4 ms·

This article is an interesting thought experiment, but I can't help but feel that the statements made are in such opposition to understood economic principle an

This article is an interesting thought experiment, but I can't help but feel that the statements made are in such opposition to understood economic principle and call into question basic moral precepts. That doesn't mean it's wrong, it just feels alien to read. As an example of what I mean, the idea of consumption being a net-negative destructive action goes against the economic concept of velocity of money and how that drives economic engines. On the other hand, I can understand because the net value is perhaps negative of a grossly consumptive action like buying a yacht, simply because of the natural resources consumed to produce it. Economics rarely accounts for the externalities.

illumin8 8y ago
I agree. I was in agreement with the article when it says that money we earn is a statement of the value we provide to society, so earning money is good, however, I don't agree with the statement that spending money and consumption is bad. The example of the yacht is rather contrived as well. They talk about how all of the craftsmen and lumber workers had to chop down, dry, age, cut and polish the wood to make the yacht, however, it's somehow evil for us to buy it? This seems rather ridiculous when you consider that the money used to buy that yacht paid the salaries and income of all the craftsmen and laborers that built it for you, compensating them for the value they provide to society. If there was nobody willing to consume or buy products, how would anyone make income? This article seems to understand capitalism superficially, then demonstrates the authors know little about capitalism in the final paragraphs.
- tristor 8y ago
  > If there was nobody willing to consume or buy products, how would anyone make income? I don't know what the author's intention was, but my assumption when I read that was their economic world view is one in which people should focus inwardly, striving for sustainability over specialization. It's conceivable to have economic exchange without luxury goods, because that labor can instead be directed into other activities. That said, I had many of the same questions myself. I think specialization in society has been historically important to the betterment of humanity in many ways. As has the ability of markets to enable businesses to invest labor ahead of sales, so whether or not someone purchases something (with the exception of custom projects like a yacht) rarely has any impact on whether or not it will actually be made. Just ask Atari.
- yholio 8y ago
  > the money used to buy that yacht paid the salaries and income of all the craftsmen and laborers that built it for you, compensating them for the value they provide to society. The point he is making is that they are compensated but no net value is returned to society as a result of their labor and resource expenditure. The yacht "disappears" in your private marina where it will rot away providing you with a purely private satisfaction, whereby the same labor could create houses, a public parc or some other widely shared goods, whilst still compensating the workers the same and having the same overall economic effects. Symbolic, money wealth, thus becomes a force that diverts social physical resources away from social needs and towards private needs of wealthy individuals, making everybody else worse off compared to an alternate more egalitarian social arrangement. I would interpret it that as long as billionaires don't sink their fortunes into megalomaniac wasteful personal consumption, like say building pyramids, the results of capitalism and inequality are not very different from a more egalitarian society, the vast majority of resources are still employed to make most people better off. What's unequal is just the representation of wealth, who owns what and who works for whom. For example, if Warren Buffet would start to liquidate his symbolic wealth to build a giant Warren Buffet statue, this would have a net negative effect on the wealth of the average citizen. Yes, it would provide jobs, but it would also extract available capital from the market that could be invested to create other jobs, so over all it's a wash. No saleable products are generated and a massive amount of resources is required, bidding the prices of these up without putting anything back. The consumption of everybody else would diminish to accommodate for the higher prices and lower overall quantity of products now available. Society has "decided" to shift production from cars and houses towards a giant statue that nobody really needs.
  - illumin8 8y ago
    I'm not sure I agree with this. The yacht could get very little use, but so could a house that you build for someone. If the argument is that we should only build public goods that will be widely used like parks, I disagree, because the concept of private property is very entrenched in our society, even in socialist countries. I also disagree that the Warren Buffet statue would have a negative effect on the wealth of the average citizen. Warren Buffet would be taking capital that is locked up inside assets and spending it to build something, directly contributing significant income to the middle class (laborers) in the economy. This would have a positive beneficial effect on the economy in general. Imagine a wealthy billionaire with all of his assets locked up in gold bars in a swiss vault. Outside of a few hired guards that protect the gold, nobody benefits. If he liquidated that gold and used the proceeds to build statues, quite a lot of people would benefit from the income generated.
dublo7 8y ago
I thought that too. If getting money is good, then spending can't be all bad because you must be giving it to someone else and at minimum creating good for that person, possibly less good if it's spread the a corporation instead of directly to an individual.
- timerol 8y ago
  I think the author's point isn't that getting money is good, but that people get money in exchange for good. Therefore, if you are receiving money, it is due to some good action you've done. If you are spending money, you are not creating good for the other person, but compensating that person for the good that they've done. (I do not fully agree with the author's point AIUI.)
nostrademons 8y ago
Economics is supposed to be value-neutral: it describes the world as it exists, and doesn't attempt to pass judgment on whether any of the behaviors it describes are good or bad. There's a whole level of punditry and policy-making on top of economics that takes these concepts and says "Ok, we want full employment and equitable distribution of wealth and minimal dead-weight loss" and then tries to tweak the appropriate levers to get that, but the field of economics itself is concerned with figuring out what the levers are. The economist isn't really concerned with whether consumption is good or bad, but takes it as a given that people want to consume. When the hypothetical protagonist in the story buys himself a yacht, he's satisfying his own desires by redirecting the productive efforts of many Kongolese towards his own end. You can layer a value system on top of this, and argue either that it's immoral for one person to be able to direct the energies of thousands of other people for his personal efforts, or argue that it's moral because he previously delivered more value to the Kongolese through his grain speculation than he is consuming through the building of his yacht. But those moral judgments are separate from the fact that under the monetary system in this thought experiment, he has both the ability and incentive to direct resources in this manner.
- claudiawerner 8y ago
  Economics is supposed to be value-neutral, but do economists question the extent to which it isn't value-neutral in its assumptions and views of the world? Similarly, science is often declared to be value-neutral, but it accepts certain philosophical ideas without really investigating them. In your example, in many hypothetical societies (not too different from our own) the very fact of hiring the Kongolese would be alien. In fact, the idea of hiring, as in, getting someone to do something for you, and to ask that they align their conatus to yours (in the modern sense) changes in the period of a lifetime. In short, I think that the assumptions and historical background of economics (descending from political economy) have produced a way of viewing the world which is not value-neutral at all. The existence of heterodox economics (which should not be dismissed as "value" spins on "regular economics") would seem to show that the bare set of assumptions that orthodox economics makes are neither givens nor small in number. Marx, Sraffa, the neo-Ricardians and the Post-Keynesians questioned them. So I think that if science can be admitted to be ideological, we're in for a big treat when it comes to economics.
ivalm 8y ago
The article has a lot of problems. It tries to conflate "net producer"="net saver"="morally good" but this is not clear at all. 1. If everyone is a net saver you get paradox of thrift [0]. 2. For every buyer there is a seller. Being a net seller depends on somebody being a net buyer... it is strange to say "i am moral by depending on somebody being immoral" 3. As others pointed out, distribution of wealth is a critical component as it grants influence multipliers to people. It is easy to pigeon hole majority into having no money (and thus no spending choice) by hoarding all of the money (especially when the "service" you offer is arbitrage, which doesn't increase net real commodities). 4. Rather than thinking about producers/consumers, it is probably more useful to think in terms of utility [1]. Spending money can increase overall utility (most clearly -- direct investment in a utility increasing business). The growth in overall utility can actually increase total production (which the author equates with "good") despite his argument totally missing this. [0] - https://en.wikipedia.org/wiki/Paradox_of_thrift https://en.wikipedia.org/wiki/Paradox_of_thrift [1] - https://en.wikipedia.org/wiki/Utility https://en.wikipedia.org/wiki/Utility

