I am taking a short break from my latest emergency project, so it’s about time to feel a little philosophical. What is economy? Well, it’s not too different from psychology beyond the basic physical and biological needs, which are pretty much covered by a GDP per capita of $7,000 to $12,000. Well, I am setting the line higher because I prefer that everyone owns a home and a car to begin with. I know it’s not possible for the present population of the Earth, but we want to make sure everyone has equivalent daily life experiences. It’s all about a proper balance between work and life, which involves happy commuting and happy living, both at work and at home. If median rather than mean income level is the new metric of the standard of living, we are really looking at the minimum level of $25,000 per person per year.
Most North Americans have figured out that the younger generation really focuses on experiences instead of possessions. It’s simple. They don’t want to miss a thing in this life. They want to see the world, experience the world, in an attempt to establish their identity in relation to their surroundings, near and far. They don’t feel the need to constantly prove themselves anymore, because it’s not about how you feel about them but how they feel about themselves. It’s a First World thing. They don’t have to prove themselves anymore. In contrast, Asians still constantly feel the need to prove themselves, hence focusing much on physical possessions, such as better condos, cars, wears and gadgets. In a way, I am still very Asian after my many years in North America. It’s not hard to see that once they hit a GDP per capita of $25,000, they may follow the same trend. They don’t have to meet the mean but the median to feel the same way. To actually hit a very high GDP per capita, Asia has to produce more billionaires, who have nothing to do with average Asians. Either way, Asia still has a long way to go.
It’s all part of growing up. The pursuit of happiness is about knowing what you want and getting what you want. Education boosts consumer demand, because people get to learn more about their wants and higher pursuits. The better educated people tend to travel more, mostly due to conferences. Travel is not exactly cheap. If everyone just travels once a year, for leisure only, that’s easily 7 trillion dollars of GDP, about the size of today’s China. Why is the global GDP that low? Well, travel is still a luxury. The expression of one grand still has its significance, even in the First World. Lots of people go to art schools, whom I call the beautiful losers. However, they are the pillar of the First World economy because they keep the consumer demand high. They have the taste and know what they want. Science is not shy, either, as a higher level of curiosity also increases spending significantly. When people really want to spend, they automatically find a way to make money. You don’t have to worry about it.
Tourism explains pretty much how a typical Asian economy functions. People hunt for hard bargains, keeping prices close to costs and creating lots of low-pay jobs. As long as the average education level stays low, consumers focus more on quantity instead of quality, a vicious cycle to break. China is building more rail roads, but the ridership is not looking good. Japan is building their new maglev, but people don’t commute as often anymore. Insecurity about future is the main killer of national economy. It’s about time to build more art schools so people increase their level of desire for the finer things in life. Science may be too intellectually challenging for the lower half of the population, but art is for everyone. When they begin to really want something, it’s easier for them to overcome their deeply seated sense of insecurity, which is typical in Asia, a highly populated region in the world where people compete fiercely against one another just for higher social status and hence better access to resources. More talks translate to more walks, as people will want to meet one another, hence creating demand or even innovation through the exchange of ideas.
If people just care about what they need and not what they want, it’s hard to go beyond $10,000 in terms of GDP per capita. The demand is simply not there. Government policies truly matter.