At its most basic level, economics is really the science of trying to explain and predict human nature. Everything we do throughout a day, every decision we make, is based on supply, demand and price.
Even things we do that seemingly have nothing to do with money can be boiled down to these principles. Where you sit at lunch, the friends you choose and even whom you married can be explained through economic terms. (A word of advice—don’t tell your spouse you married him/her because of supply, demand and price. Trust me, that conversation doesn’t go over well.)
In addition, I believe it is human nature to avoid making fundamental changes in our lives until we are forced to do so. It often requires some dramatic occurrence or series of events to make us genuinely take a critical look at who we are and the decisions we make. And at this time, the US economy is certainly trudging through a slow and sometimes painful transformation that is giving us all a chance to reflect upon our past decisions.
Hopefully this transformation is one that will lead our economy to stability and positive growth once again. For too long we based our lives and our economic growth on cheap gas, cheap imports, cheap loans and a strong dollar. We got used to the good life, but the good life was unsustainable. Those days are gone. As our government is feverishly using monetary and fiscal policy to ease the burdens we feel during the economic downturn, I would venture to say that some pain is actually good for us. That’s what it takes for us to learn. That’s what makes us really change. Or as Adam Smith might have put it, this is the invisible hand smacking us in the face. If you haven’t already lost a job and/or a home to this monumental economic shift, then you probably know someone who has.
These types of events are devastating, and I don’t want to minimize the havoc they wreak upon our lives and our families in any way. That said, I think America and Americans are at their best when they’re challenged by adversity. Crisis breeds innovation, and innovation is what we do best. In recent months there have been some glimmers of hope in our economic news—positive GDP figures, signs of easing unemployment and increasing consumer consumption. And while it looks like the worst of this recession may be behind us, we must make sure the decisions we make going forward don’t lead us back to where this all began.