Posted: Feb 09, 2017 5:44 am
by Thommo
VazScep wrote:
Thommo wrote:
  • Economies grow.
I'd like to spend some time on this one. If the money supply is mostly debt lent at interest, and we don't implode because the economy grows, then is growth mandated? Is that a recipe for disaster (the naive argument is that, even with efficiency savings, exponential growth eventually means the planet's surface temperature will be over a hundred degrees). Or is growth itself a bit of a fiction, since, as Ipetrich says, we can do stuff like inflate?

Sounds like a question of definitions, what does "at interest" mean? Are we going to allow zero and negative rates to be considered debt lent at interest? What do we want to do with inflation - net it off the interest rate?

We probably would need to separate out carefully what we're talking about as well, because when I was saying that the economy doesn't implode (because people's accumulated wealth gets divvied up at frequent intervals and the size of the economy as a whole increases), I meant implode in this particular fashion of all the wealth accumulating to individuals profiting in one area of endeavour. We could equally ask the question of people who make televisions: If you can make profit by making and selling televisions, then why don't the people who sell televisions end up with all the money? The answer being that there's limited (profitable) demand for televisions in exchange for money, just as there's limited (profitable) demand for capital in exchange for money.

Obviously if people did live forever and individuals accumulated more and more wealth (which some feel is already happening too much) by monopolizing more and more markets, then you could alter the properties of the system by progressive wealth taxes instead of relying on deaths, which obviously you can (in theory, if you had a world government or whatever) tailor to ensure that any particular level of wealth accumulation becomes the absolute limit (by 100% or super 100% rates at some level of wealth).

I think the question of "is growth a fiction?" is a separate one, and I've always felt the only reasonable answer is "no". Clearly we have created value in the sense of digging up usable minerals that were not previously accessible, and developing knowledge that was not previously known. The wealth of the average bronze age individual is pretty incomparable to the wealth of an average modern day individual.

A fun analogy is with a game of tournament poker. Games are random, skill based and over time almost inevitably end up with a single "winner who takes all" - those are the steady economic states of the game. Having more capital is an inherent advantage, and once you're out, you're out, you can't ever get capital back. But we could deliberately change the rules to make the game perpetual quite easily with various analogues. E.g. Every 80 rounds your assets are taxed 40% and distributed among all the other players, including eliminated ones (this is like inheritance taxes), or everyone pays 10% of their chips into the pot every 10th round instead of playing for standard stakes (this is like redistribution via various social security tax schemes), or the more chips you have the longer your odds are to bet on a pot (this is like wealth taxes), etc.