Our political system is not, strictly, a macroeconomic guidance machine; political leaders have a lot of responsibilities that take day-to-day precedence over direct macroeconomic maneuvering. Stewardship of our civic infrastructure can provide direct benefits to citizens, communities, and enterprise, and so our analysis of how well our policy choices work to motivate real macroeconomic health and improvement needs to consider those other values.
We all know, from one perspective or another, how ideological preferences influence what one analyst or another might refer to as “just the numbers”; this is one of the main reasons there is such heated disagreement about whose policy preferences do better at creating value for households, communities, and enterprise. By adding to our value considerations a G.O.O.D. economic analysis, we can better see the generative capacity of a given policy priority, economic trend, or technical innovation.
The goal of assessing generative value is to ensure that when we talk about whether it makes sense to roll back funding for a given program (in education or infrastructure, for instance), we can see whether the reduction will also eliminate the underpinnings of value added on which we depend for routine health and improvement of economic conditions. Such information can direct new funding into smart investments, spur innovation, and motivate the building of new community-level capacity that will help to build the middle class, all while making the budgetary process more fiscally responsible.
Generative economic activity is activity which yields a greater range and volume of resources than it consumes. For example, investment in solar energy technology is generative, because the more invested, the more resources available; investment in fossil fuels is not generative, because the more invested, the more rapidly the finite amount of resources are depleted.
Organic economic activity is activity that is woven into the fabric of what is being done throughout the marketplace in question. Organic activity is not necessarily imposed from above, but rather emerges into the currents of energy and wealth exchange that comprise the overall marketplace. This can include, but is not limited to, activity that emerges from intelligent regulation, incentives and government investment. Organic activity tends to become visible at the community level, at the human scale, and ultimately, it is the province of everyone who operates predominantly at that level.
Optimization refers to a specific way of imagining the value of economic activity. This is not the old optimist/pessimist opposition, but rather a practical differentiation between the analysis of self-appointed “realists”, who shy away from market-redefining innovations dependent on imagination and quality, and fact-based optimists, who look to achieve the best possible outcome, given what is, and who are not averse to imagining past the paradigm shift.
Demand is the primordial driver of economic activity. People need food and water to live, so there is demand for supermarkets, and for the entire fabric of agricultural and industrial activity that supports them. The demand for generative organic optimization of our economic environment is rooted in the very logic of human civilization: we devote our intelligence, our collaborative capacity, our resources—natural, synthetic and intellectual—to always doing better than what would naturally fall to us.
Why establish a GOOD-based framework for economic analysis?
Status quo is rooted in standardized thinking; GOOD-based thinking is how we get better. Conventional economics looks at “demand” as the extant sum total of need and want for specific items, services, etc. If X number of Hummers are sold in a given year, while a few sit unsold, then the supply, filtered by distribution and pricing, is meeting the demand, but overestimating by those few that remain unsold. Some economists think pricing determines demand, and others view pricing as less important in the final analysis.
Analysis of past demand is supposed to predict future demand, and so supplies are adjusted to fit such predictions, as are values, prices, investment patterns, etc. But what is not accounted for is whether the same people who generate the apparent “demand” for Hummers might be happier with equally muscular fuel free alternatives—which bad economic thinking has kept us from building—at lower prices, and where the air, water and food consumed by their family would be safer.
Conventional analyses of demand do not adequately account for the intangible, the human element involved in assessing both need and want, that drives the actual decision-making of actual people.
People tend to look for opportunities to make life more interesting, more comfortable and more worthy of respect, on some level. How those intangibles are calculated depends in large part on the character of individuals, so a real assessment of what might be missing in a given market, the extant demand, needs to look at how well that market provides opportunities for the exercise of personal character and imagination.
Generative Organic Optimization Demand (GOOD) is a way of looking at the economic landscape to determine how effective our overall strategies—our leading business interests, our laws, our system of education and our fabric of community, those things we do every day—are to achieving what people expect, what in fact is demanded by the ever-increasing population of human beings on planet Earth: better outcomes.
For a century, Gross Domestic Product (GDP) has served as a proxy for more precise but elusive measures of progress toward better outcomes. GDP totals all exchange activity within a given set of political boundaries, so it is easy to measure whether the average exchange capacity per capita (GDP per person) is increasing or decreasing. But this does not tell us whether most people are making progress toward a better existence, in terms of personal liberty, economic security and sociopolitical empowerment.
If we transition to a way of thinking that allows for GOOD-based economic analysis, we will be better equipped to discuss in real terms how people are living, what they are striving for, and how we can envision and collaborate to achieve better outcomes. So, first things first…
What are the primordial GOOD considerations for individuals and families?
