By J. D. Alt, author of The Architect Who Couldn’t Sing, available at Amazon.com or iBooks. Originally posted at New Economic Perspectives.
How would Thomas Piketty propose to save the city of Norfolk, Virginia? He teaches us, ad-nauseum, that what the U.S. collective state has to spend on such things as sea walls, flood gates, elevating infrastructure and roadways, buying-out property owners so they can relocate to higher ground, etc., etc., is limited to the number of tax dollars that can be collected from U.S. citizens—as if the collective state itself were like a club, and if the clubhouse needs repairing, the club members must first pay a special assessment of dues—or, alternatively, the club can borrow dollars from the supply of Capital owned by the wealthiest 1% of its membership, or (as a creative alternative) the rebuilding effort could be structured in such a way that the newly elevated Norfolk would pay rent to the one percent in perpetuity for the privilege of living above sea-level.
For Mr. Piketty, the calculation is: what is the availability of “Capital”? His entire book is an exercise in quantifying and compartmentalizing in various ways the distribution of “Wealth” throughout the world—and projecting how its historical 5% growth rate might be distributed in the future. Presumably, he would use these calculations to arrive at some number of Dollars that theoretically could be made available to the effort of saving Norfolk.
This perspective—and the fact that Piketty’s book so relentlessly reinforces it— is a tragedy for Norfolk. First, whatever amount of “Capital” he might calculate is available would likely fall short of the rebuilding budget. The task that modern civilization has before it over the next many decades has, it is rapidly becoming apparent, extraordinary dimensions. Second, it is virtually impossible to imagine the U.S. political system taxing the 1%—or borrowing from them—even that shortfall amount. So Norfolk is sunk. Or soon will be, possibly in my lifetime, certainly in the lifetime of my children.
The tragedy isn’t that Norfolk is sunk. It’s that it could be saved if we, as a collective nation (forget the rest of the world—they can follow in our footsteps) would only embrace a slightly shifted understanding of money than the one Piketty is stuck on. This shift in perspective doesn’t refute any of his remarkable data compilations and analysis—it simply steps slightly to one side and realizes that Piketty’s calculations are, in fact, a mirror image of reality: the “wealth” he measures and spells out in graph after graph is NOT a measure of what is available to pay citizens to do the work necessary to build and sustain their social civilization; it is, instead, a measure of the real goods and services the citizens have already created using the real resources (materials, labor and technology) that have been available to them. This is not a small distinction. The fact that the process of creating wealth manages somehow to distribute it inequitably, as Piketty admirably demonstrates, is an issue of huge social difficulty. Believing that existing wealth defines and “finances” what we can accomplish as a collective nation going forward, however, makes solutions not just difficult but impossible.
This shift in perspective—this realization of what we can actually do as a cohesive society—is not an ideological (progressive versus conservative) shift. It can provide huge benefits to Democrats, Republicans, or Libertarians alike. Furthermore, it is easily visible to any observer willing to acknowledge a few simple (and obvious) facts:
First, “money” is not a natural resource that humans dig out of the ground, or catch in the sea, or cultivate with water and sunshine. Money is a social invention created in people’s minds (using paper or metal or digital symbols to keep track of.) The purpose of the money-invention is to facilitate the trading of “debts” amongst individuals in a very large, collective society. The debts are for goods and services individual members of the society provide to each other. It should be obvious to anyone’s common sense that these goods and services are NOT limited by the number of paper, metal, or digital symbols that keep track of the debts, but are instead limited ONLY by the actual goods and services individuals are willing and capable of providing each other. The paper, metal, or digital symbols (the “money things”) are created, as needed, to accommodate the actual goods and services that are exchanged.
Second, people cannot individually create their own paper, metal, or digital symbols (“money”) because it would be impossible to know the value of one person’s money compared to another’s with respect to the quantity of various goods and services the money symbols can be exchanged for. The money invention can only work if the social group collectively agrees to a common unit of currency, and assigns the task of creating or “issuing” that currency (producing the paper, metal or digital symbols) to a Central Authority.
