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How We Think About Money
Mike Treder   Sep 1, 2011   Ethical Technology  

What does money mean to us? How do we regard the amounts that we earn, and how do we respond when some of our earnings are taxed?

Governments in most Western countries are continuing to struggle with increased deficit spending. They are paying out more than they are taking in, and the gap between income and outgo is on the rise.

So, what to do?
pic 1
Here in the United States, the overwhelming political consensus seems to be that to confront rising deficits, the right solution is to reduce government income by slashing tax rates, especially for corporations and individuals who have the most money. Spending cuts are being proposed, as well, but it’s harder to find agreement on that than on the apparently self-evident virtue of cutting taxes.

That might not strike most of us as logical, but in the Tea Party climate of 2011, logic and common sense are not highly valued commodities.

A different approach, being promoted by the few remaining people on the Left in the US, is to increase government spending with the intent of stimulating growth and creating jobs. In the short run, this will make the deficit larger, of course, but in the long run, based on historical models, it is predicted that this kind of stimulus will bring up revenues to a much larger extent than it costs in spending. (Tax increases, especially on the rich, also are proposed.)

That old-fashioned idea appears, however, to have little support in Washington with either Republicans or Democrats. Why should that be?

The Irrationality of Politics

In a (public) online conversation I had recently with Stephen Aguilar-Millan, director of research at the European Futures Observatory, he said:

I believe that both the US and the UK economies are in need of a stimulus at the moment, and that the best form of stimulus is in the form of payments to the poorest members of society (who will go out and spend the money) rather than tax cuts for the rich (who will simply accumulate the money in idle balances).

It is a shame that neither of our political systems seem capable of delivering this.

I can’t help but wonder, considering how obvious that reasoning is to most of us, and how often and how well the plain principle has been stated by celebrated economists such as Joseph Stiglitz and Paul Krugman, why it should be that, as Stephen put it, “neither of our political systems [UK or US] seem capable of delivering this.”

pic 2Why is it that most of the plutocrats who hold the puppet strings in both the US and the UK are so bent against Keynesian stimulus spending that should, in the long run, be good for them as well as for everyone else, if it means a stronger overall economy?

Could it be that some of them are actually banking on a further deterioration of the egalitarian social structure that Western society has worked so hard to build up over the last 100 years? Is there a long-term gain for them in what would be a crushing humanitarian loss for the rest of us? Or are they simply selfish and short-sighted?

When I put these questions to Stephen, he responded:

I’m not normally sympathetic to conspiracy theories, but I do feel that the link between the governing parties in the UK and high finance are more than coincidental. I suspect that the same could be said about US politicians.

I doubt that it is their intention to erode egalitarian structures. I reckon that this erosion is a by-product that does not prick their consciences. Their sin is not caring more than anything else. It’s not even in their long term interest. In the long term, they need to enrich their customers, if only to buy their products.

However, I think that you may find that the plutocratic rejection of Keynesianism isn’t total. It appears that, no matter how hard up we are said to be, money can always be found for a small war or two.

Stephen is right, of course, that no matter how strapped our national governments claim to be, there seems never to be a lack of cash for paying military contractors, buying new weapons systems, or making war against weaker countries. (Sigh…)

But I want to go further than that in this essay. I’d like to look beyond the questionable and perhaps irrational motives of the very rich, and their lapdogs in government, and talk about something more basic.

The Meaning of Money

pic 3What does money mean to us? How do we regard the amounts that we earn, and how do we respond when some of our earnings are taxed?

Do we recognize taxation as a necessary, even laudable, functioning of a properly formed civil society? Or do we harbor resentment when some of our money is withheld to serve collective purposes?

Far too many of us, I’m afraid, take the latter approach instead of the former.

Our culture promotes a childish attitude toward a proxy substance: money. What we refer to as ‘earnings’ is, in reality, just an arbitrary allocation of each individual’s estimated contribution to overall economic production.

Unfortunately, though, the current system of estimating the actual value that individuals provide, and of allocating rewards in a reasonably proportional way, doesn’t work very effectively.

Some people are paid amounts of money that are not even close to the value of what they provide to society. Both on the high end and on the low end, the system often misallocates shares of production.

But still there persists this stubborn idea that whatever you have ‘earned’ is ‘yours’.

It is a demonstrably false assumption that anyone in modern society, by themselves, with no help from anyone else, earns money. It is only because a complex infrastructure is in place, because an organized system of economics is working, and because governments have been instituted that we are able to have jobs and incomes at all.

