An Abstract Economic Model Based on Middle Class Income Ideals

An Abstract Economic Model Based on Middle Class Income Ideals 

by Hello and Lullaby

Designing this economy is to be a bit like designing a perpetual motion machine, so there are certain things in this model that are left out or exaggerated to simplify the dynamics of the real world into a basic framework, with simple math, that can be used in comparison to the real world economy. This comparison is made simple due to it’s use of an abstract average income in U.S. Dollars and the intuitive costs of a person’s daily life as it’s basic unit. This is then extrapolated out to a larger scale and made a basis for comparison to the real world. I will try to make this as much of a logically consistent framework as is possible using as few assumptions as I can to give as accurate a picture as possible of one type of stable economy in the abstract. The way I have represented here is not the only way to develop an abstract model, nor do I make any claim that it is the best way to develop an abstract model. Hopefully, it will be enough to just have designed a perpetual motion machine. There is a strong focus in this model on employment, strong middle class, stability through economic diversity, social security, and general innovation/ competitiveness as well as balance between government and the private sector as best as is possible in a competitive, production oriented information economy. One should be careful when drawing conclusions from this theoretical model to be a reason for real world change in policy in these or any other areas. 

 Basics Rules: If 
1. 100,000 people are born every year. 50,000 boys and 50,000 girls. 
2.Everyone lives to be exactly 100 years old. 
3.There is no immigration or emigration or they balance each other out exactly (to simplify the mathematics of the model and not meant as a political comment about immigration/emigration) 
4.Everyone attends college 
5.Everyone retires on their 64th birthday. 

Then The total population is always 10 million people and can always be broken down in the following way:  

Age 5 & Under - 600,000 

K-12 - 1,300,000 

College - 400,000 

Workforce - 4,000,000 

Retired - 3,700,000 

Total: 10,000,000 

This is a $50,000 per year income broken into a 5 block model by spending which will be used to calculate economic employment by spending sector. Each block is 20% of individual spending. 

By making this 5 block model the basic unit on which our economy is based, we emphasize a strong middle class as a focal point for everything else in the economy. 

This model can also represent a large scale economy defined by expectations of middle class income. 
If 
6.Everyone earns $50,000 a year 
7.There is a 40% income tax rate 
 8.The government uses this tax with 50% going towards salaries of government employees and 50% towards equipment 

 Then 
50% of the total taxes of the workforce goes directly towards salaries to support 20% of 4 million. So direct salaries from taxes accounts for 800,000 government jobs. 

 If 
9.What is needed based on the earlier population breakdown meets the following requirements stated by career. 
10.General practitioners and dentists are all government employees such that simple checkups and visits are free. 
 Then 

1 Doctor (General Practitioner) and 2 Support Staff / 1000 People 

30,000 General Medical 

1 Dentist and 2 Support Staff/ 1000 People 

30,000 Dental 

1 Voted in Political Representative and 2 Support Staff/ 1000 People 

30,000 Political 

3 Police Officers and Personnel / 1000 People 

30,000 Police 

3 Firefighters and Personnel / 1000 People 

30,000 Fire 

3 Mailmen and Personnel / 1000 People 

30,000 Mail 

1 Teacher and 1 Support Staff / 25 k-12 and college students 

136,000 Education 

1 Military / 100 People 

100,000 Defense 

Total 416,000 

 From 800,000 leaves 384,000 others working in mining, forestry, analysis, tourism, Libraries and Museums, garbage and recycling, R & D, etc... 

Total 800,000 

 This has all been the 20% of the workforce whose salaries are paid for directly with tax money, and an example of how 1 block can be broken down by employment from individual spending. This is the easiest block to show a breakdown, but you could use the same basic structure to show the rest of our economy with the next 4 blocks and see that in this way the model is somewhat realistically applicable. 

The Remaining 4 Blocks 

Though the remaining 4 blocks (or 80% of the economy by spending) are each different, they are all products of some kind or rely on products such that they can share a common business model of 50% labor and 50% parts and equipment (similar to how Marta, the Metro Atlanta Rapid Transit Authority, splits its earnings). These parts and equipment are then broken down again into 50% labor to produce them, and 50% refined raw materials needed to build them. This last 50% of refined raw materials, or 25% of our initial block, goes to the government. It takes the place of a sales tax and is important to maintaining monetary value against inflation. 

