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Economic Development and Human Behavior

Breaking News: There is still economic crisis!

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Mitt Romney and Paul Ryan can fix it
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The nature of human beings will never change. For this reason economic development should be easier than we make it out to be and yet we find ourselves in recession and bailout debt. The fact is human behavior is relatively easy to predict. A person will always seek the maximum amount of reward for the minimum amount of effort. Don’t believe it? Go look at the line in front of a lottery machine. As with all rules some people might argue an exception here or there. For example somebody might say, “What about nonprofits?!” Valid. However, is that really an exception or are they just seeking a different “reward”. For some people the well being of their fellow man might be the ultimate reward. Hopefully we can come to agree on this natural human behavior.

So, a human will seek to get the greatest return on his efforts. This natural human behavior is what brought about the greatest inventions of our history; the wheel, fire, the atlatl (spear thrower), and of course the toilet. A force, it seems, powerful enough to override this behavior in human beings is of course Love, a force that draws us to do all kinds of work for the benefit of others. But, I digress. How does this speak to economic development?

This simple human behavior explains the actions of both the 1% and the 99%. Let’s face it Occupy Wall Street is not interested in fairness. They want the maximum amount of money for the minimum amount of effort. That is why they want wealth redistribution. They are not willing to put in the work necessary to raise themselves up to reap the rewards earned by the 1%. Money doesn’t just fall into the wealthy’s laps. Somebody worked hard for that money. Maybe it was their parents (Love), but that doesn’t mean they don’t deserve it that money went exactly where the person who earned it chose for it to go. The wealthy make their money by investing their time, their talent, or their money in activities that have high returns. The largest reward for the least amount of effort.

Here is the major difference between the 1% and the 99%. The 99% invest a small amount of their time their talent or their money, and when they reap their reward they enjoy it. The 1`% invest their time, their talent and their money and then reinvest the outcome again and again. They stack earnings upon earnings without spending their reward. They do this because they understand that if they don’t spend their reward they can get an even greater reward, and the more times they stack this activity the greater reward they will get for the sdmallest amount of effort.

Now our society wants to punish them for this activity. We say they have made to much money with to little effort, and that some people exerting less effort deserve some of that reward too. Here in lies the problem. The economy is driven by this 1%. Maybe the 1% has 99% of the money, but as part of the 99% you should realize that your money is only worth what their money is. Your money can’t have a different value per dollar than their money. Say for example you have $10,000 and I have $990,000. I have enough money to buy a house and you do not. You say that’s not fair so you want 15% of the money. Now you have 150,000 and I have 850,000. I can no longer afford the expenssive house, but neither can you. What’s worse is that GM has realized that you can afford a car now, but they don’t want to make more cars they want to make more money (Maximum reward for the minimum effort). So they raise the price of their cars until the same amount of people are buying them (if the economy tanks they will go out of business, sound familiar?). This is not economic development this is economic recession.

Scenario 2: I have 990,000 you have 10,000 and nothing changes. In this scenario for GM to make more money they MUST make more cars. In order to make more cars they have to build new plants and hire new employees. You are one of them. You graduate from McDonalds to GM now you make 90,000 but I still make 990,000. that’s (carry the one) 1,080,000!? What happend? There is 8% more money??? Not only that because I have 990,000 I can afford my big house that means that the house I would have bought goes down in price (less demand). Now you can afford a car and possibly in a couple of years a house. This is economic development. It’s not about how many dollars are in your bank account its about your “buying power”. Big business and big money are good things. When people leverage their rewards to make even greater rewards everybody does better. If we want to encourage economic development we can’t punish people for making money. Human behavior also dictates that if you quit getting rewarded for an activity you are far more likely to stop doing it, and we really don’t want big money to stop investing in our economy. That is not a viable economic development plan.

If the Donald Trumps and Bill Gates of the world sit back and enjoy their money on tropical islands instead of investing it. We will all starve to death.