Wednesday, September 19, 2007
The Ideal Economy
The ideal economy I think of is one where every one works for everyone. Every one gets paid based on value he or she can add and capacity to invest in areas where activities would create more opportunities for people in the lower class.
At the bottom of the food chain,lies the lower class. Their earning is based on the value they add to the system in terms of providing services that people in other classes don't have the time to do. They add little value as all activities they do can be done even better by the players in the engine room (only it will be a waste of time as those players could be doing other more productive more ventures). No one should pay them for their capacity to invest as most investment decision they will make will focus on goods for immediate consumption. Thus their activities will improperly balance the economy.
The engine room is the middle class. The fact that they are willing to dedicate their time, effort and talent towards making things provides the capacity for the society to achieve what it wants to achieve. The earn based on the relative size of value added to the system.
People in the upper echelon are very useful. They have experienced life at the lower leg of the ladder. So they make decisions on what, where and how with regards to how this organization will live their lives. They always need to keep in mind all the possible variable that could affect any decision made. They are entitled to earning based on value added by their subordinates and their ability to make wise investment decision.
In this society, every body makes purchasing decision that are rational and are consistent with ideologies that focuses on efficient use and growth of resources.
On the macro level, the players are the government, the banks, firms and the institution.
Government put in place regulations that reflect the collective views of people that make of the society. It focuses on trying to ensure that the collective values of the people are upheld, and the society runs in an orderly manner.
The banks collect all excess cash that unit individual do not have present use of. They invest wisely to make profit and build capacity for use by the firm.
The firm actually produces what the society should consume. The firm could be either private or public (depending on how the economy of that society can distribute the provision of that service). They are funded either by the banks or by sales of shares (purchased by banks, and people in the society). This ownership structure ensures that the governance of the organization focuses on service delivery, profit and less on private interest.
The institutions trains individuals on the skills the society requires to achieve its objective. They are consistently liaise with other arms of the macro economy to ensure that the skill set is right to provide what the society needs.
The managers of the economy should always be thinking about what is in the best interest of the economy as a whole (and less for themselves, as they already have the people at the lower end of the ladder looking to that).
Obviously if I need to put more details into all these, I would have a book (and not a blog).
This generally is how I think an ideal economy can run.