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L-to-E ratio

L-to-E ratio

    Congress allegedly agreed on a budget plan last night. The great thing about this plan is that both sides can blame the other when the economy continues its long march into the crapper. Conservatives will say we didn’t cut the budget enough. Liberals will say the decrease in government spending will choke off growth and make things worse. Who’s right?

    Democrats like to point to the Clinton era as proof that the economy can flourish even as taxes are increased. But how would things have fared in the Clinton years without the Dotcom bubble? Beats me. You don’t know either.

    Economies usually find their direction from large, unpredictable events, such as wars and other disasters, moving from communism to capitalism, huge demographic shifts, and irrationality that leads to economic bubbles. For any given ten-year period, luck is the biggest driver of a nation’s economy. But what single factor is most predictive of, say, a nation’s fifty-year economic direction? I think it’s the L-to-E ratio (lawyers-to-engineers).

    My hypothesis is that the best indicator of long term economic health is the number of engineers a country produces relative to the number of lawyers. A country that is cranking out more engineers than lawyers will trend up. A country that is moving toward a lawyer-heavy economy will grind to a stop.

    This idea is nothing more than a wordy way of saying, “To a man who only has a hammer, everything looks like a nail.” Engineers build stuff and lawyers sue people. If we assume both professions like to stay busy all the time, you need more engineers than lawyers to create net growth. And I think you’d agree that the countries with the best engineers also win wars and survive disasters the best.

    I tried and failed to Google some statistics to back up my hypothesis. Anecdotally, the idea seems about right. I can’t think of a country with a strong economy that isn’t also known for its engineering prowess.

    Some of you will argue that education in general is the biggest predictor of success. But I think you’d agree that if everyone started majoring in English, we’d all starve to death with impeccable grammar.

    My take on the budget compromise is that any budget that doesn’t kill us right away will be good enough. Our economic fate is primarily in the hands of engineers. ¬†And when our collective cynicism reverts back to its baseline, maybe we’ll be lucky enough to have another economic bubble. I hope so. I enjoy those while they last.

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