[Side note: Term paper submitted by Christopher Holtby for his Harvard 2022 Spring semester class.]

Introduction to America's economic lemons and lemonade

Unlike one's first Alcoholics Anonymous meeting, America remains mute, unable to admit or even discuss that critical economic problems exist. America's 1% believes everyone wants to take or control their money. The other 99% see various gray and bleak financial futures. Gen Z and millennials do not want to start families because of cost concerns. Most Baby Boomers can afford a certain apathy to America's social and economic challenges because they are economically isolated from them. The most radical elements drive the definitions of Republican and Democratic political beliefs. America's happiness rank (16th out of 146) remains inconsistent against its economic, military, and technological prowess.[1] America spends more on health care with less healthy citizens than other high-income countries.[2] In 2021, the American Society of Civil Engineers report gave America's infrastructure a C-.[3] These are a few examples of America's current basket of economic lemons. And that is okay. America has been here before. Never the same, but America's historical basket of lemon moments somehow finds the path toward collaborative lemonade solutions. And like a successful Alcohol Anonymous member, America will jump "on the wagon" for a few decades, yet again, with a hopeful twist.


Thesis and argument

This paper argues the current state of the US economy faces a wall of economic issues solvable by learning from America's past financial troubles and employing humanistic economic modeling. The evidence will show that the amplification of America's economic headwinds over the last forty years has been caused by using outdated "blackboard" economic models and policy leaders ignoring lessons from past economic malaise events.[4] The organization of this evidence comes in three parts. Part one outlines the current economic headwinds. Part two describes lessons learned from America's past economic malaise events. Finally, part three introduces the concept of humanistic economics as a foundational framework to significantly reduce America's current economic policy malaise.


America's current economic headwinds

America handles "in-your-face" significant problems with blunt and methodical efficiency (e.g., 9/11 terrorist attacks, any singular environmental disaster). The slow creeping issues that America faces today have not attracted equally slow and creeping solution sets. This current problem list – population aging, technological changes, rising inequality, growing debt, and climate change – has unique characteristics affecting America's current economic state.


A country's population changes provide positive or negative options to address current or future problems. A vibrant economy requires growth in the working-age population and increased output per worker. A stagnate, or decreasing economy has a falling population producing less output per worker—a contemporary example – is Japan. Since the Japanese population peaked in 2009, its population growth rate has declined by 0.12% per year, and its GDP growth rate slowed to an average of 0.64% per year.[5] In comparison, the United States population growth has increased by 0.71% per year, and its GDP growth rate has hovered around 2% per year.[6] A strong correlation exists between a growing population and an expanding economy. The issue not captured in these American statistics – is the working-age population changes over the next several decades. Over the next forty years, America's working-age population will shrink from 60.9% to 55.6%.[7] Even leveraging technology to increase productivity per worker and removing "blackboard economic models," GDP "potential growth" (i.e., population plus productivity growth) will slow, affecting policymaker's choices for addressing America's growing debt problem.

Debt & Inequality

Since Reagan's presidency, government deficits have increased. However, not all debt is equal. Good debt – building infrastructure and improving the quality of a country's education system. Bad debt – starting wars and supply-side economics (i.e., "blackboard economics"). Unfortunately, the majority of America's debt came from bad debt. Policymakers' approach to incurring public debt has allowed rising corporate earnings and wealth inequality. From 1989 to 2016, the top 10% of Americans saw their total US wealth increase from 67% to 77%, whereas the bottom 50% saw their share of total US wealth decrease from 3% to 1%.[8] The same report from the Federal Reserve Bank of St. Louis saw similar inequalities across age groups, racial backgrounds, and education attainment. Rising debt with a smaller productive working-age population narrows the future choices available to policymakers to address these economic headwinds that climate change and technological progress will only exacerbate.

Technology & Climate Change

Technological progress materially affecting economic growth started with the steam engine. Over the last 300 years, economies have adapted different technologies (e.g., electricity, computer chips), causing a widening outcome range between the winners and the losers. The next technological leg, the digitization of everything, will follow Schumpeterian creative destruction.[9] Dislocations to entrenched industries and rewards for the economic captains of those new industries will further exacerbate America's current economic malaise. Policymakers and mainstream economists will have a shrinking set of solutions with America's overleveraged economic system. Policymakers need to ensure the digitization of the American economy does not exacerbate the current wealth and income inequality headwinds; policymakers must draw upon the lessons learned from the economic hollowing-out of the American midwestern states. Unlike the technological progress headwind, the climate change headwind exists in a charged political battlefield. Everyone can agree that climate change exists (i.e., dryer places becoming dryer, mild to cold, etc.). No one can agree on why. Leaders should ignore the why and focus the creative thought on reducing human's environmental footprint in measured applications to provide a long-term solution. Climate change has a cost that does not add value to America's economic system. Those with lower means and choices will bear the brunt of climate change's financial cost, much of which can be avoided.

