After wrestling with That Nagging Feeling, another stab at a model.

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Myth: We Don’t Have the Power to Shape the Economy
Most of us believe we have the power to make major decisions that shape our individual lives. But we feel powerless when it comes to the economy. Each of us can play the hand we’re dealt, we believe, but we don’t have any power over the cards we’re given. The economy is just the way it is. And if we — or “government bureaucrats” — try to shape the economy, we’ll just screw it up.

Reality: we have more power to shape the economy than we think, but to use it effectively we need to understand its limits.
 

We Have More Power To Shape the Economy Than We Think…
From Finance to housing, from energy to computers, from agriculture to health care, the economy isn’t “just the way it is.” What often seems like a natural or inevitable result of the market is in fact the result of decisions made by our society.

So why does our society pretend otherwise? Because if we openly admit that these decisions are being made, people are going to start asking who gets to make them. Why should powerful corporations and the rich call most of the shots? Why should their values and needs win out over everyone else’s? Why shouldn’t everyone get a real say in how we use our power to shape our destinies?
 
… But to Use It Effectively, We Need to Understand Its Limits
Although we do have more power than we think to shape the economy and our destinies, there’s some truth to our feeling of powerlessness. There are real limits to how much we can shape the economy, and there are an lot of off-ramps to that road paved with good intentions.

If we want to use our power effectively, there are 2 principles we should follow:

A) Stack the Odds in Favor of the Good Guys
Worried we’re going to treat the economy like a magical candy store, where we keep taking goodies without ever worrying about where they come from? Then Stack the Odds in Favor of the Good Guys. Because to do it, we’ve got to have a vivid, rich understanding of the world the Good Guys live in (a.k.a. the Practitioner’s Perspective). If you’re worried about how the Good Guys make payroll — or in more tree hugging terms, how to make it sustainable — then you’d use techniques like:

• Level the playing field — so doing right by your employees isn’t a competitive disadvantage
• Create new markets
• Make It Easy
• Make It Visible
• Use Checks and Balances
  • You Haven’t Succeeded until It’s Politically Sustainable
  • Players over Policy: balanced forces working out compromises much more dynamic, flexible than detailed regulations
  • With Checks and Balances, liberals/lefties can’t simply say “all corporations are evil,” must have positive vision that could actually work
  • Getting Real: confronting conflicting interests (why carbon tax fails: folks don’t believe they’ll have a real say and therefore will get screwed)

 

B) We Aren’t As Smart As We Think We Are
Intervening in the economy can be tricky. And this is true whether you use more direct means or say “let’s change prices and the market will work it all out” (e.g., a carbon tax to solve the climate crisis). Either way, it’s too damned complicated to be sure we’re going to get it right.

So admit it straight up — and draw on the bag of tricks businesses use every day to deal with situations where the complexities of reality outstrips our brainpower:

• Hold people accountable: if they say increasing savings will create more jobs, is that what really happens, or do 401(k) fund managers use our savings to push companies to cut good paying jobs?
• Pilot projects & iterations
• Feedback loops
• Creating space for creativity, flexibility (e.g., adapting to local conditions), etc.

 

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I used a lot of shorthand in this model, but that’s OK. My goal is to sketch out the overall idea. And although it needs a lot of work, it feels like a promising direction to explore. Some areas where it needs fleshing out:

• The sub-points of Were Not As Smart As We Think We Are and Stack the Odds aren’t cohesive – right now they’re just pieces in a bucket
• For We’re Not As Smart As We Think We Are’s sub-points — especially for iterations, pilot projects, & feedback loops – there’s no emotional connection yet
• Needs a bucket for the complexities behind “everyone should get a real say.”

Working on Part 2 of Speaking to That Nagging Feeling, I realized that if I gave my argument a little tweak here and there, I’d have the next version of my model. So, I’m going to skip writing Part 2 of Speaking to That Nagging Feeling and go right to the main event.

I think I’ve figured out a way to reframe my theory as a response to That Nagging Feeling. This Reframe isn’t how I’d explain the theory to someone. It feels more like going at it from an angle. But that’s okay. If you know how you’d handle a tough question about an idea, it tells you a lot about the idea itself. So here goes:

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I have 2 answers to That Nagging Feeling.

Answer #1: in part, That Nagging Feeling is a smokescreen.

By saying we better not mess with the economy or we’ll screw it up, it hides the fact that we already mess with the economy — and we do it successfully, and we do it a lot (see white middle class homeownership in the 50s, computer chips in the 50s and 60s, the Net in the late 80s and 90s, etc.). A lot of what we think of as inherently part of the market was a result of decisions that were made, often by powerful players who fought for and won these decisions. In short, That Nagging Feeling obscures what decisions were made and who made them.

Let me put it another way. The mainstream media often says that the market knows best, or that the market is best so long as we have a little government to patch the bad spots. But imagine if some politicians decided to act on that idea. Suppose they said, let’s stop worrying about whether Americans have jobs, whether Americans become homeowners, the price at the gas pump. Let’s just leave it up to the market and however it works out, that’s okay. How long do you think they’d stay in office?

The other reality That Nagging Feeling papers over is that in far too many cases, there’s no way getting around intervening in the economy. For example, should corporations focus on short-term profits or long-term profits? You can set up laws, institutions, and a balance of power as we have in the US, so CEOs get smacked around if they don’t focus on quarterly profits. Or you can set them up so CEOs are encouraged to think long-term, as they are in Japan and Germany. Either way it’s a choice.

Ask free-market cheerleaders, and they may give you good reasons for why some of these decisions were the best answer (even if they don’t agree with all of them). But these rationales still that don’t change what’s going on: people with power are making decisions about the rules that shape the economy, and when they do, they are changing the odds who’s more likely to win or lose. There’s nothing natural or inevitable about it.

So if these decisions are going to get made, we need to start asking, who should get to make these decisions? Who should have a say in deciding what needs are served and whose values the economy will encourage/reinforce?

Up Next: Addressing the part of That Nagging Feeling that’s based on something real.