Third, while money could simply be created “by law”—with the central authority threatening to put citizens in jail if they refuse to provide goods and services in exchange for the authority’s money-symbols— it is less effort and more effective to use a more dynamic method: Federal Taxes. Instead of requiring citizens to provide goods and services in exchange for the money, the central authority levies a tax on the citizens which can only be paid with the money the authority issues. Having given each citizen a debt which can only be paid with the authority’s money—taxes due—the collective state sets in motion the dynamic whereby it is now able to issue paper, metal or digital symbols (money) and the citizens are willing to provide real goods and services in exchange for those symbols.
It should now be apparent that we do indeed , collectively as a nation, have the monetary means to save the city of Norfolk if we choose to—and this monetary means is not dependent on any calculation by Mr. Piketty about the amount of “Capital” or “Wealth” that exists today (no matter how that wealth might be distributed.) What it does depend on, however, is the answer to two questions:
(1) Are the real resources—labor, materials, and technology—required to substantially rebuild Norfolk actually available to be employed?
(2) Assuming the real resources are available, is employing them to rebuild Norfolk to a higher elevation actually the best use of those real resources?
The incredible incompetence of our political dialog as a collective society is exemplified by the fact that neither of these questions is even being asked. But that, of course, is largely because we insist on holding on to a view of money that is exactly analogous to standing in a tub of concrete. The inevitable result of this view is that we’ll sink right alongside Norfolk.
Well at least you’re asking some of the right questions. To answer them: no, objectively speaking society does not have the available resources to save Norfolk, and even if those resources were available saving Norfolk would be a rather foolish endeavor–much like performing hip replacement surgery on a terminally ill cancer patient.
Unfortunately for MMT, the currency issuers are liable to be the most venal and amoral individuals out there. So, let’s do a thought experiment for a bit: if the Obama Regime were the Currency Issuer, how would it use the power? A: more bank bailouts for the elite, more nuclear plants for the insane, more drones for the MIC, and more data centers for Lord Voldemort. And there might be a few crumbs spread around for old people and the poor here and there–to tamp down on insurrection a bit–although those are coming more and more grudgingly as resources continue to dwindle. And all that stuff is being down anyway. Saving Norfolk would be one of the absolute last thing on the regime’s radar, with MMT or without it.
They should start by making a list of all imploding cities and add up all resources and energy that will be needed to restore them.
That will determine how many other areas in the US will need to get plundered to refurbish these cities and if after deliberation, national plundering is not an option, how many countries will need to get bullied to get these resources at affordable prices.
and two weeks later when the water reaches washington d.c. – then what?
One thing is clear from your comment history: JGordon is a Negative Nelly.
He has a penchant to dooms day prophets i.e. Dmitry Orlov and “collapsitarianism” à la “bourgeois survivalism”.
Great post. As it implies, the biggest problems we may face is not due to the “lack” of “money”, but the lack of resources due to our cumulative choices over past years. All the digitally-created currency in the world can’t of itself provide healthy, nutrient-rich, microbial-rich topsoil, clean water, clean air, wildlife diversity, wildlife habitat or the other things on which our own species depends. China doesn’t make these things. Walmart, Costco, JCPenney and Nieman Marcus don’t stock them.
Our biggest problem is ultimately not “money”, it’s our values.
This was meant to reply to the original main post.
Yes, it’s our values. Forget Norfolk. Save the Great Lakes.
The inevitable result is that we’ll sink right alongside Norfolk…
“That’s the way things go when you elevate mediocre people to positions of authority.”- Colonel Cathcart on the latest unnecessary mission to bomb a small undefended village, Joseph Heller, Catch-22
Laws to protect our environment would threaten our disaster capitalistic economy. Do not let reality or facts be an impediment to our folly. There is no fierce urgency of now to protect our environment and human life. Disaster capitalism comes at the expense of human life and nature. One need only remember Obama’s lack of response to the ecological catastrophe in the Gulf of Mexico to understand this. Ecological devastation of our planet earth by disaster capitalism will soon match the economic devastation of disaster capitalism.
Climate-change hypocrisy is just another fact of life. For another chapter in the paucity of hope and how the Obama administration continually disappointed, read the WikiLeaks diplomatic cables about our government’s tactics – money and threats, spying and cyberwarfare – defeated a meaningful climate agreement at Copenhagen and ensured the outcome that was favorable to China and the USA.
Facts? Anti-science conservatives (the Wrecking Crew) turn Daniel Patrick Moynihan’s “Everyone is entitled to his own opinion, but not to his own facts” on its head. Facts are now just whatever anyone wishes to believe. Scientific illiteracy is fertile ground for their appeals based on ignorance.
