rationalskepticism.org

Thommo wrote: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?

I wouldn't call negative rates "at interest" for the purposes of this discussion. I would say that devaluation of a currency is a way for the government to decrease its debt burden.

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.

I might have misunderstood the OP. To me, the question isn't "why hasn't this happened?" but "given the way we're doing things, isn't this inevitable?" It appeals to my inner doomsdayer.

Now I'm not sure there's a limited demand for capital. Every floated company is legally mandated to increase the value of its shares, and that might mean doing more business, which means having more capital. Moreover, those companies normally have debts to pay, and a debt lent at interest comes with an expectation that you'll have more capital in the future. You can get further in debt to pay off your debt, and consumers were introduced to this wonderful idea in the form of loan consolidation. But if we really do have a debt based economy, where the majority of the money in circulation is just a debt on a balance sheet, it wouldn't surprise me if this was inevitable.

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).

Cool. This sounds like a good counter to me.

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.

I'm not suggesting that growth is a fiction. Far from it. For a single point, we're more energy intensive than ever before, and that means something awesome.

Again, I'm not talking about the way things are. I'm wondering if the way things are is myopic, which climate scientists would suggest about our energy intensity.

We're told that recessions are terrible, and so perpetual growth is a must. This is impossible. So what do we do? Can we rely instead on fake growth?

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.

Hmm...that sounds like an interesting way to play poke and indoctrinate people. I love it!