Economics (was Why PCT is on the fringe despite its success)

CSGnet Archive CSG2015
1

[Martin Taylor 2015.07.18.22.40]

[From Frank Lenk 2015.07.18.1009 PDT]

Martin � I have only briefly read the intros to both papers, but I would agree they are on the right track. First, Keynes was concerned about a lack of effective demand from the private sector and viewed private sector savings as a leakage from the spending that keeps the economy going, recognizing that one person�s spending becomes another person�s (or firm�s) income. If savings keeps leaking out and is not accompanied by an increase in spending elsewhere, then the economy starts shrinking. Since we want the private sector to run a surplus (spending less than income), then the public sector must run a deficit even for a stable economy, let alone one that is growing.

You touch on something that has long been a puzzle for me. In the popular press discussions of economics, it is always considered a good thing for a person's savings to increase year over year, for a business to make an annual profit, and for a government to run an annual surplus on average. It is considered a bad thing to have inflation. However, if every sector of the economy has more money at the end of the year than at the beginning, and inflation has been held in check, where did all the extra money come from? Why is it considered good for governments to run surpluses rather than deficits?

Also, your insight that money is debt is also correct. As you highlight, anyone can emit money � the trouble is in getting your money accepted by others. That is why, in general, money emission falls to government, which can create the demand for its money by requiring it as the only thing that will satisfy the government�s imposed obligation of paying taxes. It is this obligation that gives money its value, not anything backing it. It is an obligation that is imposed by the Sovereign.

If you have read the rest of my "PCT View of Money" you will know that I disagree with the last part of that paragraph -- or at least I think it's overspecialized if not contradictory to my argument. Could you offer reasons why I am wrong, or why my proposals and the above are actually consistent with each other?

I have a quite different reason (not in the Web document but in the part of my chapter for LCS IV that is based on the Web document) why Government money is often but not always preferred to private money. In my chapter I have a picture of UK banknotes issued by eight different banks, only one of which is Government backed (Bank of England), but all of which are accepted as being of equal value, pound for pound, where they are accepted at all (Scottish note are not usually accepted far from the Scottish border, for example).

In the chapter, I have this short passage in a long discussion of the gradual creation of private money, just before the pictures of the seven kinds of private banknotes and a fleeting discussion of the need to reduce uncertainty by regulating private money exchange rates:

···

On 2015/07/18 2:01 PM, Franklin Lenk wrote:
-------
"To allow any single private bank a monopoly on the provision of generic IOUs � which we can now call tokens of �money� � is to unfairly enrich that bank. So if the decision is to have only one source of money tokens, the issuer should be a collectively controlled institution. Typically, such an issuer is a national treasury."
-------

By the way, to offer my suggested answer to the question I posed to Rick in

[Martin Taylor 2015.07.15.17.45]

[From Rick Marken (2015.07.15.1335)]

...

RM: I think what economics needs is a better model of how an economy works. And having a better model starts (as it does in psychology) with having the correct understanding of the phenomenon to be explained.

Do you have any description of the phenomenon to be explained might be in economics?

If we take "control" or "the control loop" to be the phenomenon to be explained in individual psychology, I would say that "the trade protocol" is the basic phenomenon in economics. (See [Martin Taylor 2014.11.26.16.45] for a brief introduction to the concept of a protocol). Any other answers would be interesting to contemplate.

Martin

2

[From Rick Marken (2015.07.19.1000)]

···

Martin Taylor (2015.07.18.22.40)–

MT: By the way, to offer my suggested answer to the question I posed to Rick in

[Martin Taylor 2015.07.15.17.45]

Do you have any description of the phenomenon to be explained might be in economics?

MT: If we take “control” or “the control loop” to be the phenomenon to be explained in individual psychology, I would say that “the trade protocol” is the basic phenomenon in economics. (See [Martin Taylor 2014.11.26.16.45] for a brief introduction to the concept of a protocol). Any other answers would be interesting to contemplate.

RM: I think the trade protocol is indeed a component of most (all) economies but I don’t think it is the basic phenomenon in economics. I think the basic phenomenon in economics is collective control of input (goods and services) via specialized output (production). I think the trade protocol is one (and surely the main) way that the distribution of specialized production has been handled. It’s the basis of “the market” which I see as a way of assigning relative value to the specialized products of production. It’s these trade protocols that end up showing that ~1 hour of my time producing consulting services is worth approximately 5 sirloin steaks, a box of grape nuts and one month at the health club. But what seems basic about this to me is that I have been able to control for food and recreation for myself by providing a rather specialized output that has nothing to do with producing food or recreation. Thanks to this economy I am able to control for things that I could not possibly have produced for myself by producing outputs that provide things for people that they could possibly have produced for themselves.

Collective, cooperative control of goods and services via specialized production. That’s what I think is the basic phenomenon to be explained in economics.

Best

Rick

–
Richard S. Marken

www.mindreadings.com
Author of Doing Research on Purpose.
Now available from Amazon or Barnes & Noble

3

[Martin Taylor 2015.07.19.14.40]

I guess it's a question of what you call "basic". I pondered adding

“collective control” as a mechanism, but since CSGnet has not had an
opportunity to discuss it, I scrapped what I wrote about it. To take
an analogy with chemistry, I would argue for a trade protocol as an
atom, and collective control as valence binding. It’s a necessary
mechanism for analysing the multitude of different kinds of economic
observations, but it can no more be a basic phenomenon than the
electromagnetic forces involved in valence binding. Without the
different atoms, there would be nothing for the electromagnetic
forces to do, but without the electromagnetic forces, the atoms can
still organize themselves through, say, Van der Waals forces.
Likewise, in economics, trade that increases value to both parties
can proceed without collective control, but when there is collective
control, lots more effects can be produced with the trade atom.
I don’t mind considering the “forces” in the economic soup as
fundamental, and the possibility of collective control is certainly
a phenomenon, but since you can create a (miniature) economy without
collective control (as in the document to which I linked), I prefer
not to call it a basic phenomenon, and certainly not a phenomenon on
a par with simple control in psychology. It’s a derived phenomenon
of control by many people. It falls out when many people get
involved in trade with each other.
But I guess that’s more along the lines of word games than an
approach to a PCT economics. On a macro scale, you can’t get away
from collective control, but to put it in as a fundamental basis for
what happens is to me a bit hand-wavy.
Martin

···

[From Rick Marken (2015.07.19.1000)]

          Martin

Taylor (2015.07.18.22.40)–

          MT: By the way, to offer my suggested answer to the

question I posed to Rick in

[Martin Taylor 2015.07.15.17.45]

            Do you have any description of the phenomenon to be

explained might be in economics?

