The Economy is a Non-Zero Sum Game

The Economy is a Non-Zero Sum Game

“The greater the proportion of a population that (fully) participate in the economy the stronger and more stable that economy will be.”  Aside from clarifying and defining some terms, I shall assert this is a testable hypothesis.

Clearly (full) participation is in need of clarification.   For example, is a person completely dependent on others for care a participant?  Is a retired person a participant?  I would argue that both can be participants.  Their level of participation is strictly a function of their abilities to engage in voluntary economic transactions.  This may well boil down to their access to money.  Indeed, it may be as simple as having an income stream.

The concept of “full” I have put in parentheses.   Here I conceive of a person’s participation not being limited because of a lack of resources, read money, because of, say, poverty.   I understand this is vague for in America we tend to blame a person if he or she is poor.  A lack of ambition, failure to stay in school, being lazy, addicted to drugs, lack of faith in God, or even moral turpitude are all reasons we use to blame someone for being poor.  We almost never ascribe a person’s poverty to the circumstances of birth.   By the same token we, in America, all assert our individual financial status is a function of our hard work.  Almost to a person we do not seem to give credit to our circumstance of birth.

While most people cannot point to a lump sum inheritance they can point to parents or family providing the support, education and a helping hand.  Shame on us for claiming we achieved what we have through our own efforts and not give credit to those whose shoulders upon whom we stand (built our success)

So, what then qualifies as a lack of resources?  First an undependable or unpredictable income stream is a lack of resources.  So, how much of an income qualifies a person to be considered a full participant in an economy?  Minimally a person needs sufficient income flow to afford a place to live (home), adequate nutrition, clothing, medical care, entertainment, and education.  That is the income needs to put them over the poverty level.   In the current American culture programs exist to “assist” “qualified” persons with some access to shelter, food, clothing and even education.  However, that assistance is normally provided in voucher form of some sort. Then the assistance is removed given even a minor change in his or her qualifications (read “income”).  Hence these programs do not provide a dependable income stream. The programs are predictable if the recipients don’t demonstrate initiative and earn money (engage in legitimate, productive economic transactions).  It seems we are afraid people will “misuse” what we give them.  Then too, we perceive what we give somehow comes out of our pockets; and, while we were taught to share in kindergarten we don’t really want to share.

Another indicator of a lack of resources is constraints on the individual’s existing resources that inhibit his or her use of them.  We have already addressed vouchers which at best are dedicated resources.   Dedicated resources are not economic transactions to which the holder of a voucher is a participant.  Leans and garnishments or tax judgements on income streams are not voluntary economic transactions.  While earlier economic transactions are in all likelihood through the reason. For if a person’s resources or income stream is eaten up by taxes and/or liens that person does not have the option to engage in voluntary economic transactions and should not be considered to have resources or an income stream.  Thus, uncomfortably,  people can place themselves in a position through  bad economic decisions.

It is not clear how to prevent or avoid people from making bad economic decisions such as excessive credit purchases or failure to pay taxes.  However, income received from the Federal Reserve for doing one’s civic duties-voting, jury duty and the like – will not be taxable as taxing that income would be a poll tax and not constitutionally permissible.  So while a stretch, placing a tax lien on that income should, by the same logic not be permissible.   Obviating credit and mechanic’s liens on that income can do two things.  First make the inclusion of income from the Federal Reserve for doing one’s civic duties not part of the income calculated in granting credit for financial responsibility.   Second, simply exempt income from doing one’s civic duties from income that can be attached.

While it is not clear that these approaches to keeping people from going clearly under will work.  It is clear that without some mechanism to insure that people can’t be put under water completely because of credit kinds of traps – unrealistic borrowing limits – that the financial flexibility afforded by income from performing civic duties is obviated.  Remember that purpose of financial flexibility is to include the greatest proportion of the population in the economy -that is involved in economic transactions.

Historically cash (gold, silver and all forms of convenient and portable money) has been manipulated by various actors in the creation and placing it in circulation.  For example, the Roman emperors systematically debased Roman coinage to try to avoid taxes.  Governments ranging from post WWI Germany to Zimbabwe have attempted to print money for paying their bills.  Indeed, when private banks in the US printed their own bank notes they took less than a conservative approach to the amount printed.

