“The reality is that we are all economists. We all deal with scarcity as we make choices and calculate how to ration various items and resources that we consume, produce and utilize.” Kurt Bills.
Shorter Economic Essays
This page contains a set of shorter economic essays. The first one describes Social Security, which clarifies an extremely common misunderstanding about how it works. It was designed originally by some very competent economists. A newer essay was added here to clarify a topic confusing to many, that describes how monetary velocity in an economy is determined. The third essay describes a surprisingly unrecognized fundamental monetary constraint that has important unrecognized consequences for our macroeconomy. It is partially described in this shorter essay, but is also explained with its larger implications in the main essay on this web site: A new macroeconomics to explain wealth inequality.
I intend to continually update in improve the clarity and content accuracy of essays here–particularly with comments and criticism of viewers of this site. You may make comments to me on the Contact Us page link above. Suggestions or criticisms that influence the content of an essay will be credited to the contributor unless anonymity is requested.
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Debunking the claim of Sudden Future death of Social Security
This essay is a description of how Social Security actually works. Because the way any economy works it is not possible to prepay now expenses of Social Security that need to be paid to provide services to many people in the distant future. What Social Security must do is divert economic resources from those of younger age to those who are older–both living at the same time. Resources like food production, medical services, haircuts cannot be produced now, then consumed many years later. For the same reason only tax money collected from those in the future will work to pay for those items in the future. Of course it is very prudent to plan now for what we will need to do to produce them in the future when conditions change–but stashing money in a “lockbox” now does essentially nothing to solve that economic problem. Click here to read more.
The Mystery of Monetary Velocity Can be Solved in Two Pages
Monetary velocity is a very important, often ignored “mystery” number that determines GDP in an economy. It represents how often, on average, each dollar in the economy is spent for goods and services. Many bloggers and writers seem completely unaware of what actual economic events cause this number to be what it is. Like most other economic numbers, it is determined by very specific human choices and actions. This short essay describes exactly what those are. Click here to read more.
Explaining the "Fundamental Monetary Constraint" for an economy
The “Fundamental Monetary Constraint” describes why there is a conflict between a money system with a fixed total amount of money, and which also allows people within that economy to save such money as wealth. To allow people to save wealth, additional financial economic institutions must be added to make it possible to save financial wealth. Some such institutions are listed here, such as the loanable funds market. Click here to read more.