Economists concern themselves with money : its income and outgo, just as we all must do unless we choose to rely on “God will provide” as a life plan. They divide their specialty into “macro” and “micro” economics, according to whether their main interest is the financial health of large entities — usually countries — or of smaller entities — little companies or just families.
Macroeconomics is a rather bloodless science that uses mathematical analysis to try to extract cause-and-effect information from observations of past correlations. See the current fad for Big Data as a substitute for analytical thinking. When the variety of conflicting theories is so bewildering that there is no body of agreed-on explanations, correlations are made to do. This strategy is supposed to make it possible for us to avoid repeating the cycle of major national and international economic catastrophes of the past known as “boom and bust.” Its main achievements heretofore have been in the form of academic papers salted with charts and formulas and laden with PhD aspirations. Practical recommendations, perhaps not so much.
Microeconomics has narrower aims. It focuses on family or company survival no matter how catastrophic conditions bequeathed us by macroeconomics may be. The micro kind of economics is therefore more likely to be of interest to real people in real life. As the basis for family or company budgeting, microeconomics sometimes works reasonably well even in troubled macroeconomic situations.
Those definitions are my own, of course; and do not necessarily accord with those you will find in economic textbooks or the dictionary, but I think my versions are useful in that they make a distinction between the two ways we need to think when we indulge in general talk about “economics” as though it were a unified subject. Too often we make the mistake of transferring jargon from one category to the other when we should be recognizing the distinction between them.
To cite a couple of examples : in our national budgeting we consider the percent of the budget expended on health care as a macroeconomic problem and largely ignore the horrendous microeconomic results we can produce by changing it by some carefully thought-out fraction of a percentage point, while in our family planning our effort is quite properly about caring for ourselves and our loved ones, and we really don’t care whether our actions raise or reduce governmental expenditures by a fraction of a percentage point or not. We want to make Aunt Mabel comfortable during the waning years of her life, federal deficit be damned. When we consider the option of replacing all the light bulbs in the house with LEDs, we recognize the eventual savings to both the economy and the ecology if everyone were to do the same (macro), but we are forced first to evaluate the change on the basis of whether we can afford to (a) throw away our investment in all the bulbs we presently own, and (b) ravage our credit-card balances with a sizeable expenditure on new ones that cost considerably more than the old ones did (micro). This results in squabbling economists “talking past each other” and a lot of confusion. That confusion infects discussions of unrelated things like the budget line item for aircraft carriers versus the one for subsidizing the visiting nurse service aimed at keeping Aunt Mabel out of the clutches of pay-for-service doctors and Medicare- and Medicaid-scamming doctors and hospital administrators.
This “talking past each other” is not inevitable, however. I think if the macroeconomists understood that their concerns really should be regarded as merely the sum of the concerns of all the microeconomists — in other words, that the chief aim of our national leaders should be the welfare of its individual citizens rather than the health of the national balance sheet — we could improve the quality of the dialogue. Instead of shaving every government department’s budget by an arbitrary percentage and letting individual care providers and patients cope and scheme as best they can, our aim should first be to provide people with satisfactory lives and afterwards worry about the way to pay for it. This is surely not easy, but I should like to suggest that it is also not impossible. I shall point to one country where I think the lesson has been learned and venture some comments on how it was accomplished there.
I am neither a politician nor an economist, but I do read the papers and some magazines and even an occasional book, and I have been living on this planet for 90-plus years and traveling around and trying to keep my eyes open for over 70. Most importantly for purposes of this essay I have talked to a lot of people in a lot of different countries (though almost all of them were in what we call the developed world, where I happen to have been born) and I have tried to be sensitive to what we might call the happiness quotient of their citizens. In my un-academic, uncertified, and highly personal opinion the citizens who seem most contented with their governments, their living conditions, their leaders, and their prospects for the future seem to live in countries with tax structures (macro) that support high standards of living, high levels of compassion, and correspondingly high taxes.
This is not accepted as a good patriotic American conclusion. In this country the myth that the road to personal success is open to everyone willing to take a chance and apply some perspiration is supposed to be convincingly demonstrated by businessmen like Bill Gates and Warren Buffett and politicians like Barack Obama. Conversely, we picture the welfare-state citizen as a sort of ambitionless jellyfish drifting this way and that on a tide of cradle-to-grave security that will finally wash him up on an island of irresponsible security. I suggest that we should test that world-view on a focus group of street kids in Harlem whose fathers decamped long ago, whose mothers live in a haze of dope and alcohol and disappointed hopes and whose ‘hood is regularly raked by gunfire and is never visited by representatives of any social agency because “it’s too dangerous to go there.” Compare their views with those of children in any Scandinavian country who were raised in well maintained and supported child-care facilities that allowed their mothers to work at good-paying jobs relaxed in the knowledge that their kids were safe and well-fed and surrounded by caring and capable and well-paid teachers.