Economic cycles as they relate to resources are most often self-reinforcing: a fabric of economic activity reliant on resource-corrosive practices and depletion of generally available stores (or potential output) of goods and services will reinforce the cycle of depletion as it expands; a fabric of economic activity which generates added basic resources for generalized consumption will reinforce the cycle of constructive collaborative improvement as it expands.
So, a GOOD-based economic improvement strategy needs to cultivate and propagate reinforcements of the following kinds:
- Biological: First of all are the life-sustaining compounds without which human life is not possible: clean air, clean water and food-borne solid nutrients.
- Structural: Next are those structural comforts of the built environment, without which human beings are less able to achieve long life expectancy and educational and professional excellence: shelter, plumbing and heat and electricity.
- Intellectual: Then come the intellectual commodities: information, education, technology sufficient for erasing the digital divide.
- Political: The hope, then, would be that with these come political liberties: freedom of thought, freedom of assembly, freedom of worship, freedom of the press, freedom from all forms of discrimination, and an enforceable guarantee of voting rights and the right to petition the government for redress of grievances.
- Community: Individuals and families tend to be, as economic actors, expressions of Generative Organic Optimization Demand, specifically over and above the four preceding categories of primordial GOOD economic requirements: biological, structural, intellectual, political. Individuals and families are best able to participate in the economic, social and political constellation of influences, when there is community infrastructure allowing for substantive, character-driven interaction at the human scale.
This means opportunities for children to gather, play and compete, safely and without undue ideological pressures or quality-of-life dictation from budget processes, violent crime, resource scarcity or contamination of the environment. Some of these community assets would be: art and music in school, school sports, community-level recreational activities, extracurricular educational opportunities, and clinics, hospitals and other services that guarantee quality affordable on-time medical attention.
Measuring the quality, affordability (as against individual, household and community income) and accessibility of biological, structural, intellectual, political and community infrastructure reinforcements is then necessary to understanding what is actually happening at the human scale, and what innovations, incentives and/or collaborative initiatives would build resiliency and mutual thriving into the human experience of a given community.
The Human Development Index (HDI) is an attempt to look at the status of people, families and communities, in relation to the above-listed reinforcements, focusing on health, education and living standards. The benefit of GOOD-based human development analysis would be to assess and determine to what degree activities related to human development are also generative, thus meeting the GOOD requirements of a given town, region or people.
What is GOOD for Main Street?
- “generative” means resource-reinforcing;
- “organic” means generalized collaborative spontaneous economic activity;
- “optimization” means improving conditions;
- “demand” refers to the real-world need for such reinforcements that improve quality of life at the human scale (individual, family and community).
The Main Street economy is the heart of GOOD economic analysis.
The five categories of GOOD-relative reinforcements listed above can serve as a guide for what to look for in the GOOD status of the Main Street economy. The financial collapse of 2008 was calamitous by any application of GOOD-based economic analysis: after a decade of declining affordability of political and community reinforcements, biological reinforcements, and then structural, became so cost-intensive, more than 1/6 of the total population of the United States was living in poverty.
Community banks, reliant on vibrant local GOOD-relative economic activity, began to collapse, and larger banks, reliant on vibrant GOOD-relative financial activity more broadly, also found themselves on the brink. Intellectual reinforcements for the GOOD-relative economic standing of Main Street interests declined in every area except online information. (Education, as well as access to reliable real-time information about the financial and legal framework of an individual’s life landscape, was becoming ever more expensive, just as people were losing what wealth they had.)
Coming out of the 2008-2010 financial sector collapse and restructuring, what the Main Street economy most required was a deliberate conscious focus on the part of financial institutions on the GOOD requirements of individuals, families and the fabric of surrounding community in which they live day to day. That did not happen, so lending has lagged, recovery in the housing market is indecisive at best, and the rate of new hiring is, accordingly, slow.
The expansion of GOOD-relative economic reinforcements for Main Street requires a comprehensive decentralization of private-sector economic power. Oversized financial institutions run up against an arithmetical limit in their capacity for genuinely sustainable steadily increasing regular asset growth. Eventually, there are no longer enough resources outside their grasp to feed the expansion of the value of what is within their grasp.
There are specific activities financial institutions can favor that will allow for a momentum shift, toward the decentralizing of economic power, effectively devolving power to consumers, and freeing corporate interests from the requirement to measure success exclusively by raw numerical growth. The leading consideration for the value of an enterprise should then shift toward how it is tied into achieving GOOD-relative reinforcements for quality of life at the human scale.
