Wanting the Past, Not So Easy

There is an interesting and unfortunately far to common perspective or irrational belief that one can violate the laws of physics; or that you can ignore the principles of economics and basic mathematical concepts. Although this way of viewing and conceiving reality is consistent with some of the more perplexing aspects of human nature which of course doesn’t alter the disconnect between what you “want to be true” from “what is true”. Nothing brings out these situations like politics, especially in election years. I suppose it’s to be expected as seeing the world this way likely makes it easier for people to live their lives with a belief that things could be better if they only went back in time.

And since this is a presidential election year, surprise, surprise, the phenomenon of what people “want to be” is once again in conflict with “what is possible”. I am not sure that it hasn’t always been the case in politics that someone isn’t advocating a “returning to” solution to some problem or issue. Often, I think both or every side, when there are more than two, are touting some “return to” solution or policy. It’s just that they are different “return to” states. Perhaps you recognize this theme showing up in some campaigns, on some issue, or as what groups are advocating that they want. Again, not really an unusual human reaction to something not being how you “want”.

Now, this would not be a problem if this was the way that everyone thought. You would have your “wants”, and others would have their “wants”, and things would work out according to the laws of physics; principles of economics, mathematics, and other hard and soft sciences; and even the erratic rational and irrational aspects of human behaviors. But your “wanting” something to be the case will not change whether it is or is not; and it will not change what the reality of “cause and effect” will bring about. You will be happy or sad depending upon happens, but your “wants” will not be guaranteed to be what “happens”.

This is not to say that your “wants” are unimportant or without impact. In fact, those “wants” may be the critical factor to the outcome(s). For example, you may “want” it to be true that “America will be better off and stronger if it is energy independent”. However, that is an assertion, not a fact. It’s possible that it is true, just as it is possible that it is false. Most likely, it is neither and because it is meaningless. If you were asked to define what it means to be “energy independent”, I would contend that you could not do it, if  that also meant that you had to answer a couple of questions about what the text of your definition of “energy independence” means. Even the terms “better off” and “stronger” can easily become problematic. Is America “better off” if it becomes less competitive and less engaged with other world powers and their respective economies?

It is possible that becoming “energy independent” will require the US to slow it’s energy demand growth, or the cost of that growth will impact other investments and advances which are necessary to achieve the capabilities, capacities, and conditions to be a “strong” nation in relation to other nations. There are requirements for reaching whatever “energy independent” state you define and those requirements are imposed by the laws of physics and all the other facets of reality that do not change or alter their requirements on time, resources, costs, and “cause and effect” consequences.

Now, I am not saying that what you “want” cannot be obtained. Only that to obtain it, you may or may not like what is required and how it impacts you and your “expectations” of what was supposed to be part of the “want” which you had not understood. There after all, numerous ways in which the US could become “energy independent” or “stronger” or both; but that you would never approve of nor accept as what you had “meant” by what you “wanted”.

Besides CEOs and executives of many food-centric industries, who do you know that doesn’t want the price of food to “go back to where it was” before our recent spate of Inflationary events? So, this is a good example of what people “want” to be, to go back to the ‘before’ times. Would I like the cost of food to be less? Absolutely. But I am not a cattle rancher, hog farmer, or poultry farmer. For me to have cheaper beef, pork, chicken, or eggs there must be changes in the economics of those products which means to the costs of some or all the things that make up the cost of those products. So, this should be relatively easy don’t you think. After all, how many things could there be that added to the costs of these products which can be altered to reduce the cost of these goods?

This is where things start getting interesting and real simultaneously.

At a very basic economic level the easiest way to reduce the cost of something is to reduce Demand for it or increase Supply. Are you ok with me reducing Demand so that it costs less? I bet not. Are you ok with me increasing Supply? You may have to wait a while; but I can make that happen, though the real costs may just be hidden from you or transferred elsewhere to others. Changing Supply and/or Demand entails actively adjusting costs, incentives, or processes that normally happen because of the very events that “caused” the Inflation to occur to start with. Who these ‘adjustments’ impact of course may not set well with them just because you don’t care as long as you think you’re getting food. Does it matter to the ranchers and farmers how your food prices are reduced? Does it matter to you if the price is reduced but you are not allowed to buy as much as you wanted? We both know that it matters to you, but you “wanted” the price lower.

How about if we reduce the costs to the ranchers and farmers, that way both you and they would win, right? Where to look, there is their costs of energy, labor, transportation, resources, and various taxes/fees/services. Which of these do you think doesn’t have it’s own complexities and Inflation-related costs? Let’s just make energy cheaper. Energy is somewhere around 10% to 20% of their costs for all aspects of their business activities. To reduce that cost requires that other businesses must reduce their costs or profits. To do that those businesses will need their costs to decrease. You can probably begin to get the theme that’s starting. And remember, the ranchers and farmers are only part of the cost of their products that you “want” to be cheaper. Since ranchers and farmers may only be 40% for example, you the consumer won’t save a lot even if you could reduce their energy costs by half. Under the best case that may only be a 4% reduction.

Now if ranchers and farmers said they were going to reduce the costs of their products, I would wonder how they were going to do that. I would have my doubts. But when politicians tell me that they are going to bring down the price of food, I am not even tempted to believe them. Even if they laid out their plans for how they are going to do, I would remain doubtful until I could get some confirmation by actually knowledgeable sources that there is a reasonable chance their plan could deliver the promised results.

I do know how the price of food will normalize though, as long as we remain in a free-market where our politicians don’t attempt to “fix” things. The general economic principle of Supply and Demand will exert it control. If Demand remains high or even grows there will be upward pressure on prices. The higher price will encourage ranchers and farmers to increase production. If the increased production begins to exceed the Demand the price will begin to drop. This is the basic economic process. However, it is more complicated in that the Supply and Demand conditions also have their own economic processes. To expand Supply, at some point there are requirements to expand production capacity: more animals, more feed, more housing for livestock, more labor, …; and in some or all cases more capital funding to expand. That funding would more often than not increase costs not decrease them.

Perhaps it would be easier to reduce Demand. If Demand drops then at some point the price drops because Supply becomes more than Demand and you can only sell more if you do so at a lower price. The ways to reduce Demand vary and the typical one is to let the prices rise until Demand drops. If you don’t recognize the method, it is what you think of as Inflation. The thing you “want” reversed. Since Inflation isn’t working for you, another solution could be to ‘ration’ products. I’d bet you are going to like that one even less, particularly if you are a rancher or farmer. Although, “price controls” are another solution. It’s a given that farmers and ranchers will not like this and it will only worsen the problems and do nothing to solve them. But the “price” of food would drop as you “want”.

Surely by now, you are recognizing that there really isn’t any way to “go back” to the way things were. What is required is to act according to the “cause and effect” principles that will bring about a stabilization of the economy to a “new” normal; or what the Federal Reserve is doing within their controls. This doesn’t mean that there are not other productive strategies and policies that could help bring the re-normalization quicker; but these still depend upon the Fed’s balancing of inteest rates, employment, and the overall Economy. These additional strategies and policies still require that you understand the realities of the market and to account for the economic principles and other factors which are required to be implemented to produce the changes that need to occur. If you believe these tasks are the type of efforts that our politicians understand and can perform then why do we have the problems to start with. If your answer is the typical “It is the ____ fault”, I would suggest that you are an even bigger part of the very problem that you are so keen to believe is going to be solved by your preferred politicians and political party. These type of problems are solvable, but they require the same level of competence that we value and depend upon in the STEM fields, not in politics.

Maybe you should go for ‘smart’ (STEM) over ‘want’ (politics).