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Imagine, if you will, that our economy is not 300,000,000+ people, but just 300 people… where you pretty much know everybody, and everybody knows you. This exercise converts the huge, imprecise, impersonal, economy into a local, specific, personal economy with all the macro and microeconomic functions still in tact, just on a smaller scale. Reducing the scale of our community makes the impact of events more personal and more immediate. It reduces the logical distance between micro and macro economics, between government and the citizens, between businesses and customers. If unemployment is at 12%, you know the 36 people who are out of work, and if some group of people decide to start or expand a business and hire six people, you can literally see the effect of a reduction of the unemployment rate from 12% to 10%. If taxes go up, you can more readily see both the impact of the loss of spendable income in families in the community and you can see the impact of fiscal and monetary policy on the people of Microville. Additionally, economic phenomena like inflation, money supply and velocity of money are more apparent.
MicrovilleUSA has all the businesses, organizations, government, schools, concerned citizens and aspiring people of a larger nation. It has a financial system with currency and banks, and a government entity (but rather than having many layers of government: City, County, State, Federal; we only have the local MicrovilleUSA government).
To simplify the model even further, initially MicrovilleUSA will be a closed economy/society. If you want to sell stock in a new business, then the stock must be sold to the other 299 residents of MicrovilleUSA. If you want to build a new road, the resources needed to build it will have to come from the people of MicrovilleUSA and the benefit will go to the people of MicrovilleUSA.
Eventually, MicrovilleUSA will become one community in a global economy, MicroWorld, where there are imports/exports, different currencies, conflicting policies, immigration issues… but for today we have just one community, one currency, one government, 300 people (bakers, bankers, burglers, bishops, bee-keepers, baseball players, busybodies and bums) that all live together and form one community…
…Welcome to MicrovilleUSA.
Copyright 2011 – John H. Lundin, PhD
All rights reserved