Market Overview

Simplicity: Working Towards True Wealth

One of the fundamental questions regarding economics is the value and meaning of wealth.

In the early days of modern economics, economists grappled with the question of value. What makes nations and individuals wealthy? Economists of the past pondered questions of why gold and silver are considered more valuable than water or iron because water and iron have much more practical uses. Mercantilists believed that a nation's wealth came from the accumulation of gold and silver. On the other hand, physiocrats believed that agriculture was the sole source of wealth in a nation's economy.

Where contemporary economists may have competing theories on wealth and value, I think individuals can learn a lot about true wealth from the virtue of parsimony, i.e. simplicity in economic affairs. Parsimony defined is the "quality of being careful with money or resources". Alternatively, parsimony is "economy in the use of means to an end".

In a time period that some are calling "the worst since the Great Depression" or "the worst in history", a bit of parsimony can do the planet some good on a macroeconomic level. Even more, keeping parsimony in mind can have substantial implications as individuals and households tighten their belts and budgets. The world needs to take another look at simplicity.

There is something to be said for simplicity. In our contemporary American society, parsimony can easily be forgotten at times. One might say that we live in a cluttered culture where companies and individuals are constantly shouting at us from the television, the computer, or the radio vying for our attention. Where it can be hard to pull oneself away from the Internet or a cell phone, the beauty of nature can easily be overlooked.

Even Steven Jobs recognized the value of simplicity in life. Jobs: "Don't be trapped by dogma -- which is living with the results of other people's thinking. Don't let the noise of other's opinions drown out your inner voice." Jobs made focus and simplicity the foundation of Apple's ethic. Jobs: "Simple can be harder than complex: You have to work hard to get your thinking clean to make it simple. But it's worth it in the end because once you get there, you can move mountains." Jobs understood that simplicity allows the mind to remain clean and focused. On an economic level, with simplicity comes efficiency, and with efficiency comes progress.

The establishment, media, and advertisers constantly attempt to drown us in a loud, boisterous, and cluttered world for control, profit, and gain. With everything from bureaucratic regulations to standards to red tape to rampant commercialism, coming back to an inner haven of simplicity within one's own mind can be a great source of relief from a noisy, annoying, and non-stop planet.

The establishment, media, and advertisers often do us a great disservice in convincing us that there is never enough of anything in this world. They say that there is never enough time, never enough land, and never enough money to do everything. Even so, by and by we manage to get by. When it comes to economic necessities, we require food, water, shelter, health care, clothing -- and that is about it.

Aside from what advertisers suggest, we don't really need things like cell phones, mp3 players, computers, or brand new shoes. Yes, these things may make our lives a bit easier and more convenient, but they do not fulfill our essential physiological necessities.

As a result of all the other supposed necessities in contemporary American society ranging from cigarettes to Coca-Cola to iPhones to Burger King to iPods to whatever else, we find ourselves in a cluttered culture. Antique malls serve as a testament to the clutteredness of our culture through the decades. But here is the crux: All else being equal, the one who realizes what the basic necessities actually are as opposed to unnecessary nonsense and cultural clutter is going to have a distinct economic advantage in financial transactions. The person who can differentiate the necessary from the unnecessary may find more money in his wallet. Such an individual would be an "homo economicus superior".

Have you ever known someone who purchased a golf club set that he never used or new equipment for a sport that he never played? The homo economicus superior would have been able to see the differentiation between the essential and the non-essential. If you were to walk around a house that was cluttered or had a great number of material items in it, it is as if you could walk around and see dollar signs above various items translating into potentially lost value. I know for me personally I wish I could get back at least a portion of the money I have spent on cigarettes in my life; that money's gone now. Of course, we all have various individualistic quirks and hobbies we enjoy, but in weighing the cost and the benefit of any given thing, all else being equal the person who more properly determines value in terms of life essentials will be at an advantage.

Ceteris paribus, the one who holds on to his dollar rather than spending it on a worthless or useless item is going to have much more economic freedom in the marketplace. Where one individual may have $100 and another only has $50 because he had to pay his monthly cell phone bill, the man with the $100 is going to have that much more economic freedom in the marketplace.

Of course, it is not easy to go without a cell phone or an iPod and it may be impractical to go without a car, but if we apply the principle of parsimony to things like clothing, food, and drink, we can see a taste of economic efficiency at work. Simplicity is a kind of habit, and with simplicity comes efficiency. In this way, the "homo economicus superior" understands that the real nature of this economic game is not about wealth or gold or yachts or even retirement. Rather, the economic game is about perpetuation -- perpetuation of oneself, and in turn, the species.

In this way, the man who is 50 years old having raised five children while making $40,000 per year may be considered wealthier than the man who made $250,000 per year and died alone of a heart attack at fifty years of age. Yes, the richer individual may have owned more houses or went on more vacations, but which individual lived a more valuable life? The man who made $250,000 per year may have been richer, but which individual was wealthier?

I spoke above regarding the idea of there never being enough of anything on this planet. Where one could argue that all the world could fit in the state of California or Texas, we have to wonder whether there is really never enough. Something in me suggests that the homo economicus superior understands that in the end there really is enough -- the reason why there appears to not be enough is purely owing to humanity itself. Although I disagree with Friedrich Engels' opinions on political economy, I do appreciate what he wrote on the topic of overpopulation and comparing human needs & population with living conditions: "In short, if we want to be consistent, we must admit that the earth was already overpopulated when only one man existed." If anything, let us let Nature determine when the Earth has gotten overpopulated.