With blunt strategies and tactics, America's current headwinds (i.e., population aging, technological changes, rising inequality, growing debt, and climate change) cannot be solved. For example, we can all agree that brushing and flossing our teeth twice a day does not guarantee healthy gums and no cavities but increases the odds in one's favor. However, if policymakers leverage a skill utilized personally (e.g., healthy personal choices with uncertain future outcomes) and regularly review "film" of past economic malaise events—the odds of these headwinds growing decrease in likelihood and effect.

Examples of America turning lemons into lemonade

Winners write history. Evergreen history lessons spring from understanding how winners won, and losers lost. Throughout America's history, policymakers and its economic actors survived several economic malaise events, aptly offering solutions to solve America's current economic headwinds.

Financial crisis of 2007-2009

The financial crisis of 2007-2009 began with a signature in 1999 – President Clinton repealing the Glass-Steagall Act of 1933. This act, enacted during the Great Depression, separated commercial banks' allowable activities (taking deposits guaranteed by the US government and lending to commercial businesses) from investment banks (raising capital, merger and acquisition advising, and trading securities). For almost seventy years, the financial industry provided a balanced boost to America's GDP growth based on policymaker's regulatory limits on capitalisms animal spirits. President Clinton followed the lead established by the "Ayn Rand" St. Reagan administration (e.g., the securitization of mortgage bonds boosting available capital to fund homeownership). With the Glass-Steagall Act gone, Wall Street found new verticals within the US economic system to financialize every aspect of the economy (e.g., credit cards, cosmetic surgery loans, car loans). Policymakers did not anticipate the innovation Wall Street leveraged from their newfound regulatory flexibility. Economists and their models assumed rational agents would produce rational decisions. Instead, Wall Street's financial innovations jumped to another level post-1999 leading to the financial crisis. Reviewing the "film" of the financial crisis, the evidence points to a few missed opportunities: avoiding moral hazard (two sides not having the identical information) and stopping future imbalance of gains and losses (policymakers socializing losses and privatizing profits). Looking forward, policymakers should enact a modern-day version of the Glass-Steagall Act to restrain the animal spirits of America's economic actors. The Great Depression solutions provide seventy years of historical evidence of how policymakers and economists turned lemons into lemonade. These actions will lower the wealth accumulated through financed asymmetric information if implemented today. These actions will reduce income and wealth inequality and lower private debt balances leading to a stable financial system.

From riches to rags: America's rustbelt

The American midwestern economic successes during the 20th century created a Minksy moment (i.e., stability breeds instability) exacerbated by policymakers' allowable effects of globalization without any offset for American workers.[10] "A closed economy, without competition from [the] outside" will collapse upon itself when confronted with competition unfettered with laws or regulations for its workers or communities.[11] The reversal of America's midwestern success stories happened slowly from the late 1970s to the mid-1990s. For example, Japan, and later Mexico and China, offered faster and cheaper manufacturing solutions. With companies, domestically and globally, fully adopting globalization, the entrenched midwestern companies could not compete domestically or internationally. The outcome of Delphi Automotive can explain an example of this situation. Before globalization, 100% of its workers lived in midwestern states with stable jobs, secure pensions, and company-funded health care benefits. Globalization forced Delphi's management to outsource and force draconian pension and health care concessions to its workers. The aftermath left vast swaths of workers without jobs or retraining opportunities funded by policymakers' legislative acts or unions' financial reserves. Reviewing the "film" of these globalization effects strikes an eerie similarity of the digitization risks (e.g., machine learning, artificial intelligence) facing entrenched industries and workers throughout America today. Policymakers should create structured retraining centers for those soon-to-be Luddites affected by the new technology – digitization.

The losers from the effects of globalization in America and the policy outcomes from the financial crisis have no voice. Only the winners from these events have a voice. America's current economic headwinds have been caused by the winners ignoring the lessons of past economic catastrophic events. Had policymakers taken a non-Ayn Rand approach to the globalization effects within midwestern America and the outcomes of the financial crisis, large swaths of the American population would be economically solid contributors to the economic system. Unlike President Reagan's quip about the government being the problem, economic and capitalist actors are not rational. They need new legislative policies and regulatory guardrails to keep America's financial future adapting and succeeding. The trick lies in finding a balance – not too sweet, not too bland. Our economic "blackboard" models need an update.