          MT: If we take "control" or "the control loop" to be the

phenomenon to be explained in individual psychology, I
would say that “the trade protocol” is the basic
phenomenon in economics. (See [Martin Taylor
2014.11.26.16.45] for a brief introduction to the concept
of a protocol). Any other answers would be interesting to
contemplate.

        RM: I think the trade protocol is indeed a component of

most (all) economies but I don’t think it is the basic
phenomenon in economics. I think the basic phenomenon in
economics is collective control of input (goods and
services) via specialized output (production).

4

[From Rick Marken (2015.07.19.1315)]

···

Martin Taylor (2015.07.19.14.40)–

MT:  I guess it's a question of what you call "basic". I pondered adding

“collective control” as a mechanism,

RM: I am proposing “collective control of input (goods and services) via specialized output (production)” as the phenomenon to be explained by an economic model. The trade protocol is surely going to be part of the mechanism (model) that explains this phenomenon.

MT: I don't mind considering the "forces" in the economic soup as

fundamental, and the possibility of collective control is certainly
a phenomenon, but since you can create a (miniature) economy without
collective control (as in the document to which I linked), I prefer
not to call it a basic phenomenon

RM: Could you point me to your “miniature economy without collective control”. It would help me see what you think of as an economy. Since I define an economy as “collective control of input (goods and services) via specialized output (production)” I can’t imagine any kind of an economy, miniature or maximal, that doesn’t involve “collective control”.

Best

Rick

–

        RM: I think the trade protocol is indeed a component of

most (all) economies but I don’t think it is the basic
phenomenon in economics. I think the basic phenomenon in
economics is collective control of input (goods and
services) via specialized output (production).

Richard S. Marken

www.mindreadings.com
Author of Doing Research on Purpose.
Now available from Amazon or Barnes & Noble

5

[From Rick Marken (2015.07.20.1400)]

Hi Martin

I’m putting this on CSGNet in case anyone is interested.It took me long enough to write it and it might be nice to get some others involved.

···

On Mon, Jul 20, 2015 at 9:59 AM, Martin Taylor mmt-csg@mmtaylor.net wrote:

MT: Rick,

I think "collective control" must mean something different to you

than it does to me (and to Kent McClelland).

In our view of collective control (I can say "our" because Kent and

I have been discussing this at length for some months), more than
one person is influencing some property of the environment (such as
the location of a stone – see “Stone of Scone” for a real-life
example – or the political structure of a government) as they
control their individual perceptions. When this happens, if one uses
the Test for the Controlled Variable with the hypothesis that the
particular property is controlled, the Test indicates that it is, by
a controller that is not in any one individual. We call it a “Giant
Virtual Controller” which in the simplest case has a gain equal to
the sum of the gains of the individual controllers and a reference
value that is a weighted average of their reference values.

RM: Yes, that’s collective control also. It’s the kind that happens in a production facility; many workers contributing (by doing quite different things) to the production of a product.

MT: In the trading relation, there is no collective control.

RM: I know. But a trading relation is only needed when there is collective control in my sense – many different people (the collective) specializing in the making different products, all of which each individual wants

MT: There is

internal conflict. Joe wants X and has Y. Joe can get X only by not
having Y. It’s just the same as Joe wanting the door to be
permanently shut, and also wanting to get out of the room, which he
can do only by opening the door. If Joe resolves the conflict by
opening the door, he can’t have the door permanently shut, and vice
versa. If there’s a way Joe can get X by dropping Y in a hole, he
might do it (imagine that Y is a key to Aladdin’s cave, that once
dropped in the appropriate hole, vanishes in a puff of smoke). Less
fantastically, Joe happens to meet Vince, who has Y and wants X.
Vince has the same conflict as Joe, but resolves it in the other
sense. By happenstance, each of them discovers that the other has
the same conflict, and that both of them can resolve their conflict
if Joe gives Y to Vince and Vince gives X to Joe.

MT: X and Y don't have to be objects. In fact, at the heart of the

economy, they are the application of specialized skills. Joe knows
how to cut hair, and Vince has a reference for his hair to be
shorter than it is (Y is the performance of the haircut). Vince
knows how to paint a room, and Joe has a reference to perceive one
of his rooms a different colour (X is the painting of the room).

MT: This kind of conflict resolution does not seem to me to be any form

of collective control. All it is is two people controlling their
perceptions, and it happens that each can more easily do so if the
other is controlling their own perceptions in such a way that each
can control using the actions of the other.

RM: Yes, this is “the market” in action. And a market exists only because there is collective control (in my sense) based on specialized production of goods and services that are needed by all individuals in the collective.

MT: Collective control does enter the picture when trading protocols get

formalized. It can enter the picture when one’s relatives all
persuade one to become a butcher like Dad. But I can’t see how it
necessarily enters the picture just because some people have
skills that differ from others.

It enters the picture precisely because some people make things that are not made by others. Let’s try this again. Person A makes X, B makes Y and C makes Z. Persons A, B and C want X, Y and Y. So person A has to put some of his X on the market, trading some of his X for B’s Y and C’s Z; B has to do the same, trading some of his Y for A’s X and C’s Z. This mutual trading determines (in a money economy) how much A has to pay for Y and Z, how much B has to pay for X and Z and how much C has to pay for X and Y. So the market just determines the cost of X, Y and Z.

RM: I call this “collective” control because, for example, A is controlling for X, Y and Z with the “help” of B and C; B is controlling for X, Y and Z with the “help” of A and C; and Z is controlling for X, Y and Z with the help of A and B.

RM: Of course, in a real economy, A is not an individual but an industry – a collection of A’s, as is B and C. So there is collective control (in your sense) involved in the production of X, Y and Z and there is collective control in my sense because all A’s are able to control for X, Y and Z because these are being produced, collectively, by all the folks in industry B and C. Same for all Bs and Cs.

RM: That, to me, is the important thing to model about an economy. How the individuals in as economy are able to control for the goods and services produced by that economy when each individual is controlling for many inputs (goods and services) that are not the result of their own outputs.

Best

Rick

It _probably_ enters the picture,

because a bunch of people influence Bill the blacksmith to shoe
their horses rather than to paint their houses, and Vince the
housepainter to paint rather than to make their jewellery.

I'm downgrading "collective control" here more than I would if we

had no disagreement, in order to see if we can clarify what we mean
by the words. I see “collective control” in economics much as I see
reorganization in the individual control hierarchy. It’s a mechanism
whereby the essential components get organized. Without it, there’s
(in the everyday sense of the word) chaos. With it, organizations do
things that help most people control better than they otherwise
could.

I think my main argument isn't with you. It's with people who treat

money rather than “value” (the higher-level perception that resolves
the trading conflicts) as being the heart of the economy.