Shawn Otto @ Scientific American, “Antiscience Beliefs Jeopardize U.S. Democracy,” writes:
“By falsely equating knowledge with opinion, postmodernists and anti-science conservatives alike collapse our thinking back to a pre-Enlightenment era, leaving no common basis for public policy. Public discourse is reduced to endless warring opinions, none seen as more valid than another. Policy is determined by the loudest voices, reducing us to a world in which might makes right – the classic definition of authoritarianism.”
“One of the biggest changes in politics in my life time is that the delusional is no longer marginal. It has come in from the fringe, to sit in the seats of power…For the first time in our history, ideology and theology hold a monopoly of power in Washington. Theology asserts propositions that cannot be proven true; ideologues hold stoutly to a worldview despite being contradicted by what is generally accepted as reality. The offspring of ideology and theology are not always bad but they are always blind. And that is the danger: voters and politicians alike, oblivious to the facts.” – Bill Moyers, The Delusional Is No Longer Marginal, New York Review of Books, March 24, 2005
Delay is the deadliest form of denial. A nation built on lies has a weak foundation. Two ways in which people are controlled. First, frighten people. Second, demoralize them. An educated, healthy and confident nation is harder to govern. They don’t want people to be educated, healthy and confident because they would get out of control.
“We do not measure a culture by its output of undisguised trivialities but by what it claims as significant … One way of looking at the history of the human group is that it has been a continuing struggle against the veneration of ‘crap.’” – Neil Postman, Amusing Ourselves to Death: Public Discourse in the Age of Show Business
“Where justice is denied, where poverty is enforced, where ignorance prevails, and where any one class is made to feel that society is an organized conspiracy to oppress, rob and degrade them, neither persons nor property will be safe.” – Frederick Douglass
“I’d like to see the government get out of war altogether and leave the whole field to private industry.” – Milo, Catch-22
“This time Milo had gone too far. Bombing his own men and planes was more than even the most phlegmatic observer could stomach, and it looked like the end for him…Milo was all washed up until he opened his books to the public and disclosed the tremendous profit he had made.” – Milo’s double dealing profits from getting the Germans to bomb his own outfit, Catch-22
I would prefer using my energy and resources for my own city. Since there are hundreds of cities that are imploding, there will be no consensus on which city gets first dibs.
As I look at my own city, it is obvious that the money is going towards growth and not towards maintenance. Our whole economic system is based on growth. As long as we are sticking to this growth objective, the multiple stays up. If companies come out and say that there is no more growth and they are from now on a dividend company with no growth, the jig will be up. The stocks will tank along with their multiple.
So in the mean time we are burning the furniture to keep the growth game going but one day the music will stop. And the physical world will determine it.
How did you go bankrupt?” Two ways. Gradually, then suddenly.” ― Ernest Hemingway, The Sun Also Rises
Contrary to that foundational assumption of capitalist economics, MORE is NOT always better. The pursuit of MORE is asphyxiating us.
A week ago, here in CA, we had an (another) article on the drought. The article pointed out the expense of enlarging or creating new dams. And I was astounded that economists put forward the proposition that instead of more dams, more pumping from wells should be done (not conservation in addition, conservation wasn’t mentioned at all) as it would be cheaper!!! One really got the idea that these economists simply do not acknowledge that it is possible to run out of a resource, or that an alternative….I don’t know, maybe irrigate with beer – can always be found. Or that new orchards or vineyards should not be planted when there isn’t enough forseeable water for the agricultural demands we have now.
How long does it take to regenerate an aquifer in the central valley of CA? I really can’t find anything that answers that straight forwardly, but I imagine it takes quite a while (if not, why after decades of well drilling does every well always have to be deeper?)
We won’t run out of water or oil…..it will just be so expensive that a basket of strawberries will cost 30$, just as a tank of gas will cost 15$. We can PLAN to ameliorate these upcoming shortages, or we can whistle in the dark. I’m betting on the whistlers….
The trends are alarming, the politics complex, but the science is rather simple: The Central Valley — from Redding to Bakersfield — is consuming twice as much groundwater as nature is returning through rain and snow.