illumin8 8y ago

I agree. I was in agreement with the article when it says that money we earn is a statement of the value we provide to society, so earning money is good, however, I don't agree with the statement that spending money and consumption is bad. The example of the yacht is rather contrived as well. They talk about how all of the craftsmen and lumber workers had to chop down, dry, age, cut and polish the wood to make the yacht, however, it's somehow evil for us to buy it? This seems rather ridiculous when you consider that the money used to buy that yacht paid the salaries and income of all the craftsmen and laborers that built it for you, compensating them for the value they provide to society. If there was nobody willing to consume or buy products, how would anyone make income? This article seems to understand capitalism superficially, then demonstrates the authors know little about capitalism in the final paragraphs.

tristor 8y ago
> If there was nobody willing to consume or buy products, how would anyone make income? I don't know what the author's intention was, but my assumption when I read that was their economic world view is one in which people should focus inwardly, striving for sustainability over specialization. It's conceivable to have economic exchange without luxury goods, because that labor can instead be directed into other activities. That said, I had many of the same questions myself. I think specialization in society has been historically important to the betterment of humanity in many ways. As has the ability of markets to enable businesses to invest labor ahead of sales, so whether or not someone purchases something (with the exception of custom projects like a yacht) rarely has any impact on whether or not it will actually be made. Just ask Atari.
yholio 8y ago
> the money used to buy that yacht paid the salaries and income of all the craftsmen and laborers that built it for you, compensating them for the value they provide to society. The point he is making is that they are compensated but no net value is returned to society as a result of their labor and resource expenditure. The yacht "disappears" in your private marina where it will rot away providing you with a purely private satisfaction, whereby the same labor could create houses, a public parc or some other widely shared goods, whilst still compensating the workers the same and having the same overall economic effects. Symbolic, money wealth, thus becomes a force that diverts social physical resources away from social needs and towards private needs of wealthy individuals, making everybody else worse off compared to an alternate more egalitarian social arrangement. I would interpret it that as long as billionaires don't sink their fortunes into megalomaniac wasteful personal consumption, like say building pyramids, the results of capitalism and inequality are not very different from a more egalitarian society, the vast majority of resources are still employed to make most people better off. What's unequal is just the representation of wealth, who owns what and who works for whom. For example, if Warren Buffet would start to liquidate his symbolic wealth to build a giant Warren Buffet statue, this would have a net negative effect on the wealth of the average citizen. Yes, it would provide jobs, but it would also extract available capital from the market that could be invested to create other jobs, so over all it's a wash. No saleable products are generated and a massive amount of resources is required, bidding the prices of these up without putting anything back. The consumption of everybody else would diminish to accommodate for the higher prices and lower overall quantity of products now available. Society has "decided" to shift production from cars and houses towards a giant statue that nobody really needs.
- illumin8 8y ago
  I'm not sure I agree with this. The yacht could get very little use, but so could a house that you build for someone. If the argument is that we should only build public goods that will be widely used like parks, I disagree, because the concept of private property is very entrenched in our society, even in socialist countries. I also disagree that the Warren Buffet statue would have a negative effect on the wealth of the average citizen. Warren Buffet would be taking capital that is locked up inside assets and spending it to build something, directly contributing significant income to the middle class (laborers) in the economy. This would have a positive beneficial effect on the economy in general. Imagine a wealthy billionaire with all of his assets locked up in gold bars in a swiss vault. Outside of a few hired guards that protect the gold, nobody benefits. If he liquidated that gold and used the proceeds to build statues, quite a lot of people would benefit from the income generated.

