The Relativity and Uncertainty of Market Economics

Economics is a philosophical system of taking statistical data on individual technical indicators consequential to subjective conclusions: example of such: Gross Domestic Product  variations call % positive or negative growth while two consecutive quarters of the second calls a recession. Although the GDP does not indicate the distribution of gained or lost wealth or many economic activities such as at home labor and any transactions that do not exchange cash. Other example is the Unemployment Rate The official unemployment rate (technically called U3) simply divides the number of people who are not working, want to work, and have been actively applying for jobs (defined as having applied to at least two different employers within the last month) by the sum of the people working and those defined as unemployed. Thus, lots of people who are unemployed by many reasonable definitions do not count as such in the official government statistic. Using the government’s own definition, workers who are discouraged or marginally attached to the labor market do not count in the official unemployment rate. There are different, broader, unemployment measures available, but they do not get the headlines.

However insufficient, the GDP, Unemployment Rate, and other statistical indicators are used to draw ‘at the moment’ situational picture on an economy that provides the Central Banks parameters to trigger Monetary, Fiscal or other Policies. When recession persist going even deeper into red the actions take even very unorthodox actions such as Quantitative Easing, saving individual Banks, Corporations, extending Unemployment Benefits, etc.

What ‘modern’ economics lacks? – first the inability to call economic indicators: trigger flags into a system of relativity and uncertainty where ‘market tools’ must be used not based on believes or ideologies but on ‘counter’ or ‘pro’ cyclical pragmatic measures – parameters into an unstable market environment; and second, the prioritize on at the moment actual market tools to accelerate or prevent relative market developments. Let say that a market e.d. economy is running into stagnation with diminishing demand: seemingly it must trigger pro-demand measures; or a market is running under strong inflationary forces: such should take measures to boost the supply driving market forces. The relativity of demand to supply or the way around is balanced by market equilibriums in which situation the market resistance is at it’s the least force. So to speak, when market tools are used as parameters on an ‘as it comes; as it goes’ approach triggered by ‘at the time’ market developments; such pragmatic approach may prevent the real economy from violent market variations.

The relativity of real economy’s market developments is not unconditional because of the high uncertainty of economic realities; however, by isolating ‘at the moment’ developments then acting to smooth or accelerate these developments: let say, a market is running stagnation (deflationary forces) while the consumption/demand is indicated then the pro-expanding demand market tools should be used to steer higher employment, income, and consumption. The action strength will depend from the strength of the indicated variations.

Market Agents such as the Environmental Protection that are unconditional – thus any other market actions must comply with. Less demanding but not the least important are Poverty Alleviation; or Consumer & Costumer Protection, the Rule of Law in Business, and Insurance & Bonding that will help saving Earth, raise market security to allow SME and Investors lower rates lend-ability, raise the level of quality of business activities.

Market Tools as triggered Market Leaps through Direct Investment, Subsidies, Low rate Financing, or Social and Infrastructural Expenses, Sectoral Monetary Policies, Fiscal and Lending Policies, Prevailing Wages or just maintaining market equilibrium by using these Market Tools as Parameters under Uncertainty. Inflation/Deflation are fundamental Market/Economic Indicators that can trigger actions on the Demand or Supply Sides. Minimum Unemployment is down to Full Employment relying mostly on Small to Medium Businesses and Investors to steer enough business activity; however, governmental and other means for employment are feasible: balancing private employment. Some markets where the governments are more involved in employment could evolve into more private employment, other may follow the way around: ‘the means justify the deeds’; however, free entrepreneurship performs as best in in market development and manage at best market equilibrium; the inflexible bureaucracies cannot compete private entrepreneurial organization such. There are market sectors that common hold property is must to ensure fair common services, and the percentage of non private employment will probably rise – the fiscal reserves that support such employment must also be flexible, sometime not debt related but market demand driven. Overall, to succeed full employment in a highly technologically developed and developing world the idea of National Debt should evolve into the ideas of protecting Earth Environment and alleviation of Poverty to support it, the entire market economics should be founded on two bases: first is the Micro –level that is directly market forces compliant and adjusted by the by competing market participants and second is the Macro-level that is not only market adjusted: the appointed factors of Earth Protection and Poverty Alleviation will overwrite it, but also even the existing market forces could not let it self-adjust as it is seen by the 2007-9 Recession that required enactment of many counter-cyclical  governments actions such as the Stimulus  packages, the QE, the bailing of ‘too big to fail’ Banks. The Market Tools usage could be adjusted on Macro-level to eventually slow-down an overheating market by targeting individual market sectors (example of such interference is the way China cooled down their Real Estate in post recession time by limiting lending access to 50% LTV on first property and prohibiting lending on a second property, also not allowing for the Developers to change prices from the previously listed ones. The targeted actions by the Central Banks should not be limited to Discount Rates or even Quantitative Easing but should go to individual sectors and fix the redundancies or shortages.