Martin


  On 2015/07/20 11:37 AM, Richard Marken

wrote:

Hi Martin

–

        On Sun, Jul 19, 2015 at 7:10 PM,

Martin Taylor mmt-csg@mmtaylor.net
wrote:

Rick,

            I didn't intend to have sent it personally, but perhaps

it is for the best. The miniature economy is that of the
village in which all these people live. They control for
the interchange of goods and services, and create their
own money, or rather, monies. To me, that’s a fully
functioning economy, pretty much as all economies must
have started back in the days of the first Mesopotamian
cities. There’s no collective control yet.

          If there is no collective control then why the exchange

of goods? An economy where there is no collective control
is one where each individual in the economy produces every
thing they want for themselves, on their own. Each
individual is an economy unto themselves. Once you have
specialization – some people get the food, others make
the clothes, others make the pots, others care for the
children – you have collective control to the extent that
each individual wants food, clothes, pots and childcare
but doesn’t do it all themselves.

Best

Rick

On 2015/07/19 9:47 PM, Richard Marken wrote:

            That comes later,

and becomes very important, especially when people start
to agree to use a generalized form of money, the value
of which is indeed collectively controlled.

            Martin

                  You sent this to me only. Of course I already

had read the document but I saw no “miniature
economy” anywhere. Where is the miniature economy?

Best

hi Martin
Rick

                  On Sunday, July 19, 2015, Martin Taylor <mmt-csg@mmtaylor.net                      >

wrote:

On 2015/07/19 4:15 PM, Richard Marken (rsmarken@gmail.com via
csgnet Mailing List) wrote:

                          [From Rick Marken

(2015.07.19.1315)]

                    [Martin

Taylor 2015.07.19.16.44]

                      You could try reading the document to which I

have given you the link twice now. I think
that it would answer your question, at least
insofar as it would allow you to imagine such
an economy.

                      Here's the link again [](https://urldefense.proofpoint.com/v2/url?u=http-3A__www.mmtaylor.net_Economics_econ_Table-5Fof-5FContents.html&d=AwMFaQ&c=8hUWFZcy2Z-Za5rBPlktOQ&r=-dJBNItYEMOLt6aj_KjGi2LMO_Q8QB-ZzxIZIF8DGyQ&m=XDH6qH-I3hF0-8a5Pt8iAMJXy4eP0CMXG5y7NpurQF0&s=ioVUJpC6najqvB5JyGRirQZDh-2X_YAZhuotuSnVtbA&e=)[<http://www.mmtaylor.net/Economics/econ/Table_of_Contents.html>](https://urldefense.proofpoint.com/v2/url?u=http-3A__www.mmtaylor.net_Economics_econ_Table-5Fof-5FContents.html&d=AwMFaQ&c=8hUWFZcy2Z-Za5rBPlktOQ&r=-dJBNItYEMOLt6aj_KjGi2LMO_Q8QB-ZzxIZIF8DGyQ&m=XDH6qH-I3hF0-8a5Pt8iAMJXy4eP0CMXG5y7NpurQF0&s=ioVUJpC6najqvB5JyGRirQZDh-2X_YAZhuotuSnVtbA&e=)



                      Martin

Richard S. Marken

www.mindreadings.com

                            Author of  [                                  Doing

Research on Purpose](https://urldefense.proofpoint.com/v2/url?u=http-3A__www.amazon.com_Doing-2DResearch-2DPurpose-2DExperimental-2DPsychology_dp_0944337554_ref-3Dsr-5F1-5F1-3Fie-3DUTF8-26qid-3D1407342866-26sr-3D8-2D1-26keywords-3Ddoing-2Bresearch-2Bon-2Bpurpose&d=AwMFaQ&c=8hUWFZcy2Z-Za5rBPlktOQ&r=-dJBNItYEMOLt6aj_KjGi2LMO_Q8QB-ZzxIZIF8DGyQ&m=XDH6qH-I3hF0-8a5Pt8iAMJXy4eP0CMXG5y7NpurQF0&s=tixnw5yxhT0zk9rhsySN6-1INXkXpKXCdlucfjCIiZo&e=).
Now available from Amazon or Barnes
& Noble

                --

–
Richard S. Marken

www.mindreadings.com

                    Author of  [Doing Research on Purpose](https://urldefense.proofpoint.com/v2/url?u=http-3A__www.amazon.com_Doing-2DResearch-2DPurpose-2DExperimental-2DPsychology_dp_0944337554_ref-3Dsr-5F1-5F1-3Fie-3DUTF8-26qid-3D1407342866-26sr-3D8-2D1-26keywords-3Ddoing-2Bresearch-2Bon-2Bpurpose&d=AwMFaQ&c=8hUWFZcy2Z-Za5rBPlktOQ&r=-dJBNItYEMOLt6aj_KjGi2LMO_Q8QB-ZzxIZIF8DGyQ&m=XDH6qH-I3hF0-8a5Pt8iAMJXy4eP0CMXG5y7NpurQF0&s=tixnw5yxhT0zk9rhsySN6-1INXkXpKXCdlucfjCIiZo&e=). 
                      Now available from Amazon or Barnes &

Noble

                                  Martin Taylor

(2015.07.19.14.40)–

                                  MT:  I guess it's a

question of what you call “basic”.
I pondered adding “collective
control” as a mechanism,

                                RM: I am proposing "collective

control of input (goods and
services) via specialized output
(production)" as the phenomenon to
be explained by an economic model.
The trade protocol is surely going
to be part of the mechanism (model)
that explains this phenomenon.

                                  MT: I don't mind

considering the “forces” in the
economic soup as fundamental, and
the possibility of collective
control is certainly a phenomenon,
but since you can create a
(miniature) economy without
collective control (as in the
document to which I linked), I
prefer not to call it a basic
phenomenon

                                RM: Could you point me to your

“miniature economy without
collective control”. It would help
me see what you think of as an
economy. Since I define an economy
as “collective control of input
(goods and services) via specialized
output (production)” I can’t imagine
any kind of an economy, miniature or
maximal, that doesn’t involve
“collective control”.

                                            RM: I think the trade

protocol is indeed a
component of most (all)
economies but I don’t
think it is the basic
phenomenon in economics.
I think the basic
phenomenon in economics
is collective control of
input (goods and
services) via
specialized output
(production).

