In that sort of tiny, closed, economy, where money can only be redeemed for what 20 other people produce, they likely would be better off. Which suggests that they wouldn’t be working for the rich man to start with.
Of course, if the man was wealthy through production of some sort of good of service, he could consume a lot, and have many servants and such, by trading his good or service for it. If he just has a pile of currency, why would the others want or need it?
You said they’d work for him because he paid more money. Why would they work for him instead of trading amongst themselves, unless they come out ahead that way?
How? Barring slavery, he can only retain their services if what he’s offering is worth more to them then their labor.
As it happens, these sort of small, tribal communities didn’t use currency, they bartered, or used inherently useful objects like obsidian to trade. Currency only has value in a larger, more complex economy in which barter is impractical.
ETA: Short and sweet: you’re assuming that the rich man’s money is both so valuable as to command the labor of the others, yet so useless that they come out worse for working for it instead of for themselves. It can’t be both.
FDR was feeling his way back then. A WPA now wouldn’t solve it all either, but it would cut unemployment and by increasing demand could jumpstart an economy which is in a lot better shape than the 1935 economy.
We’ve done the opposite, cutting employment at the state level, which sure didn’t help.
Suppose the rich man has a billion dollars, and the other twenty have $100 between them. It’s pretty easy to see why they’d choose to work for him, than for each other, isn’t it?
Ordinarily, great wealth comes from owning things. Perhaps he owns the land, and charges rent. Or maybe he owns the right to fish in the sea. Or perhaps he owns the patent on canoes, or fishing rods, or nets, or plows or seeds. Or maybe he owns the right to issue (print) currency. Maybe he owns the bank. You don’t have to produce anything when you own things: you merely have to be able to collect fees from people who use the things you own.
People want currency because they need it to pay rent, to buy food, and pay back loans, among other things.
Money doesn’t have a set value. If the total amount of money on the island is $100, divided among 20 people, then $1 would purchase a substantial amount of stuff. If the total amount of money is $1,000,000,100, then the $100 owned by the twenty would purchase relatively little, compared to what $1,000,000,000 could buy. They would be better off trading with each other, but for disproportionate amount of money controlled by the rich guy.
He can retain their services so long as he can pay more than anyone else. You don’t need slaves, when you have money. You get all the benefits, without the pitfalls.
If they used obsidian, then obsidian was currency. In any event, it doesn’t matter whether the number of people is 20 or 20 million. The result is the same.
It can, and it is.
Consider the tragedy of the commons: individually everyone is better off feeding as many animals from the commons as possible. But collectively, they’re worse off once the animals eat all the grass.
Or consider the stadium: individually one can see better standing up. But of everyone stands up, you can’t see any better than when everyone was sitting down.
Or consider the free rider effect. Individually, each person is better sitting in the wagon, rather than pushing. But if everyone sits, the wagon doesn’t go.
People doing what’s best for themselves (working for the rich man, for example, or over-fishing) can, and does, lead to worse outcomes than if the choice had never had never been there at all.
Do you really believe that’s what the “non-college track” was for and do you really not know that most high schools still offer “non-college track” classes?
No, it’s not. What good is the money going to do them? They can’t buy anything from the rich guy, as he just happens to be rich in your scenario, without producing anything. Why work for currency from this guy, then use the currency to trade amongst the 20 of them?
The 20 residents are only going to agree to respect his ownership, which is merely a legal fiction, if they believe it’s of benefit to them. None of the above would, except the bank, which provides a service.
Not necessarily, no. To pay rent, buy food, etc, they need something that the landlord or grocer values more than their residence or groceries. That’s all.
So why use currency? It has actual benefits in a real economy. In this one, like traditional tribal societies, it doesn’t.
Imagine a tribe of 20 people that swapped a fixed number bottle caps between each other for currency. One day, one of them finds a crate filled with more bottle caps than the rest of the people combined. Is it in the best interests for the other people to shrug and continue to use the same system, or to switch to something else, disavowing the man’s windfall?
There’s no benefit to having currency in your scenario.
Obsidian, like food or fabric, is inherently useful, as it can be made into tools. It’s not a mere placeholder like a banknote, it’s a form of barter.
It absolutely matters whether the number is 20 or 20 million. Why do you suppose currency was only developed after settled agricultural communities came into existence? Were tribal people just stupid, or did they have no need for currency? Currency is only needed when the number of participants and products in the market is so great that barter becomes cumbersome.