We all pay taxes in order to keep that system functioning, because without it, none of us could earn a tenth of what we are making now.

pic 4Since you did not earn it by yourself, with no help from others, whatever wealth you possess should not be seen as ‘your’ money. It should be recognized for what it truly is: an arbitrary estimated share of total production.

Sometimes, perhaps often, because the system we have is imperfect, those shares are distributed unfairly. Adjusting tax rates progressively can help to restore an appropriate balance.

Is our current method of taxation, in the US or the UK, the optimal one? Almost certainly not. Various reforms have been promoted, some more radical than others. One idea worth serious consideration is the Land Value Tax, as described here.

But whatever changes are made in how we handle taxation, the first and most fundamental proposition we should recognize and accept is that money is a vague proxy for actual value. Our ‘ownership’ of it should be less emotional, more insightful, and much more collective.

Mike Treder is a former Managing Director of the IEET.


Particularly under capitalism, money is an astounding inefficient and unequal distribution system. I recommend its abolition and replacement with a gift economy and/or technocratic universal distribution scheme.

I really liked “The Meaning of Money”  part. On related lines, I think that once an individual’s basic needs are satisfied consuming anything gives us more happiness only if there is a greater correlation to what we produce.

Oh my gosh!  I actually agree with Summerspeaker this time. I really enjoy Burning Man’s “gift economy” but I’m not sure how it can be implemented in the real world. I am so disgusted by unused housing - huge buildings abandoned at night. They can be put to good use. Also, in San Francisco, there’s a pet adoption center where the dogs and cats have couches and televisions. Homeless advocates tried to get the indigent allowed to stay there at night, but it never happened.  We have more care and compassion for kittens than people?  also, food, wasted food…

As technology becomes more powerful with robotics, AI and nanotech, it will at some point eliminate the need for as much labor and create permanent structural unemployment (I think it is already happening).

This means that eventually the wage can no longer be a sufficient vehicle for distribution of the wealth that such a high technology society produces. We will have to distribute wealth in another way such as a basic income guarantee.

However, there will initially be a lot political resistance to this because society (especially anglo-saxon countries) still have the legacy of the “protestant work ethic” within their culture albeit on a unconscious level.

These are two of the main prescriptions of Ravi Batra, professor of Economics at Southern Methodist University, a follower of PR Sarkar:

a) a 50% tax on corporate earnings (which was the rate circa the 1950s or thereabouts).
b)  no CEO to be paid more than 5x the wages of the lowest ranking employee in a given corporation.

Something drastic will eventually be done—is there any doubt about that?

Always good to inject a bit of levity in the face of grim economic prognoses:
the old joke was that under capitalism life is dog-eat-dog;
under Communism it is vice versa smile

“A different approach, being promoted by the few remaining people on the Left in the US, is to increase government spending with the intent of stimulating growth and creating jobs. “

“Intent” is the key word, isn’t it. The USDOE offered a $535 million loan guarantee to Solyndra, Inc. to support the construction of a commercial-scale manufacturing plant for its proprietary solar photovoltaic panels. Look what happened to Solyndra.

This can’t be denied, yet at the risk of fobbing off a banality, Ravi Batra used a priceless epigram in one of his books- perhaps ‘The Downfall Of Communism And Capitalism’:

“failure is one rung on the ladder of success”

Not to ignore $535 million, Veronica, but more than that is spent on tobacco and booze. We for instance probably take better care of our motor vehicles than our bodies; merely an example—for starters.
You can take it from there.

...we want to seek balance in economics, ‘homeostatis’ shall we say, don’t we?
I don’t reject libertarianism/minarchism altogether; however value-neutrality in economics wont work anymore: now the potential for each individual to be a scorpion in the bottle, to harm humans, animals, the biosphere, is too much of a risk, IMO, though such a position can’t be backed up with statistics—the numbers are too large, ciphering the role of each player too complex & complicated.
At any rate, value-neutrality to me means considering baby food of the same value as thermonuclear devices, say. Such objectivity is admittedly in line with classical economics yet there’s a subtle hiding behind analytical objectivity involved in this. Though expedient, the question of how far do we go arises. If values are neutral, one can justify virtually anything in pursuit of economic activity, a meth dealer becomes a methamphetamine salesperson. Kidnapping people for slavery and organ harvesting (not unheard of) can possibly be perceived as alternative commerce if value-neutrality is pushed to extreme, though not necessarily illogical, limits (or lack thereof!)
As Veronica and others state or allude to, those who produce have to be rewarded or incentive is reduced too much. However when you examine behavior rather than what is said the fact remains that what we call the ‘Right’ (an umbrella designation) wants to manage the economy its way, using the means of legitimized statism for economic-political ends. With economic activity opening up via new methods of wealth creation, the world is up for grabs. And that is an inescapable reality.
The bottom line.

