The Electro-Magnetic Theory Of Economics

First of all, have you ever seen a worse title for a blog post? If 9 people read this thing it will be a miracle. Which may be a good thing because I'm going off into hyper-space today.

I've never understood how an economy works. Why is business good one year and then stinks the next year? There are the same amount of people, and the same amount of money, and all of a sudden everything stops. I don't get it.

Then an idea occurred to me. Maybe economics is like electricity. The way electricity works is like this (well, this is the idiot blogger version anyway) -- some materials have more "loose" electrons than others. And when two materials that have different levels of loose electrons are connected, and there is a path created, the electrons want to reach an equilibrium, so the electrons flow from the material with more loose electrons to the material with fewer. And we get electricity. The greater the imbalance, the heavier the flow.

Maybe an economy works that way. Think about dollars as electrons. There is always an imbalance of dollars. Some people have more dollars than others. Some countries have more dollars than others. So when the circumstances are right, and there is a clear path, dollars flow from those with more dollars to those with less -- in other words, people buy things.

But what is the clear path that makes the dollars flow? The answer is value. Why is there no steel industry in the US any more? Because our steel became too expensive and the loose electrons started flowing where there was a greater imbalance -- overseas.

If this is true, than the greater the imbalance the more robust the economic activity -- just as long as there's a clear path. This is a disconcerting prospect for advanced economies. It means that societies that have lower costs of production will have more rapid rates of economic growth -- just as long as they have a clear path (something of value) that they're able to sell. This explains our constant balance-of-trade problems. We keep sending our electrons to Saudi Arabia for their oil and to China for their refrigerators.

It also explains the nasty appeal of colonialism. Societies with lots of expendable electrons will be drawn to creating "paths" to those where the electromagnetic pull is the strongest.

It also explains our recent recession. I could never understand why the recession started. But if you look at it like electricity, the materials with loose electrons (banks) lost their attraction to materials with fewer electrons (us.) Electrons stopped flowing and the economy went floppy.

Being an economics idiot I am sure this theory is either completely stupid or completely obvious. But for an ad hack riding to work on the train, I thought it was a pretty handy bit of work.

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