The Psychology of Inducement

“The fractured American Economy is a predictable consequence of having extended seriously flawed economic theory to the expansive architecture of global order. Combine these features with a predatory monetary policy and an unbridled lust for foreign entanglements and the distance between the truly inspired and what becomes of it by compromise is now measured in light-years….”  

For years I’ve argued in opposition to the prevailing economic theory of both Keynesian and Supply-Side Economics and for a very good reason; these theories articulate a theoretical premise based on the aggregation of stoic after-the-fact events and then apply the very same theoretical premise and its pre-cast and asymmetrical attributions to nascent economic processes.  The result of course is always the same: A predictable outcome that always fails. 

Although their prognostications appear to be valid none as yet have attributed their claimed success as being nothing more than the function and simplicity of selectively pairing event so as to assure a desired outcome. Keynes, for example, achieved acclaim (partially) from his theoretical attributions as an associate-cause for Post World War II economic success yet failed to identify the more likely root cause: The human psychology of induced demand. 

This type of Induced Demand can be an explosive kinetic force and should not be overlooked. Think of it: A population in search of an outlet to anesthetize rationalize or validate depression-era and/or post-war trauma along with the reproductive rates that followed is quite a remarkable and pro-generative force. One can clearly measure outcome post occurrence however consider what Mr. Keynes outlook might have been had he established his theoretical projections, instead, from his perspective on December 6th, 1941. 

“Redirecting the Federal Government toward a focused economic agenda, it is hoped, will cause many to discover that our greatest defense evolves thru a vibrant domestic economic agenda. Our great gift to the world will not be on our ability to drive a global form of heretical rule but from our success in perfecting the American Ideal drawing others to mirror a success worth replicating.” 

Then, of course there is an alternative theoretical perspective offered by Arthur Laffer (Reagan-era Economist most notably known for the “Laffer Curve”) who memorialized a version of Supply-Side Economics by creating a theology of thought that attached reduction in tax rates to an increase in demand. His assumptions of course are quite rational and reasonable but again his theory rests on government action as a causal force whereas it is more likely pent-up Native Demand (more on this in a moment), suffering the consequence of government intervention, that was the driving force.    

Creating a science to dissect and explain human action, as measured by an economic event, is all well and good but as a mechanism for understanding the motive force driving and as a prognosticative tool for measuring an economic event the whole idea is an exercise in futility; they are disparate events with distinctly different pathologies. I’ll explain the point I intend by way of an example: A person is driven by desire to resolve their hunger and so they move to fill this native demand by sourcing and purchasing one dozen of eggs. A simple economic event easily measured and recorded now available to be used as a prognosticative Keynesian/Supply-Side Theoretical tool. Now then let’s apply this new-found knowledge and observe the outcome which we will affect by way of a simply question: Is it reasonable for a Farmer to believe that if he can persuade his chicken to double its output you will now, suddenly, be twice as hungry? Probably not!   

Why is the issue relevant and worthy of an attempt to draw your attention?  Simply because it relates to the financial deprivation most Americans presently endure and for a few other reasons as well: 

(1.) No single Presidential Candidate, the current President or Congressmen (save perhaps for a few) seem to understand the severity of this Nation’s Economic battle. 

(2.) The issue will not be resolved simply by the miscellaneous mutterings of Tax Reform. And,

(3.) The Issue will require a correction in the philosophical and structural understanding of what drives an economic event and that the national economy will no longer respond to inflationary stimuli.

 “The residue of past economic success has been consumed.” 

So then, what is the Native Economy? 

“The fundamental human components which when engaged command an event or cycle we refer to as “economy” or give life to what is thought of as an “economic event”. These human components are inseparable from and integral to a functional organic economic system and are best described as intuitive, self-driven and a perfecting life-sustaining-source which compels demand in search of supply. In practice it holds the purest possible form of free-market capitalism.” 

The greatest threat to the Native Economy is the risk of misinterpreting what it is. Many look at Corporate America and its various multi-national forms and believe them to be the embodiment of free-market capitalism and not the degenerative weed they’ve become. As a matter of purpose and survivability these enterprises loathe free-market forces for one very good reason: Free-Market Forces are a threat to their dominance and like government they deliberately work to void a distinct Wealth Creation Premise: There is a distinct difference between extracting wealth from an economic system and one which persists geometrically by first seeding the Wealth Creation process and then subsists and expands from its productive processes.  

Any attempt at using government as an inducements mechanism for creating or spurring the native economy and its processes is naive as to the generative process and completely ignorant as to the dynamics which compel the process to occur in the first place. Unless and until an appropriate level of deference is applied to these simply structures, every government action will, predictably, fail and we’ve got a 100 year track-record that proves it. 