Take Sweden, for example.
It happens that I lived in Sweden for a couple of years, some sixty-odd years ago. I went there out of curiosity after having received my ruptured duck and severance pay from the army and had finished my college degree courtesy of the GI Bill. A book on my Sociology reading list had been Marquis Child’s “The Middle Way,” an account of the social democratic political revolution in Sweden that occurred when the Labor Party gained control of the government. One of the first things I discovered about the welfare state was that although there were strict rules about the need for official documents for visitors (for which I didn’t qualify) I had no problem finding employers who were more interested in my practical skills and my eagerness to learn Swedish than in my lack of papers. And despite the many rules and regulations supposedly governing every facet of day-to-day socialist life (from liquor rationing to opening a bank account) they were unlikely to be enforced by any individual Swede — in or out of an official capacity — when they conflicted with common sense. The average citizen paid 53% of his income in taxes (the same as today), and the top marginal rate (levied on incomes of over $25,000 a year in those days, which would be equivalent to $340,000 today) was a full 100% (that’s been modified). This chased into exile a few of the top one-percent earners (very few), but there was little complaint from the 99%, who didn’t have to spend so much as a single öre of their income for health care or education or any basic need.
(As a visitor on a tourist visa I once spent three weeks in Stockholm’s General Hospital recovering from a skiing mishap. I received those three weeks of care, and crutches, and a walker, not to speak of the services of doctors, nurses with lovely Scandinavian smiles, and even as a finale a Husqvarna bicycle, from the health service without — although mind you I was not a citizen — a bill for any part of it.) My Swedish friends considered this quite normal. The system was there to take care of people; not to meet budget line-item goals or to discriminate against foreigners.
So how did the country’s economy manage to survive? Most non-Swedish economists (macro), especially those in Lockean capitalist countries, solemnly predicted disaster. The rules had been newly made by a recently installed government heavily backed by the trade union movement, without (the experts said) due consideration of fiscal reality, which would inevitably lead to quick bankruptcy, since the economy couldn’t possibly survive the out-of-control national debt being racked up by all these nanny-state services. The same prediction — in the same dire language — is still being made today, 70 years later, by their philosophic protegés, but so far, even with the recent controversial addition of hundreds of thousands of immigrant workers (Sweden’s population is presently about 9.5 million, of which 14.3% are foreign born, 9.2% of them from non-EU countries, many of them heavy users of the schools, new-parent support and social services including unemployment benefits). Sweden is still one of the EU’s economic powerhouses, and according to the UN’s official “Happiness Index,” is consistently among the top 10 of the 187 countries covered by the survey. (If you are curious, Norway is number one. The U.S. is number 4.)
So what’s the point?
Well for one thing it raises a question about quality of life versus balancing of budgets. It’s a nice thought that you might be able to leave behind you a neat set of ledgers where the income column and the expense column balance perfectly. You could have them reproduced in granite and use them as your tombstone, after having deprived yourself of all luxury during your life to achieve a macroeconomist’s dream. On the other hand you could ask yourself whether your unquestioning loyalty to absolute numerical income-equals-outgo equality had accomplished more for the welfare of your planet, your country, your family —and yourself — than a less tight-sphinctered approach might have done.
You could ask yourself whether the setting of macroeconomic goals first and tailoring microeconomic goals to meet them is really the most sensible way of looking at the science of economics (sometimes with good reason called by skeptics the “dismal science”) as a whole, or whether successful macroeconomics might not be better determined simply by adding up total of each citizen’s microeconomic requirements. If 53% income taxes gives you freedom from worry about health care and school tuition and shelter and family solvency mightn’t that be more contributory to national and individual happiness than a neatly balanced set of books? Isn’t there something trying to sneak in here about a cart and a horse?
You might also wonder whether micro and macro economics are really two branches of the same subject, as college catalogs tend to list them, or whether they are completely separate disciplines in need of new names that would encourage us to think of them in a new light.
Vance Weaver 