Hi Kenneth,



Fascinating piece.



Economics, like democracy -- is always a 'work in progress'.



There are no perfect economies and there are no perfect democracies.



Each generation makes its mark to further protect union and enhance the economic realization of that union.



Landing men on the Moon directly correlates with the invention of the printing press -- no printing press, no huge, available and constantly-upgraded knowledge base for thousands of scientists over the centuries since then, for our generations to draw from. (Someone from NASA said this)



This proves that all the technology since the printing press is derivative of that original invention.



Similar could be said about the invention of the wheel, the invention and the capture for use, of electricity.



All the inventions these days are merely derivatives of earlier inventions.



Although the global knowledge base doubles every few years nowadays, it is all knowledge being added to the existing knowledge base. It is not new, it is additional knowledge.



With regard to economic policy, the same applies. It is certainly in our best interests to improve on economic thought, building on what we already know to be true as demonstrated by the many empirical examples we have seen.



We have gone from learning the basics (the abacus) to multiplication tables, graphs, algorithms, Algorithmic information theory, Computational complexity theory, Complexity economics and Predictive Behavior Modeling.



Now that we have arrived in the 21st-century and our economic thinking has advanced, we find ourselves grasping for a better understanding of what we see going on around us, economically-speaking.



All of the foregoing are useful and can explain what has happened, but does not predict well what will happen.



What is missing is human psychology. Economics is a form of human expression, how people feel is how they spend, how they react to different stimuli affects the economy, in large ways.



When human psychology becomes fully integrated into the economics classroom, we will have fulfilled our hopes to predict every future economic indicator to an exact degree.



Then, adjusting policy, rates, regulations and economic theory to match those patterns will become light-years more accurate and efficient.



In short, the entire economy revolves around human psychology, which continues to happen right in front of us.



Bull market, bear market, recession, housing bubble, recession, financial crises, etc... are all directly a result of human expression.



"So, is the main cause of the recent slowdown an innovation crisis or a financial crisis?"



No. It is a lack of full and deep understanding by economists and policymakers of the human psychology expressed in the trillions of individual economic actions every day -- combined with a lack of ability by economists and policymakers to enhance the positive aspects of human action/reaction and preempt and marginalize the negative expressions of human economic action, in order to better perfect our economic union and the economic status of the people in that union.



As always, very best regards, JBS

http://jbsnews.com













