March 20, 2017
My temporary retirement is coming to a close. And I’ve been pretty quiet here, cus retirement. Now I’m beginning to narrow down options and trying to keep feeding myself, so am thinking about work again. I’m starting to approach old clients and seeing if they’ll give me money for pushing truths out of my head and into electrons.
I’ve been a bit quiet here for a while, compared to the January to half way through February period where I’d posted 3 blogs. It seemed my need to write could use a new outlet. So I started a book, And finished-ish a book, and started another. Now I’m approaching Publishers and seeing if I can make some actual income from pushing made up stories out of my head and into electrons. Your hands don’t get as ink covered from keyboards, but the letters on the keys wear off. Hopefully I won’t get the truths and the made up stories mixed up.
The book is in the Fantasy genre, cus reality has got it’s own problems, and I don’t want to add to them. If somebody wants to publish it, then cool. If not, I’ll do the amazon thing and put it up for cheap. Don’t want to put any spoilers here, but it’s way fun…for me, and my sister said she liked it!
In the book, I ended up with some preachy social and economic pieces that work well in that world, so it how everybody should do stuff in this world. It’s all a proven process now, and if I can get it published, I can use the book as a reference, everyone will be excellent to each other and all will be good.
Thinking through the consequences to a society on having “magic” available to them was sort of interesting though. What would that society want? What kind of place in the social structure would mages have? You have most people that don’t have access to magic, and the magic folks having whatever they can dream up. Talk about economic disparity!!
It plugs into the things that people really want. I’ve come to the conclusion in both worlds, that the only real currency, is a call on other peoples time. There’s a bit in there for land, but most of it is other peoples time. Most of the wealth of the world is the knowledge bequeathed to us by our ancestors (the post living have a lot of IP).
That plugs into peoples love of time saving gadgets. What we all really want is more time for us to plug our Focus into our Interests. It’s been demonstrated that most people won’t mail in rebate offers or similar small-ish money offers if it is even a bit of a Hassle. Make it a big Hassle and most people won’t do it for big money (compared to their salary). It needs to be a big enough sum to offer enough E|T to motivate the person overcome the Hassle. In the book people want Enchanted items like refrigeration, transportation, lighting etc. – in the real world, it’s the same – just different magics.
If we go to our present society, the economists focus on money as a proxy for value. If we build in a social benefit into the value, a better proxy is time. In that view an awful lot of the economy doesn’t get measured. It not that it doesn’t occur, it just isn’t measured. If a change in the economy occurs that moves things from a non-measured to measured activity, there is no social benefit, but the economic measurements, as they are, may show growth. ie a voluntary position becomes a paid position.
Big example – the totally cool introduction of woman in the workforce. It led to day-care going from a voluntary, unpaid so not measured category – to a paid, measured category. Because Daycare is generally used by people that can earn more then daycare costs, there is an economic and social benefit, but it’s (what you make) – (daycare costs). The present economic measurement techniques record it as (what you make) + (daycare costs.) so end up with a poor measurement – and that’s entirely a discussion of measurement error, not social value.
Arguments about the additional non-monetized social cost or social benefit of daycare vs stay at home parenting, and the quality of life/improvement in the world in general though empowering women – are in addition/subtraction to the socioeconomic measurement above – and if anyone thinks it’s a net subtraction, give your head a shake.
To look at more conventional measurements and where the social good isn’t allocated efficiently, lets look at a businesses rent in a 50 year old building. The whole rent + taxes goes to the building owner or the city/taxing authority. Now look at the social inputs into the construction from dead people and their time.
The time it took to construct the building, to time to learn how to construct buildings, to time to learn how to design buildings, to time to have put the services – sewer, water, power, telecoms – into the street. To building the street to designing the street, for developing the social stability that allows economic activity to flourish. and on and on and on and with the present economic measurement, those costs are discounted to zero.
If you build those into a socioeconomic model and track that historical IP things as part of wealth, and even earnings, comparisons get interesting. Take the difference between earning a million $US a year in Congo, or a million $US a year in Canada.
A median income in Canada is somewhere around $40,000 a year. If you add in all the social benefits that accrue to an individual, around security (Both personal and financial), health care, infrastructure, schools, social cohesiveness, etc. and you can reasonably argue that’s the equivalent-ish of a million a year in Congo, which is 7 years into the most deadly conflict since WW2 (and that most people in the Western world know nothing of).
One of the social implications of that, is, from an economics side, most of anyone’s wealth is the collection of knowledge bequeathed to us from previous generations. If you look at the giant sum of knowledge that under pins the economic prosperity of today, it’s old knowledge. From wheels, to foundations, to nails, to concrete, to steam, to electricity, to computers, social institutions, to type of government to, to, to, whatev…
If you get a plumber to fix your pipe, you aren’t paying for the development of the pipe, the development of the tools the plumber uses, the development of the method of making the tools, the development of services in the ground that get water in and sewage out of the building, the development of the road network, etc, etc…whatev.
