Lived experience ≠ data;
our “Vibe Economy”
Liam Scotchmer
References listed below.
- Minute Read
A bike or a McDonald’s? Since the government is so concerned about GDP - the total value of all goods and services produced in a country, what would be the better choice?
Bike: a cyclist purchases no car, usually no insurance, no paid parking, and repairs aren’t too expensive.
On the contrary, a McDonald’s creates at least 30 jobs in the medical field, as well as obviously the people working in the store itself.
GDP wise, a McDonald’s of course!
Nah, this sounds like bullshit, right?
"Sometimes GDP accounts for socially unproductive or toxic things”, as said by my Economics lecturer, like for things above.
As you can see with this example, metrics that measure the prosperity of our "Economic kingdom” don't really capture anything beyond spending. This is one example of the disconnect between economic metrics and the lived experience.
GDP, CPI, PCE... when we get good numbers, yet my grocery prices are up... why? These metrics now feel meaningless. This disconnect between the data on the paper, and the lived experience is the core of the "vibe economy."
And this disconnect shapes our behaviour. This disconnect can be shown, like Kyla Scanlon explained, as a 3 ingredient cake:
Expectations: how we expect things to be
Theory: how things are supposed to be
Reality: how things are
This cake is the vibe of our economy.
It goes: Theory -> expectations (vibes) -> behaviour -> reality.
Money is expectations made tradeable, theory is what the Economists say should happen, and reality, is well.. slow and messy (+a lot more).
But expectations can be irrational, and “economic theory is measurable, but on the basis of loose facts.” - Kyla Scanlon
Hello! What do you mean we don’t understand what’s happening or going to happen?
As Kyla mentioned, The Economist publishes their forecast for the year ahead:
Its year-ahead preview published in January 2020 does not say a single word about covid.
Its year-ahead preview published in January 2022 does not say a single word about Russia invading Ukraine.
Its year-ahead preview published in January 2023 does not say a single word about Hamas attacking Israel.
This isn’t an attack on The Economist. “But it highlights how massively difficult it is to wrap your head around how this behemoth called the global economy works, where it’s going, and how we can all learn to live with it."
So, these 3 ingredients can be misaligned, and it is always happening.. thus, uncertainty is created and we act on this behaviour.
Rather than just facts alone, vibes have a huge amount of power over outcomes. Investing, spending, wages, risk appetite .. it's on vibes!
[explain what we should do knowing this]