circulates around the room in the form of heat while other parts of the fire carry particles from the burning log upward through the chimney. Finally, the unconsumed mass of the log rests on the grate. Are we converting energy into matter or matter into energy? Perhaps we are changing one form of energy into another as the fire rearranges the molecules in the mass of the log. At this point, I (Dr. Sase) refer our readers to Bill Nye the Science Guy for a simple but eloquent explanation of how this process works (billnye.com).
A Return to Production Resources
As we further our discussion of the economics of resource allocation, let us return to our Noosphere model. Human cognition transforms biological life in this model, which in turn continues to transform all inanimate matter. In other words, this model helps us to sort the interaction among the scarce resources used in the process of production while providing a language for defining the limitations of production.
We recognize that we can achieve a desired level of production through the application of Labor, Land, (Financial/Physical) Capital, Intellectual Property, Technology, and Entrepreneurship. In our preceding episode, we defined and considered these six factors of production as well as addressing fifteen bi-directional interrelationships within this group of six factors.
The addition of the human mind as the regulator of these factors adds six additional interrelationships. Visually, we can grasp these relationships by tracing seven interlocking circles on a piece of paper and then connecting them one to the other. This pattern results in the ancient Seed of Life diagram.
Cookie Time
In further discussion of the matter of combinations, let us consider a more tactile example. We gather a block of butter, a bag of sugar, a carton of eggs, a bag of baking flour, a can of baking powder, and a cannister of salt in order to make cookies for a party. Yum! The type and quantity of cookies that we can make depends on the total amount of each of the ingredients along with our own tastes and preferences. We recognize that there are many ways in which to combine each pair of ingredients. Some guests may be happy with a recipe containing mostly butter and sugar, while others may prefer cookies with a small amount of sugar and a large amount of baking powder. When we consider the range of combinations that we could obtain by using various amounts of the six ingredients, we find that the number of recipe variations approaches or exceeds “Googolplex” (a term coined by Milton Sirotta, the nine-year-old nephew of American mathematician Dr. Edward Kasner, as “one, followed by writing zeroes until you get tired” in 1938).
The variations in our cookie example address the basic concept of Production Possibilities. We can consider the sum of all possibilities that fully employ our resources. However, we gravitate to a feasible possibility that fulfills the condition of maximizing our output. The gain in production of one good results in a necessary complement in the production of the others. In larger economic situations, this imbalance may occur when the skills of available workers do not match the skills for required tasks. Fortunately, we have the ability to retrain or reeducate ourselves in order to overcome this dilemma, which is known as long-term
Structural Unemployment.
Our Mind
Our mind brings together the Geosphere, Biosphere, and Noosphere and allows us to delineate the cosmic whole of these parts into the six Factors of Production in order to produce the goods and services that we need and want. Without delving into the philosophical question of whether we function as separate and individual minds or simply exist as part of a single comprehensively universal mind, let us focus on two elements of concern to the human mind—Power and Choice. Power appears as the fundamental element of the human experience and Choice serves as our greatest tool. In respect to Behavioral Economics, we do not refer to Power in the form of a bull rampaging through a china shop, nor do we define Choice as something that is unfocused, unchecked, or inconsiderate of others. Instead, we defer to Subtle Power and Subtle Choice, which work as fuel within our individual minds. Let us refer to the American medical/spiritual intuitive Carolyn Myss (“The Power of Choice,” Creative Jetstream, 2001, and gaia.com, 2019) in respect to Subtle Power and Subtle Choice in order to summarize what we may apply to the practice of Economics.
Subtle Power and Subtle Choice
In our discussion of power and choice, let us consider what we should do as well as what we should not do. First, by living congruently in our heads and our hearts as we respond to our inner guidance, we will not betray ourselves or others. Second, we need to live with integrity and truth by first being true to ourselves as an integral person of self-knowledge. Third, we need to know and to live out our values through self-honesty about what motivates us. Fourth, we need to choose, to develop, to maintain, and to practice our personal spiritual worldview. To do otherwise leads to a loss of power within, which causes increasing stress and tension. This is so, because we exist with one another as one system since we are all of one mind. Based upon these first four tenets, let us continue with what we need to do subsequently.
Fifth, we need to choose and to practice kindness toward ourselves and others because these acts have long-term effects that promulgate throughout life and beyond. When we go past the concept of a Deity of Productivity that delivers material outcomes, we find that life is a Living/Learning Experience with a purpose to develop kindness. Sixth, as we become more powerful, we begin to make choices that are invisible in this power. Therefore, we need to reflect daily in order to ponder the quality of the choices that we make as well as what values motivate and direct us to do so. Through this exercise, we contemplate the long-term consequences of our choices on the lives of others. Seventh, we need to serve others as well as ourselves. Power does not come through greatness. Subtle Power emanates through reflection and congruency as well as being of service. Eighth, we need to empower others. When we become powerful enough within ourselves, then we can empower others by giving away grace. Economic philosophers and others who have studied power and choice have observed that the greatest regrets held by people toward the end of their lives come from their inability to empower others and to love another as deeply as they wanted to love them.
In summary, let us move full circle, back to our initial goal of satisfying or satisficing our needs and wants. In order to meet our requirements as well as our desires, we need to produce a variety, quantity, and quality of goods and services. These possibilities include products that we both need and enjoy. All of us have needs and wants that we seek to satisfice. This is simple. However, understanding the immense complexity of the interplay of the elements from the Geosphere, Biosphere, and Noosphere that emerge as scarce human and non-human resources used in production consistently remains one of the most quicksilver topics in the field of Economics.
It’s a Wrap
The preceding sections have focused on the interworking of the elements that are needed in order to increase production and consumption in a healthy and stable way that provides sufficient affluence for all in a sustainable economy. Hopefully, this evolving series will help attorneys, who find themselves as practitioners of law, both at the rarified, esoteric level of thought as well as down on the backstreets of everyman.
Hopefully, our multi-episode approach to this subject will provide an interesting background for attorneys and other professionals to develop their own primers for sharing with their colleagues, staffs, and jurors in cases involving economic issues. Mostly, we hope that this ongoing primer will help in our continuing effort to redirect the negative energy in our region by educating our readership on how we may bring the Principles of Economics to the reality of today. By doing so, we hope to foster a positive spirit in Metropolitan Detroit and environs.
Next month, we will delve into the economics of marketplaces as we explore the economic principles of exchange, equilibrium, and related topics.
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Dr. John F. Sase teaches Economics at Wayne State University and has practiced Forensic and Investigative Economics for twenty years. He earned a combined M.A. in Economics and an MBA at the University of Detroit, followed by a Ph.D. in Economics from Wayne State University. He is a graduate of the University of Detroit Jesuit High School (www.saseassociates.com).
Gerard J. Senick is a freelance writer, editor, and musician. He earned his degree in English at the University of Detroit and was a supervisory editor at Gale Research Company (now Cengage) for over twenty years. Currently, he edits books for publication (www.senick-editing.com).
Julie G. Sase is a copyeditor, parent coach, and empath. She earned her degree in English at Marygrove College and her graduate certificate in Parent Coaching from Seattle Pacific University. Ms. Sase coaches clients, writes articles, and edits copy (royaloakparentcoaching.com).
