Economics is not a science, it is an art. Its pioneers may have had noble intentions, such as the most equitable and sensible distribution of goods and services possible, they may have wanted to maximise the good and minimise the bad, but there seems to have been a collective failure in the predictive power of economics in recent years, or at least, perhaps thanks to the internet, such failure is now more famous than ever before. Physical laws tend not to undergo such perturbations (quantum mechanics aside). Economics seems to have become the art of obfuscation in the way philosophy can be, in the way religion can be. Centuries ago great minds debated how many angels could dance on the head of a pin. Today economists debate how many derivatives can dance at the head of an economy.
We have a problem, do we not, when something as simple as direction of price, that is inflation and deflation, cannot be predicted. The experts of this dismal science cannot agree; is inflation coming, or is it deflation, or is it both at the same time, or maybe stagflation? Surely this is a sign that something is very wrong in the kingdom of Denmark.
The typical reaction to this pressure is to prove ever more strenuously that one’s own opinion is the right one, to shout louder in more and more complex terms why it is that one has been right all along. A lifetime of effort and study have been invested. This is not a small matter of betting on the wrong horse at the tracks. These are career defining times for many, and the pressure is intense. The punter wants to know why the experts screwed up. Even the Queen of England has asked her pointed question. Why did economics experts fail?
So what qualifies me to take a stab at this most difficult of questions? Absolutely nothing. I am a two-time university drop-out, a daydreamer, and a poet/novelist of questionable skill. But I am also a concerned and interested human being, who has come to believe, passionately, that it’s up to “We The People” to chance our arms and help the experts out, whether they like it or not. I am prepared to risk opprobrium, or worse, ringing silence, in the faint hope that my own small effort here helps in some tiny way to clear heads, and focus attention on the right areas. This is my take on what is wrong with our kingdom.
Folks, we need to get back to basics. If the big guys and girls can only squabble like children, and make mistake after mistake, when it is unclear what mistakes even are, what latitude predictions must be granted, we’re not going to find the reasons for this chaos at the top end of this discipline. We have to look at its foundations. To my inexpert eyes the whole structure is wobbling. There can only be two possible explanations for this: 1. it wasn’t put together right, or 2. the real world out there is so full of unknowable and uncontrollable variables theory can’t keep up with it. Either way, by my lights we are obliged to focus our attention in the basement. Economics 101 needs to be revisited.
There are two main foundation stones to consider in such an exercise, one is scarcity, the other is ownership or private property. Both are assumptions. My question here is this: are they justified?
I’ll start with scarcity. Economics defines scarcity as infinite wants versus finite resources, which sounds like an eternal problem where there can only be too many people competing over too few things. It’s insoluble. People are greedy, insatiable even, and there’s only so much stuff out there. Hence we need the clean and cold arbitration of a medium of exchange – a prerequisite for the market place – so that a price mechanism can, in a totally impartial manner, distribute the scarce stuff amongst the greedy competitors. The market may well be hard, even cruel at times, but life is like that. Take a look around you. Nature is competition. Unfair in the particular, certainly, but fair over time.
And yet I am not insatiable, and neither is my wife. All joking aside, I don’t know any people so greedy they can’t be satisfied. In short, I don’t think wants can be infinite. Not only can there only be a finite number of people on the planet, this finite number of people cannot exercise the finite total of their wants simultaneously. Wants are brought to the market place in fits and starts, over whole lifetimes, finite lifetimes. The load is always changing. Furthermore, should there be some people incapable of “having enough,” whatever that really means, they are physically constrained from exercising their endless greed, from bringing it to bear on the market place in totality, by the limits of their purchasing power, by the size and number of their homes, by the size of their stomachs, their need for sleep, recuperation, indeed by their very mortality. Wants cannot be infinite. They can change, they can exceed supply, but they cannot be infinite. This, to me, is very important.
It therefore makes sense to define scarcity as finite wants versus finite resources. That sounds like a totally different type of problem to the classical definition. I’m not implying scarcity is not a problem, rather that economics has defined it badly, and this fallacious definition adversely effects the entire structure. The definition needs to be reassessed, and the following types of question asked: Is scarcity a design problem, i.e. solvable? Can humanity’s incredible ingenuity produce goods and services in abundance? What does abundance do to economic theory? Is scarcity a good or a bad thing? For example, technologies such as cold fusion, radiant energy panels, and the STAIR battery could make clean and renewable energy abundantly available to everyone on the planet. (As an aside, this need not be about peak oil, but simply about new technologies making old ones obsolete. The Stone Age did not end for lack of stones!) What effect would clean abundant energy have on the energy industry? On tax revenues? On centralisation itself? Establishing a sensible definition of scarcity, dealing with it thereafter as a design challenge, has profound implications.