A new beginning - humanistic economics

Economics is the bastard child of two academic parents who never married – the sciences (e.g., chemistry, physics, math) and the humanities (e.g., psychology, sociology, politics, philosophy). Policymakers and modern-day economists find this description unsettling based on their approaches to solving past economic malaise events (e.g., Savings & Loans, LTCM, and Financial Crisis). Solving our current economic headwinds requires approaching economic models with a simple agreement – economic actors are not rational nor as scientifically mathematical as they want to be. Humans, individually or within a group (i.e., a company), are self-interested actors fine-tuned through thousands of years of trial and error to ensure their success and survival. Using this approach under a free-market system can cause economic imbalances and violent corrections. Societies have created rules (i.e., laws and regulations) to ensure free markets do not cause more harm than good. Policymakers and economists (e.g., Keynes) applied lessons learned from the Great Depression with new laws and regulations (e.g., the Glass-Steagall Act, the FDIC, etc.). Time has eroded the humility born from the lessons of the Great Depression. As a result, hubris exists in modern-day economic thought. By applying rigorous scientific models, modern-day economists believe solutions exist to any economic malaise event created by the economic actors. Under the assumption, economic actors are rational. Over the last forty years, economists have ignored their bastard child heritage and assumed their subject could be subjugated and controlled under the definition of pure science (e.g., "blackboard economics"). A new economic philosophy should be taught and employed to solve our current financial problems.

"Humanistic economics need not be an oxymoron."[12] One economic system, capitalism, should be a foundation for humanistic economics. Capitalism offers the most ingrained and natural solution to our fine-tuned behavior where all economic actors can win. However, the critical question – the definition of a win for all economic actors – cannot be answered by capitalism alone. Marxism, socialism, communism, and fascism do not employ the authentic human qualities showcasing our lemons to lemonade successes through the travails of history. Unbridled capitalism, evidenced by America's current economic malaise, showcases the need for an additional philosophical attachment – the employment of the humanist concepts of Jesus Christ. These universal concepts – removing uncertainty, reducing fear, and avoiding manipulation – can be found in other religions or humanistic philosophers (e.g., Confucius, Buddha, Hippocrates, Socrates, etc.). Policymakers and economic leaders desire a population to have less uncertainty over basic needs (e.g., food, shelter, education, medicine, retirement). These people realize that less manipulation (e.g., asymmetric information) over economic and financial tools allows for balanced growth with less discontentment (i.e., modern-day society's revolutions begin with the middle-class resentments). In the aggregate, another requirement – less fear – provides for a more "efficient allocation of resources" for steady long-term economic growth for all.[13] Humanistic economics pulls the best out of capitalism and humanism so that a society can provide for the wealthy and living wage actors to exist in harmony, kindness, and fairness. Thus, solving America's current economic and social headwinds.


America has periodically existed during economic moments holding only lemons, such as today. Americans have shown a consistent proclivity to turn those lemons into lemonade. Alcoholics Anonymous attendees know that the first step to solving a problem requires admitting the problem exists. Americans have that can-do attitude, especially with those "in-your-face" problems. Policymakers and economic leaders live in a unique historical moment to employ the past successes of addressing economic and social issues and using humanistic economics. A famous phrase on Wall Street – pigs get fed, and hogs get slaughtered – aptly showcases the ripe and right moment to reduce the steroid GDP booster of financialization and focus on a steady growth trend for all. Ignoring this timely opportunity sets the eventual stage for another Edward Gibbons-style historical biography of a foregone empire.















Atkinson, Robert D. The Past and Future of America's EconomyThe Past and Future of America's Economy: Long Waves of Innovation That Power Cycles of Growth. Cheltenham, UK: Edward Elgar Pub. 2004.

Diamond, Arthur M., Jr. 2006. "Schumpeter's Creative Destruction: a Review of the Evidence." The Journal of Private Enterprise 22 (1): 120. https://hollis.harvard.edu/permalink/f/1mdq5o5/TN_cdi_proquest_journals_215108274

Helliwell, J.F., Layard, R., Sachs, J.D., De Neve, J.-E., Aknin, L.B., & Wang, S. (Eds). "World Happiness Report 2022. New York: Sustainable Development Solutions Network," United Nations, World Happiness Report, 2022, https://worldhappiness.report/ed/2022/happiness-benevolence-and-trust-during-covid-19-and-beyond/, accessed April 23, 2022.

Federal Reserve Bank of St. Louis. "What Wealth Inequality in America Looks Like: Key Facts & Figures," https://www.stlouisfed.org/open-vault/2019/august/wealth-inequality-in-america-facts-figures, Accessed May 4, 2022.