The forgoing examples are but a drop in the bucket.  However, they serve to start the dialogue.  Wealth tends to attract money.   The problem then is to attempt to insulate new money creation from doing one’s civic duty from manipulation by anyone, particularly those in charge and those with wealth.  Just as the proposal to have the Feds deposit new money in citizens and units of governments’ accounts can be viewed as a schema, some caution needs to be in place to avoid schemes to manipulate it.

Then there is the issue of inflation.  Regardless of the kind of money in circulation–gold, silver, fiat or commodities–excessive new money tends to cause inflation.  So the criticism of this proposal to regularly issue new money is that it will be inflationary.

Perhaps, however, an examination of the growth of the US money supply over the past 100 years or so demonstrates that, ceteris paribus, a growing money supply is not only needed but necessary for growth.  And as this set of essays has discussed elsewhere a predictable and steady supply of new money will eliminate the boom and bust cycle we have experienced under the present system of creating new money based on debt instruments.

Further, the inflationary reaction to new money occurs when new money is not anticipated by the market.  Announced and predictable large increases in new money do not seem to result in inflationary pressures–witness quantitative easing.  So, the expectation is that basing new money creation on citizens doing their civic duty will not, prima facie, be inflationary.

This is not to say there will not be clamoring for increases in the size of each individual’s payments.  Clearly checks must be put in place to prevent these pleas from turning inflationary such as criminalizing votes by congressional representatives for such increases.  But, again, this only scratches the surface of the potential problems for managing the rate of creation.  But, inflation would be a result of manipulation or perhaps attempts by demigods to curry favor for power.

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Incumbents, elites, will be a very hard sell

Incumbents, elites, will be a very hard sell

70,000 years ago human beings did everything using their own muscles, from digging roots to carrying things.  Sometime in the last 5,000 or so years, human beings domesticated horses and oxen which human beings then used in place of their own muscles whenever possible.  Over the last 300 years human being began to replace horses and oxen with steam and internal combustion engines.  The change from human muscle to power work to horses and oxen and then to machines was an obvious improvement to anyone relying on the older method (save some who claimed to be too old to change or who. would not change for religious reasons or who had too much of an investment in the old approach).  So the movement from human muscles to machines took place because each step was more efficient or productive than the last way of doing things.  (NOTE wind mills were first used about 3,000 years ago and water wheels some 2,400 years ago, electricity less than 150 years ago and nuclear reactors about 75 years ago.   Each source of power was integrated into use fairly quickly. However, these substitutes for human and animal muscle require location and material investments.)

 

 

Change in social, economic, and political arrangements and power, however, haven’t been as quickly embraced because those who exercise power in economic, social or political contexts don’t want change; for change means those in power think they will lose it.  The Queen of Hearts cry “Off with their heads” is all too frequently heard by incumbents during a revolution.  And revolutions are often required for political, social and economic change (and religious change in some cases).  Besides, most economic elites seem to think economies are zero-sum games when in fact the more participants the greater the wealth (goods, services and money) available to be divided among the participants.  Most political elites seem bent on maintaining their control regardless of the costs to their wealth, ideology, religion, or socioeconomic status.  Besides the vast majority of political elites have poorly treated others to the point that the elites fear retribution should they relinquish power.

 

Generally, those with social power have overlapped with those with economic and/ or political power.  Generally social elites have been the bulwark of maintaining the order or the status quo — conservative or reactionary.  What social elites have to loose with change is status and deference by others.  Hence, social elites risk becoming ordinary human beings when social change is implemented.

 

In addition, alternatives to existing social, economic and political arrangements are not easy to envision for there are no examples or scant and ill formed examples to demonstrate the alternatives.  There are, however, a variety of alternatives at any given time in history–socialism/capitalism/communism, monarchy/republic/dictatorship, hierarchical/egalitarian and secular/sacred.  Unlike the replacement of human muscles by horses, machines and even computers there are no examples of working alternatives to existing social, economic and political “arrangements” for people to examine or witness.

 

Compound all of these impediments to changing some social, economic or political arrangement with the fact that human beings are creatures of belief before they are prone to accept and use evidence and well-reasoned argument and one has almost an iron clad warrantee against change.

