Monday, July 9, 2007

A callous but realistic analysis

Human beings really aren't calibrated to fathom the macroeconomic social world (national/global markets, 9-10 figure population sizes) as they are with the microeconomic social world (cliques, families, offices, 2-3 figure population sizes). The rules that govern macroeconomics are very different from the rules that govern microeconomics, so trying to comprehend global economies in terms of the basic "I'll scratch your back if you scratch mine" rules that we use in our every day lives doesn't work very well. It's like trying to comprehend galaxy cluster behavior with classical physics (which is basically how we think) rather than general relativity. It just doesn't work.

As far as we know, death is the worst thing that can happen to us, and we go to great lengths to avoid it and preserve life. Yet on a macroeconomic level, deaths matter much, much less. When you die, how many people in the global economy do you think will care, or would be willing to exchange a sum of personal property/money to save your life? The answer is very, very few. Individual human lives are much more like units rather than wholes on this unthinkably large social level.

It sounds cruel and inhuman to think this way, but that's because we're dealing with concepts that can't be understood intuitively; they must be understood theoretically and scientifically. No scientist can truly comprehend the size of a galaxy, and no human being can truly comprehend a global economy.

While it does sound very arrogant and cold-hearted, the facts of the matter are as follows: humans do follow incentives. They do prefer more goods to less. They will not provide altruistically for the greater good without a gun to their heads. Individuals that consume more than they can produce are a drain on society's resources, and a system that selects against such individuals must lead to surplusses and prosperity.

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