Re: Some Econ Pessimism?

Alexander Chislenko (
Thu, 13 Feb 1997 17:49:24 -0500

So sources of the disturbances in the economic progress are:
political upheavals, wars, and financial crises. I'dd add
natural catastrophes and environmental crises as reasons for
some of the above.

Many of these - or most - are caused by reasons that have little
to do with a market economy.

U.S. today seems naturally shielded from some of them - at this
point, it is not likely to start a big war, or be attacked; the
size of the economy gives an insurance against most natural
catastrophes, that could devastate a little country; environment
seems pretty safe at this point as well.

I would not rule out a possibility of political or financial crises
though - and *some* probability of wars, epidemics or huge natural

I recently listened to a speech of an investment salesman projecting
the 401(K) profits for my colleagues based on the previous performance
of the market. In all such calculations, it is assumed that the string
of luck will continue indefinitely, U.S. government will exist forever,
and the probability of any disruptions is exactly equal to 0.
This creates a comfortable feeling of (false) security that leads many
people in their 20s to take money away from travel, health or education,
and entrust it to the big financial institutions.

On another note, I feel quite suspicious about all these statistics.
They do not take into account any new products and structural changes
and economic and social novelty.

The 5% growth is in oil, cars, and pork bellies in some constant prices.
The fact that people can now use less oil to accomplish the same things
(like sending messages), use safer cars and food, and enjoy new services
and products that just did not exist a few years earlier, is not accounted
in the economic statistics. Neither does quality of the environment, level
of public education, etc.

My personal quality of life increased immeasurably in the last several
years, with the development of the Internet, and my understanding of it.

I have yet to see an indicator of progress that would take it into account.
The statistics show the quantity of resources spent by the economy - the
amount of oil burned, number of letters delivered, new office space
constructed, counseling services provided, etc. It does not measure the
quality of the results - the utility of information received, efficiency
of offices, health and wisdom of the population, stability of social
structures, etc. When the same ends can be satisfied with new, better,
and cheaper technologies, all traditional quantitative indicators can
plunge, while the results may dramatically improve.

There may be methods allowing to reduce qualitative progress to quantitative
measures. For example, I can ask myself whether I would sacrifice my Net
access to add $100K to the value of my house. Well, I wouldn't.

Alexander Chislenko Home page: <>
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