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The Economy as A Beehive, NOT A House of Cards

Dr. Mark J. Perry

CARPE DIEM
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A natural system manages and heals itself. The economic system is no exception. The economy is not a "house of cards," susceptible to collapse as soon as a few cards are dislodged, it's more like a beehive. The future of the hive does not depend on full employment for all the worker bees. In fact, an accident can put many bees out of action without compromising the hive as a whole.
At the micro level, the failure of an institution is often a disaster to those with a personal stake. But from an overall perspective, when one institution becomes insolvent, another can be relied on to pick up its functions.
It's widely assumed that a large enough wave of bankruptcies will bring the economy down. Little or no credit is given to the ability of the economic system to heal itself and find its way back to vitality.
What's excessive now is fear, not debt: Fears of insolvency and private-sector indebtedness are misplaced and harmful. They place obstacles in the way of ill-used capital that seeks to move toward safer and more profitable employment. They plunge the stock market into turbulence. They push government into hasty actions that intrude more aggressively into private choices and decisions. They undercut the market-price system, without which the economy cannot allocate resources productively. Last but not least, these fears trigger the proverbial false alarm in a crowded theater, sending everyone stampeding for the exits.