Richard S. Marken

www.mindreadings.com
Author of Doing Research on Purpose.
Now available from Amazon or Barnes & Noble

6

[Martin Taylor 2015.07.20.18.08]

[From Rick Marken (2015.07.20.1400)]

Rick,

I'm confused as to why you want to call a lot of people controlling

different things and interacting through side effects “collective
control” when there is a formal definition going back to Kent’s talk
at CSG93. You don’t even get that correct. I realized a day or two
ago that I had put Kent’s talk onto my Web site, at
.
No. Contributing by doing quite different things that contribute to
the production of a product is not the McClelland kind of collective
control. Formally, “collective control” exists when the “Test for
the Controlled Variable” (TCV) indicates control is present and more
than one controller is acting on the hypothesized environmental
variable that corresponds to a hypothesised controlled perceptual
value.
Let’s ask the critical question. To perform the TCV one hypothesises
some property of the environment that might correspond to a
perceptual function producing the controlled perception, disturbs
that property of the environment and checks for the characteristic
effects of control (among other things such as checking for whether
the property could be perceived and influenced by the hypothetical
controller). In the production of a product, what would be the
environmental property that might be disturbed experimentally? Why call that collective control at all? What you are dealing with
is a network of influences of one person’s actions on all the
others. Some of those influences are direct and bidirectional, in
the form of trades, some are not (side effects, which are indeed
likely to create loops), but the only justification I can see for
using the words "collective control in this situation is that you
call a community a “collective” and note that people in the
community actually control (as do all organisms).
You introduce “making specialized products” as a construct required
for collective control. That is not required for the McClelland kind
of collective control. Two people helping each other to move a sofa
are collectively controlling the location of the sofa. And you say
“a trading relation” (by which I assume you mean the performance of
a trade) is needed only when many people make many specialized
products. But I would think a trading relation exists if I am
holding a heavy balanced object and tell you I would give you $1 if
you would steady my arm while I try to carry it up the stairs (and
you do so and I actually give you $1).
It’s actually a trade, not a market.
I know what you are getting at in your description (elided here) of
people interchanging trades in a big network, and I agree with you.
It’s the old (1950s?) psychophysics question of obtaining a
numerical scale from a network of binary “greater than less than”
relationships. In the economic realm this is the way relative
(absolute except for a scale measure) values are determined. Since
any value is a personal perception, the values determined from
external observation are indeed the result of collective control, or
so it seems to me. But it happens without a necessary recourse to
“specialized skills”. The development of those specializations seems
to likely to be as much an effect as a cause, in a complex feedback
structure, quite probably because of differences in people’s
perceptions of values.
To me that’s one important result to get out of a model of an
economy. It’s not an input to such a model, nor the primary
objective of such a model, nor a guide to the structure of a model.
I think the primary objective is to find out, on the basis of
individual perceptual control, how an economy behaves given
different kinds of constraints. What happens when governments do or
don’t consistently run a deficit, for example? And yes, how the
individuals’ ability to control their perceptions are affected by
different policies that affect trading relationships.
Martin

···

http://www.mmtaylor.net/PCT/Movie/McClelland_CSG93.mp4

Hi Martin

      I'm putting this on CSGNet in case anyone is interested.It

took me long enough to write it and it might be nice to get
some others involved.

          On Mon, Jul 20, 2015 at 9:59 AM,

Martin Taylor <>
wrote:

MT: Rick,

              I think "collective control" must mean something

different to you than it does to me (and to Kent
McClelland).

              In our view of collective control (I can say "our"

because Kent and I have been discussing this at length
for some months), more than one person is influencing
some property of the environment (such as the location
of a stone – see “Stone of Scone” for a real-life
example – or the political structure of a government)
as they control their individual perceptions. When
this happens, if one uses the Test for the Controlled
Variable with the hypothesis that the particular
property is controlled, the Test indicates that it is,
by a controller that is not in any one individual. We
call it a “Giant Virtual Controller” which in the
simplest case has a gain equal to the sum of the gains
of the individual controllers and a reference value
that is a weighted average of their reference values.

            RM: Yes, that's collective control also. It's the

kind that happens in a production facility; many workers
contributing (by doing quite different things) to the
production of a product.

              MT: In the trading relation, there is no collective

control.

            RM: I know. But a trading relation is only needed

when there is collective control in my sense – many
different people (the collective) specializing in the
making different products, all of which each individual
wants

              MT: There is

internal conflict. Joe wants X and has Y. Joe can get
X only by not having Y. It’s just the same as Joe
wanting the door to be permanently shut, and also
wanting to get out of the room, which he can do only
by opening the door. If Joe resolves the conflict by
opening the door, he can’t have the door permanently
shut, and vice versa. If there’s a way Joe can get X
by dropping Y in a hole, he might do it (imagine that
Y is a key to Aladdin’s cave, that once dropped in the
appropriate hole, vanishes in a puff of smoke). Less
fantastically, Joe happens to meet Vince, who has Y
and wants X. Vince has the same conflict as Joe, but
resolves it in the other sense. By happenstance, each
of them discovers that the other has the same
conflict, and that both of them can resolve their
conflict if Joe gives Y to Vince and Vince gives X to
Joe.

              MT: X and Y don't have to be objects. In fact, at the

heart of the economy, they are the application of
specialized skills. Joe knows how to cut hair, and
Vince has a reference for his hair to be shorter than
it is (Y is the performance of the haircut). Vince
knows how to paint a room, and Joe has a reference to
perceive one of his rooms a different colour (X is the
painting of the room).

              MT: This kind of conflict resolution does not seem to

me to be any form of collective control. All it is is
two people controlling their perceptions, and it
happens that each can more easily do so if the other
is controlling their own perceptions in such a way
that each can control using the actions of the other.

            RM: Yes, this is "the market" in action. And a market

exists only because there is collective control (in my
sense) based on specialized production of goods and
services that are needed by all individuals in the
collective.

              MT: Collective

control does enter the picture when trading protocols
get formalized. It can enter the picture when one’s
relatives all persuade one to become a butcher like
Dad. But I can’t see how it necessarily enters the
picture just because some people have skills that
differ from others.

…

            RM: That, to me, is the important thing to model

about an economy. How the individuals in as economy are
able to control for the goods and services produced by
that economy when each individual is controlling for
many inputs (goods and services) that are not the result
of their own outputs.

mmt-csg@mmtaylor.net

7

[From Frank Lenk 2015.07.21.0832 CDT]

Martin - you are right I was not precise in my statement about what gives money its value. As you state, the value given goods, services and money is determined by our perception of their ability to help us control other perceptions to references that may be more important or intrinsic.

