Introduction: The COVID-19 Pandemic

We are now well into November. Things were much different and much more stable 11 months ago in the beginning of 2020. Goods and services were flowing within and across national borders. People, some of whom were tourists, could jump on a jet plane and travel to distant locations throughout the world. We had just heard rumors about a medical problem that had arisen in China. In fact, it turned out to be the beginning of the COVID-19 Pandemic. The first indication of the problem in the US came from Washington State in early January.

One of the important effects of the pandemic is the number of changes it has produced. There have been big changes in the nature and amounts of the goods and services that the population wants most. For example, there were massive shortages of things like hand sanitizer and toilet paper. And suddenly there was a high demand for items like face masks, so much so that people started making their own cloth face coverings at home.

Then there is “remote learning”. As some teachers might agree, one of the joys of teaching comes from the direct contact with the students. That was certainly my experience. Not only did it help the student’s learning process, but added to my understanding as well. Now we have parents in the position of homeschooling their kids and workers being furloughed because it is unsafe to be in their work environments.

I have experienced many changes to my routine which have made it more difficult to stay connected with my community. In the olden days I got together with my colleagues and friends once a week or so to hang out, have lunch and discuss things. Now weather permitting, we sit outside 10 feet apart with face masks or get together on Zoom — in 2D not 3D. Also, with my hearing and vision issues, face masks have added another layer of difficulty. Faces and expressions are important points of connection for me. Where are the lips, smiles and frowns? Not to mention the hugs! Another pandemic, way back in 1916, deprived me of the opportunity to meet my maternal grandfather. I think of all those who will go on to live their lives being deprived of meeting their grandparents or other loved ones too. We haven’t seen the effects of these changes yet, but loss has a serious impact on those who must live with it.

COVID-19 is a new and novel respiratory disease, one that has never been experienced previously. There is no way of knowing ahead of time how it will play itself out and what steps are required to ameliorate its effects. By its very nature a basic, significant and underlying effect of the pandemic is the uncertainty that the disease brings along with it.

Society’s resources are limited. Some products in the previous mix are no longer required. Who knows if we will ever return to movie theaters, indoor malls, or restaurants? Many businesses have closed and others are struggling to stay open and may not make it to 2021. The pandemic mandates a significant reallocation of society’s limited resources.

The objective of this series of blog posts entitled “The Pandemic” is to examine the effects of the COVID-19 pandemic and the changes that have to be made to adjust to it. And we will adjust to it. Believe me, I have seen some changes in my (almost) 93 years. In this series we will explore some of the changes and talk about some of the important and long-term implications that I think are being overlooked.

Baskets: Unacknowledged Accomplishments

I learned the mantra — Art is a product of the culture — from Prof. Clemens Sommer in my Art History course at UNC-Chapel Hill. It has always resonated for me. From my perspective as an economist, it has taken on a special meaning that I would like to share with you. Art is like any other product. To be created it must go through a process of production. That process requires some of the limited time, energy, skills, tools, equipment, materials and other resources that are available locally at the time. The primary use for those inputs is to provide the goods and services the population needs to take care of itself just to survive. Art comes along afterward.

For any individual to be able create art there has to be a Surplus. Surplus is the time, energy, resources and funds (TERF) you have left over after taking care of yourself and fulfilling any obligations and commitments that were taken on. Not only does the concept apply to individuals, the concept applies to a society as a whole as well.Some of the surplus TERF can be used to produce art. Notably, when the art is sold that increases income and adds to the surplus.Typically art is not part of current consumption. Consequently producing any art requires a surplus.

It is from that perspective that I would like to re-examine Prof. Sommer’s mantra with you in the context of what happened on the small, mountainous tropical 19 1/2 sq.mi. island in the Caribbean known as St. John. St. John, along with its larger sister islands, St. Thomas and St. Croix, were originally part the Danish West Indies. Today they are part of the US Virgin Islands. In earlier years, because of the nature of transportation and communication, St. John was quite isolated, especially when boats were under sail and there were no phones and no internet.

Evidence of art on St. John reaches back into prehistoric times. Art is etched in stone in Reef Bay as petroglyphs. They tell us of the existence and a little bit about a culture that existed at the time. Not only did these ancient artists have the creative imagination, skills and tools to create artwork, the culture also had to have the sufficient surplus time, energy, and resources to make this art possible. A St. John artist, David Ferguson, many, many, many years later copied the images of these petroglyphs and put them on a T-shirt, which I have gladly worn for many years. During the historic period, centuries later, St. John had a very important art form — St. John baskets. They were around long before paper and plastic bags. Baskets are typically thought of as functional items however, some baskets have reached level of high end art.

Continue reading “Baskets: Unacknowledged Accomplishments”

The Adjustments: The Last Chapter

After revisiting the previous blog post entitled Lesson from Lauren I realized there was an important additional lesson to learn. I’m 92 and never expected to be here. I’ve outlived everyone in my family, including my son, Paul. One thing is guaranteed. Sometime in the future I will die. That is true for each of us. I have no idea when that will be.