It may take some work and effort, but this world has a lot to offer. The world is a big place and bountiful. And in the end, what is required for humanity to survive includes air, food, water, clothing, shelter, and health care. Economics is regarded as "the study of how society uses its scarce resources", but the problem of scarcity rests not in the inherent nature of the Earth, but in the inherent nature of mankind.

An economist could argue that an individual could have an infinite number of desires that could only be satisfied by a finite amount of resources. Even so, if a prince lives in a castle on an island with a harem and servants to satisfy his every wish and the prince has a sufficient amount of fish, rice, & vegetables for food, sufficient water, and sufficient wine, but the prince desires steak...is the applicable scarcity of steak a problem caused by the island or caused by the prince himself? The perceived scarcity comes from the prince and his intelligence, not the island. Any perceived scarcity of steak or cigarettes or bourbon would say more about the prince than the island. The island could have a scarcity of food, water, land, shelter, et al., but even then questions arise as to why people continue reside on the island in the first place and what the prince is doing about the situation.

Of course, the universe has a limited amount of gold, steak, and rice, but we cannot discount the fact that all that a human requires for survival is contained on the Earth itself. The world is abundant, and I think ceteris paribus the individual who is at peace with what he has will have to face that much less perceived scarcity in life.

Imagine, for example, that God Himself came down and bestowed upon humanity a number of "food replicator" devices (as seen on Star Trek) that could produce and synthesize food on demand. You could go to the food replicator device and say "filet mignon" or "lobster tails" and the machine would produce filet mignon or lobster tails or whatever else you could want. Now imagine that God gave humanity as a gift hundreds upon thousands of these devices to cure starvation and feed the world distributed equally to the continents at random locations.

The clouds would part, the sun would shine forth, and God would say, "I am dropping all these food replicators down to the planet Earth that can produce meals on demand so that My children shall starve no more. Yea, verily, I do not want My children to suffer, so I shall put upon the earth food replicators from which they may sup." So the food replicators from yonder heavens appear randomly in various places on the planet. What do you think would happen next? Most likely, entrepreneurial individuals, the wealthy, and politicians would use weapons, thugs, and/or armies to find and secure these food replicator devices so that the rest of the population would not be able to enjoy them. Later, those in control of the food replicator devices would charge hefty fees or leases to individuals and nations to use the various food replicators.

In being given food replicators, humanity would effectively have the solution to world starvation but would deprive humanity of this solution for economic gain. I am sure starvation would still exist in the world as some would not be able to afford to gain access to these food replicators. Even worse, to increase demand for the replicators, some individuals would go so far as to destroy several of the food replicators. Even if God were to "cure" food or water scarcity, humanity would most likely take steps to manufacture the scarcity for economic gain. And why would humans take such steps for economic gain? In order to secure preservation of oneself, i.e. perpetuation of the species.

As such, in light of perceived scarcity owing to the fallen nature of our species, applying the principle of parsimony in our daily lives can go a long way. With simplicity, no longer are we bound to living cluttered lives with trivial distractions. What makes up the wealth of the "homo economicus superior"? Anything beyond food, water, clothing, shelter, and health care. Beyond what is essential, all else is luxury.

Even in the midst of a depressing time period with dire socio-economic conditions, there are still many opportunities for finding a true, lasting sense of wealth in light of the basic human experience. It is said that, "If you have your health, you have everything". But even further, it is said, "Love is sweet, but tastes better with bread". Yes, a human does require certain things to survive, but one's happiness is not necessarily tied to materialistic items. Yes, technology may improve our quality of life and everyday activities, but it need not hold us in bondage. In the end, one's wealth is greater than the sum of his or her material items.

In terms of the current financial crisis, what is the value of mansions that must be torn down owing to macroeconomic conditions? What is the value of tons of food that goes to waste owing to distorted market conditions?

An economist like Paul Krugman could argue that the embracing of simplicity by mass amounts of the populace could give way to further economic problems with a decline in aggregate demand, but I am not speaking in terms of financial prosperity, but rather a sense of personal prosperity. If we tie our happiness, our personal values, and our sense of personal worth to the value of the dollar, we are running with our shoelaces tied together; we are thus bound to get tripped up. In the long run, I believe the market will work towards efficiency -- and with efficiency comes parsimony. If financial prosperity is worth being sought, it will be sought with economic efficiency.

If we as a society, a civilization, and a species really want to pursue a true sense of economic prosperity for not only ourselves personally but also the greater community, we cannot forget the non-financial aspect of our economic lives; as such, we all share in the common currency-commodity that is time. As goes the everyday maxim: Time is money. Where time can often be in short supply, parsimony can work to our advantage. The crux comes down to a sense of awareness regarding the economic reality of our human experience.

In short, the "homo economicus superior" gets it. The "homo economicus superior" understands that all that bombards us in society from news about politics to advertisements to a kiss on the cheek from your girlfriend is all tied to an economic game -- the objective of which is the perpetuation of the species. In this light, the value of simplicity helps to prevent a cluttered life -- and on a societal level, a cluttered culture.

From an enlightened perspective advocating a sense of simplicity in life and economic affairs, individuals are able to cope with daily life in even the troubling economic times of today. By not giving in to the cluttered, noisy culture, the "homo economicus superior" finds himself in a much stabler, better, and more fulfilling economic position. The path to economic stability is paved with the bricks of simplicity. And in time, if traveled patiently with the drive for productivity, ongoing education, and efficiency, I believe that path inevitably leads to a true sense of wealth.

Posted-In: Entrepreneurship Psychology Topics Economics Be Your Own Boss Small Business Personal Finance General Best of Benzinga

 

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