The question I was really answering is why the money we end up holding and using in transactions and savings is the government’s money (or money denominated in the government’s money, which is what bank money is, i.e., checking and savings accounts) rather than your money or my money or Wal-Mart’s money or Microsoft’s money. Our use of government money is cl
early not based on trust of the government. Neither are legal tender laws sufficient, as evidenced by periods and countries where residents refuse to hold their government’s money due to its perceived worthlessness. And it is not due to backing the currency by gold since the US dollar remains in high demand despite being off the gold standard since 1973. MMT’s answer - that it is because the government alone has the ability to name the unit of account and the power to collect a tax in that account from its citizens and firms under penalty of loss of a considerable amount of control (fines or jail) – is the one that makes the most sense to me. The government’s money becomes what is used in private transactions as well because virtually everyone has to use it to at least determine their tax obligation to the government, even if by virtue of tax credits (also denominated in the government’s money) they end up paying nothing. &nbsp
;

See in particular blogs #6, 7 and 8 here: http://neweconomicperspectives.org/modern-monetary-theory-primer.html

You may also be interested in the (somewhat speculative) history of money in blogs #12 and 13.

Frank

[Martin Taylor 2015.07.18.22.40]

[From Frank Lenk 2015.07.18.1009 PDT]

Martin – I have only briefly read the intros to both papers, but I

would agree they are on the right track. First, Keynes was concerned

about a lack of effective demand from the private sector and viewed

private sector savings as a leakage from the spending that keeps the

economy going, recognizing that one person’s spending becomes another

person’s (or firm’s) income. If savings keeps leaking out and is not

accompanied by an increase in spending elsewhere, then the economy

starts shrinking. Since we want the private sector to run a surplus

(spending less than inco
me), then the public sector must run a deficit

even for a stable economy, let alone one that is growing.

You touch on something that has long been a puzzle for me. In the

popular press discussions of economics, it is always considered a good

thing for a person’s savings to increase year over year, for a business

to make an annual profit, and for a government to run an annual surplus

on average. It is considered a bad thing to have inflation. However, if

every sector of the economy has more money at the end of the year than

at the beginning, and inflation has been held in check, where did all

the extra money come from? Why is it considered good for governments to

run surpluses rather than deficits?

<

Also, your insight that money is debt is also correct. As you

highlight, anyone can emit money – the trouble is in getting your

money accepted by others. That is why, in general, money emission

falls to government, which can create the demand for its money by

requiring it as the only thing that will satisfy the government’s

imposed obligation of paying taxes. It is this obligation that gives

money its value, not anything backing it. It is an obligation that is

imposed by the Sovereign.

If you have read the rest of my “PCT View of Money” you will know that I

disagree with the last part of that paragraph – or at least I think

it’s overspecialized if not contradictory to my argument. Could you

offer reasons why I am wrong, or why my proposals and the above are

actu
ally consistent with each other?

I have a quite different reason (not in the Web document but in the part

of my chapter for LCS IV that is based on the Web document) why

Government money is often but not always preferred to private money. In

my chapter I have a picture of UK banknotes issued by eight different

banks, only one of which is Government backed (Bank of England), but all

of which are accepted as being of equal value, pound for pound, where

they are accepted at all (Scottish note are not usually accepted far

from the Scottish border, for example).

In the chapter, I have this short passage in a long discussion of the

gradual creation of private money, just before the pictures of the seven

kinds of private banknotes and a fleeting discussion of the need to

reduce uncertainty by regulating private money exchang
e rates:

···

On 7/18/15, 8:26 PM, “Martin Taylor” mmt-csg@mmtaylor.net wrote:

On 2015/07/18 2:01 PM, Franklin Lenk wrote:

"To allow any single private bank a monopoly on the provision of generic

IOUs — which we can now call tokens of “money” — is to unfairly enrich

that bank. So if the decision is to have only one source of money

tokens, the issuer should be a collectively controlled institution.

Typically, such an issuer is a national treasury."

By the way, to offer my suggested answer to the question I posed to Rick in

[Martin Taylor 2015.07.15.17.45]

[From Rick Marken (2015.07.15.1335)]

…

RM: I think what economics needs is a better model of how an economy

works. And having a better model starts (as it does in psychology)

with having the correct understanding of the phenomenon to be explained.

Do you have any description of the phenomenon to be explained might be

in economics?

If we take “control” or “the control loop” to be the phenomenon to be

explained in individual psychology, I would say that "the trade

protocol" is the basic phenomenon in economics. (See [Martin Taylor

2014.11.26.16.45] for a brief introduction to the concept of a

protocol). Any other answers would be interesting to contemplate.

Martin

8

[From Rick Marken (2015.07.21.0950)]

···

Martin Taylor (2015.07.20.18.080 –

MT:Rick,

I'm confused as to why you want to call a lot of people controlling

different things and interacting through side effects “collective
control” when there is a formal definition going back to Kent’s talk
at CSG93.

RM: Because I think it’s a good description of what I’m talking about. The “formal definition” your are talking about describes a situation that is just a subset of all the things that I would call collective control – and a rather rare subset at that.

MT: Contributing by doing quite different things that contribute to

the production of a product is not the McClelland kind of collective
control.

RM: I know. As I said, Kent’s examples of “collective control” are a subset of what I consider to be collective control. I think the collective control that goes on when producing a house, for example, is far more common (and important, economically) than the collective control Kent models, which is what you see when two people lift couch of when a group of people pull in one direction in a tug of war. And even in those cases there had to be prior agreement (a control process) to add their output to the control of a particular variable (couch or flag position).

MT: Let's ask the critical question. To perform the TCV one hypothesises

some property of the environment that might correspond to a
perceptual function producing the controlled perception, disturbs
that property of the environment and checks for the characteristic
effects of control (among other things such as checking for whether
the property could be perceived and influenced by the hypothetical
controller). In the production of a product, what would be the
environmental property that might be disturbed experimentally?

RM: The product itself is the environmental property that can be disturbed. Take a house for example. I want to build (control for the perception of) a house… Building a house typically involves many different people controlling many different things (financing, plans, foundation/framing, plumbing/electrical/, etc) in order to get the final product (a perception of the house I want built). If you have ever built a house you know that there are many places where there are disturbances that have to be overcome. Most of these disturbances are handled by getting other people to help out. For example, the architect doesn’t produce the plans you want (the plans are a disturbance). If you can’t correct the plans yourself you will act to correct this disturbance by asking the architect to change them or by hiring a new architect. All along the way, the production of the house is the result of collective control by many different people, not just those directly involved in building the house but also those who milled the lumber, built the tools used in construction, etc. And you are paying all those people (directly or indirectly) so that they can buy things produced by other people – food, clothes, etc – that they don’t have the ability or time to produce for themselves because they have specialized in helping to produce a house.

MT: Why call that collective control at all?

RM: Because that sounds like a good way to describe it. But if you have a better idea I’ll consider it. How about calling it an economy;-)

MT: You introduce "making specialized products" as a construct required

for collective control. That is not required for the McClelland kind
of collective control.

