I've had a breakthrough lately I'm going to share.
I work in cell culture, which involves forcing Chinese hamster ovary cells to make proteins they don't want to make, which someone else then purifies out of the soupy, smelly morass and our company uses in clinical trials or sells on the market.
My job is to try and make as much drug as possible. Our manufacturing facilities are a certain size, so how much drug comes out of each reactor is ultimately a function of only two things: how many cells there are, and how much drug each cell makes. There are a lot of factors that change how many cells there are, and a few things that affect how much drug each cell makes, but when it comes right down to it that's all you've got.
There are a lot of options to get more cells. Higher temperature, more food, sometimes less food, better food, special food, etc. How much drug each cell makes is mostly genetic and I don't understand a lot of it. It's harder to change, so we talk about it more. It even gets its own name: "Specific productivity".
The realization I've had is that our economy works the same way. I've been confused by different explanations of the economy. Some people say government spending grows the economy, some say it doesn't, etc. Because how does an economy grow?
Like cells!
(FYI, I know I'm a nerd, no one needs to point this out.)
Economies grow. Obviously. Otherwise we'd still be living in wood-heated houses without electricity or access to dental care. Like Europe outside the major cities which no one seems to acknowledge. Cough. Obviously TVs get cheaper from year to year. Obviously every person has more stuff than before. More food, more cars, more technology, larger homes, more clothes, more cable channels, etc. So where does it come from?
Just like cell culture, there are only two ways: more people who make stuff, or each person making more stuff.
If there are more people who are producing things, be it services or actual physical things like cars or breakfast cereal or knit caps to sell on Etsy, there is a net increase in things. This would be population growth. It could either be more people actually existing (more immigration, more births) or more people working (like when women started entering the work force). Conversely, the productive population decreases with unemployment, when people leave the work force (voluntarily or not).
Just like cells, specific productivity is harder. Each person has to make more things. And that sounds hard, but it happens all the time. The first time you knit a cap it takes forever and is ugly. By the tenth hat you're whipping them out three a day and can do patterns and stripes. Every time you implement a computer system that saves time off of doing something, that increases specific productivity. Every time you automate an activity, freeing up a person to work at something else, you're increasing specific productivity. For instance, a bank with five workers could only handle so many customers a day. But with ATMs that can handle the mundane withdrawals and deposits, those workers can handle more complex transactions, sell mortgages, etc.
And with that concept, everything is starting to make sense to me. For instance, how could our economy grow during this recession? Well, for one, I think they're fudging all the numbers, but even so, the economy can grow if the increase in specific productivity is larger than the decrease in productive population. Unemployment has risen, but companies are doing the same work with fewer workers or workers are putting in longer hours, both of which would increase specific productivity.
It also explains why bounce-backs from recessions can be pronounced. If the workforce increases its specific productivity during recessions because they had to make do with fewer workers, when the population grows again the total production will increase at a faster rate than if the old specific productivity had been maintained. It's as if recessions are opportunities to learn - to winnow the chaff - to get rid of the dead weight - to make things more efficient.
And it helps me understand why the current recession has gone on so long. Mostly, the government's intervention has messed with both ends of the scale. Extended unemployment insurance keeps the population down, because people have financial incentive to stay unemployed (let's face it, we're all lazy and wouldn't work if someone is actually paying us to sit on our butts and watch TV). Stimulus funds to governments and companies to prevent layoffs means they don't have to learn out of necessity and don't increase their specific productivity. It may have prevented additional population decrease, but not enough.
This way makes much more sense to me than anyone who describes the economy as a pie.
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