The rate of water loss over the past two years is the largest since the University of California started using NASA satellites to measure underground water reserves in 2003. The Central Valley’s reserves are shrinking by 800 billion gallons a year — enough to supply every resident of California with water for seven months, according to Jay Famiglietti, director of the University of California Center for Hydrologic Modeling.
“We may only be a few decades away from hitting bottom,” said Famiglietti, considered one of the leading experts on state water policy.
However, little is being done to control it. States such as Kansas and even Texas prevent unlimited pumping of groundwater. But California has failed to regulate how much groundwater is pumped, leaving it up to the courts to settle disputes over excessive use, according to Barton H. “Buzz” Thompson Jr., professor of natural resources law at Stanford University.
In the past, during dry years, farmers routinely would fallow their fields, either not planting or letting crops such as alfalfa go dormant.
But now, despite the historic drought, many farmers are opening new acreage to more intensive cultivation — converting row crops to orchards, such as almonds and grapes, that command a higher profit but demand water to survive year-round. When it’s dry, that water has to come from the ground.
I believe what was old will be new again
It’s interesting to focus on Norfolk, since it’s one of the major cities of the national security state. I think Naval Station Norfolk is the largest naval base on the planet.
But the bigger question that seems to go unexplored in this kind of perspective is laying out what general principles should guide the use of money. Money is just the idea, the mental construct, for how we think about human labor.
Of course we could save Norfolk. It is not obvious that we should spend human labor ‘saving’ Norfolk, though – nor is it obvious how we would do that – especially if we’re not touching the crony capitalism of the 1% and their technocratic elite enablers in law, medicine, academia, media, banking, etc.. To conclude that saving Norfolk is worth the investment, that requires comparing various specific uses of human labor. Indeed, much of the history of human civilization is abandoning places, not defending them. A century ago, St Louis, MO was one of the biggest cities in the nation. Today, the population is less than it was in 1900(!). The decline in the city of Detroit is even more dramatic in terms of absolute numbers of people leaving the city relative to its peak. Cahokia, in modern-day Illinois, was one of the great cities of North America (perhaps in the entire world). Today most people have never heard of it. The millions of people now that live right along the Atlantic coast is a pretty idiotic use of land. Why should the collective subsidize rich people owning property right along the coast?
The reason environmental destruction is causing such havoc is precisely because human labor has been organized on a massive scale in ways that destroy the environment, from McMansion sprawl to the stress of demeaning and overworked jobs to the destruction of our passenger rail system. There is no reason to think that even greater scaling of human labor would produce a different outcome. To do that, we have to change the management, the governing philosophy behind the way we are deploying resources. The size of the currency printing is irrelevant – the government is already massive, beyond comprehension and still growing.
The tragedy isn’t that Norfolk is sunk. It’s that it could be saved if we, as a collective nation (forget the rest of the world—they can follow in our footsteps) would only embrace a slightly shifted understanding of money than the one Piketty is stuck on.
And “if only” pigs could fly.
I’m glad someone has noticed that Norfolk is sinking.
I thought about writing a long post saying that Norfolk’s inundation is one of the reasons Eric Cantor got inundated. Those people in Richmond have been taught to believe that there is no global warming, but all they had to do was look east. So they felt they had to do something. Being Conservatives, the only thing possible for them was to do something that doesn’t help at all, except in the way a temper tantrum makes you feel better. It’s like the French voting for Marine Le Pen.
WE however, being enlightened liberal-socialist-progressives, have many things we can do. No matter what you say, Elizabeth Warren is more effective than Barack Obama, and no matter what you say, Barack Obama is better than George Bush, as he proved yesterday, when he said we would NOT go back into Iraq. And Mr. Lawsky is getting some bankers fired, and pretty soon some of them will go to jail.
And Obama in one week changed the discussion from “Does global warming exist?” to “What do we do about it?”
I hope y’all (Eric Cantor’s word) vote, and use your hands to write to your representatives. The practice of alternately wringing them and throwing them into the air–oh, never mind.
Confusion to our enemies.
This is getting a little off topic from Alt’s post, but what do you mean by this statement: “Barack Obama is better than George Bush”?
The Democratic leadership has spent the past couple decades, and especially the last 8 years, demonstrating quite clearly that they offer no alternative management philosophy.
I can’t say what Deloss means by “Barack Obama is better than George Bush”, but I happen to agree. They’re both hideous, but Bush is quadruple plus ungood, and Obama is only triple plus ungood. I still expect to vote for an as yet unknown third party candidate for President in 2016.