RM: I introduced the specialization of production, not of products. The fact that this is not part of Kent’s demonstrations of collective control is the reason why I don’t think that kind of collective control is particularly relevant to economics.

Best

Rick

–

            RM: I know. But a trading relation is only needed

when there is collective control in my sense – many
different people (the collective) specializing in the
making different products, all of which each individual
wants

Richard S. Marken

www.mindreadings.com
Author of Doing Research on Purpose.
Now available from Amazon or Barnes & Noble

9

[From Frank Lenk 2015.07.21.1118 CDT]

Correction: I misstated the year the US went off the gold standard – it was 1971, not 1973.

Frank

···

From: Frank Lenk frank.lenk@gmail.com
Date: Tuesday, July 21, 2015 at 9:37 AM
To: Martin Taylor mmt-csg@mmtaylor.net, “csgnet@lists.illinois.edu” csgnet@lists.illinois.edu
Subject: Re: Economics (was Why PCT is on the fringe despite its success)

[From Frank Lenk 2015.07.21.0832 CDT]

Martin - you are right I was not precise in my statement about what gives money its value. As you state, the value given goods, services and money is determined by our perception of their ability to help us control other perceptions to references that may be more important or intrinsic.

The question I was really answering is why the money we end up holding and using in transactions and savings is the government’s money (or money denominated in the government’s money, which is what bank money is, i.e., checking and savings accounts) rather than your money or my money or Wal-Mart’s money or Microsoft’s money. Our use of government money is clearly not based on trust of the government. Neither are legal tender laws sufficient, as evidenced by periods and countries where residents refuse to hold their government’s money due to its perceived worthlessness. And it is not due to backing the currency by gold since the US dollar remains in high demand despite being off the gold standard since 1973. MMT’s answer - that it is because the government alone has the ability to name the unit of account and the power to collect a tax in that account from its citizens and firms under penalty of loss of a considerable amount of control (fines or jail) – is the o
ne that makes the most sense to me. The government’s money becomes what is used in private transactions as well because virtually everyone has to use it to at least determine their tax obligation to the government, even if by virtue of tax credits (also denominated in the government’s money) they end up paying nothing.

See in particular blogs #6, 7 and 8 here: http://neweconomicperspectives.org/modern-monetary-theory-primer.html

You may also be interested in the (somewhat speculative) history of money in blogs #12 and 13.

Frank

On 7/18/15, 8:26 PM, “Martin Taylor” mmt-csg@mmtaylor.net wrote:

[Martin Taylor 2015.07.18.22.40]

On 2015/07/18 2:01 PM, Franklin Lenk wrote:

[From Frank Lenk 2015.07.18.1009 PDT]

Martin – I have only briefly read the intros to both papers, but I

would agree they are on the right track. First, Keynes was concerned

about a lack of effective demand from the private sector and viewed

private sector savings as a leakage from the spending that keeps the

economy going, recognizing that one person
’s spending becomes another

person’s (or firm’s) income. If savings keeps leaking out and is not

accompanied by an increase in spending elsewhere, then the economy

starts shrinking. Since we want the private sector to run a surplus

(spending less than income), then the public sector must run a deficit

even for a stable economy, let alone one that is growing.

You touch on something that has long been a puzzle for me. In the

popular press discussions of economics, it is always considered a good

thing for a person’s savings to increase year over year, for a business

to make an annual profit, and for a government to run an annual surplus

on average. It is considered a bad thing to have inflation. However, if

every sector of the economy has more money at the end of the year than

at the beginning, and inflation has been held in check, where did all

the extra money come from? Why is it considered good for governments to

run surpluses rather than deficits?

Also, your insight that money is debt is also correct. As you

highlight, anyone can emit money – the trouble is in getting your

money accepted by others. That is why, in general, money emission

falls to government, which can create the demand for its money by

requiring it as the only thing that will satisfy the government’s

imposed obligation of paying taxes. It is this obligation that gives

money its value, not anything backing it. It is an obligation that is

imposed by the Sovereign.

If you have read the rest of my “PCT View of Money” you will know that I

disagree with the last part of that paragraph – or at least I think

it’s overspecialized if not contradictory to my argument. Could you

offer reasons why I am wrong, or why my proposals and the above are

actually consistent with each other?

I have a quite different reason (not in the Web document but in the part

of my chapter for LCS IV that is based on the Web document) why

Government money is often but not always preferred to private money. In

my chapter I have a picture of UK banknotes issued by eight different

banks, only one of which is Government backed (Bank of England), but all

of which are accepted as being of equal value, pound for pound, where

they are accepted at all (Scottish note are not usually accepted far

from the Scottish b
order, for example).

In the chapter, I have this short passage in a long discussion of the

gradual creation of private money, just before the pictures of the seven

kinds of private banknotes and a fleeting discussion of the need to

reduce uncertainty by regulating private money exchange rates:

"To allow any single private bank a monopoly on the provision of generic

IOUs — which we can now call tokens of “money” — is to unfairly enrich

that bank. So if the decision is to have only one source of money

tokens, the issuer should be a collectively controlled institution.

Typically, such an issuer is a national treasury."

By the way, to offer my suggested answer to the question I posed to Rick in

[Martin Taylor 2015.07.15.17.45]

[From Rick Marken (2015.07.15.1335)]

…

RM: I think what economics needs is a better model of how an economy

works. And having a better model starts (as it does in psychology)

with having the correct understanding of the phenomenon to be explained.

Do you have any description of the phenomenon to be explained might be

in economics?

If we take “control” or “the control loop” to be the phenomenon to be

explained in individual psychology, I would say that "the trade

protocol" is the basic phenomenon in economics. (See [Martin Taylor

2014.11.26.16.45] for a brief
introduction to the concept of a

protocol). Any other answers would be interesting to contemplate.

