Chapter 4

How a Perfect World Would Work

This is no longer your parents or grandparents economy. As we saw, knowing that “it's the economy, stupid” and understanding how the economy actually operates, are two different things. Worse, the economy is a living, and therefore, changing thing.

Our standard of living, the types of jobs we have, our employment opportunities, what we can afford to buy with the money we make and even the full range of goods that we can purchase are all wrapped up in the way we organize and operate our economic activity not just now but also in the future. So, yes, it is the economy! But the key is not to be stupid about it and the way you do that is by understanding how all the players in the economy operate.

How We Got Here

The economic structure we currently operate in the United States is the result of centuries of trial and error. It is not something that came from the Founding Fathers, though there are many who think that is the case. Yes, the Constitution set out the basic principles for the nation, but it did not tell us how to run the economy. Indeed, there are economic positions in it that have been abandoned. So we cannot look to the eighteenth century for what we have today or what will emerge as we go through the twenty-first century.

The economy also didn't come from following the directions in an economic textbook or a self-help manual entitled “How to Form an Economy.” Yes, economists like to take credit for just about anything that good ...

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