Today’s Wall Street Journal is has a provocative op-ed by Zachary Karabell — There Is No ‘The Economy’. His point is that our conception of “the economy” is outdated – based on the nation-state:
In truth, what used to be “the economy” is just one part of a global chess board, and the data we have is incomplete, misleading, and simultaneously right and wrong. It is right given what it measures, and wrong given what most people conclude on the basis of it.
The world is composed of hundreds of economies that interact with one another in unpredictable and unexpected ways. We cling to the notion of one economy because it creates an illusion of shared experiences. As comforting as that illusion is, it will not restore a simplicity that no longer exists, and clinging to it will not lead to viable solutions for pressing problems.
Provocative, yes; correct, partly. Aggregate national statistics are what hit the evening news. But we also produce a torrent of disaggregated statistics on regional, local and sectors bases. The overall economic situation is carefully looked at from a regional perspective. For example, the well-known “Beige Book” of the Federal Reserve is a collection of regional outlooks. The reason why we use aggregate statistics is that the various micro-economies are tied together. And they are even more tied together than before. What happens in housing foreclosures in California affects stock markets in Hong Kong.
Rather than focus on the aggregate versus local story of what is wrong with our perception of “the economy,” I think it is more important to focus on the nature of the economy itself. We all agree that we are no longer in an industrial age. Yet, our measures and mindset continue to think that way.
So, yes, there is “the economy” – but, no, it is not what everyone normally thinks it is.