Martin

10

[Martin Taylor 2015.07.21.14.42]

Not at all rare, I think. Bruce Nevin (and I) would say that it is

the reason we can have languages, cultures, and team sports, for
example.
I would call (and have called) l your kind of control that involves
many people “organizational control” or “control by organization”.
As I described at CSG2005
this kind of control is control by an actual physical control
structure very much along the lines of the hierarchy within an
individual. It is not control by a collective, in the same way that
a linked list is not a collection of items. A collective is just a
set, a collection of people, not even an ordered set. An
organization is a specific kind of collective, just as a linked list
is a specific kind of collection.
Not true at all. The people involved in collective control need not
even know of each other’s existence, let alone have an agreement.
Nor do they need to have the same reference value for their
perceptions of the property they collectively control, though there
is less conflict if they do.
I would call it interacting control systems. Since I had already
given several examples in which trading occurs with NO specialized
products, I should have called you on that as well.
The only criterion for a trade to occur is that two parties each
control some perceptions in such a way that for both of them the
error in those perceptions is reduced more by making the trade than
by not making it. “You make dinner, and I’ll bring wine”. That’s a
trade, and if the company is expected to be pleasant, the trade will
be made, even if the host already has plenty of wine.
I don’t remember claiming it was. My claim, before I knew that you
were using an idiosyncratic meaning for “collective control”, was
that the foundational “atom” of economics was the trade, not
collective control. I did argue that collective control had much the same role in
economics as does valence bonding in chemistry, but I can change
that metaphor, and say that collective control, by stabilizing the
forms of trading protocols and the relative values of some things
(such as money), acts as a lubricant for the economic gears. It’s
not a very good metaphor, because trades are not like gears, but
collective control does make trade easier, and not only because of
its function in smoothing changes in the quasi-objective value of
money. (That’s Kent’s type of collective control, not control by
organization, unless you are in a Soviet-style command economy).
Martin

···

On 2015/07/21 12:52 PM, Richard Marken
( via csgnet Mailing List) wrote:

rsmarken@gmail.com

[From Rick Marken (2015.07.21.0950)]

            Martin Taylor

(2015.07.20.18.080 –

            MT:Rick,



            I'm confused as to why you want to call a lot of people

controlling different things and interacting through
side effects “collective control” when there is a formal
definition going back to Kent’s talk at CSG93.

          RM: Because I think it's a good description of what I'm

talking about. The “formal definition” your are talking
about describes a situation that is just a subset of all
the things that I would call collective control – and a
rather rare subset at that.

            MT: Contributing by

doing quite different things that contribute to the
production of a product is not the McClelland kind of
collective control.

          RM: I know. As I said, Kent's examples of "collective

control" are a subset of what I consider to be collective
control. I think the collective control that goes on when
producing a house, for example, is far more common (and
important, economically) than the collective control Kent
models

http://www.mmtaylor.net/PCT/CSG2005/CSG2005cSocialControl.ppt

          , which is what you see when two people lift couch of

when a group of people pull in one direction in a tug of
war. And even in those cases there had to be prior
agreement (a control process) to add their output to the
control of a particular variable (couch or flag position).

                          RM: I know. But a trading relation is

only needed when there is collective
control in my sense – many different
people (the collective) specializing in
the making different products, all of
which each individual wants

MT: Why call that collective control at all?

          RM: Because that sounds like a good way to describe it.

But if you have a better idea I’ll consider it. How about
calling it an economy;-)

            MT: You introduce

“making specialized products” as a construct required
for collective control. That is not required for the
McClelland kind of collective control.

          RM: I introduced the specialization of production, not

of products. The fact that this is not part of Kent’s
demonstrations of collective control is the reason why I
don’t think that kind of collective control is
particularly relevant to economics.

11

[From Rick Marken (2015.07.22.0920)]

Martin Taylor (2015.07.21.14.42)–

MT: Not at all rare, I think. Bruce Nevin (and I) would say that it is

the reason we can have languages, cultures, and team sports, for
example.

RM: I would like to see how the “formal definition” of “collective control” accounts for these things. I don’t believe it accounts for much of anything other than the simultaneous coincidental control of exactly the same variable by two or more people.

MT: I would call (and have called) l your kind of control that involves

many people “organizational control” or “control by organization”.

RM" Ok, let’s call it that. An economy is organizational control of goods and services. I like collective control better but apparently you hold the copyright;-)

MT: Not true at all. The people involved in collective control need not

even know of each other’s existence, let alone have an agreement.
Nor do they need to have the same reference value for their
perceptions of the property they collectively control, though there
is less conflict if they do.

RM: Then two people lifting a couch are not involved in your “collective control” unless they just happen to coincidentally be in the proper locations relative to the couch at the same time and decide to exert exactly the right amount of upward force on their ends of the couch at exactly the right time. I would call this kind of circumstance extremely rare. My experience with couch lifting has always involved some coordination before the actual lifting took place: I had to get a friend to agreed to help, point to the side of the couch to be lifted and said something like “lift on 3”.

MT: I would call it interacting control systems. Since I had already

given several examples in which trading occurs with NO specialized
products, I should have called you on that as well.

RM: Of course trading can occur without specialization. My point was simply that trading is unnecessary unless there is some specialization. If every member of society could produce for themselves all on their own what they wanted then there would be no need to trade. I suppose people in that situation could do the trading for its own sake just because the good or service was made by someone else. But I don’t think that’s why trading occurs in a real society. Ignoring specialized production is really ignoring the fundamental reason for an economy. Specialization is the first thing Adam Smith discusses in Wealth of Nations and I think he was right on target. Specialization is the basis of economics. Trade (through barter or money exchange) was invented to deal with it.

MT: My claim, before I knew that you

were using an idiosyncratic meaning for “collective control”, was
that the foundational “atom” of economics was the trade, not
collective control.

RM: I disagree. The foundational unit of economics is individual controllers – people. These individuals are controlling for the goods and services they want in the context of an environment where most of these goods and services are produced by other controllers – via specialization. Trade (using barter or money) is one strategy these controllers have developed for distributing to each other the goods and services produced by specialization.

RM: Trade is something people invented to deal with specialization. Because trade is an invention – rather than a natural reality, as it is in the mythology of “free marketers” – it can be adjusted, by rules (regulations) – to produce results that are consistent (or inconsistent) with one’s goals about the way societies should be (consistent with one’s system concepts). Which is why we have people who believe that trading should not be regulated (people who like to see a society with big winners and lots of losers) and those who think it should be regulated (people who like to see a society where everyone is able to be in control).

RM: I’m sure we’ll never come to agreement about PCT and economics (as is true of so many other things PCT) so why don’t we just call this off until I finish what I have to do and you finish your paper for LCS IV. It’s been over two years since Bill passed away and this book should have been completed months ago!

Best

Rick

···

RM: Because I think it’s a good description of what I’m
talking about. The “formal definition” [of “collective control”] your are talking
about describes a situation that is just a subset of all
the things that I would call collective control – and a
rather rare subset at that.

          RM: I know. As I said, Kent's examples of "collective

control" are a subset of what I consider to be collective
control. I think the collective control that goes on when
producing a house, for example, is far more common (and
important, economically) than the collective control Kent
models

          RM: ["collective control"] is what you see when two people lift couch of

when a group of people pull in one direction in a tug of
war. And even in those cases there had to be prior
agreement (a control process) to add their output to the
control of a particular variable (couch or flag position).

