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Eureka: Developing strong economies
by Jay Gutman
2017-10-10 10:48:11
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Just like in labor, there are three types of economies. There are economies in survival mode, economies in solidarity mode and economies in altruistic or narcissistic mode.

Basically every economy starts in survival mode. Economies in survival mode can rely on agriculture or mining, two industries that demand very little investment. They can gradually save up from those industries to move to solidarity mode. But agriculture depends largely on climate factors and is not a stable source of income, nor is mining which is an industry notorious for its price fluctuations.

econ01_400_02The other problem is that some individuals in survival mode economies divert the income. So economies in survival mode need the kind of social contract that binds them to society where such economies can move to solidarity mode. This starts with a good education system where students are taught their rights, as well as the rule of law and clear distinctions between individual property and private property. So if you are a country in survival mode and want to draft a new constitution, you want one that distinguishes individual property from public property.

When advising countries in survival mode you want to ask two questions. What is your yearly income and how much debt do you have. You then want to help get the income up, that is put as many people as possible to work but that can be complicated as well. You need infrastructure to bring the income up such as roads, ports and airports. You also need climate to be generous. Finally you want safety in the country so business can flow.

So that's a lot of factors involved in economic development. Rule of law, clear distinctions between public and private property, and education system that teaches how to read, write, count and understand your rights, infrastructure, freedom from natural disasters and security. Once you have that you can move to solidarity mode.

A country or territory in solidarity mode is one that helps its dependents. One where those who can't work receive assistance. The definition of solidarity varies from country to country. In some countries solidarity is mainly defined as public security, while in other countries solidarity is defined as helping those who have trouble finding work or working. In this economy, taxes start playing an important role and the notion of social solidarity becomes important.

Now the third stage is one that few countries have reached, perhaps the only one being Norway. An economy in altruistic or narcissistic mode is one that has so many resources and cash reserves that bringing the income up is really an option. Such countries or territories can choose to help other nations or choose to upgrade its image in the rest of the world.

The danger in any economy is an economy in survival or solidarity mode that starts acting like it's in altruism or narcissitic mode. I've seen some countries behave like that, mainly but not only in Asia. Such countries spend a lot of money helping other nations and upgrading their image when they should really be in survival or solidarity mode.

Some countries can also fall from altruism to survival or solidarity mode if they're not careful enough. A lot of lottery winners have confessed that one of the main reasons they lost it all is because they gave it and donated it all, spent so much time giving that they didn't have time to earn income or to upgrade their income. So investing and working in the end is just as important, if not more important than giving.

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Emanuel Paparella2017-10-10 13:25:07
Which goes to confirm that Professor Richard Thaler who just won the 2017 Nobel prize in economic sciences is on target in insisting in hie behavioral economics that economics can never be a precise quantifiable science since it deals with a human nature that more often than not is unpredictable and will in fact yield wrong results if we, who use economics, get human nature wrong...Back to Aristotle's ethics and philosophy of science!

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