The 50/50 business model turns into a 75%/25% labor to materials economic model that applies across all of our remaining 4 blocks. Each block thus has 600,000 people employed and 25% of the spending block going to government surplus. This is true for the Housing and Utilities block, Government Equipment from taxes block, General Spending on consumer goods block, and last but not least, the insurance and savings/investment block (though this last block may seem more flexible, the same basic principle shall apply for purposes of this model). 

With a 5% surplus from each of our 4 remaining blocks, we have a total of a 1 block equivalent that is government surplus. The 20% budget surplus by spending will account for our Liberal arts jobs, with public sector artists and musicians as well as social scientists, and will also cover research and development, all with a ratio to be adjusted as needed as well as by changing interests in fields of study. 

This should all be a somewhat solid framework allowing for flexibility within spending block sectors as well as between, and a roughly equal size of government employees to private sector employees (40/60) as well as workforce to retired (about 50/50). This may seem like the government is too large by comparison to the real world US economy, however this is due to the 20% of our workforce that is employed in liberal arts careers by the government. This is how we support a strong private sector creative media with data, reports, studies, and artwork in this model, as well as account for automation of labor. In this model, the government does not own all of the manufacturing equipment as in communism, however it does own some machine tools which can be used to design other machines and tools for small businesses at a cheaper price so that they can compete in the private sector with larger operations (another way to curb inflation and maintain the competitive edge). 

Areas of Model So Far Unaccounted For 

The spending areas this model doesn’t account for so far are: 
1. Mining, Refining, and Recycling equipment, and Machine Tools owned by government. 
2. Social Security 
3. Tourism both inbound and outbound 
4. Imports and Exports 
5. Other 

The first two and #5 are to be the basis of “printing money” on government issued credit, while #3 and #4 are to be maintained by government employees and private sector business to balance out with respect to a 5 year economic activity index. While some may look at this model and say “the inflation will be too high,” I argue that this is simply a solid structure, and with so much produced locally, the effect of inflation will not be as high as it seems. Inflation will be lowered in part due to the government monopoly over raw materials mining and refinement as well as strong investment in recycling and proper managing of imports and exports as well as tourism. The economy will grow in capital gains of having more equipment, the latest equipment, and top notch infrastructure due to a fixed salary of $50,000 per person, and thus a consistent ratio of money to population (an increase in income in this economy is not impossible, it just means that you have to do less work and still get the same amount of money). The value of money and goods produced by the society will therefore be reliable, cutting edge, and at consistent cost if all based on a consistent price of raw materials. In fact, you are able to support a larger retired population which will have a roughly equal economic voice to the workforce in consumption, as well as perhaps a stronger voice in the stock market, and thus maintain a conservative pace of change with focus on quality in all matters of business and politics. 

An example of how money could be generated and spent by the government may be that the government stipend of the retired population is represented by the first 3 blocks of our 5 block model, and this population does not have to pay taxes. Houses will mostly be paid off, and so this block becomes only housing maintenance costs, furniture, and what had been monthly payments of $1,000 is now extra money for investing or spending on grandchildren, etc... as well as increasing cost of medical care from private sector specialists as one ages. One could also sell their house and still pay a monthly rent with the proceeds from selling their house going to those areas mentioned above. A forth block per member of the workforce shall cover the ratio for mining, refining, recycling, and machine tool equipment as it relates to the number of individuals and businesses in the society. A 5th block per member of the workforce shall cover miscellaneous spending unaccounted for in this model such as the criminal justice system, public parks, etc... 

 In the end, this is only an abstract model, but one from which you can begin to mentally project all of the moving parts of an economy in a simple way. The total size of this economy as individual income is 311 Billion U.S. $’s per year plus trade and tourism surplus. Assume an equal wage of $50,000 per year. What would happen to this economy over 100 years if no other economies existed? What would happen over 100 years if other economies did exist? How can this model be adjusted or developed to be more stable, accurate, and long lasting while remaining a simple outline of an economic structure? How does this model compare to, and is it more or less stable than our current economic structure? How would you develop a model such as this?