I do know that I am in the last chapter of the book entitled “My Life”. There is no way of knowing how long the chapter will be. Given my age is likely to be relatively short, 10 years at most. During that time I want to take responsibility for and take care of myself. When I Copy of Copy of Copy of Untitled-4need assistance to fill the gaps that come along with aging, I want to be able to compensate those who provide that assistance. For more about the effects of those changes check out my prior blog post entitled Giving Up Driving.

The balance of my surplus will be devoted to hanging out and interacting with those who want to spend time with me and writing about the ideas I want to share with others, including my blog posts. I accomplish that by talking to my computer and editing on a large screen.

The COVID-19 pandemic as made many things more difficult. As a part of the more vulnerable segment of the population, I have decided to self-isolate. That along with my decreased flexibility in going where I want to go, how much rest I need, etc. requires more of my limited TERF. These days people have to come to see me or we have to Zoom or talk on the phone. We can’t just get together, go to a restaurant and hang out over a meal. I still go to the Farmers Market — with a mask on. That is all part of my current reality.

Each of us must choose the path that we are comfortable with, paying attention to the uncertainty that the new and novel Corona-virus brings along with it. That path determines the outcomes that we will face. Remember, that you always give up whatever else an alternative path using the equivalent amount of TERF would have provided. Whoops, there I go is an economist again.

I woke up one morning last week in a really comfortable place. At my age and stage I’ve pursued my objectives, developed fine relationships and look forward to what the future will bring. That includes hanging out with those who want to spend time with me and coming up with new ideas that I’d like to share with others — including blog posts like this one. But I sure do miss the HUGS.

 

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Surplus: Creativity

Having a surplus is an essential component in the creative process. To bring an idea to fruition a surplus is necessary. Moreover, the greater the amount of surplus that is devoted to higher priorities, including additional consumption, the less of it is available for crCanva - Creative young ethnic craftsman working with screen printing in workshopeative ventures. Not only is that true for a novel work of art, it also applies to any  invention or innovation. For more about the creative process see my blog post entitled “Creativity: Ideas, Invention, and Innovation”. It makes no difference whether we are talking about a new product, a new process of production, a new way of getting products to consumers, a new work of art or any other new, novel concept.

Let’s begin by looking at works of art. It is important to realize that a surplus is required before any work of art can be created. That is because the artwork is not part of the goods and services the artist uses up daily for current consumption. On a daily basis survival, along with one’s other priorities, comes first. Moreover, the materials, equipment and supplies that go into making the work of art come out of surplus as well. An essential element of the creative process is that there is no guarantee ahead of time that the idea will ever come to fruition. Regardless of whether it does or doesn’t, the person who comes up with the idea must use some of their limited TERF just to survive and to fulfill any obligations and commitments that they have taken on. That takes priority over all else. Continue reading “Surplus: Creativity”

Surplus: Inefficiency

Canva - 20 Us Dollar BillsHaving a surplus is essential to creativity. Without a surplus there would be no new products or new processes of production, some of which can lead to lower costs and prices.

Typically when we think of “efficiency” we imagine that the product was made in the simplest, most direct, least expensive way — avoiding any waste. Certainly, new products and processes of production can be more efficient than the old ones.

However, that is part just of what we, as economists, mean when we talk about efficiency. When we call a society efficient there is a second and very important component: that the society produces the mix of goods and services that the people want most at a price that just covers the cost of production.

While the existence of a surplus makes that possible, it also creates circumstances that make it less likely. Surplus puts money into the hands of the innovators — both the companies and those at the upper-end of the income distribution. They can use that extra surplus to reinforce a company’s market position and promote the recipients political agenda. When the innovation is widely adopted the significant addition to surplus makes that outcome more likely. It reminds me of the old adage ‘Money talks’.
Let’s take a closer look at how the increased surplus can lead to greater inefficiency.

Initially there is strong incentive to inform potential customers about the new product and to get it to market as soon as possible. Other considerations fall by the wayside. The Boeing 737 Max is an example. Effectively the company took over the government’s role and responsibility for ensuring plane’s safety.

Continue reading “Surplus: Inefficiency”

Surplus: Collective Decisions

Canva - People DancingAs we discussed in the earlier blog posts about surplus, our primary responsibility is is to use some of our limited time, energy, resources and funds (TERF) to take care of ourselves and fulfill any commitments and obligations that we have taken on. The balance of our disposable TERF is our surplus. Not only is that true for us as individuals and for households, it holds true for any aggregation of them and for the society as a whole as well. The groups of individuals to which the concept of surplus applies include: families, extended families, teams, tribes, communities, villages, churches, clubs, firms, organizations, towns, the district, states, nations, international organizations and the world’s population.

Just as with individuals, first and foremost, the group must produce or have enough goods and services available to sustain itself over time. The decision of how to use the balance of their surplus is not only the aggregate decision of the single individuals and households, it also depends on the aggregate decisions of the group.

