“The economy is doing well” or “the economy has reached a stand-still” or many other myriad ways to refer to “the economy” should always be taken as a metaphor. And yet, while this is so, this is not actually the way that the mainstream economic thinking works. For them, the economy is treated as an entity independent of the millions of individual human beings acting according to their own goals and values.
In this way, so-called “macroeconomics” is distinct from (and sometimes even contradicts) “microeconomics.” This can be seen especially in the old Keynesian problem of the “paradox of thrift.” The paradox of thrift is the idea that while putting more money away into one’s savings may be good for the individual, it is actually harmful for the greater economy, which allegedly (especially according to the vision of John Keynes) depends on consumption spending and consumer demand. This distinction/tension between “the economy” and the individual human actor is one of the several great faults in the Keynesian paradigm, and it blinds them to the problems with a government or central acting in effort to heal the overall economic picture.
Moreover, the entire enterprise of “macroeconomic data” including GDP, CPI calculations, monthly jobless claims, and other “economic indicators” that supposedly point to the health of the economy at large comes about as a result of the mentality that macroeconomic information is helpful as such. But in reality, these data really only serve to encourage and bring about government responses to the information; that is, the only purpose this information serves is to help influence financial and monetary policy. In other words, the entire assumption here is that governments and central banks need these statical gathering efforts in order to make the right decisions for the economy. For if the central bank needs to decide whether to raise or lower interest rates, whether to stimulate the economy by way of increased treasury purchases, and so on, they need a reason to act. And so exists the power of the statistics industry.
However, for the investor in a free market; for the capitalist needing to make choices about where his capital is most urgently needed on the market, this information actually does not help him. The entrepreneur needs very specific information about the needs and trends of consumers, about how they react to and/or embrace specific products. If there is no specific information, there is no knowledge about the most advantageous location for one’s investments. The investor is looking for specific avenues wherein he can make a profit and which avenues to avoid so that he does not result in a loss. If he makes the wrong decision, he will not earn a return on his investment.
The investor needs to know, not about “GDP” and jobless claims, but about the health of a company; about its costs, its debt load, its profit margin, its leadership, its history. He needs to know how the company plans to cope with changing consumer demand, with threats from the competition, with internal management.
The metaphor of “the economy” should really just point to the conglomeration of individuals producing and providing goods and services, and exchanging them for the goods and services that they anticipate will aid them in the satisfaction of their goals. It is possible to refer to the interaction of millions of producers and consumers as “the economy” but we must never mistake this economy as something that has a life of its own. It is actually government that has a tendency to refer to the economy as something in and of itself, as Frank Shostak observes:
While in a free market environment the “economy” is just a metaphor and doesn’t exist as such, the government gives birth to a creature called the “economy” via its constant statistical reference to it. For example, the government reports that the “economy” grew by such and such percentage, or the widening in the trade deficit threatens the “economy.” The “economy” is presented as a living entity apart from individuals.