The meaning of economy
In this episode. we explore the implications that arise at every scale when we use the word ‘economy’ in its literal meaning
What does the word ‘economics’ actually mean? And where - and why - does money play any part in that picture?
This one’s a lot trickier than it looks. With a lot of, uh, interesting implications, too…
Yeah, it’s tricky. So probably best to start with an analogy, then.
My ‘day job’ is in a profession that calls itself ‘enterprise-architecture’. But the fundamental problem there is that most of what claims to be ‘enterprise-architecture’ is neither about enterprise nor about architecture, in the literal sense for either of those two terms. Instead, what most people in that profession seem to use it for is, well, little more than a means to sell the latest shiny new IT-toys to unsuspecting organisations. And the blunt reality is that most of it doesn’t work anyway - and too often expensively doesn’t work, at that.
Oops…
Yet why doesn’t it work? A lot of reasons, of course - historical and otherwise - but the short-answer is that they’ve failed to understand what ‘enterprise-architecture’ literally means, and hence what it demands from us. In literal terms, ‘enterprise’ is not just some commercial organisation, but is more about people, about emotion, about ‘the animal spirits of the entrepreneur’ (to quote John Maynard Keynes) - in essence, a story that describes the context and purpose for the organisation and its business. And ‘architecture’ is not just about structure, but more a way to ensure that everything works together, an interweaving of structure, story and purpose, at every scope and scale, into a single, resilient, dynamic, unified whole.
So yes, sure, the IT will usually play a relevant role in that enterprise, and in the architecture that holds that enterprise together as a whole. But it’s essential to realise that the IT is not the enterprise in itself; and nor is it necessarily the most important of part of that enterprise, either. In fact it’s often just one tiny, tiny part of that whole, and also often merely the easiest part of that whole, as well. And we also cannot allow the IT to portray itself as something ‘special and separate’ from everything else - because fragmenting the architecture in that way will guarantee that it won’t work well, or even work at all.
And if we ever forget any of that? - well, that’s when things tend to go badly wrong…
Which brings us back to economics.
Because we have exactly the same problem there…
Okay, perhaps not exactly the same. But it’s close enough that we can treat it as essentially identical. This so-called ‘economics’ is driven by yet another fundamental meaning-mistake, leading to disastrous misunderstandings and misinterpretations. Yet another case where a small subset of a context is arbitrarily assumed by so many people as the only part of that context that matters, and that everything else can be safely ignored. Yet another case where the whole miserable mess causes enormous damage - especially over the longer-term - and yet where almost no-one seems able to understand what’s actually going on or why it doesn’t work.
So yes, it’s the same kind of mess. The only real difference in this case is that the core cause of the mess is not an over-focus on IT, but an over-focus on money.
Think of economics, ‘the economy’, as being a bit like enterprise-architecture. Here, though, the enterprise is portrayed as being solely about money - microeconomics at the small-scale, perhaps, or macroeconomics at the large-scale, and so on, but always about money alone. Yet in reality the money is just one tiny, tiny part of the whole - and often merely the easiest part of that whole, as well. As with IT and enterprise-architecture, we’ll need not that just one tiny part of economics, but everything that goes into economics-as-a-unified-whole. It won’t work - in fact can’t work - without that real whole.
What?
Well, once again, it really is very much like what we saw with enterprise-architecture: any understanding of ‘the whole’ is crippled because people are using a core term in a way that doesn’t actually mean what they think it does.
To understand what’s really going on here, we need to recognise that the term ‘economy’ literally means ‘the management of the household’. Which means that whatever is in and of the household - everything that plays a role in or for that household - will need to be managed as part of that literal ‘the economy’. Everything: no exceptions. And if we get that one wrong - as most people still do - then there’s no way that we can make that economy make sense. Which is why most of what currently calls itself ‘economics’ simply does not work.
So yes, in current ‘economics’ managing the money is probably an important part of managing the household - but the money is by no means the only part that we need to manage. And whilst managing the money of the household may not always be easy, it’s likely to be the easiest part to manage, compared to almost anything else - as probably every parent would know all too well…
And there’s also a scale-issue here. Much as our current so-called ‘economics’ may scale from microeconomics to macroeconomics, the same would apply to the scale of household that that economics would need to manage. Not just the house or apartment or campervan or whatever that we might think of as ‘home’ right now, but all the way up to the household in which everyone and everything will live - otherwise known as the world:
The whole world. And everything in it. Including us.
All too literally our household.
All too literally our only household.
Yet if ‘economics’ literally means ‘the management of the household’, then how well are we managing that global-scale household?
Is money the only thing that matters in the management of that household?
Is money even a meaningful metric at all in the management of that household?
Hmm…
Not just scale, but timescale too. Things like sustainability and so on. For example, one key international definition there is that:
[sustainability is] meeting the needs of the present without compromising the ability of future generations to meet their own needs
The blunt reality is that, in global terms, we’re not doing well on that one. Literally consuming the world into oblivion. Perhaps not so surprising, though, given how so many organisations and others so derisively describe their customers and clients only as ‘consumers’…
In practice, it seems, the only real reason that we’ve built an ‘economy’ based on money is that money makes it easier for people to steal from others in the present, the future, even the past. Not a good way to ‘manage the household’ at a global scale.
And perhaps one of the main side-effects of this mess created by defining ‘economy’ in monetary terms is that, in a business-organisation, the main way to ‘make money’ relies on getting people to be as wasteful as possible - the exact antithesis of ‘economy’. Or, in short, our current definition of ‘economy’ is about as far from economy as it’s possible to get.
Oops…
As you’ll have seen in previous episodes here, such as ‘Imagine a world beyond money’ and suchlike, we don’t even need money to run an economy. And as I explained in a weblog-post some years ago, the worst problem about a money-based economy is that when we map it all out, it becomes painfully clear that it really, really doesn’t work:
What you’ll see is that whenever you least need resources, they’re most likely to be available. And even more so, whenever you most need resources, they’re least likely to be available.
In other words, it’s an almost perfect mismatch. Not merely a poor system, then, but the worst we could possibly devise. And yet we think of it as ‘normal’…
So to cope with the fact that the basic, fundamental, underlying concept simply doesn’t work, we have to construct a huge superstructure of banks, savings, loans, pensions, insurance, superannuation and god-knows-what-else, to try to time-shift the resources from where they’re not really needed to where they really are needed. But that huge superstructure comes at a huge cost: a huge cost, in every possible sense.
And yet we could remove the need for that entire, ungainly, inefficient, insanely expensive superstructure with just one phrase: “what do you need?”
Kind of scary, really.
I’ll talk more about this in future episodes. But in the meantime, time for a rethink, methinks…?