MT: Why call that collective control at all?

          RM: Because that sounds like a good way to describe it.

But if you have a better idea I’ll consider it. How about
calling it an economy;-)

12

[Martin Taylor 2015.07.22.12.28]

[From Rick Marken (2015.07.22.0920)]

          Martin Taylor

(2015.07.21.14.42)–

          MT: Not at all rare, I think. Bruce Nevin (and I) would

say that it is the reason we can have languages, cultures,
and team sports, for example.

        RM: I would like to see how the "formal definition" of

“collective control” accounts for these things. I don’t
believe it accounts for much of anything other than the
simultaneous coincidental control of exactly the same
variable by two or more people.

I know you will continue to believe what you want to believe instead

of trying to analyze the situation, so since this last response of
your seems to me to be actively trying to be silly in order to make
some kind of point that is obscure to me, I agree with …

…
RM: … why don’t we just call this off until I finish
what I have to do and you finish your paper for LCS IV.

That is indeed something I am working hard to do. It includes a lot

that is based on collective control (Kent’s version as it has
developed over the last 22 years), including basic economics. It
also deals with organizational control and hybrid forms that also
involve groups of people. I’m sure you won’t like it, if you ever
read it.

Martin
···

RM: Because I think it’s a good description
of what I’m talking about. The “formal
definition” [of “collective control”] your are
talking about describes a situation that is just
a subset of all the things that I would call
collective control – and a rather rare subset
at that.

13

[Martin Taylor 2015.07.22.13.43]

[From Frank Lenk 2015.07.21.0832 CDT]

    Martin - you are right I was not precise in my statement

about what gives money its value. As you state, the value given
goods, services and money is determined by our perception of
their ability to help us control other perceptions to references
that may be more important or intrinsic.

    The question I was really answering is why the money we end

up holding and using in transactions and savings is the
government’s money (or money denominated in the government’s
money, which is what bank money is, i.e., checking and savings
accounts) rather than your money or my money or Wal-Mart’s money
or Microsoft’s money.

Yes, but is it? For example, is the Euro the money of the European

Parliament’s majority party? If not, of what government is it the
money? Is the money of the Scottish and Northern Irish banks,
denominated in Pounds Sterling, government money? Is the “Haweater
Dollar” (a coin the size of a Canadian dollar, interchangeable with
a loonie on Manitoulin Island) government money?

    Our use of government money is cl early not based on trust

of the government. Neither are legal tender laws sufficient, as
evidenced by periods and countries where residents refuse to
hold their government’s money due to its perceived
worthlessness.

Yes, as an example, when I was on a tour in Turkey in 2000, many

people preferred to use US$ cash in place of Turkish Lire (it was
kind of fun to pay a cool million for a cup of Turkish coffee), and
a lot of shops would accept either currency equally happily.

    And it is not due to backing the currency by gold since the

US dollar remains in high demand despite being off the gold
standard since 1973. MMT’s answer - that it is because the
government alone has the ability to name the unit of account and
the power to collect a tax in that account from its citizens and
firms under penalty of loss of a considerable amount of control
(fines or jail) – is the one that makes the most sense to me.
The government’s money becomes what is used in private
transactions as well because virtually everyone has to use it to
at least determine their tax obligation to the government, even
if by virtue of tax credits (also denominated in the
government’s money) they end up paying nothing. ;

See in particular blogs #6, 7 and 8 here: 

    You may also be interested in the (somewhat speculative)

history of money in blogs #12 and 13.

These are very long blogs, and I haven't read past the first few

paragraphs of blog 1, so forgive me if what I say seems irrelevant
or is refuted by later portions of the blog series.

I (MMT) didn't, and don't claim or believe that the government alone

has the ability to name a unit of account. I would argue that
anything, cowrie shells, bitcoins, gold dust, bolts of linen (Ebla
ca 2200 B.C.E), millstones too heavy for one person to move, can be
a unit of account if people perceive it as having a value stable
enough that its acquisition in one transaction allows the acquirer
to expect to be able to give it to someone else in a later trade in
order to get some good or service of what is now seen as being of
comparable value.

It's true that if the government has declared a tax of 10 bushels of

barley on every farmer, the farmer either has to grow barley or be
able to trade for 10 bushels, and barley thereby acquires a tax
value. The tax value also propagates into general trade, because the
farmer who doesn’t grow it has to exchange some good or service to
get the barley, perhaps for 2 bushels in one trade, 7 in another,
and 5 in a third trade, leaving him with 4 bushels that he could
trade with anyone else for something he wants. By these trades,
barley does get matched against the value of a range of goods and
services, and acquires for itself a value beyond its value as food,
which seems to put a floor on its value per bushel. But the tax in
itself seems to leave the value of barley floating until the
government uses that barley to get people to perform services such
as infrastructure construction and maintenance. If the government
prudently stores the barley as a hedge against years of drought and
poor crops, it doesn’t even acquire trade value at all.

Even if the barley tax requires all farmers to have some barley on

hand at tax time, nothing about it says that barley would become THE
currency in general use. Non-farmers don’t need to have barley to
pay tax, as the tax for non-farmers might be in the form of 40 hours
per year of work on infrastructure projects or on clerical work to
keep track of the farmers’ barley payments.

Barley is heavy to cart around, so if it were to be a currency,

trades would presumably be preferentially conducted as paper
transaction, IOUs for so many bushels, to be paid only when someone
wanted to eat the barley. But the government might not accept the
IOUs in place of the barley, because it wants to store real, edible
barley against times of famine. If the government would not accept
barley IOUs, then the barley could not be used as money by the
government. All the same, the IOUs might still be used as money by
the general public.

If this way of looking at the situation makes any sense, then the

value of money is independent of its use for paying taxes. But if
so, we must ask why it is usually true that government denominated
money is what most people use as money. My answer to this is quite
simple: it’s convenient. It’s convenient because the government is
an organization with which everyone has dealings of some kind,
whether it’s a dictatorship or a democracy, a monarchy or a republic
(that is 2x2 matrix of possibilities). Not everyone has dealings
with the Gargantuan Bank of Central Fiscomania, so Gargantuan Bank
money would be useful only among people who trust that they will be
able to use the money in future trades, at something like the same
value per unit as in the current trade. Nobody pays taxes to the
Gargantuan Bank, unless you count their profits as taxes. But if
they are widely trusted, their money would be good.

Maybe I'll find this is all discussed and refuted in the blogs. If

so, I apologise for answering prematurely, but even so, maybe you
can comment on how the refutation would proceed.

Martin
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http://neweconomicperspectives.org/modern-monetary-theory-primer.htmlmmt-csg@mmtaylor.net