New Economies, New Anxieties
New semesters bring challenges, for sure. I was expecting that. What I wasn’t expecting was how disorienting my economics class would be. This semester I am taking “The Networked Economy” from Dr. Garcia. After enjoying her lectures in our Communication, Culture and Technology course last semester, I decided to take her course and see if economics was as interesting as her lectures and Freakonomics had made it seem.
I have never participated in any activity that even resembled “economics”, unless you include the countless evenings during my childhood when my father would round up my siblings and I and take us to his office. Together we would fold flyers and glossy brochures featuring banner style headers proclaiming “Retail/Warehouse Space for SALE or LEASE!” all while my father preached about the costs of running a business. These conversations seemed to imply that we should be running businesses of our own. For a six year old who was only focused on folding flyers so that “Available Now!” appeared above the fold, this was a simultaneously self-evident and daunting proposition.
With only my childhood to support me in this new class, Garcia’s opening question was equally daunting: “Is there a new economy?” Apparently the explosion of technology has created a networked market that has, to some extent, challenged traditional economic theory. On that first day she stood silently in front of us all, her question hanging in the air. Perhaps it was for dramatic effect. I was praying it was for dramatic effect. After all, I didn’t even know what the old economy was, let alone if we had discarded it. And then it happened. Garcia turned to me, and evoking the same anxiety as my father when he would catch me taking a break from feeding the postage meter, she asked, “Jed, do you think we are in a new economy?” My attempt to produce an answer resembled the jammed postal meter of my childhood, spewing words like half stamped brochures.
Several weeks later, following my fair share of extra reading, I have found my footing in the most reduced amount of economic theory. Generally speaking, these theories are the lessons from my father’s office. Retail buildings cost more than warehouses; people will pay for buildings in the right location, price is based on quantity: these were the lessons delivered as axiomatic truths across buckets of mail, stamped and ready for the post office. It doesn’t take a degree in psychology, however, to see how complicated the systemic understanding those simple effect can be. Moreover, with computers, software and digital distribution, the market is no longer based on Adam Smith’s fish or bread or even my father’s buildings. So I am left with the more important question for this semester: Are we in a new economy?
Help me out if you can! (Garcia, if you read this, feel free to comment.)
February 7th, 2008 at 7:12 pm
Much like you, many of my students get confused when they first learn about theory outside of neo-classical economics. This is in part due to a lack of training in the field of economics, but also the narrow approach that economics takes to relating the economy to us as individuals.
My research focuses on the effects of turbulence and complexity on the economy. It is my belief that the major challenges to traditional economic thinking come from the increasingly complicated ways of exchanging information that cause turbulence across both society as a whole, and the way that society interacts with its markets.
Take your blog, for example. Without it, I would not be writing to you; it mediates our ability to interact. This is a dramatic shift. In the past I would not have been able to give you advise unless you were a student of mine living in Michigan. The renegotiation of our traditional hierarchical structures is being challenged as we establish a global information network and marketplace in which information becomes the primary economic commodity.
I hope you don’t mind, but I forwarded your post on to a few colleagues of mine. Hopefully some of them will have time to help you out as well. And don’t stress out too much about trying to impress your professor. From what I know about Dr. Garcia, she has probably already told you if she thinks we are in that new economy. Good luck with the semester!
February 7th, 2008 at 7:28 pm
The universal truths that I uncovered were derived through the appropriate application of the positivist philosophy. Specifically, we have seen that the market orients itself around production, and it is from production that the marketplace expands.
Axelrod, while you point out that the motivation of individuals can obscure the principled truths of the marketplace, we must endeavor, as Comte wrote after my time, to apply our “precise knowledge of general rules.” It is these general rules that create the “invisible hand.” It is this metaphor that embodies the collective effect of self-interest in the market place.
Jed, your father, by selling shops and warehouses, was focused on his private interests. He aided his tenants in increasing their level of production based on the requirements of the market. It is through this that the marketplace grows and the wealth of his nations increases. I cannot see how the invention of new products can replace these fundamental principals with this so called “new economy.”
February 7th, 2008 at 7:29 pm
February 7th, 2008 at 7:30 pm
February 7th, 2008 at 7:33 pm
Instead, we need to look at economic changes from a perspective of cumulative causation. The recent changes to our economy are clearly influenced by social and cultural factors that make your idea of equilibrium a bit simplistic. How can your notions of equilibrium account for change?
February 7th, 2008 at 7:33 pm
The ways in which we engage in transactions has reshaped traditional understandings of exchange and without a doubt supports the argument for a new economy.
February 7th, 2008 at 7:36 pm
February 7th, 2008 at 7:41 pm
February 7th, 2008 at 7:41 pm
February 7th, 2008 at 7:45 pm
This pattern of economic growth across time challenges much of what Adam Smith and Alfred Marshall believe. How can equilibrium or a “perfect economy” exist when economic growth restructures the economy itself? While there is merit to your argument about the mechanization of the workforce, keep in mind that the technologies not only replace the workforce, but older technologies as well. Those older technologies are abandoned, which lead to the further the diversification of the market place.
So is there a new economy? I would say no. Our so called “new economy” has been here all along.
February 7th, 2008 at 7:46 pm
February 7th, 2008 at 7:46 pm
Your father was clearly trying to act in his market interests, but I suspect that you and your siblings influenced those interests. Family and social life is one of many external factors that can influence this idea of always acting in one’s perfect market interest. Otherwise, how would we explain advertising? Social context is another important externality. I believe that it is responsible for the differences we see in the economies we see across different cultures around the world.
February 7th, 2008 at 7:47 pm