Invest in People, Not More Stuff

The Register Guard (Eugene, OR), February 20, 2011 | Go to article overview

Invest in People, Not More Stuff


Byline: Tom Giesen For The Register-Guard

We have long been wedded to growth. By growth I mean an increase in the dollar value of economic activity. The value of perpetual growth is in high dispute, but growth continues; ongoing exponential growth arguably remains one of our highest values.

But a focus solely on growth misses the point. Not all economic activity is the same, and not all growth is the same. We need to define some differences between lovable and unlovable economic activities and growth.

Growth is measured by increases in the gross domestic product, or GDP - the total dollar amount of all goods and services produced annually in the United States. Goods are tangible; services are intangible. Consumers, businesses and governments all contribute to GDP, and each has a goods component and a service component.

There remain some hard-core adherents to a view that only goods matter, not services, because goods produced from natural resources and shipped to some other geographic area are said to provide income for the source area and are thus the keystone of economic activity and growth - the "export model" of economic theory. But that now is a discredited view, and is especially inapplicable in a computerized, Internet-connected world.

Software, for example, is not at all like a two-by-four, an automobile or a clothes dryer. Software has been found by the courts to be either a good or a service, depending on circumstances and legal theories. But in any case, the portion of software constructed from natural resources and developed as a good is very small - or nothing, depending on whether the software comes loaded in a computer, on a disc or is simply downloaded from the Internet.

Software can be seen as a highly efficient condensation of intellectual activity whose purpose is to direct and regulate processes, and hence best fits in the service category. Untold billions of dollars have been made from software, and it has become a major component of GDP.

Of course, goods (such as computers) are needed to run the software - rarely is a good or a service purely just a good or a service. But computers without software are not very useful.

Similarly, types of advice - legal, medical, psychological, psychiatric, accounting, investment, insurance, marketing and so on - all are services, and are important elements of the economy. Virtually all functions of governments are services: the courts, regulation of activities ranging from trade to traffic, creating and enforcing laws and regulations, protecting our homes from fires and so on.

But education is far and away the most important service. While some tangible products (such as books and computers) form a minor component of education, information and the interactions between teachers and students are the primary elements.

An up-to-date education is essential to gain employment in markets that are now global. An up-to-date education is essential for institutions, governments and businesses seeking to do well in both competitive and cooperative circumstances. Ours is a complex world - and becoming more so - and without literacy in at least some aspects of history, mathematics and physical and life sciences, citizens can be relegated to passive roles, uncomprehending of the forces that shape their lives.

Understanding the clear distinction between goods and services is critically important, because the problematic element in economic activity and growth is the production of goods - specifically goods reliant on natural resources. …

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