The ongoing Globalization and rising Productivity have put strong market exogenous forces over national economies in the 21st Century as seen it has prompted excessive national debt and rising inequality. The Transnational Corporation in manufacturing, financing, services have flourished under these new conditions by outsourcing and moving business elsewhere; in addition the China’s Industrialization and the Internet have aggregated these market processes of changing the pro-supply forces well handled by the economics of Capitalism into a pro-demand and pro-supply new forces ravaging many markets because the inability a new system of market economics be implemented.

To include these exogenous market forces along with the endogenous such of technologies and highly sufficient management, and the Earth Protection very expensive and uncompetitive means, and the needed Poverty alleviation on a currently used Budgetary Economics is going to be impossible: if the whole economics is ruled by debt and budgetary approaches the many issues arousing from these 21st Century developments cannot be properly dealt, and therefore an evolution to a Market Economics adjusted to Inflation/Deflation must be apprehended. To overcome the head winds coming from the new developments to stay on Austerity adjusted Debt economics is impossible by nature, neither all economies can industrialize to fulfil their Fiscal shortages nor by cutting on expenses can take these to some balance to the necessary investments to build the required infrastructure, full employment, stop polluting by focal fuels, old vehicles,  stop woodcutting, garbage disposal, invest substantial money into green energies and technologies. To succeed Market Development the Debt stigma can not apply, the lending, financing, shareholding, are private issues based on ‘risk’ or ‘reward’ principles that must become national and international investment principles too:

How governments will handle these highly demanding new expanses? – Foreign Direct Investment, available other capital: Public or Private, the Quantitative Easing, the SDR issues by large Central Banks and International Finance Institutions are the one to provide and control proper investment and execution, even though, this is not going to change the current economic order in complete it will create some very unknown market conditions.

How the government will make sure not prompting at the moment Inflation? – the Market Leaps are targeted environmentally friendly project developments that target infrastructure build up, construction employment, maintenance employment, other employment: double targets as could be seen; what such project must sustain is not prompting excessive Inflation and consequential diminishing employment: the complexity of making projections should include the scenario of having large manufacturers, banks, wholesalers and retailers be included in the project as auxiliary  filling the blanks to prevent Inflation, also a project should include green farming, tourism, apprenticeships, courses in management, finances, agriculture, to prompt employment and teach the locals to manage themselves – the Prevailing Wages, Residential Requirements, SME lending parameters are necessary too. Such project will employ  in the beginning many foreign managers, instructors, teachers, and specialists that will provide the needed expertise but all mid-management, labor, support must be done by the trained locals in prospective all the positions must be occupied by trained local staff. The discussed project imply some underdeveloped markets with lack of proper education and skills, however, when a Market Leap is done in an developed market the need for outside specialists could be limited.

Most developed markets may not need Market Leaps but just acceleration of the existing green energies projects; however, employment is an issue in these markets too, so to prompt business and employment many new approaches must be used that will boost SME activities, will create opportunities for all – meaning full employment that consequently will give more Fiscal power and revive the optimism and the desire to succeed. The motion, when created, will employ the positive energy of many skilled currently underemployed or unemployed people.

In details, the developed markets have many channels to shake up business, social and infrastructural expenses are not excluded as a market tool’ the Market Agent apply to these markets as well to developing ones in their entire powers; they are the foundations for higher market security that will allow low interest lend-ability to small and medium businesses and investors, and establish high requirements for consumer and labor protection changing the ‘quantity’ development into ‘quality’ development. Under higher quality requirements more education, professionalism, is going to be required to compete, but better rewards will follow up. The globalizing marketplace will provide plentiful of opportunities for highly educated specialists.

To ensure modest Inflation the developed markets artificially boosted Market Development should be done in a complex manner by engaging more diverse measures: from manufacturing, service sector, farming, tourism to all go green – protecting the Earth environment. The substantial capital needed

such actions must come mostly through QE, but investors will get involved after the project starts. The commercial financing must be done through commercial banks on setup terms and subsidies (in the beginning) why letter the high security at the markets will make such low interest rating market compatible. The Market development literally means developing markets: developed or developing by using Market Tools for targeted Market Leaps or accelerated economic activities under implemented Market Agents business environment. These projects differ from country to country and from market in a country to another market could be in the same country (example: South of Chicago and North of Chicago could be considered different markets: differing in education level, access to employment, safety, property values, opportunities for business development – even though neighboring, having the same currencies, language, etc even under GDP, Unemployment, and other current indicators the difference is substantial; thus to approach these two markets requires dissimilar planning, financing, and executing: the planning for North of Chicago will improve already developing green infrastructure, by vehicles replacement with electrical, solar and wind power generation, renovation of buildings aiming  isolations, finance existing small and medium businesses to expand, using fiscal breaks to leave more money for consumption, higher social pension, Medicare, helping for high education, schools, etc that much of the project could be financed by direct and indirect investors. The strong middle class markets require upgrading to more business opportunities, green infrastructure, electric means of transportation, zero pollution.

Whereas, the South of Chicago is needed ground up planning for a Market Leap closer to one in the developing than in the developed worlds formerly explained.

Marketism calls economies markets so the less advanced parts of an economy could be qualified into markets with their specifics that require individual planning and actions.

