Opportunity Cost

You can’t have your cake and eat it, too.  It’s a silly old saying with a huge dollop of folk wisdom hidden in the middle of it.  But money spent is sometimes more than just money gone – in an integrated world it’s a choice to make one connection when another one might have been a better choice.

Rather than just measure how much money is going in and out, it might be better to understand what we could buy with the same money.  The technical term for this is “Opportunity Cost”, or what we give up by making the choices we do.

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Ben Bernanke

The economy, as a great big thing, is mysterious.  The lives of millions of people connect into one big system that has its own ways apart from any one of them.  But there are people who have positions of power and influence, those whose job it is to keep it all keepin’ on.

Chief among them is the Chief, Ben Bernanke.  Who is this guy?

More people every day are asking that question.  The press, for its part, gave his introduction a long time ago – and rarely go back over the same ground.  That’s a shame because now we have a track record to examine.

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Connections, Revisited

The clock goes off at a pre-set time, maybe launching a radio station that fills the air with familiar patter and music that you’ve come to rely on. You wander to the bathroom where the tap has hot water waiting and you can start your day on a schedule.  If you timed it right there’s time for a cup of coffee from Colombia, maybe a banana from Costa Rica or a swallow of orange juice from Brazil.  You might have some processed food taken from a box and reheated in a Chinese made appliance.

These are the systems you’ve come to rely on – as much as the systems have come to rely on you to be part of them.

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Downward Revision

How are things going?  Without useful data, it’s nearly impossible to make good decisions and adjust accordingly.  The most surprising thing about the decade-long downturn in the US economy is that the bottom line data, real (inflation adjusted) Gross Domestic Product, has been a moving target.  Data has been constantly revised downward for as far back as 2003 through last month.

With the first revision to the second quarter 2011 GDP figure due on Friday, we can only expect the very worst.  But that’s not all there is to this problem. A look back at how far it has all been revised down shows just how bad things have been for the last decade – and how policy makers never saw it happening.

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The most innocent remarks often hide profound truths.  One of the regular commenters of Barataria recently confessed that trying to make sense of the world was a “major hobby” – a statement similar to what many of you have said over the years. Barataria itself is a hobby dedicated to the same basic principle – the world we live in takes some effort to make sense of.  Unsaid is the implication that the professionals that are supposed to be helping us in the process aren’t all that helpful.

As hobbies go, it might seem a bit strange.  Yet it’s easy to argue the flip side, namely that this should be the duty of every citizen of a Democratic Republic.  Certainly, there was a time not all that long ago when everyone who hoped to be called a Gentleman spent a lot of time connecting with people and connecting the dots of their world.

What is the role of hobbyists in an integrated world once defined by experts who may be falling down horribly?  The new world beyond this Depression might well be defined by hobbyists like us.  That’s where it gets interesting.

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