Regardless of how a decision is arrived at, a group decision on what projects to undertake and how to use their surplus is effectively a joint decision. Furthermore, in order to transform any idea into a reality, collective, coordinated, collaborative action is required. Depending on the size of the project, it can take a considerable amount of the limited TERF, and sometime years, decades or even longer to make it happen. Continue reading “Surplus: Collective Decisions”

Lesson from Lauren

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Photo by Simon Matzinger on Pexels.com

Here I am at 92 still learning important lessons. Let me tell you a story. As things have changed, like not being able to drive and the deterioration of my vision due to an inflamed retina and Age-Related Macular Degeneration, I realized that I needed additional assistance to to do some of the things I used to be able to do on my own. I got in touch with an organization that hires out companion care for seniors. They provided me with a delightful assistant. Her name is Lauren.

I arranged for Lauren to come by every Monday from 2 to 4 PM. Typically, Lauren and I would jump into her vehicle do some chores, including the week’s shopping. Lauren, just 26, quickly learned the things I like. Moreover, she is a delight to work with and to be with. One time we picked up a nice piece of salmon. We got back to the house and began preparing dinner. I was pan broiling the salmon and the LP gas ran out! Luckily, my next-door neighbor, Deborah, said that we could use her electric stove. Lauren and I carried the pots over and finished the preparations. We sat down to dinner together and cleaned up afterward. What a delight.

When we were ordered by our governor to stay-at-home because of COVID-19, Lauren went to Trader Joe’s and picked up everything I needed for the week. I was set. However, a few weeks later Lauren did not show up at our normal time. I found out from her supervisor, Ann, that Lauren had a fever and would not be available for a couple of weeks. Ann provided a backup. Continue reading “Lesson from Lauren”

Surplus: Community

Let’s take a look of the broader effects on society that the changes in technological and economic conditions have brought about. The first step is to check out a list of products that were not previously available. A good starting point is the list in the previous blog post entitled “The Changes”. Then try to imagine what life would be like without them. In some cases, like no plastics, no smartphones and not having the Interstates, it is very difficult even to imagine. There is no question that many of the changes have made almost everyone better off.

That is certainly true for anyone who has adequate surplus, making it possible for them to purchase new products. It is also true for those who were pushed into upper-end of the income distribution as a result of the changes.

The role of the economic system is to provide the goods and services that consumers want most at a price that just covers the long run costs of production and distribution in the most efficient manner. When the market mechanism does not adequately perform that function, it opens up a possible role for government intervention. Just look at the recent pandemic and the chaos that has ensued. We’ll talk more about that later.

Canva - Persons Raising Hands-1In a democracy the government is of the people, by the people, and for the people with liberty and justice for all. It is not a government controlled by the elite few who have been able to obtain a position of power, like a dictatorship, an oligarchy or by those at the upper-end of the income distribution.

Those who developed the new products and new processes of production deserve to be rewarded for the contributions that made others better off. However, often they have used their newly acquired additional surplus to engage in activities that push them even further into the upper-end of the income distribution and enable them promote their private agenda.

They often use some of their newly gotten gains — additional surplus — to promote and extend their market position and to engage in activities that are self-centered and designed to increase their surplus even further. By doing so they fail to take account of the members of society that have been harmed by their actions.

Continue reading “Surplus: Community”

Surplus: Winners and Losers

the-weight-of-the-2032357_960_720In attempting to understand the consequences of the new technological and economic conditions, and the changes that covid-19 has brought along with it,we need to take a look at the list of products that were not available previously. The list on the previous blog post is a good starting point. Then try to imagine what life would be like without them. In some cases, like no Smartphones and no Interstates, it is even difficult to conceive of the possibility. There is no question that many of the changes have made almost everyone better off.

That is certainly true for anyone who has an adequate surplus, making it possible for them to purchase those products. Those who developed the new products and made them available deserve to be rewarded for their contribution. They benefit from the changes and have been pushed into the upper-end of the income distribution.

However, that is not true for everyone. Let us take a look at the effects on consumers  when companies charge prices in excess of the long run costs of production and distribution.

Consumers and other users benefit from the new products that become available. They also benefit when the lower costs that are the result of the new processes of production and distribution lead to lower prices. Clearly, the companies who provided those products benefit as well. So do their suppliers and distributors. In addition, the executives, managers, owners and employees of each of those firms experience an increase in their surplus.

Continue reading “Surplus: Winners and Losers”

Surplus: The Changes

Changes in technological and economic conditions is the primary underlying cause for the income redistribution. In 1945 at the end of World War II things were a lot different than they are now. TVs had just come on the market. Planes had propellers. There were no Jets. With the exception of Bakelite, there were no plastics. Nylon, the first of the synthetic fibers, had just come on the market. Microwave ovens had not arrived yet. Business machines used punchcards. The IBM machines, with 90% of the market, used cards with rectangular holes. Remington Rand’s, with the remaining 10%, had circular holes. We did have adding machines and desktop calculators, but no computers. They had not yet come into existence.

In 1952 I was an economist at the Federal Trade Commission. At the time there were five computers in the world. They were powered by cathode-ray tubes, not transistors, and each filled a large room. IBM, the National Bureau of Standards, MIT, the University of Illinois and the University of Pennsylvania each had one. The U of P computer was developed by Eckert and Mauchly. In order to get into the computer business Remington Rand acquired their company. Continue reading “Surplus: The Changes”