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Productivity at Base

I have an economic question or two. Why is monetary policy
positioned at the apex of control in our nation's economic
hierarchy? Why is the Fed Board Chairman the go-to lifeguard and man-
on-the-mountain-guru for our entire economy? Failing a lowering of
the prime lending rate or the fed rate, we don't seem to know how to
intervene or plan the economy such that moments of panic necessitate
these quick fixes (that only harm the economy in the long run). And
this makes me confused about everything I have learned and everything
that makes sense about economic theory. In academic circles, there
seems to be a general acceptance of what might be called the standard
model of economic science. From what I have read, serious scientists
of economies almost always agree that productivity alone sits at base
of all influencers at play in any economic system. Ultimately, this
means that other factors weigh in more on the side of effect and that
productivity is THE factor that more often than not is more causal
than any other factor effecting economies. Modelers of economic
systems, like modelers of global climate, implement countless
mathematic dynamics seeking mathematic descriptions that can robustly
mirror and follow the arch of actual economies under actual natural
pressures over time. In these models, the ones that can achieve some
success aping real economies at global scales... productivity rises
to the top of every influence hierarchy. So what is productivity?
How is it different from other metrics of economic influence like
spending, commodity, resource, stock, currency, and geopolitical
trade markets, saving rates, inflation, jobless rate, secondary
education rate, incarceration rate, capital investment rates, basic
research spending, infrastructure amortization, how indeed is it
different from large scale economic measures like GDP itself?

The concept backing the term productivity is a more complex than
other common economic measures. Like evolution it is obvious that it
is central to and at base of the inverted influence pyramid... but
like evolution, it seems also to be a moving target... like the
shadow of a person walking east in the evening, it is right there, it
has a finite length, yet one never catches or completely possesses
it. Wow that is a metaphor out of control. Actually, a moving
target is just what you would expect in a dynamic system that feeds
on it's tail, that is different tomorrow because of what happens
today. And, like evolution, productivity defines the propensity of
today's systems to maximize the effectiveness of tomorrow's systems.

The problem with Fed Rate finagling and other Monetary Policy
doodling is that, like lifeguards flinging life rings, is too public
and too immediate, too much of a band aid, too much after the fact,
and we soon forget that the very use of such stop-gap measures is
usually a good indication of deeper ills, ills that can not be truly
fixed with heroics (with all the screaming and running around, and
with all of the cowboy heroics and wasn't that close brow wiping and
back slapping afterwards, who is going to remember the importance of
swimming lessons and civic behavior, and safe pool design?). Here
come the bank chairman calling out for a quick fed fix (read subsidy,
read absolute disincentive to act responsibly or to care about the
health of the economy) and the here comes the Fed Chairman on his
white horse again to provide a temporary high level fix to what is by
definition always the result of deep low-level wows. And here we
are, the public, by practical necessity (our busy lives) ignorant of
the subtile complexities that make up the grand causal stack that is
the economy, anxiously anticipating a quick fix, so that we can go
back to our blissfully simple understanding of the economic world
around us.

I frequently use the term hierarchy of influence to remind myself and
others that every complex system is an assembly of parts arranged by
hard natural law into an influence tree where some parts have greater
influence on change than others do. On the bottom of this tree
influence tree are the things that cause other things, as you move up
the tree you find things that are more caused by or are the effect of
other more influential things below them. Cause and effect are very
very different. This is the important concept to get. Consider a
simple system, a steel bolt laying on a concrete floor with a magnate
laying on a bench a few feet away. The prime influencer in this
system is gravity. If you move that magnate closer to that bolt, the
influence hierarchy will at some point flip when the attractive force
from the magnate is stronger than the gravitational force between the
bolt and the earth. At all times one must remember, both forces are
at play, it is just their relative influence that changes. The
physical and behavioral state of all systems at any given moment are
simply the sum of all influences at play within them. And these
influences are not equal. If your goal was to move that bolt, it
would be ridiculous to spend much energy worrying about the
orientation of that magnate on the bench. Yes, spinning the magnate
does have some (miniscule) measurable effect on the system... on the
bolt, but there are other potential influencing factors that will
have far greater effect on the system (moving that magnate within a
few inches of the bolt for instance). Same goes for the economy of
course. If you were given the task of defining the indispensable
factors that would absolutely have to be present in a healthy,
growing, regionally and globally competitive economy, prime rates and
cash fluidity would probably not enter the picture until many more
profound factors were taken care of (resource availability, trained
and knowledgeable labor base, save and stable living conditions that
promote individual well being, transportation and communication
infrastructure, physical and virtual markets (where to buy and sell
things), ownership protection, ready availability of credit for
capital expenses, etc. It is when the existence, availability or
balance of these systems fail, that stop gap measures like currency
and lending rate control become necessary.