From Bill Powers (2008.10.02.0605 MDT)]
Richard Kennaway (2008.10.02.0845 BST) --
[From Bill Powers (2008.10.01.1727 MDT)]
There is nothing about the flow of money that enables people to do all these things.
That's like looking at a control system and saying you could do without the controller: exactly the same actions and perceptions could go on without it.
Not quite. It's like saying we could do without the environmental feedback function: the means by which our actions alter our inputs. Money is part of the environmental feedback function, not the outputs or inputs, of a person. It is not, however, the entire environmental feedback function -- it's not the only way to convert our actions into getting what we want.
No, it's not *like* that: it *is* that. The people who do all of the things that you list are doing them for their own purposes. What are those purposes? Actors might still act without being paid, but no-one drives a delivery van for the joy of bringing goods to the shops.
Right. Driving the delivery van is a means of obtaining credit that can then be used to obtain the inputs the driver wants. The purposes for which the driver drives the van are all his his usual purposes, which are to get food, shelter, warmth, pleasure, companionship, and so on, from bottom to top. So this tells us that money is useful as a substitute for barter, which is impractical when things get at all complicated. But the main thing it is useful for is getting people what they want and need -- if barter works better, and often it does, people will use that rather than money. It's been estimated that the undergound economy, which avoids monetary transactions (and taxes) is 30 to 40 per cent of the monetary economy in the USA. I don't know if that is correct.
Why does the farmer grow crops? Not because they have a zeal to see their neighbours shod or fed.
That's an interesting point, because at least in the past, many farmers grew crops and raised livestock even in years when they lost money doing it, because they so greatly preferred that life-style over the alternatives. In fact there are many people who say they would work free if they could afford to, just because they love what they do. I once published a science-fiction story called The Calibrated Man, in which all those "menial" jobs like driving taxis and garbage trucks were done by teenagers who had always wanted to do such things. That doesn't quite cover everything, but it covers a lot.
But the main point we're approaching here is that money is only a means to an end, and the end is to provide people with what they want without requiring from them more effort than they can generate without pain (mental or physical). Economic theories try to explain how the economy works without taking individual reference conditions into account. The late Bill Williams, our only CSG economist, would use the word "individual" as a swear-word, with a sneer, when it was suggested that the driving force behind economics is what individuals want. The words "supply" and "demand" refer to abstract, and imaginary, forces that float in the air among people, making "the market" behave as it does. Economics shares that view with old-style sociology, which tried to deal with social laws in the same way, as statistical abstractions.
This is the same dehumanizing view of human affairs that we find in the bomber pilot, who is not bombing grandparents, parents, children, lovers, and invalids, but "targets."
PCT brings us back to considering live, real, people, who do what they find necessary and possible in order to control what they experience. PCT will lead to a person-centered rather than a institution-centered economics.
A medium of exchange -- historically, it was usually precious metals, but many other things have been used -- resolves these problems.
I agree, and these features of a monetary system will probably survive. The shopping mall will survive for its sheer interest and convenience, and people need to bring money, not carts full of other goods, to a shopping mall.
How the precious metal system evolved into the present scheme of doing things is summarised in this video:
http://video.google.com/videoplay?docid=-9050474362583451279
Main website: http://www.moneyasdebt.net/
That was excellent. It supports what I gleaned from others some years ago. Interestingly, though, it didn't consider what happens to the money that people borrow and spend when they default on a loan. The banks can't go around to the people who got the money that was spent and take it back. That money (minus forfeited property auctioned at a fraction of its worth) becomes "permanent money". The bank has to "write off" the unpaid balance -- erase it from the books. This doesn't cost the bank anything, but it leaves more money in the system than there was before the loan was made.
The result is that it can't be true that all the money in existence is debt. In fact, the amount of money that is permanent can only increase. Could this be the counterbalance to the threat of the banks owning everything? Most debts get repaid, destroying the money they represent. But bad debts are never repaid by auctioning off the collateral (if there is any). And that money doesn't disappear just because it was spent.
Money does more than merely avoid the inconvenience of barter. Besides exchanging goods, it also results in exchanging information. By publicly asking and offering prices, people communicate the value they place on the things they are buying and selling. The better they communicate, the more efficient the market, in the sense of satisfying more of people's desires -- their purposes -- their controlled perceptions.
I find that a lot less convincing. What do I care about the value other people place on things, if I get what I want? Things don't "have" value. If I'm willing to pay 50 cents for a newspaper, does that mean I have calculated its value relative to all the other things I might have got for my 50 cents, or compared the value of the newspaper to me with it's value to someone else? Of course not, not even subconciously. I have the 50 cents, and more; I want the newspaper; I buy the newspaper.
The idea of the "rational actor" in economics is a figment of the imagination. That person doesn't exist, outside the small group of obsessive-compulsive accountants who still have their first nickel.
"Speculation" is putting a price on future goods, and trading accordingly. If you think the price of something is going to rise in the future, you buy it now -- either something for your own use or to sell later. That tends to raise prices now and decrease them later. If you think the price is going to drop, sell now and buy later. What that does is dampen out the fluctuations.
Nonsense. It's just as likely to amplify them. Look at the 777-point dive the Dow Industrials took when Congress didn't pass the rescue bill. A bunch of nervous nellies, hypersensitive to the first derivative of every market indicator, with loop gains as high as their blood pressure. Sure, rate feedback in moderation will dampen fluctuations, but not when there's a time delay and predictions are imperfect and there is a lot of system noise.
If you want to prove to me that your prediction about dampening the fluctuations is right, you'll have to show me a working model in which that (legitimately) occurs. So you see, I entice you into my trap.
There may well be issues around leverage (borrowing most of the money you use to make these trades), and whether excessive leverage results in instability: I don't know, but I think it likely that the mathematics on these issues has been done already. Of course, maybe a PCT perspective would suggest new and better models.
I doubt that the mathematics has been done right (garbage in, garbage out), and I do think PCT will provide a new perspective. Mostly, we have to go back to the level of the individual controller and build the model up from there. The number of different economic policies that people follow is not infinite; our computers are big and fast enough now (even the ones we can carry around) to model quite a large array of possibilities.
But "speculation" is just a sideshow, as is the furore over "fat cat bonuses", the magnitude of which is a drop in the bucket compared to the sums of money at stake. The real beneficiaries of the system will be only too glad to have the public distracted with these shadow puppets.
BTW, one factor in the current financial situation is that the government required many of the bad loans to be made, in the name of "equality". See
A Mortgage Fable - WSJ
and
Community Reinvestment Act - Wikipedia
These measures hindered the flow of information in the market. How effectively can you drive a car when the windscreen is fogged up?
Well, forcing a lot of really bad loans is one way the government can put a lot of permanent money into circulation, if my idea about the effects of loan defaults is right. But I'd rather see it done without making poor people suffer the results.
I just don't believe anything any economist says about how things work, and won't until I see a working model that behaves the way real people behave, quantitatively. I see no signs that anyone understands the economy: it's all a lot of bluster and bluff.
Best,
Bill P.