None of those examples fit what you’re positing, because you’re still assuming that working for the rich man is what’s best for each person, without establishing why that’s so. Currency has no inherent value.
Imagine trying to get this idea off the ground, and perhaps that’ll help. If a man came to you and 20 of your neighbors, and proposed that you work for him, in which case he’d give you tokens that you could trade amongst one another, what would you say?
Yeah, I have to go with this statement. People lack the vision to imagine a world that is dramatically different from the one they currently reside in. They think that if you change one variable, like automate widget production, the entire economy will collapse because of all the unemployed widget-makers.
Two hundred years ago, most people worked of farms. A hundred years ago, most people worked in factories and mills. Now most people work in cubicles in office parks. A hundred years from now, we won’t even recognize what people do as “work”.
How many people truly don’t have anything to offer the marketplace? Or, on the flip side, what does Warren Buffet really offer the marketplace? He’s a smart guy and has a great ability to make wealth through investing. But it’s not like he actually invents anything.
Of course they can buy things from the rich guy. If he owns the land, then they can (actually must) pay rent so they have a place to live. They can buy fishing licenses so they can fish. If he owns the bank, they can pay interest. If he owns the factory, they can buy the things they make in his factory.
Well they can do that do. But working for the rich guy would pay more.
You’re talking about theft. You commie.
People get locked up, for talking like that.
When you say “something” are you talking about money?
It is a real economy. If you think it’s not real because it’s too small, you can make it 200, or 2000 or 2 million if you want. Anyway, people need money to pay rent, and interest, and licenses so they can fish. If there’s a government, they need money to pay taxes. YOU can barter, if you want. But you’d rather have money, wouldn’t you?
That’s an interesting question. The historical precedent is the discovery of gold when people used gold for money, and the vast transfer of silver from the new world to the old, after the Spanish conquest.
Arguably, the increase in money is beneficial, if at some conditions are met: there’s at least some unemployment; the economy is growing, either from productivity gains or increased population; and wages are sticky. If those conditions are met, I’d argue, increasing the money supply (in this case, bottle caps) can be beneficial.
That’s assuming the man spends the bottle caps (he doesn’t hoard them, for example), and he doesn’t lend them out for interest.
There’s almost always a benefit to currency. Even in prison camps and jails prisoners develop currency systems: cigarettes, or envelopes, or stamps or whatever.
A thing can be useful, and still be currency.
Well, I don’t know that’s the case. To my understanding, even hunter-gatherers used animal pelts, jewelry, or shells, for money, when they had the opportunity to trade with other groups.
It’s cumbersome any time people want to trade, but they don’t have an exact coincidence of wants.
But it does have value, so long as you can use it to (for example) pay rent or buy things or pay taxes.
Depends on whether I could use the tokens to pay rent, or taxes, or interest on loans.
OK, back in the 1970s in NY the way the schools were set up were that you had grade school - 1-6, middle school- 7-9, and high school - 10-12. Everybody did 1-9 exactly the same, or roughly the school day went home room, 3 1 hour classes, half an hour or 1 hour for lunch and then 3 more classes then after school activities. YMMV depending on the size of the school and the facilities. In any given week there would be 1 ‘gym’ class/phys ed, and everybody took the same classes though you might be sorted into one of 3 levels - regular, remedial or advanced. High school you all took english, history, math, science, phys ed, and an optional [language, home ec or shop sorted by gender, and unplanned.study hall] Each of the 3 years you dropped a required class - 9th grade the math and science were sort of optional, 10th grade the history was sort of optional, 11th the optional was mostly dropped - the only class that was required every year was english and gym, go figure. So you could get all the way to senior where you had 5 study halls and english or gym any given day. Also in high school you had regular or regents as your skill level. [I ended up with a regents science diploma and a full ride scholarship from Bausch and Lomb if I wanted a hard science university degree.] There was an option in 10th grade to go to BOCES, which was a tradeschool option for either the morning or afternoon sessions - my brother took plumbing/heating BOCES. At the time, BOCES tradeschool students were basically considered losers and mentally defective by the ‘college track’ students who stayed in the regular school, decreased their classes to the minimum required and lazed through school. I might note that while my brother has stayed with ‘menial’ work he has stayed employed and quite a few of the university track students in his class and mine seem to have been hit by the unemployment issue that has struck a fair number of companies. Paperpushers seem to have ended up with the short end of the stick. Right now he has been working for the same company for more than a decade - starting as warehouseman to head of warehouse now.