dublo7 8y ago

I thought that too. If getting money is good, then spending can't be all bad because you must be giving it to someone else and at minimum creating good for that person, possibly less good if it's spread the a corporation instead of directly to an individual.

timerol 8y ago
I think the author's point isn't that getting money is good, but that people get money in exchange for good. Therefore, if you are receiving money, it is due to some good action you've done. If you are spending money, you are not creating good for the other person, but compensating that person for the good that they've done. (I do not fully agree with the author's point AIUI.)

nostrademons 8y ago

Economics is supposed to be value-neutral: it describes the world as it exists, and doesn't attempt to pass judgment on whether any of the behaviors it describes are good or bad. There's a whole level of punditry and policy-making on top of economics that takes these concepts and says "Ok, we want full employment and equitable distribution of wealth and minimal dead-weight loss" and then tries to tweak the appropriate levers to get that, but the field of economics itself is concerned with figuring out what the levers are. The economist isn't really concerned with whether consumption is good or bad, but takes it as a given that people want to consume. When the hypothetical protagonist in the story buys himself a yacht, he's satisfying his own desires by redirecting the productive efforts of many Kongolese towards his own end. You can layer a value system on top of this, and argue either that it's immoral for one person to be able to direct the energies of thousands of other people for his personal efforts, or argue that it's moral because he previously delivered more value to the Kongolese through his grain speculation than he is consuming through the building of his yacht. But those moral judgments are separate from the fact that under the monetary system in this thought experiment, he has both the ability and incentive to direct resources in this manner.

claudiawerner 8y ago
Economics is supposed to be value-neutral, but do economists question the extent to which it isn't value-neutral in its assumptions and views of the world? Similarly, science is often declared to be value-neutral, but it accepts certain philosophical ideas without really investigating them. In your example, in many hypothetical societies (not too different from our own) the very fact of hiring the Kongolese would be alien. In fact, the idea of hiring, as in, getting someone to do something for you, and to ask that they align their conatus to yours (in the modern sense) changes in the period of a lifetime. In short, I think that the assumptions and historical background of economics (descending from political economy) have produced a way of viewing the world which is not value-neutral at all. The existence of heterodox economics (which should not be dismissed as "value" spins on "regular economics") would seem to show that the bare set of assumptions that orthodox economics makes are neither givens nor small in number. Marx, Sraffa, the neo-Ricardians and the Post-Keynesians questioned them. So I think that if science can be admitted to be ideological, we're in for a big treat when it comes to economics.

ivalm 8y ago

The article has a lot of problems. It tries to conflate "net producer"="net saver"="morally good" but this is not clear at all. 1. If everyone is a net saver you get paradox of thrift [0]. 2. For every buyer there is a seller. Being a net seller depends on somebody being a net buyer... it is strange to say "i am moral by depending on somebody being immoral" 3. As others pointed out, distribution of wealth is a critical component as it grants influence multipliers to people. It is easy to pigeon hole majority into having no money (and thus no spending choice) by hoarding all of the money (especially when the "service" you offer is arbitrage, which doesn't increase net real commodities). 4. Rather than thinking about producers/consumers, it is probably more useful to think in terms of utility [1]. Spending money can increase overall utility (most clearly -- direct investment in a utility increasing business). The growth in overall utility can actually increase total production (which the author equates with "good") despite his argument totally missing this. [0] - https://en.wikipedia.org/wiki/Paradox_of_thrift https://en.wikipedia.org/wiki/Paradox_of_thrift [1] - https://en.wikipedia.org/wiki/Utility https://en.wikipedia.org/wiki/Utility