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Mixing in ingredients for an economic recipe that doesn't taste 'blah'
We won't here recount all of the data -- it's easily referenced with a turn of the page. And while the economy this year in Penn's Wood certainly won't warrant a "blech!" a solid "blah" seems to be appropriate.
Just about all of the region's leading economic indicators are expected to remain relatively flat, though housing starts and business investment could provide some encouraging news. Tax cuts proposed by President Bush also should help -- if passed by the Congress. But war -- against terrorism and Iraq -- could dampen some or all of any expected modest gains.
The key to any rebounding economy, of course, is growth. And now might be a good time to discuss what growth really is.
Our offering a tutorial on growth might strike some as condescending. After all, it's a simple word and an obvious concept: The more that's sold sparks a need for more to be made to be sold. But that only scratches the surface.
As economist Paul M. Romer noted a few years back, economic growth occurs whenever people take resources and rearrange them in ways that are more valuable. He offers a simple kitchen metaphor to explain the complexities of the marketplace:
"To create valuable final products, we mix inexpensive ingredients together according to a recipe. The cooking one can do is limited by the supply of ingredients, and most cooking in the economy produces undesirable side effects. If economic growth could be achieved only by doing more and more of the same kind of cooking, we would eventually run out of raw materials and suffer from unacceptable levels of pollution and nuisance.
"Human history teaches us, however, that economic growth springs from better recipes, not just from more cooking," Professor Romer says.
Better recipes, we would add, not just as they relate to new ingredients and new products (and the research and entrepreneurship required for both) but better recipes for capital formation and allocation and taxation policies that spark the former while not retarding the latter.
More important, though, is that growth can occur only when the private sector rearranges those resources, primarily capital, in the most efficient manner to create new wealth. What's too often billed as, and mistaken for, "growth" is government interventionism that redistributes wealth.
The only guarantees offered in the marketplace are that some will succeed and others will fail. In fact, without failures there cannot be success. For today's failures are the impetus for the new "ingredients" that lead to tomorrow's successes. The greater the government intervention, the less likely the free-market model can survive.
Thus, the surest way to keep a "blech!" economy at bay is to resist the temptation that the government can fix our economic "blahs." Cyclical as the economy is, the "blahs" tend to work themselves out.