On to the second foundation stone. Ownership is an idea, albeit one that seems to be natural; tigers with their territories, for example. But, because ownership is a very old human word drenched in a particular history, a mountain of law, and deep entanglement throughout economics, politics and culture generally, we need to subject it to closer inspection.
Tigers have no clue about ownership as a concept. They simply operate in a particular boundary, inside which the amount of prey necessary for the tiger’s ongoing survival can be sustained. That is not ownership in the legal sense, that is an operational function of tiger-type living. Tigers cannot want more and more territory because scarcity increases value, nor hoard to take care of themselves in their old age. Humans, on the other hand, both understand and are vulnerable to ideas, unlike other animals. This is a crucial distinction. Human behaviours change according to the type of society in which they are raised. A quick look at hunter-gatherers, at the Alouette Eskimos, at the history of the people of St Kilda demonstrates this.
Ownership is an idea that effects human behaviour, not a part of our biology which effects our behaviour. A better word for it might be “access.” Ownership affords exclusive access to a thing. Exclusivity, in this sense, means, at least functionally, “sufficient.” Ownership affords the owner sufficient access to the thing owned. Ownership is furthermore a necessary legal concept because of scarcity. Without scarcity the need for ownership vanishes, transforms into abundant access to that which we need and want. Functionally speaking, it is the access that is important, not the paper actuality of the legal sense of ownership. If you have ownership without access, you have nothing. Access without ownership, on the other hand, is not a problem. Renting a home, for example. Or borrowing a friend’s book, or hiring a car, etc. To collapse the above into one sentence: The idea of ownership has a particular utility (sufficient access) whose importance is dependent upon the conditions (scarcity) in which it operates.
Private property, it turns out, is an anomaly in our biological history. Of course there are for hunter-gatherers issues such as mating partners and the whole “selfish gene” meme (a gene cannot be selfish, it has no sense of self!), and yet doesn’t private property, as a defined and understood concept, really have its roots in farming? Farming is a technological solution to some of the negatives of hunter-gathering, a way of coping with the uncertainty of weather and other natural challenges. My point here is that a human technological development gave rise to the need for the legal concept of ownership. Might further technological development give rise to its demise? If the arc of our development is currently towards abundance and away from scarcity, could ownership become a redundant concept? What effect might this have on economics?
Because I don’t want to write a hugely long tract, I will close with some further, brief points. Technological unemployment is real and not a lump of labour fallacy as orthodox economics posits. It describes the slow, ongoing trend of replicating human abilities via mechanical means. Human abilities are finite. Therefore, due to our technological progress, we are rendering human labour progressively less necessary to the economy. This has a negative impact on purchasing power, and on money itself, since money derives its value ultimately from human labour, whether it be sweat-of-the-brow grunt work, or high level creativity. This is a problem economics must address, unblinkered.
Economics should not lock itself away from physics, sociology, psychology, history etc. Economics is central to society because money is central. It is too important to leave alone, to rot incestuously in its own unexposed juices. Because the things we really value – after the material side of things have been taken care of – cannot be valued monetarily; friendship, trust, the ecosystem, family, community, love; and because money makes revenue generating parts of society more “important” than non-revenue generating, we have a built-in problem with money’s relative importance. That is, it tends to concentrate to itself and cause overly powerful, monopolistic power accrual whereby “business” and “politics” necessarily fuse (as if they were ever separate!). Because perfect competition is impossible (another foundation stone of economics), because rational and perfectly informed market participants are impossible, excessive profits are systemically unavoidable.
Competition over scarce resources is a monopoly-creating mechanism, an inherent property of markets, “free” or otherwise. Economics must address this problem honestly and openly. After all, money is less important than we are; without humans it has no meaning or use. This logic needs to find a place in economics, before we experience global civilizational collapse, due to generations of irrelevant education, eroding topsoil, diminishing drinking water, less and less healthy air, etc. For these reasons and others, money must be demoted. We need a new economics capable of coping with such a concept, capable of coping with reality as it is, not as we theorise it to be. Establishing a new economics is up to us. All of us.
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