One of the most pressing questions we all have is ..... "What should we do next??" Isn't that the question that every politician, economist........human being for that matter, is weighing in on in one way or another? No one is really suggesting to do nothing. They may suggest not doing anything different from what we are doing (even though thats impossible) but everyone knows we will do something. The only question is what. So how do we go about figuring this out?
We live in a world that loves data. Data is information. Data gets compiled, analyzed, interpreted and then is used as justification for suggesting a next step. Without the data, a choice of next step would be much more uncertain. How would we know what to do if we have no way of knowing what will happen? How can we know what will happen without analyzing what has happened before?
Of course obtaining this data requires tools that allow us to make measurements. We have to quantify things or else we cant really predict the outcomes of our "what should we do now" questions. We have to know what we have in order to know where we can get to. If I want to get to Los Angeles within 12 hours from Georgia, even the fastest car in the world won't help me. Knowing what we have and the limits of its capacity are crucial to even beginning to suggest a next step. Another word for our capacity is our means. What are we capable of?
I read it somewhere e-v-e-r-y d a y that we have been living "beyond our means" in the past and now we are paying it back and simply must accept current conditions. Its quite a popular refrain from many. But how do they measure what our means were.... or are? How do they know what we were capable of? The only tool they have is financial. Graphs showing debt accumulations to a point (around 2006 or 2007) and then a rapid descent are cited as a eureka moment for our macroeconomy when we finally were shown the error of our previous ways and our now "paying the piper". Of course the unspoken premise here is that our incomes are the measure of our means. But almost none of us determine our incomes. Our incomes are determined by others. Do others get to say what we are capable of?
We need to realize the limits of our measurements. Financial statements do NOT measure our means. Prices in stock markets or any other market are not measurements of capacity. This is easily demonstrated by the fact that if a companies stock value or a stock market as a whole falls to a price approaching zero it does not mean that that company now has no "means" for future growth. Our measurement system is what is flawed. It is capable of measuring a zero value. It can give us, as they say in the medical world, false negatives.
Looking at our past accumulations in financial accounts does not give us any information about what our present means and future capacities are. To assume it does gives too much power to numbers. Numbers which can be manipulated.
I don't buy the "beyond our means" mantra. Not at all. In fact I think we have consistently lived below our capacity. Most every human is not close to doing what they can and in their most optimistic moments, really want to do.
If we are going to use the graphs to castigate the many for living beyond our means we must use the same graphs to castigate the few for living so far below their means. Why isn't Jamie Dimon living up to his capacity? If he would just do more the rest of us wouldn't have to go so beyond our capacity
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