 

Let’s begin with an assumption about human behavior.  People tend to try to hang on to what they have and try to get more.  That is people are conservative and not satiated with what they have; they always want more.  This largely says the same thing as the economist ‘ s assumption that people’s wants are never filled.   History, generally, shows improvements in our standard of living with both technological and egalitarian improvements.   Yes, in Sapiens: A Brief History of Humankind Harari, among others, presents a strong case for the worsening of the human condition as a result of giving up hunting and gathering for agriculture.  And any number of observers would strongly argue that the revolutions of the proletariat were disasters former Soviet Bloc countries and China.  However even with local (in history) blips the human condition has improved with technology and real inclusion (equality).

 

So, I would argue here that democratizing money creation is, while less than obvious, the next logical step in expanding participation in the economy—improving, on the whole, the human condition by making as many people as possible full participants in the economy.  The existing ideologies-liberalism and conservativism-both approach the way to move forward and improve the human condition as a tug of war involving taxes and government programs.  Unfortunately, that tug of war has led to greater inequalities, discontent, institutionalized poverty and divergence from the equality values proponents of both claim to share:  life, liberty and the pursuit of happiness.

 

As I have presented elsewhere in this blog creating new money by depositing in citizen’s financial accounts will necessitate a smaller government footprint by eliminating the need for most catch-all social welfare programs.  A smaller government footprint will reduce the sheer number of areas in which that tug of war will be played out and the government’s need for taxes.  Recall, the scheme I propose provides governments with new money too.

 

However, as I asserted at the beginning of this installment there are no existing models one can point to as examples.  Hence it will require a massive sales job.   Ironically, in the American context, those in power are the safest from any changes democratizing money occasions.  The average citizen pays little attention to political matters.  The average citizen tends to vote in the next election the same way he and she did in the last election.   Most incumbents enjoy a 95% reelection rate.  To say their seats or positions are safe is a mammoth understatement.  However, it is those incumbents who have to act to make the democratization of money a reality.  If they do or don’t they will be reelected.  They fear primary challenges and opposition party challenges.  Yes, the evidence is neither a same party or opposition party challenger is particularly successful.  So the incumbents who know how to work the socio-economic system to their political advantage will tend to shy away from changing that system.  Ironically, they would probably enjoy a larger rate of reelection immediately after they put forth the change to democratize money.  They would enjoy that increased electoral safety because their potential opponents would be caught with their proverbial policies down—there would be very little for opponents to run on— “I’m a better choice for I never would have given you a safe and secure income flow.  Elect me and I will repeal it.”  Yet, incumbents will be a very hard sell.

The Impact on Immigration Policy

The Impact on Immigration Policy

 

While an over simplification, family unification comprises more than 70% Of all legal US immigrants; and, the US admits 10 times as many resident immigrants as all the rest of the countries in the world combined.  The reasons for immigrating to the United States may be as numerous as the number of immigrants, but the reasons seem to boil down to three: freedom, economic opportunity and family unification.

 

Ironically the main reasons illegal immigrants come are freedom, economic opportunity and family unification.  The difference is the legal immigrant had the resources and time to go through the “process of waiting.”  Generally, the illegal takes jobs for which those already here don’t even apply-agricultural and other “menial” jobs.  For example, in eastern Washington State one apple grower told a news reporter that it had been decades since a non-Latino had applied for a job on his farm.  The implication is that Latino applicants were illegal immigrants.  That is probably not 100% correct.  But it illustrates the point that were there not employment opportunities illegal immigrants would not come in the numbers that they have historically.  Indeed, estimates of the number of Mexican illegals over the past few years, during the current protracted contraction, have declined and even reversed with more Mexicans returning to Mexico that crossing illegally into the US.

 

Given all American citizens would receive new base money in their accounts, America, if possible, would become a more attractive place for immigrants.  But, only if they became citizens.  Illegal immigrants would not have increased reasons for coming unless one thinks that more Americans would choose to live on their base money deposits and more employment opportunities would be available to illegal immigrants.

 

This raises explicitly the question of what motivates people to work or not work?  Economists tend to assume that peoples’ wants are insatiable.  So that chain of logic leads to people with regular base money deposits in their accounts will seek ways to get more money.  Most of these ways involve gainful employment.  Indeed, as I argue elsewhere in this blog, base money deposits in the poorer voters’ accounts may give them the necessary resources to apply for jobs.