The governments involvement and interfering with economic activities or the control on business vary substantially from country to country as mentioned before. Markets like China have strong State Companies competing straight with private companies whereas markets like the US does not run State Companies and the competition is among private companies, markets like the Scandinavian have very strong social protection system with public Medicare  far different than the more individual US such. These examples are to show how diverse the world markets are and therefor, the Marketism should use compatible Market Tools to their specific business activities, employment, environmental protection.

Market Agents are required by the need for markets unification, for marginalizing competition disadvantages to Small and Medium Businesses and Investors, and for higher market security. In the world of so much diversity the basic rules of Market Agents are more than enough to stabilize international business and financing to allow the proportionate usage of Market Tools to steer enough business activities, local investment, employment, alleviation of poverty, and finally protection of the Earth environment by market means.

Up to now the tight budgetary leach on economies prevented or were suppose to do so from exacerbations in business and governments, modest recessions were suppose to cut dead branches of redundancies by painful but necessary self-adjusting. Then the 2007-9 ‘Great’ Recession hit the economy so hard that the multiple interference by the Central Banks and the Government was necessary to prevent from total melt down. The ‘certainty’ of the science of economics evolved into ‘uncertainty’ – so, instead the measures (pro-cyclical) follow the trickle-down philosophy of the Capitalism, the ‘as it comes; as it goes’ counter-cyclical approach of using market tools as parameters was used. The Keynesian interference could be considered closer to the methodology used by the Central Banks means but the Quantitative Easing, for example, was far beyond it; the complexity of the interference into the economy went far unorthodox, but it saved the world economic order from destruction. The showed the level of ‘uncertainty’ prompted under the new global conditions that exceed the conceptions. After substantial amounts cash was infused by the Central Banks Inflation was predicted by the orthodox economics, however, such did not come: the exogenous forces more powerful than even huge quantities of money prevailed. How strong are these forces though? And if Inflation has evolved into chronical Deflation where is the turning point?

Thus from one side the Globalization and rising Productivity have been taking away the fundamental industrial jobs from another it has pushed prices and Inflationary pressures down. The ideas of certainty by letting these developments self-adjust cannot be considered practical. Example of sticking to the orthodox ideas was the European Union insisted by Germany: the weak results of a barely improving EU markets are a good example how such philosophy underperforms. Example for using more flexibly economics is China that even though it had highly dependent on export economy it gradually been changing by exploring QE, targeted stimulus, subsidies, on the supply as well on the demand sides; thus raising living standards and boosting consumption.

The question how to prompt the right market development by not triggering excessive Inflation in the most fundamental for an ‘as it comes; as it goes’ economics; the diversity of markets structures further complicate any setup system. Actually, there isn’t any possibilities for a ‘setup’ system – it is about using Market Tools as Parameters to boost business activities and employment while preventing excessive Inflation. In principle, as mentioned before, if Market Leaps are used these must be more complex having in account all sides of a market while balancing demand to supply. The excessive capabilities of the Transnational Corporations to expand global production, financing, outsourcing, and moving are preventive valves to short term inflation; in a longer term, the steering of market competition on micro-level could self-adjust, on a Macro-level prompt actions to cool overheating market sectors must be preventively used. The game economics can not comprehend the complexity of data from endogenous and exogenous prospective to setup a system working for the appointed diversity in market varieties, only based on parameters that slow or accelerate certain market sectors the system may localize and address effects and consequences for a market, particularly in a short term; in a long term for a market that has overgone market leaps or targeted business activities boost the micro-level market competition should let such market self-adjust business activities; the interference on macro-level should boost environmentally friendly business activities in any possible varieties and if needed to use Social expenses along with Subsidies to maintain full employment, that is considered paramount by Market Economics.

The full employment of Market Economics is not in the 2-3% level but in the single 1% . To have such high employment is the target: in less developed markets such employment consists of less advance jobs but yet giving the individuals the ability to maintain normal life to the local standard of living. It is obvious that the most developed markets will have more access to high education and high-tech jobs, at least of the beginning of such global market development. Industrialization is not considered by Market Economic as the way to Global Markets Development – the Market Agents consist strict Environmental, Consumer, and Labor Laws thus not giving to the Transnationals the initiative of deregulated markets. The non-industrial market development is the most fundamental difference between Market Economics (Marketism) and the Capitalism. The artificial Market Leaps and targeted Projects which are not self-adjusting on a Macro-level are the second big difference – in this case the Environmental Protection targeted by Market Economics overwrites the Debt controlled self-adjusting Capitalism.

Market Economics I.e. Marketism is based on free entrepreneurship as a vivid force for global development; the Market Tools use many artificial approaches such as Subsidies but on Micro-level the market competition is ruling, thus the finance institutions and governments are the ‘invisible hand’ to prompting business activities not the overhand of making business or money. Freedom of capital flows, labor, recourses, private ownership, freedom of speech and ideas are paramount for Market Economics to succeed in a long term.

Joshua Ioji Konov 2016


About Joshua Ioji Konov
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One Response to The Relativity and Uncertainty of Market Economics

  1. Pingback: How Globalization affects Market Economy | Philosophy of Market Economics

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