[From Rick Marken (2002.08.18.1015)]
David Goldstein wrote:
Rick and listmates,
I told my wife about this email.
She wants to know what closed loop economics would recommend to improve the
economy.
It depends on what one considers an "improved economy". I consider an economy
"improved" when it gives more people the ability to control their own lives
more effectively. At the aggregate level, this means that having a child
poverty rate of 0% is more important to me than having a GDP growth rate of
7%; it means that having an unemployment rate of 0% is more important than
having the Dow at 36000.
I don't know the exact policies that would produce these results. There are
probably many different policies that would work. Which policies are used
and/or how they are implemented would depend on current economic circumstances
and what people will agree to accept.
I do think some form of highly progressive taxation combined with commensurate
government spending on communal infrastructure development (transportation,
education, energy, conservation, etc) would have to be part of a closed loop
approach to improving the economy. It seems that the main problem with our
otherwise excellent market system is distribution of wealth. A system that
allows a small number of people to pocket most of the GNP, leaving crumbs for
those who actually produced it, has a flaw, I think. Central control is an
approach to dealing with this flaw but this approach has its own, worse flaws.
What we need is some reasonably non-coercive and generally accepted way to
redistribute wealth. The goal would not be to make everyone have the same
income but to reduce the income discrepancy. This would reduce leakage,
keeping the economy producing at its maximal potential while reducing the
proportion of people living in poverty. If we use progressive taxation to
achieve this result it must be combined with government spending on
infrastructure. Government spending redistributes income (to the people
working on the infrastructure) and improves the productive environment (by
providing better distribution systems, better educated workers, etc.).
The problem is to get general agreement regarding this approach to economic
development. Right now the prevailing wisdom overwhelmingly favors open loop
economics, which can look successful if one ignores the poverty that exists in
the midst of the wealth. I think this approach is prevalent because the
greedy (who stand to lose the most from an understanding of closed loop
economics) are currently in control of all the political switches in the US
(via campaign contribution bribery). It may take another economic catastrophe,
on the order of the great depression, to get people to pay attention to a new
approach to economics. As it is now, it seems that most people in the US are
comfortable with the system as it is so there is no need for them to consider
changing their economic beliefs.
Best regards
Rick
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Richard S. Marken
MindReadings.com
marken@mindreadings.com
310 474-0313