A Quick Word about the Economy

One of the main ideas in my undergraduate class on investment was the balancing concepts of “fear and greed” as motivators for investment.  My imagination still plays back this scene:
Dr. Martin - “The stock market is motivated by what…Mr. Ross?”
Me -     “Fear and greed…”
Dr. Martin – “Fear and greed indeed”
People, by nature, want stuff, and in some cases that stuff can be purchased with money.  This gives money value, and is the basis for all capitalistic economic theory.  As with anything of value, money can be rented out for a fee to those who have a greater immediate need.  This is call investment, and it is done to make more money, those with a surplus rent out (invest) their money.  This is the greed motivator or the reason to invest; more euphemistically known as self-interest.
The problem with letting some one else use your money is simple.  You risk that the money may not be given back.  This is the fear motivator, or reason not to invest.
The U.S. government openly admits that it regulates so that investors will have more confidence renting out their money which will stimulate business, and ideally make almost everyone (including the government) more money.  They are decreasing the fear factor for people who want to invest.  This promotes investment in things that most people never see or even understand because they feel comfort that the government has their back. 
Unfortunately, these regulations give a false sense of security for two reasons.  The first is that complexity in business and life makes it nearly impossible for these regulations to be enforced. Second, the creation of these regulations is influenced by powerful institutions simple seeking their own interests.    
The solution:  remove many of the cumbersome, complex, and ambiguous regulations, and allow the natural fear of losing what you have to balance out the desire to obtain more.  This equilibrium will promote personal investigation and responsibility which will encourage people to invest in what they know and in what they trust.  This will challenge those seeking investment to be more transparent and more trustworthy if they desire those funds.  When individuals struggle to make more informed personal business choices it produces a better economy, and builds a stronger people.    

5 comments:

Christy said...

I find it quite interesting that you equate investment with "greed." The Merriam-Webster defines greed as: : a selfish and excessive desire for more of something (as money) than is needed. The key words in that definition are "excessive" and "more of...than" - meaning that having a need is one thing while going BEYOND that need in both action and desire is something else. These are a few verses from the Bible describing investing: I Tim 5:8 - But if anyone does not provide for his own, and especially for those of his household, he has denied the faith and is worse than an unbeliever. Prov 6:6-8 - Go to the ant, you sluggard! Consider her ways and be wise, which having no captain overseer or ruler, provides her supplies in the summer, and gathers her food in the harvest.

Brandon said...

I love it when some one clearly defines terms when contructing a comment/criticism, but I think you miss the actual key word. The definition centers around the word "needed." The basic necessities (needs) of life (food, shelter, safety) are rarely the things investors have in mind, and in our society "needs" are very often confused with "wants". Re-read the post and you will see that I don't "equate" investment with anything. I mearly analyze the feelings in our society regarding the need for additional government regualtion in the light of the two commonly accepted motivators for investors of "fear and Greed"(which I paraphrase as self-interest.) I think investing is a very wise, and self-interest is at the center of much we do. I also think it is dangerous to assume government regulations make safe investments you don't understand.

Christy said...

I'm a libertarian, so my arguement in regards to government reg's is always going to be less, less, less - I think we are in agreement with this. You didn't have me at "hello" but everything else is on target. Regarding the def of the word "need," we could both wax eloquently and philosophically regarding what is and is not a need and we would both have a valid point in what we are saying. If you are referring to Maslow's heirarchy of needs, there are several levels, but each level is still considered a need - some are just more relevant to the situation. Safety being first and then food then shelter and clothing. I would also consider investing as a "need" for the future considering that the government can't and should not be in the business of taking care of it's people. I would hate to find myself in my 80's with expensive medicine, rent to pay, and hungry without having though ahead and invested. :-)

Brandon said...

Libertarian here as well, and investing is a great idea. Hopefully you wont't be renting when you're 80 though.

Christy said...

I know lots of ladies who rent when they're 80 if nothing more than to avoid the upkeep of a home. Either that or assisted living, and both cost money. What's the idea you're investing in?

You and the family should come out to our cafe sometime. Your brother and his wife stopped by today.