Economics -- n. the study of human behavior in the face of scarcity

Can you apply economic thought to the problem of education? Definitely!

Economics is the study of human behavior in the face of scarcity. When you consider the American economy as a whole, it's very obvious that scarcity of money is a huge problem. There is limited supply of money available to spend on a plethora of options, ranging from public works, to unemployment benefits, to tax breaks for business. However, the effect of government spending on these projects varies immensely.

Government intervention in economics basically affects the economy in one of two ways: by increasing the demand for goods, or increasing the supply of goods. Processes such as paying for unemployment benefits or repaving roads stimulate demand by encouraging people to buy more goods, or allowing the government to buy goods or services. However, this short-term solution comes with many drawbacks. The short-term increase in demand results in an increase in RGDP as well as a larger increase in inflation. Demand-side stimulation works only if the economy is in an extreme recession.

However, supply-side stimulation works much better, in theory. By increasing supply, the cost of goods decrease while RGDP increases simultaneously! This type of stimulation is caused by an increase in technology, a better input (such as cheaper raw materials or more labor), or by tax cuts and subsidies for companies. The most direct method of government intervention is obviously tax cuts for businesses. This measure easily earns politicians pro-business credentials, but is often useless in practical terms because businesses expect that this policy is short-term. Since the savings are temporary, businesses are not ready to increase production to the levels necessary to spur the economy for the long term, choosing to save the larger part of the savings. The resulting change in RGDP is minimal at best.

So, does that mean that the economy is doomed to remain stagnant? No! In fact, the most reliable way to maintain high levels of growth is to focus on developing new technology that streamlines production and to create a better work force -- through education. The key to long-term, stable growth is a well-educated population that can create jobs and provide excellent skills to maintain the country. These educated people will innovate the necessities of the future.

Unfortunately, in Michigan, Governor Snyder is taking the opposite approach. He is subsidizing tax cuts with cuts to education. In the long-run, the economy will suffer due to the lack of innovation. But in the short-term, it will seem as though Michigan has been pulled out of the recession. It's only too bad that the long-run will be far less rosy.

The levels of economic growth that was sustained during the past few decades was actually the result of the decisions made regarding education in the 50s and 60s. Such prosperity can hardly be expected in the near future with such minimized attention to education.