Ok, as long as youre not voting D for Damn Evil or R for Really Evil you wont be voting for Evil.
Which Deloss doesnt understand. He thinks ‘Lesser Evil’ starts with D, when it would be better to call it Almost as Evil.
Or, as Lambert says, The More Effective Evil.
The great Black Agenda Report, actually.
Oops, he said it again (as I would’ve noticed had I scrolled down).
Obama saying anything is not “proof” of anything. The proof is in the pudding. If this administration has not actively made changes to the issues of importance to you, come the mid-term elections, you should reconsider your vote of blind faith.
Sorry. It’s not exactly “blind faith,” but by now it is habit. The first Presidential campaign I got to vote in was Lyndon Johnson versus Barry Goldwater. I had heard Barry Goldwater speak, in person–
“I charge that this administration is soft on Communism, and you know it!” (frenzied cheering)
–and I came home and threw up–really–and I’m not very sensitive. But since then I’ve never seen the slightest reason to vote for a Republican, or for a third party, because I might wind up with a Goldwater or a Reagan, or a Paul Ryan.
2. Executive action involving the EPA diminishing carbon pollution
3. Executive action reducing student debt
4. Refusal to put back troops he had withdrawn from Iraq
“But but but any reasonable person would have done these things! Or better ones!” Maybe. But the other side keeps nominating lunatics who would repeal 1-4 as fast as boiled asparagus. Too bad, Norfolk!
Come back in 6 months and we can review your list.
BTW, if you were a regular reader here you would not have used the ACA as an example.
1. We’ve told you repeatedly, if you read this blog, that Obamacare leaves many people uninsured, leaves many WORSE off, and the only group that appears to clearly benefit are those in states with Medicaid expansion who are newly eligible. I’ve had conversations with people who now can and did buy insurance who were previously unable to due to pre-existing conditions. They’ve told me the policies are so costly that they still aren’t sure they should have gotten them.
2. We have also had posts saying that the Obama carbon proposal is bunk because it fails to incluce methane. It’s basically a “promote fracking” plan that will if anything INCREASE greenhouse gases and wreck aquifers.
3. There is less to his student debt action than meets the eye.
4. Hard to applaud Obama’s foreign policy after Syria and the Ukraine (oh, and our unduly attenuated exit from Afghanistan, and our “make everyone hate us even more” use of drones in Pakistan).
And if you think Obama is better than George Bush, then you have proven you are no smarter than you were 5 years ago.
Further, Warren ‘more effective’ than Obama… What proof do you have of that? Shes not in any kind of political power.
Youre still as deluded as you were 5 years ago.
Why Barack Obama is the More Effective Evil.
Common sense: Money is not wealth.
The money that represents wealth in trade and debt is more easily concentrated than the wealth itself. To acquire more wealth [or at least rent it] and increasingly to get what we need to live we must borrow money from those who have most of it. We pay them interest and the problem is exascerbated.
At least that which we borrow collectively through our governments could instead be taxed rather than allowed to cripple us with debt and interest.
In the end, the least valuable members of society are the elite ruling class masters who live by the everything tax their financial industry imposes on [almost] all of our enterprises and transactions.
“In the end, the least valuable members of society are the elite ruling class masters who live by the everything tax their financial industry imposes on [almost] all of our enterprises and transactions.”
They may be the “least valuable”, but they hold dominion over all of us, as we permit them to extract the cost of interest from every product or service we need to live. Margrit Kennedy estimates the cost of interest to average 40 percent–of EVERYTHING. Talk about inflationary!
Kennedy book “Interest and Inflation Free Money” is available for free: http://kennedy-bibliothek.info/data/bibo/media/GeldbuchEnglisch.pdf
“When at long last we awaken from our dream of untold riches, now become a nightmare of greed and betrayal, the true nature of our situation will become clear: what is meaningful is not the financial system, nor the economy, nor even money itself, which will soon lose all its value, but the availability of the resources necessary to sustain and enhance life — and the manner through which these resources are to be produced and distributed.”