Now then there is the Progressive’s argument which suggests that indeed government investment has a proven track record of success. The oft cited cause-celebre ventures such as the Hoover Dam, the TVA, WPA or Interstate Highway System are often their chosen monument yet they seem to disregard the realities of most social programs, make-work programs and the many others such government ventures that simulate affect-in-form such as the notorious “cash-for-clunkers”; they are, with regularity, economic failures which simply morph into programs requiring perpetual funding routines.  

To be fair there is the rare example where a government program can be made to be self-sustaining and I cite the Hoover Dam as a case-in-point; a government program with a self-funding routine that although it does suffer from the waste and abuse typical for most government-run and managed programs it does take advantage of a key ingredient that should be the core-driver of any government scheme – a native demand to which a revenue generating mechanism can be attached. Conversely, such as in the case of the Interstate Highway System and other National Infrastructure Improvements, there is no such “mechanism” in place by design and thus they require regular capital infusion by government legislative fiat. On the occasion were these (type) programs do possess funding mechanisms, such as tolls and excise taxes, the revenues are often derailed to fund bloated and inefficient self-entitled bureaucracies. 

In the Book, Value Given, Value Received, we review several inviolable economic principles that are integral to viable economic processes. For this discussion there is one principle, in particular, that is acutely relevant as it identifies a structural-contamination feature which I refer to as: Physio-Socio Economic Effect (PSEE)a term which identifies the practices and tendencies of how economic actions/events alter and enterprises orientate themselves in response to sociological/political interferences, inducements or both. The motive force behind these practices and tendencies are typically advantage-driven by nature.  In practice the PSEE defeats all native, organic and normal economic cycles.  

The best way to consider the effect to which PSEE refers is to consider a native component being integral to all economic success: Economic Efficiencies. This single attribute is missing in nearly every government-run routine and it is for this single reason nearly every government-run or government-sponsored program requires perennial subsidy and sustains perpetual cost over-runs or exceeds every budgetary projections; they possess no motive for success or price for failure. 

Where there is no demand for economic efficiency or fiscal restraint there exists no motive or burden to void economic abuse or failure; we refer to these features as Torsional-Economic Tension (TET) which describes the organic/native forces applied to or confronted by an economic function serving to expose and eliminate deficiencies as a means to compel the refinement toward positive measured outcome.  This is, in effect, the self-perfecting component of the Native Economy. In practices, it is the refining force behind free-market capitalism and is non-existent in the environment that is identified by the concept described above as the PSE Effect. To refine the point further; consider that when there is no consequence for these actions there is also no compelling motive to correct the failures and so the system self-conforms to persist and function within this paradigm. The result of course is that you now have no market-response mechanism driving the refinement toward economic efficiency and reward; in fact the response is the complete opposite; economic inefficiency.  

Now then, with consideration to these two concepts, the PSE Effect and TET, we observe the cause for precisely why Amtrak, the U.S. Postal Service, the Federal, State and Local Governments fail so predictably. One might find it interesting to consider that each of these Public Entities exist in the Private Sector so the suggestion that there is no equivalent success-model is simply unsupported by the facts. It has nothing to do with the question of whether or not government is necessary or even financially viable but more to do with the fact that we’ve abandoned every attachment to fiscal and economic efficiency were government operations are concerned. We have, by endorsement or licensing, consented to a common belief that somehow government has no fiscal responsibility and worse yet, we further demean the process by what may be the most perverse accommodation of all: We accept the excesses and abuses attached to government processes and contracting as the nature and essence of government and its political bias.  In essence, the common ideal seems to be: 

“It is the norm and custom of government to demand and accommodate abuses of all types. It is the practice and policy of government to market reason and prudence among the plenary of its commodities on display before the entrails of commerce.” 

As a People, we are seemingly tethered to a common ambition, a search if you will. For some reason it is as if we’ve become intimidated by the overwhelming sense that the mounting abuses and their collateral consequences are so extreme and overwhelming such that they are beyond our capacity to resolve and I say not so! I say that not only are these obstacles survivable, they are actually not our greatest challenge. It is when the need is greatest and the willing appear unannounced, without fanfare being compelled by a motive force far in excess of that which only appears to be insurmountable, do we witness the pure and perfect essence of what becomes valorous. Valor in Prosperity is not only representative of one’s personal achievement, it is more so a monument of one’s expression of choice and becomes a most impressive resource; evidence of the infinite potential of choice and the inevitability of outcome. 

“The recovery solution is not a matter of mere tinkering, it will require a near revolutionary course correction. History shows us that once the temptations of tyrannical rule take hold there has never been a regime willing or capable of correcting its faults. The U.S. stands at rather unique point in history; the test has been assembled, the faults and fissures known; the choices are clear; what remains is the most elusive component of all: Will.” 

Curtis C. Greco, Founder

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