The Local-Global Flip, or, “The Lanier Effect”

“JARON LANIER: One of the things I’ve been thinking about is how computation is a human-centric concept. In the abstract, aliens don’t recognize our bits. There has to be a cultural setup for us to recognize stored information. And that cultural setup can bring into it all kinds of fundamental ideas which could have a huge effect on how society runs, how the economy works, and how our lives are put together.

I’ve focused quite a lot on how this stealthy component of computation can affect our sense of ourselves, what it is to be a person. But lately I’ve been thinking a lot about what it means to economics.”

“There’s this question of why is there so much economic pain at once all over the world, what happened? There are a number of different explanations that can be helpful. Hitting some hard limits to growth in the world is part of it, the rise of new powers of India, and China, and Brazil, so that suddenly there are more people with means. That’s part of the story. But there’s something else going on here, too, which is that the mechanisms of finance just completely failed and screwed everybody. If we look at exactly what happened with the mortgage meltdowns and the utter failure of complex financial instruments in which securities were bundled in ways that were beyond human understanding, essentially, if you look at the extraordinary ways in which the whole world seemed to go into debt at once, what happened there?”

You can read the rest here..


The above gets to it well, Cygnus.
The proximate origin is that we are walking anachronisms, which it goes without saying includes economics. In fact the dictum ‘war is politics pursued by other means’ can be applied to economics: economics is politics pursued by other means, and vice versa. And actual warfare itself is still a large factor. How can we make economic progress with such outmoded institutions? an open question. Plus, such assumes most people even want to make progress, it assumes they aren’t hopelessly stuck in the past—IMO we cannot assume so at this time.
As for pure economics, it is more confusing than ever. Technically minarchists & libertarians are entirely correct, of course government is extremely inefficient! But so what? there simply are not enough trustworthy people (there are too many bandit-types) to have “free minds and free markets.” Bailey isn’t mistaken, though—he is only premature.
Cygnus, five years from now we will be discussing virtually the same points—that’s how slowly it changes even in the 21st century.

How we think about the future of production and unemployment

This article is well worth a read..

Artificial intelligence
Difference Engine: Luddite legacy

“AN APOCRYPHAL tale is told about Henry Ford II showing Walter Reuther, the veteran leader of the United Automobile Workers, around a newly automated car plant. “Walter, how are you going to get those robots to pay your union dues,” gibed the boss of Ford Motor Company. Without skipping a beat, Reuther replied, “Henry, how are you going to get them to buy your cars?”

Whether the exchange was true or not is irrelevant. The point was that any increase in productivity required a corresponding increase in the number of consumers capable of buying the product. The original Henry Ford, committed to raising productivity and lowering prices remorselessly, appreciated this profoundly—and insisted on paying his workers twice the going rate, so they could afford to buy his cars.”

...“As an example, they point to the way Amazon and eBay have spurred over 600,000 people to earn their livings by dreaming up products for a world-wide customer base. Likewise, Apple’s App Store and Google’s Android Marketplace have made it easy for those with ideas for doing things with phones to distribute their products globally. Such activities may not create a new wave of billion-dollar businesses, but they can put food on the table for many a family and pay the rent, and perhaps even the college fees.

In the end, the Luddites may still be wrong. But the nature of what constitutes work today—the notion of a full-time job—will have to change dramatically. The things that make people human—the ability to imagine, feel, learn, create, adapt, improvise, have intuition, act spontaneously—are the comparative advantages they have over machines. They are also the skills that machines, no matter how smart, have had the greatest difficulty replicating.

Marina Gorbis of the Institute for the Future, an independent think-tank in Palo Alto, California, believes that, while machines will replace people in any number of tasks, “they will amplify us, enabling us to do things we never dreamed of doing before.” If that new “human-machine partnership” gives people the dignity of work, as well as some means for financial reward, all the better. But for sure, the world is going to be a different place.”

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