Economic Growth and Value

There is a blurry mix of information swirling around regarding how to stimulate the economy.  I believe the Economic Value is central concept to understand when it comes to Economic Growth.  If we established that it would be valuable to employ 300 people with shovels to dig a large ditch, it would be laughable.  We have machines and energy sources that get it done much faster and at a lower cost.  In other areas of the world, this idea is central to how to get work completed.  We saw plenty of this in Africa.  Although this is an obvious example of labor inefficiency, President Obama gave us an example when he said that our economy was faltering because of ATM machines.  In this example, a live banker was considered of higher value to have the employee count, rather than the machine, which provides a more limited skill set.  Remember the example of the buggy whip?  In the days of horses and buggies, it was necessary to have whips to direct the horse, and manufacturers to make the whips.  When the automobile replaced horse travel, the need for buggy whips diminished significantly.  Should we have had a government program to support this industry?  This sounds very silly, but we need to watch out for this idea to creep into our policy.

The economy grows when we either become more efficient at doing the same work, or adding more production capability of what we are currently doing.  Economic growth is also defined by taking raw material products and ideas, and producing a more sophisticated or developed product.  Wheat into cereal and flour.  Wood into furniture.  Silica, glass, plastics, etc and design into electronic devices etc etc.  These concepts of growth must be front and center to any discussions about economic growth.

Let's take the issue of green energy.  The product is more expensive and it takes more labor to implement.  You don't really end up with the same product (more on this in future postings), but let's assume that it is similar enough to call it a "wash".  If you end up with a similar product, and it takes more labor to produce, there isn't any economic growth.  We would simply be using more labor to produce a product that is more expensive, and end up shifting resources from the users of electricity to those producing the product.  Remember the ditch example?  Buggy whips?  ATMs?   Those proposing the need for green energy are concerned about the CO2 emissions from conventional generation such as coal and natural gas, and they would state that any additional costs are justified(another source of future postings is the validity of these claims).

Let's get it straight in our heads that simply adding more labor forces will not bring about economic growth.  We can't be pushing for ideas that simply add more ditch diggers to the economy.  America is the land where raw materials, education, and innovation produce economic growth from new services and products.   This is driven by individuals who are operating in compliance to laws and regulations of the land.   Government doesn't bring this growth to the table.  No need to push this idea of "partnerships" with government (more on this later also).   Let the government  get out the way by lowering taxes and regulations to the innovators who provide real Economic Growth and Value.