 

I know there is a line of thought that the poor do not work because they are satisfied living on welfare, unemployment and other “government handouts.”  Since welfare, unemployment compensation and other income support programs will be replaced by new base money deposits into voter’s accounts, at least those satisfied to live on that resource will no longer be taking transfer payments from tax payers who believe those not working do so because they would rather live on our tax dollars.  So, even if a voter chooses not to work, so what?  The non-working voter costs society only the lost production from his or her laziness and not tax dollars from the rest of us (but, I am retired and would probably fall into that lazy group.  However, after writing all of the words in this blog and more which were edited out, I am tired and need some time to be lazy).

 

So let us return to illegal immigrants.  If they have no hope of receiving base money deposits and welfare is no longer in existence, why will they still come?  They will still come for freedom, economic opportunity and to unify their families.  If you think about it, we provide the freedom and economic opportunity with our capitalist system and our democratic constitution.  Our basic creed is that in America all are free, equal and have the same opportunity.  They believe we mean it.  We do mean it, “kinda.” However, the part we seem to get hung up on is when it comes to sharing our freedom and opportunity.  For we seem to view freedom and opportunity as zero-sum situations.  They are not zero-sum situations for the more people who enjoy freedom with us the more secure our freedom is.  The more people who enjoy opportunity with us, the more opportunity and wealth there is for each and all.  So, if we really meant that everyone is free and has opportunity we would not cry out for fences, deportations, jail terms and the like for people, in the face of massive unemployment in America, manage to do the apple piking and other harvest work for which you, my fellow Americans, and I refuse even to apply.

 

You can have whatever restrictions on immigration that you want.  I would advise an alternative route.  Let anyone who wants to become a citizen go to an American embassy or consulate and apply for citizenship.  Setup a test similar to what is used now and continue with the same background checks.  Then when an applicant meets the qualifications, swear him or her in, get their account information and have them register to vote in the jurisdiction of their choice.  Or set up a voting district for non-resident citizens.  Either way works.  Then those who were immigrating for economic reasons can stay where they are and not have to come.

 

Consider the possibilities for eventual new states.  I should think that the lure of a steady income of base money will drive a majority in most places to become Americans. Then, realizing their strength in numbers, they will take over that country’s government through elections and petition for statehood.  If America is what it says that it stands for, it will eventually encompass the world.

 

A little inclusion can go a long way.

One Reason Private Money should be excluded from Politics

One Reason Private Money should be excluded from Politics

 

I went in for a follow-up visit with my pulmonologist the other day.  As it happens, the conversation took a political twist.  I made the statement that Obama should have pressed for universal health coverage after the fashion of the UK and Canada.  She replied that if we had that people would have to wait for dialysis and other forms of treatment because of the sheer numbers.  She said one would achieve equality but the tradeoff is you would make those who need treatment wait unless they can buy it outside of the system.   So, she asserted that one would have an egalitarian system but the rich would still be better treated because they would get private treatment. She is right.  Universal health care in the US would still be subpar and the rich would still get better treatment.  However, it would not be equal for under the existing system of campaign finance the US “enjoys,” the rich consisting of corporate, union and incredibly wealthy individual donors determine how and what public policy is written—laws—by using their money to pick candidates to their liking and which candidates either will do their bidding (through the use of lobbyists) or who are predisposed to their positions.   She is right because in the United States the rich make the rules, the laws, through their private contributions to politicians running for office or re-election; and, the rich finance public advertising campaigns asserting this or that.

 

Just as campaign contributing donors would write the rules for universal health care, as they have for most policies over the history of the United States, they would write the rules for the plan in this blog for distributing new money to citizens.  The growing concentration of wealth in the US (and other countries for that matter) and the growing disparity between the income of those with wealth and the rest of us, is the strongest evidence to demonstrate the validity of the proposition that if the campaign contributing donors write the rules, there will be more opportunities for them to increase their wealth even further as the plan for distributing new money to citizens is detailed and passed into law.  But what if the rich did not make the rules?  What if we made private contributions to campaigns illegal, all gifts of any kind to candidates for office illegal—call a bribe a bribe?   And we went further and make candidates spending their own money or resources on campaigns illegal?

 

So, step one in implementing the plan for distributing new money to citizens is to reform campaign election financing and take big money out of determining candidates, outcomes and public policy—make it illegal for any use of private money or resources to support an election or reelection to an office or in support of any ballot proposal.  In short, if the US is to achieve electoral equality and not have public policy favoring the wealthy, private money has to be taken out of elections.  So, my digression into campaign finance is not as much of a digression as one would think at first blush.