Organic optimizing activities conducive to GOOD economic status improvement
The organic optimizing activities required to respond to GOOD should include:
- health-reinforcing food production;
- affordable health quality-enhancing goods and services;
- intellectual agility-expanding goods and services (educational and informational liberation);
- community-level quality-of-life enterprises;
- human-scale banking initiatives aimed at building GOOD-relative reinforcements into local economic landscapes;
- crowd-funding for job creation, in mode of the Opportunity Finance Network;
- a revenue-neutral fee on carbon emitting fuels, with 100% dividend to households;
- distributed 100% clean-energy infrastructure, training and services;
- cost-effective mass-market quick-charge electric vehicles;
- municipal, state and federal policy priorities, rooted in full-spectrum sustainability;
- urban development innovations that provide for pollution-free affordable public transport…
Extreme examples might include:
- business solutions like crowd-funding of foreclosure avoidance plans;
- 100% transparency in major conglomerate banking or transnational financial enterprise;
- chartered partnerships between municipalities and local businesses, aimed at hiring, educational opportunity, recreational quality of life and health funding;
- transitioning most business tax credits to reward innovation, hiring, clean energy, energy efficiency and health funding initiatives;
- public-private partnerships in owning, drawing revenue from 100% clean public transit;
- direct investment in “breathable air” initiatives;
- deliberate focus on tree planting, park greening, throughout urban and exurban areas;
- explicit plans to halve the number of combustible fuel vehicles on a city or region’s roads within 10 years…
In each case, these organic optimizing activities optimize the GOOD economic status of a city or region by incentivizing investment, hiring and direct funding of improvements to quality of life and to resource-generative activities. They become organic by feeding directly into the fabric of generalized everyday economic activity. By becoming an organic part of the wider fabric of economic activity, everyone across the economic landscape is empowered to contribute to the improvement of their own circumstances, simply by participating in generalized everyday economic activity.
Where GOOD is missing from our economic calculus
Travel from Bayside, Queens, to Long Island City, or to the Brooklyn Navy Yard, using 100% electric green tramways, and/or a gleaming new monorail system, and you are helping to pay for new employment, new construction, immediate palpable improvements to the aesthetics of the built environment, and for enhanced mobility and economic opportunity across at least two counties.
Build such a system into the wider fabric of New York City and the region, and the benefit to commuters, to commuter-dependent enterprises, to the housing market, and to the funding of schools, community recreational activities, public safety and health treatment options supported by the public or private sector, is still more noticeable. The same sort of organic optimization can generate new resources and better quality of life in non-urban settings as well, as small communities become 100% energy independent, and build in smart, innovative enterprises, better quality of life, more efficient transport and educational options, each of these inducing new hiring and new investment, at the local level.
In a city like Barcelona, Spain, refurbishing central markets in every barrio of the city, and adding 100% clean-energy-based new construction and training programs, would vastly enhance the amount of GOOD-relative investment, cycling new wealth through the generalized economy of middle class and working families. It would also afford young people with new routes into the labor market, something Spain desperately needs.
In cities like Jakarta, Indonesia, Maputo, Mozambique, or Mokha, Yemen, doing three things would vastly improve the GOOD-relative standing of millions of people:
- Incentivize investment by businesses and municipalities in more permanent structural reinforcements, allowing people to participate in and profit from the building in their own communities;
- Put at the center of this new human-scale construction initiative new schools and health clinics;
- Build into the new structural reinforcements 100% smart-grid-based clean energy technologies, which would generate jobs and new wealth in the communities themselves…
These are examples, and enacting such policies will require significant changes in the way funds are disbursed. The World Bank and IMF could be what they are supposed to be—forces for good—by being forces for GOOD-based generative reinforcements of an economic sea change motivated by an awareness of the benefits of real mutual thriving. Without an aim to build GOOD-based thinking into wider economic planning, we will not overcome the corrosive tendencies of exploitative hyper-consumption, and so we will not do enough to eliminate poverty and build a permanent democratically empowered middle class.
GOOD-based economics is just a start, but it is integral to understanding how we, as a civilization, move forward in this increasingly connected, personality-driven 21st century where we hope that all people everywhere will be free to live, work, dream and achieve, with dignity, security and socio-political empowerment to back them up and to reinforce and propagate the best outcomes of their best intentions, talents and relationships.
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A version of this article first appeared on The Hot Spring Network, on September 10, 2012, and in the fall 2012 edition of the Hot Spring Quarterly. This version was published March 8, 2015, at PoetEconomist.com
Respond to GOOD-based Economics: How to Build the Middle Class