The Economy and People's Decisions...

This post is a little different than our typical, but it has been on my mind, so I thought that I would share.

There have been a lot of conversations about our economy over the past several months and for good reason - things are currently bleak even for an optimist. This is the Dow Jones Industrial Average charted over the past year, and it is clear we have taken a downward turn.


There are so many factors that affect our economy and we have heard about a lot of them recently. There are also many thoughts and varying opinions about what went wrong, who’s to blame, and how we are going to fix things. I would agree that these are important questions, but in trying to answer them have we, myself included, forgot about or skipped over a very basic truth of economics – it is a SOCIAL science. It is PEOPLE that drive economics – demand, supply, prices, etc.

We have heard so many times that our problems are the result of something far removed from us as individuals (consumers and citizens). It appears that we are laying the majority of responsibility of our struggling economy on big corporations and our government, but is this really the case?

• Does the blame for people losing their homes lie with big corporations such as ‘greedy’ mortgage banks or ‘predatory’ credit card companies? Or, is it to some extent that we as a country spent beyond our means because we ‘have’ to have this or that?


• Are our energy costs a result of ‘huge’ American oil companies taking advantage of us? Or is it at least in large part the result of our demand for manufactured goods and our desire to drive the vehicle of our choice wherever and whenever that has driven the GLOBAL market price for oil to its highs.


• Is our own government to blame because of our ‘broken’ tax code and their ‘uncontrolled’ spending? Or is it that each of us tries to minimize our tax burden, but yet we demand that the government keep us safe, build and maintain our infrastructure to some of the highest levels in the world, provide social welfare benefits, etc.

I am not saying that I don’t agree that there are problems with each of the above that need to be addressed, and I certainly can’t say that I understand all of the complexities of each of these. However, it is ultimately the decisions and actions by individuals that have made our economy what it is. Our economy is on the decline right now, but history has shown us that our free-market economy works. When allowed to function, markets will dictate to businesses to produce more or less and to individuals to consume more or less. They also lead to price discovery and equilibriums, innovation and entrepreneurship, and in some cases, the failure of a company.

Our free market economy has been down before only to rebound and grow. This is part of the American Dream!