Those are all things you don’t pay for, they are social capital. You do pay for maintenance and upkeep and all those infrastructure things, but not the development of how and why. and if it’s even a little bit old, the construction costs are depreciated to zero so are free as well according to accounting practices and GDP style economics. That economic value all belongs to previous generations (if you want to get pedantic, a teeny bit of the newest developments of techniques may be passed on to you, but only a teeny bit for the most recent tweaks in production.)
Then you look at wage cost for the plumber, your paying for a fraction of the training costs, and tool cost, and living wage costs of the plumber because our society needs plumbers, so those costs get socialized amongst everyone who uses the plumbers services.
The super high earners and CEO types are sitting on this huge pile of historic and social wealth, and extracting high rents from it and tell people they built it, and they deserve 10000 times the median income, because their output is all because of them. Completely avoiding the question of how much of their companies present day economic success in actually because of them, the companies output is mostly about infrastructure and knowledge bequeathed to them by our ancestors.
Our present economic system focuses on ensuring there is a healthy return to all capital – except the social capital. Is it cus social capital isn’t worth what money capital is? Is it because a big chunk of the agency around economic rules and measures are people that have control of a lot of money capital, and the social kind is everyone’s, so we shouldn’t pay for the return on that social capital at all cus rich people don’t want to?
The capitalist system is efficient at providing consumer goods. The capitalist system is efficient at allocating capital (mostly old knowledge and a bit of other peoples time). The capitalist system is not efficient at allocating social goods.
If tax rates represented the return of social capital and income represented the return on hoards of other peoples time, we’d have a tax rate of 99% and a guaranteed income of lots. There may be a wee problem in motivating the living with that, and the dead won’t complain if you stiff them (har har) so that’s probably not the best plan. According to our present economic calculations on the importance on allocating returns to capital, that’s where you end up (I’ll reducto your al and raise an absurdium).
Luckily, the one place all the classical economists believe behavioural economics should be considered, is that cash is the only thing that motivates people to do anything at all…or sorry incentivizes, (cus if you use words people understand, they’ll figure out your argument sucks). The standard Chicago style economist thinks that the only way to get a breakfast is to pay for one. I wonder about their childhoods. I’ve motivated people to do all sorts of stupid stuff by saying “I double dog dare you” so I know there are other routes to motivation.
Most of the capital of our world, exists in those contributors from the past. So what is the most moral way to distribute the return from capital? Should the people who inherited the cash from a 20 times removed ancestor receive the benefit? 10 times? 1 times? One route to socializing the benefit that comes from dead people is inheritance taxes.
It is totally moral in my view, to have inheritance taxes of 50% (details and thresholds matter here so just pretend I’m including all the stuff you like) scaling to 100% over a large figure (say 10 million dollars per inheritor (no corporations allowed). You can put in exceptions for number of children, charitable donations and whatever, but if your children can’t sort out their lives with a 10-ish million dollar head start, they kinda deserve to fail.
So how can we socialize the return on more of the social capital than we do now? How do we do it fairly? How do we do it where big enough chunks of capital are available to pursue large projects? How do we make sure that the Hassle of working through the capitalization efforts are adequately incentivized to maintain progress? These questions get to the meat of what should be getting considered in a moral world. We don’t spend time considering those issues from a socioeconomic benefit (Outside of NGO’s and people without any agency to implement change – like me for instance). If you put the net socioeconomic value on that historical knowledge, you end up gazillions of gazillions of dollars and what we have is a distribution problem, not a capital problem.
In our world we’re trying to decide how to prosecute rich folks that were caught cheating on taxes, and whether to prosecute officers of a corporation that plead guilty to criminal charges. We’re arguing on how much we can cut tax rates on the top 1%. And that’s the top 1% of earnings, not piles of cash – often fairly stagnant piles of cash (our present measurement of wealth).
One of the big problems in today’s conventional economic policy comes out of too much money with the rich folk, who tend to invest there money and don’t spend it. People aren’t buying the present supply of houses or widgets or the output of present factories or production facilities or entertainment facilities put out now, so why would you want to build new factories or plants or houses or whatev…because no one will buy them.
The money just sits their and no one wants to invest it in actual productive stuff, cus it’s risk and work, and you end up with stock bubbles and housing bubbles and a large investment industry. The investment industry’s purpose in an economy is the efficient allocation of capital. That allocation is important to economies, so there is a moral justification that people that are good at it are rewarded. Unfortunately, if that industry gets too big, all those savings just churn around in there, with the professionals involved taking a slice, each cycle, in economic terms, they are mostly rentiers. They extract wealth with no social benefit.
The moral case for the present allocation of wealth chokes on the percent of the economy that just sits and spins in the financial industry. Nobody can afford to buy stuff, so no one wants to invest into productive improvements in saturated industries, and there is no penalty to just sitting on piles of case, as the inflation rate is presently small (in some countries negative). The inflation target the central banks aim for is small (2% at present).
