News anchors and talking heads love to spout off about what they call The Economy.
“The Economy is suffering under this administration.”
“The Economy is making a brilliant recovery.”
“The Economy is in danger.”
What are they talking about? What is this thing called the Economy? They make it sound like a big machine hidden in some government warehouse that churns out stuff and consumes stuff and might die tomorrow or might grow bigger and run strong. But what is it really?
The economy is more like a rainforest than a machine. A rainforest is made up of millions of little living things – snakes, mice, ferns, monkeys, algae, jaguars, fish. On any given day, if a scientist studies one of these factors they would be alarmed at what they find. “The snake population has grown 17% in the past year. If this continues, all the mice will die, and there won’t be enough food, and then the snakes will die, killing all the iguanas that feed on the snakes, thereby ruining the delicate ecosystem in the rainforest. Be afraid! Warning, warning!”
While the facts about the individual populations of the rainforest are true, if we abandoned the whole thing and came back 500 years from now, the rainforest would still be there flourishing. Because it’s composed of millions of factors, taking any one factor and saying it has the ability to control all the others is silly. Things adapt, adjust, and move on.
If the Economy were a giant machine, then one malfunctioning part or one bad operator could ruin it all. The growth or decline would be immediate and explosive, or predictably gradual. But neither of these scenarios are reality. Even the Great Recession was a temporary roadblock, albeit a painful one.
No one can predict or control the Economy. Like the rainforest, it is more adaptable then we realize, because it’s made up of millions of living beings called people making millions of predictable and unpredictable decisions. No “expert” can know how things will go. We are all along for the ride, making educated guesses and constantly reworking our theories.
NOTE: I credit the analogy for this post to Brian Wesbury at First Trust Portfolios. I really enjoy his little 5 min. economics videos. You can see the latest ones here – http://www.ftportfolios.com/Commentary/EconomicResearch/2015/3/12/there-will-be-growth-in-the-spring
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