Economic Rubber-Neckers
Man, am I ever tired of hearing about how bad the economy is. I’m very much aware that there are plenty of negative indicators as I read around ten pretty hardcore economics blogs on a daily basis. One of the indicators is this thing called “aggregate demand.” There are some really fancy equations that serve to define what this term means, but here’s a basic and workable definition: aggregate demand is the sum total of how much stuff we all want to buy at a given moment.
Basically, my client’s customers buy stuff from them and my clients then use that money to pay me for my services. I take that money and use it to buy the things my business needs. Those businesses take my money and spend it on what they need. And on and on it goes. Add up all of that demand from all the businesses and all the individuals whose incomes are provided by said businesses and you get aggregate demand.
Have you ever been on the interstate when all of the sudden everyone starts slowing down and there’s this big backup in traffic? You’re pulling halfway onto the shoulder trying to see what is going on, but all you can see is brake lights running up to the top of the next hill. Eventually traffic starts to pick back up, and you see that there was no good reason for people to slow down, except that on the complete other side of the interstate there was a car on fire. The idiot moron rubber-neckers on your side of the interstate were compelled to slow down and gawk, stalling traffic and causing a chain-reaction of brake lights and an reduction in the aggregate speed of traffic along the interstate.
Well, aggregate demand is suffering from the same problem right now. Yeah, there are some parts of our economy on fire, and that’s not exactly awesome, but the problem is made worse by the fact that people are slowing down to either gawk or because the folks in front of them are forcing them to slow down. In other words, the perception of a problem has created a real one.
Case in point: this morning I heard from a business that I’ve been working with to build a software system. They desperately need this system and my company can provide a customized solution at a fraction of the cost of many enterprise turn-key systems. It’s looking like my client is considering not going forward with the system because of “the economy.” Never mind the fact that their revenues are still up a significant percentage. Never mind that they just finished their best year of business to date. And never mind that they’re already projecting record revenues for 2009 based on signed contracts.
If we don’t get this contract, we might be hosed. That means that the businesses to whom I shell out several thousand a month for services will lose that revenue, making it more difficult for them to sustain their current level of demand for their vendors’ good and services.
And all because of economic rubbernecking.
