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Originally Posted by mercuryrising  What I find particularly fascinating about economics is that it is largely based on theories of human behavior. It is not an exact science.
So we are told there is a recession or a depression, what is the behavior we exemplify? Fear, desperation, anxiety, distrust. And it is those feelings that propels the recession even further.
If we are told that this is a boom economy and there is money growing on trees, what is our behavior then? Confidence, elation, relaxation, trust. And those feelings propels the boom even further.
The problem is running an economy on feelings; it's what creates this bi-polar shifting. This economic model will destroy humanity when applied on a global scale. |
Booms times are as bad as recessions, because the boom times almost inevitably cause malinvestment that must be rectified by a bust, or recession. Economies follow the laws of nature. They aren't completely governed by human emotion.
Irrational exuberance wouldn't cause gigantic bubbles to form without the meddling of central banks in the economy. Have you ever wondered where all the extra money that inflated the housing bubble came from? It came from the lax monetary policies of the Federal Reserve during the last 6 years.
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Human beings are more than just consumers. They are not an unending series of wants battling for a limited supply of resources. As we enter a global economy, we will have to re-evaluate human behavior to reflect the reality of a global community. The current economic model doesn't even recognize the cause of prosperity, which is our creativity. And creativity is an unlimited resource.
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Consumption based economics is derived from the ideas of John Maynard Keynes, whose theories are considered sacrosanct by most modern economists. On the other hand, the Austrian school of economics correctly observed that it is production that runs the economy. Like you say, it's the creators that generate prosperity.
Consumption vs. Production