I would say that of his graduating class [I was in a different school, I did private schools much of my time.] there were maybe 10% BOCES students out of some 300 in his class.
And? New York state’s educational requirements are still set up that way and BOCES is still a big part of the curriculum if you choose to take those classes. You’re right, BOCES students only accounted for about 10% of all students, but I don’t remember BOCES students being referred to as “losers.”
Rent-seeking is altogether different from providing goods and services, as a bank or factory would do. The former doesn’t benefit the people of the island, the latter does.
That doesn’t answer the question…
Er, no, I’m not. Theft is unlawful taking. The island government voting 20-1 for land reform is land reform.
The only way the rich guy could own the land and fish in practice, instead of in name, is through force. I don’t think 1 guy against 20 is up to the challenge.
Of course, he might be able to recruit others to his cause. He’d have to promise them something big, though, like a chunk of land of their own that passed to their sons and their sons’ sons, as long as they fought for the rich man and his progeny. Hey presto, I invented feudalism.
Not in my country, they don’t.
I’m talking about anything the other party to the exchange values. It could be food, furniture, fixing up a chicken coop, a favor to be redeemed later, a sharp knife, a cow, a song, a woman’s hand in marriage, membership in an elite level of society, and so on. Anything valued by the person can facilitate a trade.
“Real” was the wrong word…how about “modern” or “macro”? I’d rather have money, because it benefits me (I can easily make trades) but doesn’t cost me (I’m not monopolized by a rich guy, there are many rich guys who compete for my labor and goods).
Economies behave differently with scale. This isn’t particularly controversial. There is a reason that micro- and macroeconomics are distinct fields. Consider something as simple as information symmetry. If I live with 20 other people, then I know them all personally, and am familiar with the quality of their work: I can literally watch Bob the carpenter make furniture, and inspect Steve the baker’s bread-baking process. If I live with 2 million people, I only know a tiny handful of them. Adverse selection is now a major part of trade, where with 20 people it wasn’t.
So you agree that it’s a big deal, and worthy of careful consideration from the rest of the community, irrespective of their ultimate decision, yes? And under many circumstances, it’d be quite detrimental? All that New World gold sure didn’t do much for the Spanish.
Hence in your scenario.
It’s a different kind of currency, however.
That’s barter: an exchange of goods.
Nothing prevents the 20 people from starting a new currency, either.
We’re really talking about two different concepts here: rent-seeking, and currency.
If your thesis is that rent-seeking is bad, well, yes it is, in the scenario you’ve outlined. The elements that give rise to rent-seeking, however, are hard to distinguish from the elements that give rise to productivity and growth: the ability to own things, and prosper from their productive use.
Why not come up with your own tokens for this purpose, instead of depending on this rich guy’s, and coming out behind on the deal?
Well, banks and factories don’t actually do anything on their own. Bankers and factory workers do. Are you classifying somebody who owns land, or a house, as a “rent seeker” but not somebody who owns a factory or a bank? What about somebody who owns fishing rights, or the patent on poles or nets?
Sure it does. If the rich guy can pay more for you to fix his house than your poor neighbors, you fix the fix the rich guys house, and not your neighbor’s. That’s why rich people live in nice houses, and poor people don’t.
I was being sarcastic, sort of. But you realize some people would call it theft, even if there was a vote first.
Yet some people do own vastly disproportionate amounts of land and other assets, while millions of others live in poverty.
You’re right that it is partly the use of force that maintains that situation. (Police, for example.) but it’s also the internalization of ideology: for example, that the poor deserve to be poor, because they weren’t born from the right line of ancestors, or they don’t work hard enough, or they’re stupid or don’t have the right skills or whatever.
It doesn’t have to be feudalism. Our current system also supports wildly disproportionate rights of ownership over assets.
Again, sarcasm. They haven’t actually locked anybody up just for talking that way in my country (the US) in decades. They might lock you up for taking action, though.
Well if you’re talking about barter, one problem is the coincidence of wants, like I said before. One person may want a chicken coop and somebody else might want a sharp knife, but if the values aren’t the same, it’s hard to make the trade work without money. The other problem is that you might need money to pay rent or interest or taxes. So you might wind up with a sharp knife or a chicken cop, but still be short on rent.
