The long-term stimulus: productivity

A key function of a head of state is to articulate national goals, reflecting what the populace already wants, but in a focused, actionable way.

Citizens follow that lead. Deng Xiaoping’s famous quote, “To get rich is glorious,” may be apocryphally attributed, but undoubtedly refocused China on capitalism, with results that speak for themselves.

Americans want to advance economically, but don’t know how.  The government is not helping. Unknown to nearly all Americans, there is a vanishingly simple formula:  maximize your net income per work hour.

What?  you may say.  It is not that simple.  What about controlling spending?  Education?  Savings and investment?  Retirement and vacations?  Yes, those matter, but all are contained within the above formula, if you define net income as any business does:  revenue minus expenses.

Controlling spending:  if you earn $100k this year and spend it all, your net income is zero.  To increase net income quickly, spend less.

Saving:  identical to controlling spending.  If you spend 20% less than you make, you have saved 20% of income.  

Investment:  identical to saving.  Bank accounts are an investment, but there are many other, better investments.  More importantly, investment income doesn’t consume your time:  conservative investments yield very high income per work hour.  Thus, spending less than you earn may not quickly increase your total gross income, but the increase per marginal work hour is incredibly high.

Education:  identical to investment.  It is a way of spending time or money to increase net income per work hour.

Retirement and vacations:  the fewer hours you work for a given income, the higher your income per work hour.  Thus, vacations and retirement go hand in hand with maximizing net income per work hour.  Again, all contained within the simple definition above.

In short, everything comes down to net income per work hour.  Economists would call this a measure of productivity.

The ultimate economically empowering statement from an American president would be “To increase productivity is glorious.”

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