Field, AJ. 2005. "The Past and Future of America's Economy: Long Waves of Innovation That Power Cycles of Growth." Independent Review. OAKLAND: The Independent Institute. https://hollis.harvard.edu/permalink/f/1mdq5o5/TN_cdi_proquest_journals_211319251.

Gordon, Robert, J. Demise of US Economic Growth: Restatement, Rebuttal, and Reflections. National Bureau of Economic Research. Working Paper 19895. http://www.nber.org/papers/w19895.

Jagadeesh, Dhanya. 2015. "The Impact of Savings in Economic Growth: An Empirical Study Based on Botswana." International Journal of Research in Business Studies and Management 2, Issue 9 (September 2015): 10-21.

Kindleberger, Charles P. Manias, Panics, and Crashes: A History of Financial Crises. 4th edition. New York: Wiley. 2000.

Komlos, John. Foundations of Real-World Economics: What Every Economics Student Needs to Know. 2nd edition. New York: Routledge. 2019.

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Longworth, Richard C. Caught in the Middle: America's Heartland in the Age of Globalism. 1st US ed. New York: Bloomsbury. 2008

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Papanicolas, Woskie, L. R., & Jha, A. K. (2018). Health Care Spending in the United States and Other High-Income Countries. JAMA : the Journal of the American Medical Association319(10), 1024–1039. https://doi.org/10.1001/jama.2018.1150.

PEW Research Center. 2020. "Trends in Income and Wealth Inequality," https://www.pewresearch.org/social-trends/2020/01/09/trends-in-income-and-wealth-inequality/screen-shot-2020-01-08-at-5-06-47-pm/, Accessed December 10, 2021.

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Schumpeter, Joseph A. 1950. Capitalism, Socialism, and Democracy. 3d ed. New York: Harper. https://web-p-ebscohost-com.ezp-prod1.hul.harvard.edu/ehost/ebookviewer/ebook/bmxlYmtfXzg4MjEzX19BTg2?sid=cca8cd1a-605b-4db3-ba81-ccc5bfc73b96@redis&vid=0&format=EB#.

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[1] Helliwell, J.F., Layard, R., Sachs, J.D., De Neve, J.-E., Aknin, L.B., & Wang, S. (Eds). (2022). World Happiness Report 2022. New York: Sustainable Development Solutions Network. Figure 2.1, United Nations, World Happiness Report, 2022, https://worldhappiness.report/ed/2022/happiness-benevolence-and-trust-during-covid-19-and-beyond/, accessed April 23, 2022, p 17 (use this for the biography https://happiness-report.s3.amazonaws.com/2022/WHR+22.pdf).

[2] Papanicolas I, Woskie LR, Jha AK. Health Care Spending in the United States and Other High-Income Countries. JAMA. 2018;319(10):1024–1039. doi:10.1001/jama.2018.1150, p. 1026.

[3] https://infrastructurereportcard.org/ accessed April 23, 2022.

[4] Komlos, John, Foundations of Real World Economics: What Every Economics Student Needs to Know, 2nd (New York: Routledge, 2019), 13.

[5] Macrotrends LLC. “Japan GDP growth rate and Population growth rate 1961-2022”, https://www.macrotrends.net/countries/JPN/japan/gdp-growth-rate, and https://www.macrotrends.net/countries/JPN/japan/population-growth-rate. Accessed May 1, 2022.

[6] Macrotrends LLC. “United States GDP growth rate and Population growth rate 1961-2022”, https://www.macrotrends.net/countries/USA/united-states/gdp-growth-rate, and https://www.macrotrends.net/countries/USA/united-states/population-growth-rate. Accessed May 1, 2022.

[7] U.S. Census Bureau. “Demographic Turning Points for the United States: Population Projections for 2020 to 2060,” https://www.census.gov/content/dam/Census/library/publications/2020/demo/p25-1144.pdf, P. 4, Accessed May 1, 2022.

[8] Federal Reserve Bank of St. Louis. “What Wealth Inequality in America Looks Like: Key Facts & Figures,” https://www.stlouisfed.org/open-vault/2019/august/wealth-inequality-in-america-facts-figures, Accessed May 4, 2022.

[9] Arthur M. Diamond, Jr., “Schumpeter's Creative Destruction: a Review of the Evidence.” The Journal of Private Enterprise 22 (1) (Fall 2006): 121.

[10] Komlos, Foundations of Real World Economics: What Every Economics Student Needs to Know, 242.

[11] Richard C. Longworth, Caught in the Middle: America’s Heartland in the Age of Globalism, 1st edition (New York: Bloomsbury, 2008), Chapter 3.

[12] Komlos, Foundations of Real World Economics: What Every Economics Student Needs to Know, 5.

[13] Komlos, Foundations of Real World Economics: What Every Economics Student Needs to Know, 5.