How do we know when the economy is really on the fritz and in need of a fix? Politicians use it as an issue to get elected.
Maybe there’s a better way.
The effects of a good economy don’t make as much news as the effects of a bad economy. After all, when does good news become news? Only when it becomes bad news.
‘The’ economy is really made up of many diverse smaller economies. Even when the economy goes to hell in a hand basket, people still buy and sell their goods. We gotta eat, right? Economies, overt or covert, public, underground or black, exist and thrive everywhere there are people with products to sell and customers to buy.
Economists study economic data. It’s what they do. Politicians study reports from economists. Well, maybe politicians only study report headlines or facts that support their political predisposition of the moment. Deep thinking politicians are difficult to find these days.
Economists and the government have a variety of economic indicators which tell them about the health, or lack of, of the economy. There are jobs reports which tell how many jobs are gained or loss over a period of time.
Data also describes an economy by tracking buying and selling, retail and wholesale over a period of time. When home sales drop, so do sales of appliances and furniture, so there are many cascading effects within parts of the economy.
When manufacturers slow their purchases of raw materials, economists can see that products produced from those materials may be less in demand.
Personally, I think a more accurate and elegant method of determining the health of an economy is in order.
Start with employment. If everyone you know has a job, then the economy is probably pretty good. When people work, they get money, when they have money, they spend money. When people spend money, everyone is happy. Well, happier.
What about the economic indicators which can be used to describe a recession or a depression? In an effort to keep the divining process simple and elegant, try this approach.
If you’re out of a job, it’s a recession. If I’m out of a job, it’s a depression.
See how easy economics can be if you put your mind to it?