Mole in the Ground, March 3, 2009: http://amoleintheground.blogspot.com/2009/03/shape-of-things-to-come-part-12.html
there is a planet orbiting Zeta Reticuli where the population prefers to live in places beset by rising sea levels, harsh storm and floods. They consider these events to be exciting phenomenon that add to their utlility maximization. Wanton destruction of habitations and the deaths of thousands by drowning doesn”t daunt their enthusiasm, as they believe life should be lived for excitement not tedium, and time is less important to them than experience & sensation. As a result, capital accumulates in assets most exposed to natural disasters, since those are the most prized. What to make of these people, and they are people, even though they look a little funny by our standards, Are they irrational? Are they nuts? Are they self-immolating psychopaths? Economics has no answer for these questions. The people on this planet believe themselves to be quite rational and they would think earthlings are tedious bores — wildly irrational numskulls who favor a sedentary delirium over the ecstasy of the power of nature. Oh well, maybe we can do a study and figure out these fukkkers, they seem nuts to me, but the facts are the facts.
Are you sure the planet is orbiting Zeta Reticuli?
Because I think the planet you speak of is in the Milky Way…..because:
they build houses nest to eroding beaches
They build houses in eroding, fireprone foothills
They build above ground houses, not tied down, in tornado prone great plains regions
They believe there are infinite resources that they can never, ever use up….
If there are other critters like this in the universe….well, the universe is really f*cked.
Hmmm. It is possible our astro-ethnographical staff was looking through the wrong end of the telescope. Their methods don’t always embody the rigorous standards for precision that one would naturally assume attendant to any serious scientific inquiry. I will certainly inquire about this with the project leader as soon as he sobers up.
Yes Craazy. You are almost never wrong. It is all craaziness. The very thing we love, strangely. Alt could have indulged himself in a tiny bit of condescension to explain to us that “wealth” isn’t wealth. Since most of us don’t know how to use that fact. That capitalism has to grow to survive, whether as a socialist or a fascist agreement, without any underlying value.
Alt asks the question at the end of his post that the two questions he relates are not being asked. Ok, that’s the case for sure, bur I submit to you that no significant questions are being asked within the public sphere, moreover, they cannot be asked in this culture of denial and misdirection that is the hallmark of our major institutions at all levels. Not only can’t we ask them, we can’t discuss them in any rational definition of the word. Look at how major issues are discussed in public.
Those of us in opposition ought to be not only asking more questions (we are well on the way to doing that) but we need to take the next step and come to have real dialogue rather not to come to any facile conclusions but to understand that culture including the political economy is a collective enterprise and that dominance and submission (except for a certain kind of fun) has no place on the left.
Good post. I think Alt shoulda said that capitalism is not an ism at all, it’s just an accounting mechanism for accumulation. In this case of dollars. Which cannot be deemed to have any intrinsic value outside of social agreements. He thinks we all get that already. But we don’t. It’s like saying double-entry accounting-ism. Or whatever. But you definitely cannot call MMT “double entry accounting-ism” because it doesn’t have that many columns; it isn’t anywhere near that uber-rationalized ballpark. Which is why it is an alternative to capitalism. Capitalism is just an accounting method used by both socialism and fascism. Capitalism cannot survive without growth – whether for society (good) or for the plutocratic parasites (bad). But MMT is a different animal altogether. One that can actually work because the value of a nations sovereign “money” is political. Cool. It values the health of its labor market and economy with serious devotion because if that falters its currency also gets devalued. So currency = equals healthy economy, and only then = wealth. And etc.
Excellent link suggestion, Lambert. (Why Barack Obama is the More Effective Evil.)
Obama the Drone Assassin and international terrorist—Cheney the Darth Vader who facilitated 911.
Why is Obama worse than Bush? Because he came to office at one of the rare moments in history when the country was primed for real change, but not only failed to lead it forward but served as a Trojan horse to enrich the Overlords and entrench Orwellian fascism on every possible occasion.
Thanks. The BAR crew are awesome.
