Five-Fold Path towards a Robust Economy
Page 4 of 4

Fifth Path
People do what they do for their own reasons. If they have positive reasons for what they do, they can draw upon more of what they are and be more productive, than if their activity is largely an avoidance pattern.

Adam Smith, creator of modern understandings of the marketplace as the archetypical self-governing system, showed us a number of areas of economic activity where the market should operate free of interference. In most of those areas of economic activity, the pricing mechanism reflexively guides people and resources "like an invisible guiding hand" toward their most productive, rewarding uses. In those areas and regards, government or other kinds of interference only reduce efficiency and general well-being. But:

Smith also showed us a number of sectors and regards of economic activity where this is not the case. Sectors and factors where "the invisible guiding hand" actually leads people away from contributing to their own and the general well-being. He wrote about this most cogently in 1776 in The Wealth of Nations. It is precisely these areas where a public need or hardship is generated, and which requires an intervention of some sort from outside the reflexive marketplace, usually some sort of government control or provision or policing. It is in this context that have raged most of the political and ideological struggles of the past two centuries.

Most of what government now does (and, alas, does poorly), directly in such intervention, could be achieved much more effectively and efficiently from the private sector, the marketplace, if incentives were in place to supplement the directions being provided by "the invisible guiding hand." Controls could be very light and very subtle, with little motion or effort wasted. If the appropriate incentives were in place, people on their own and where situated as appropriate, would address the need in question and do so at least expense.

What incentives? At the level of government, prestige awards (like Japan's "national treasure" awards system) can do some things, but so few people may aspire to most of the awards in question that you need something which will catch the attention of far more people, from whom enough will become involved to address the need. Government's main resource for this purpose is—the tax system.

People go to great lengths to avoid this or that bit of taxes.—Might as well make those very slight changes which, when people go to those lengths to avoid taxes, will result in the things which address the needs the taxes were being levied to pay for! This in turn can greatly lighten the tax burden itself, reduce the sometimes heavy-handed role of overt government control, and attract capital and firms which would prefer to live under a lighter tax load.

On the level of corporations, as demonstrated by, among many other things, widespread complaints about "micromanagement," direct control and supervision are expensive. They are far more expensive than well-designed incentives and a good information system which enables employees to know widely and readily what's available to them, as well as ensuring they are well-informed on the context of the tasks they are pursuing on behalf of the company.

Far more can and should be said, but because so many have their eco-political ideologies so rock-solid predetermined, too much said here could get in some readers' way in responding to other points of this paper and its other four paths. If anyone is open to considering options in this sector, I've said considerably more in my book Incentives As A Preferred Instrument of Corporate and Public Policy. Suffice it to say here that there are acceptable and unacceptable forms of incentive; that these are largely defined by terms of the local culture; that incentives as a rule of thumb cost between 1 and 5 percent of more direct means of intervention, control and supervision, whether governmental or corporate; and that few areas of public need exist which cannot readily be solved or improved-upon by careful, thoughtful, informed adjustment of the incentives which now and already are acting upon the people in and around each such situation.


There are already at hand a number of diverse means to bring an end to both poverty and to the present economic difficulty in parts of the world. These include:
o Computer-coordinated barter as a way to step aside from accumulated disadvantage in the main currency and accessing higher productivity to begin creating wealth on your own;

o Applying some of the many effective problem-solving skills yourself and finding ways to encourage others locally also to become skilled in and use such skills on the issues they are contending with or which are around them.

o Extending some of the same techniques to creating, from local resources and people and situations, new unique products which your community or country can trade to advantage in the world economy.

o Using related techniques to profoundly accelerate learning, with understanding. Create quickly and easily a far more valuable workforce and set of world-calibre professionals from the people around you.

o Using subtle incentives instead of more direct, heavy-handed and expensive means of control, policing and punishment, and supervision, as a preferred means to achieve the goals and satisfy the needs of your corporation, community or country.
In any case, such a resolution is much more likely to come sooner and more fully if people can work with what they already have and with local resources, rather than waiting upon far-off authorities and institutions and IMF-type programs to make their decisions and arrangements for them.

Jeremy Bentham's argument may still hold, despite some of the ill effects in some areas of contemporary educational systems, that: people are likelier to know best for their own immediate affairs and to produce greater general benefit therefrom, than are far-off authorities. How many of you reading this really think that World Bank and IMF know better what's good for you than you do? You can choose to continue to depend upon them, or you can choose to depend upon yourself.

It's not that most of the people in those and related institutions lack good faith or good intentions. —But do you want to trust everything to their omniscient wisdom?

Or you can stand by and wait indefinitely for developments. Some have waited for decades; some for centuries. Serious application of one or several of these five ways could well bring an end to your country's or your community's part of the recession within months, with other parts of the world also consequently beginning to recover. You already have, or can readily access, the means by which to do so.

If any part of this makes sense to you, please bring it to someone else's attention and discuss it with them, as thoughtfully and perceptively as you can. Please forgive any parts which don't yet make sense to you. That could be from shortcomings in the proposition, or from speaking across a gap in cultural context, or it could simply be a shortcoming in my own way of saying things. I don't want to mislead anyone any more than did most of those (I believe well-meaning) economic advisors wish to mislead their clients. But a little care and probing and observing and testing and comparison of actual observations may show much that can surprise you.

Whether any or some combination of these five proposed paths, or whether this paper has started your own thinking going on some different measure more directly your own, at least you don't have to continue to sit there taking hits on your economic chin. I know you can solve matters sooner rather than later. I encourage you to look beyond these five paths toward your own solution because your own situation is necessarily somewhat unique and because each of these five paths involves some work and effort, and some other path you might find might be better.

—But let's get the problem solved, one way or another, sooner rather than later, and preferably in a way that leaves you in control of your own life and of what's happening to you.


Comments to
Win Wenger

Related Reading:

  • Mixed Economy
  • Incentives as a preferred instrument of corporate and public policy

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