Adam Smith talks about the self regulating part of capitalism where it doesn’t really matter who makes decisions on allocation of capital in an economy as long as it is diverse. People that put it into wrong places go broke and people who put it good places get rich. Over time the capital all ends up in the hands of people that are good at it and you can harness their greed for the benefit of all. (It doesn’t mean greed is good. That you can harness a social bad to make a social good is awesome, but nothing to celebrate)
But if you look at the present financial market it spins an awful lot of money from one financial instrument to another. The last number I have in my head for the capitalisation of the New York financial industry is 40 Trillion dollars. That is the output of the entire US economy in around 3 1/2 years. It just churns around and some of the biggest earning people in the world are those that just take a slice every churn That’s one way to socialize the capitalisation, but not a terribly equitable one.
Take a typical rich guy, lets call him Charles. Charles inherited a pile of cash is presently worth 600 million dollars. Charles lives in an inherited mansion, and spends all day every day playing golf and watching old movies. He handed that big pile of money off to Chad at the brokers.
Charles doesn’t pay a whole lot of attention to the money, cus it’s in a big pile. Chad is fairly incompetent, but in a lazy way. He sticks the whole thing into a market index and collects 20% of the return on the investment. The american economy grows at 2% (Inflation corrected), the pile grows 12 million, Chad takes 2.4 million leaving Charles 11.6 million richer – one million of which he spends.
Charles has done nothing at all but get born. Chad took 10 minutes of his time working, and has done nothing else. Every year they continue to be rewarded in a way most of the worlds people can’t imagine. There is no moral case for a system set up where Charles and Chad consist of much of the market.
Solution to Charles and Chads, don’t let Charles inherit that much capital. If he inherit’s 10 million, he’s going to have to do amazing things with it to get back to his comfort zone. Give the rest to the society who provided most of the IP (Intellectual property )that Charles’s father used to earn all that money
The central banks presently target that 2% inflation as the optimal rate for economic growth. If you end up with swing in, say, as a totally random example, house prices, that impacts greater than 2% of the economy (including furnishings etc) downward, you get trapped in the Zero Lower Band problem and are at risk of deflation (which is bad in a myriad of ways – google has a ton on that if your interested).
So what if we target, say 7% inflation. That will wipe out half of a fortune in a decade if it just sits in a mattress. Suddenly the central banks have a lot more room to avoid a zero lower bound problem and your a lot less likely to have a demand crisis anyway.
That last point would lead to most published and properly educated economist to go, “there is no evidence to support that statement”. And I’d say bullshit and they’d say you know nothing and the argument would turn into a useless morass of insults. So instead I’m going to write it down, cus it’s harder to collapse an argument into insults when only one side even knows the argument is getting made!
So, “Less likely to have a demand crisis anyway” gets us into something economists used to do, but can’t anymore because it isn’t microfounded. A thought experiment. What’s funny about this thought experiment is that it IS microfounded! The population of CEO’s is small so it’s microfounded in a micro population!
Take a CEO of a typical large company – Peter. He gets marked on profit. His company has enough market share to be a key player in his industry. If he makes less money than last year 3 years in a row, he gets turfed. He makes 2% of sales in profit at an inflation rate of 1%. Yeah Peter, keeps his job, doesn’t change a single thing or add any value, just rides the same old same old, and change is so slow he can fall behind and then catch up with a months actual work, in any metrics he might fall behind in, over his 3 year response window.
Now lets say, inflation is targeted at 7%. Now Peter gets a little worried. He needs to keep changing his prices to keep up with inflation, so he is active in wage management of the employees and getting better efficiencies out of inventory management, production flow and as a result the companies productivity increases, he make 8% sales growth and is right were he was financially the year before, but had greater incentives to take risks and move the needle farther and faster. It becomes a dynamic system instead of a stable one, and Peter has more sleepness nights, but he comes closer to earning his wage and society produces more. Lets pretend that’s a worthwhile thing for now.
Note that wages need to be going up at 7% to maintain that inflation target (it’s tautological), so it’s not a penalty on wage earners, it’s a penalty on capital. The group that gets hit hard by this, is retired workers, trying to get by on savings. Some type of social security fixes NEED to be included in this case. So a guaranteed income on savings (or part of savings) at time of retirement, a boost in the target payout of SS, some combination – something needs to happen here so Grandma doesn’t starve. Remember, a big chunk of our wealth is development of knowledge in the past. Paying a chunk of money to feed the recent past is a pretty small cost, give everybody who makes it to 65 a guaranteed income = Canadian median and raise taxes to pay for it.
Final note on the raise taxes stuff. Happiness has a link to relative wealth and earnings, not absolute (there are references for that and google might know them, but I’m too lazy) Raise everybody’s taxes, happiness doesn’t move. Do elect a government that want to run the government well. We need government, it’s a big corporation so there are all sorts of things it could do better, like every big corporation, but a belief that government is evil is a bad trait in the people you hire to run it.
So lets all be excellent to each other (yeah, same joke twice in one blog but the other one was way earlier)