If I may be permitted a perhaps-unfairly-synoptic summary, it seems many of the objections in the mostly-excellent reader discussion above appear to boil down to the following inequality – or perhaps better, non-equality – which, unlike Piketty’s simplistic and endless-debatable “r > g”, I would argue is truly fundamental, and moreover crucial to understanding how economies really function, why labor is not fungible, and why burying bottles full of new-printed money (either literally or figuratively) does not increase aggregate wealth, typically having quite the opposite effect in practice:
(financial capital) != (human capital)
Despite being the product (and yes, I know he was “really a Scot”) of one of history’s great global looting operations and centers of financial fraud & innovation (those 2 are so invariably linked as to cry out for a single-word embodiment … “fraudnovation” perhaps?), Adam Smith understood this very well – both sides of the above non-equality figure in his famous “invisible hand” passage:
As every individual, therefore, endeavours as much as he can both to employ his capital in the support of domestic industry, and so to direct that industry that its produce may be of the greatest value; every individual necessarily labours to render the annual revenue of the society as great as he can. He generally, indeed, neither intends to promote the public interest, nor knows how much he is promoting it. By preferring the support of domestic to that of foreign industry, he intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention. Nor is it always the worse for the society that it was no part of it. By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it. I have never known much good done by those who affected to trade for the public good.
Of what percentage of latter-day so-called-economists and money manipulators can it similarly be said that they understand both the distinction and its importance?
Too many sitting ducks in the comments to take a shot at, so I’ll just tip the hat to JD Alt and Lambert. Nice post, good insight into what is wealth and money, the questions we really should be asking, and the answers we should be hearing.
TheCatSaid : “” Our biggest problem is ultimately not “money”, it’s our values.””
Ultimately the problem is even deeper than values . It is a problem of having enough of the correct information at the correct time for the purpose at hand . The www provides the technology to do that and when the time is right fear will provide the motivation to extract the info via the web . Unfortunately , people do not usually become fearful until mortality rates are quite high . Correct info is always inherently valuable .
washunate : “” … the government is already massive, beyond comprehension and still growing.””
That is why we need a limitation on taxation ( all taxes [ includes sales tax ], fed , state , local ) of 50% of your income ( where income is any money that you receive to pay for living expenses [ includes capital gains ]). If the government collects more than 50% in total taxes of your income then the government is too big and you are being officially screwed . You do not need to know how big the gov should be only what the tax limit is because that determines its size .
I hear your point, but I would counter that it’s all relative. The question for me is not what percentage of income is taxed back to the government.
Rather, the question is what do you get in exchange for a given level of taxation? I don’t support shrinking government for the sake of shrinking government. I support shrinking individual programs that do not contribute to the public good.
Which, unfortunately, is a huge chunk of government activity these days.
agkaiser : “” Common sense: Money is not wealth.””
Wrong . That is common nonsense . It is a major propaganda meme of the rich that is intended to confuse , obfuscate and deflect your attention from matters of money and those whom have lots of it . To make a long story short , money satisfies every single Webster definition of wealth . Do you have a dictionary ? Moreover , if if money is not wealth and has no intrinsic value , why is genuine currency , including electronic bits , always accepted worldwide in exchange for items of wealth ? Money has intrinsic value ( contrary to Bernankian lies ) and that is why billions of people worldwide accept “intrinsicly worthless currency” in exchange for items of wealth — everyday . This is not to say that the intrinsic value cannot be reduced to zero by excess issuance of currency .
In estimating the wealth distribution within a capitalist society, Piketty is quite correct to assess “wealth” as it is assessed by those who control the capital within that society.
Under MMT, you still have to use taxes to redistribute wealth. Without wealth redistribution to make things more equal, under MMT you’ll still have the problem of inequality associated with the ownership of capital. Piketty’s conclusions will still be true, but someone would just have to express the formula a bit differently. Dig up some medieval scholastics, extract their DNA, grow them in a test tube, and set them to research the matter.
The wealth distribution matters much more than the monetary system. You can have a People’s Budget under the gold standard, and you can have plutocracy under MMT.
Second, people cannot individually create their own paper, metal, or digital symbols (“money”) because it would be impossible to know the value of one person’s money compared to another’s with respect to the quantity of various goods and services the money symbols can be exchanged for. J. D. Alt
Wrong, since every private money of consequence would have a market determined price in fiat. For example, the common stock of a company could be used as a private money and who denies that the market value of a common stock can be determined?
The purpose of the money-invention is to facilitate the trading of “debts” amongst individuals in a very large, collective society. J.D. alt
Contrary to the notion that money must always be debt is the undeniable fact that money can be equity too. Just look at a balance sheet and notice that Equity is on the same side as Liabilities and is thus backed by the unencumbered assets of the issuing company.
Correction: Make that ” is the undeniable fact that money can be shares in equity (common stock) too”