Well, if the goods and services of most people are ultimately monopolized by a small subset of the population, it doesn’t make much difference if it’s 100,000 people dominating the economy of 300 million, or one guy monopolizing the economy of 20 people. I made the example small for the sake of simplicity, not because it makes a difference.
By the way, you agree, at least on a small scale, that 20 people working for each other are better off than 20 people working for one person? To put it differently, if the one guy gets a robot to replace the twenty, the twenty are better off than they were before?
I don’t know about the effect of the New World silver on the Spanish, in particular, except that it temporarily made them very rich. The diffusion of all that silver currency throughout Europe, however, did coincide with the rise of Europe as a world power, and later, in the industrial revolution.
As I said before, I think an increase in money (or other financial assets), under certain circumstances, can dramatically improve productivity. The comparison between Europe and America is a good example. The US transferd several trillion dollars of assets to the private sector, and our unemployment rate has fallen to 7%. Austerity, on the other hand, has resulted in 20%+ unemployment in parts of Europe.
I don’t know what you mean. Prisoners use alternate currencies because official currency is unavailable to them - it’s prohibited. They have no choice. Presumably if they allowed money in jail, they’d use money.
Not if they were using the shells or pelts as stores of value, or mediums of exchange. Then they would be currency, not barter.
They could start a new currency, assuming it wasn’t forbidden, but if they had to pay rent and interest and other factory goods in the old currency, it’d be tough to get the new one off the ground.
That’s true. That doesn’t mean the government can’t pursue policies that benefit the majority, rather than the minority.
Well, I’ve answered that question we’ve real times. If the rich man owns the land, they have to pay rent in his currency. If he owns the right to fish, or the copyright to fishing gear, they have to pay him for that. If he controls the government, they have to pay taxes in the official currency, not one they made up on their own. If he controls the factories and the stores, they have to pay for factory made or store bought goods in the currency he demands.
Yup, good point. I’ve thought about that too. A friend of mine points out that as long as it’s a democracy, something’s gotta give, though. Plus, do they really need someone to buy the products? Why not just each other, or for themselves. That is, if they own the resources, and if production is automated, what do they need consumers for?
Not much. All they need is scientists and engineers and managers, to keep stuff humming. Which is Vonnegut’s scenario (with welfare).
Thanks for that: very interesting. I’d had a few of those ideas myself (haven’t we all?) but it was nice to see someone fleshing them out like that.
I admit I did keep waiting for the other shoe to drop, but it didn’t.
The explanation that the Vertebrane can’t be corrupted was wishful thinking, but perhaps there’s still hope.
BTW, an interesting idea with virtual realities is the possibility of purely voluntary communities. As long as the physical substrate is taken care of (as it is with the Australia Project) allowing people to live in virtual realities, then different VR worlds or communities can have any kind of legal and cultural systems they want.
Folks who miss Free Enterprise can join a Free Enterprise Society, and earn virtual bucks to build virtual castles. One wonders what kinds of cultures could develop.
They and their rich friends don’t buy enough to let them make enough. Frederik Pohl had a story about consumers being forced to consume all the stuff the automated factories made. He got it, as usual.
I’m reminded of the Great Depression, and how people were encouraged to help their down-on-their-luck neighbors by hiring them to do odd-jobs. It was “unpatriotic” to cut your own grass or mop your own floors when these people badly need work.
I wonder if we will see a return of this messaging as more people experience long-term unemployment. With so many good people without work, it will be seen as one’s “duty” to relegate household duties to a team of servants. Even with automation, you will still need someone to rake the yard, clean out the refrigerator, and pick up the groceries.
I am not looking forward to such a scenario playing out, though. I can totally see people voluntarily signing up for Slavery 2.0 if that means getting out of the cold and having a full belly. If you can’t get a paying job, slavery doesn’t sound too bad. That’s scary.
I think the the Vertebrane system was quite handwavy, and I kept waiting to find out that, once installed, you no longer were actually in the real world (because how would you tell?) and everyone was living in a VR world, much like the Matrix. They poo-poohed that idea.
It’s fiction, but I think it’s useful as a jumping off point for discussion.
Land, possibly; house, generally not; factory, no; bank, no; fishing rights, yes; patent, generally not. Building a house creates wealth, operating a bank or a factory creates wealth. Owning land or fishing rights does not. Patents are a bit more complex, in that inventing something useful creates wealth, but the patent can be sold, licensed, etc, so the person holding the patent isn’t necessarily the inventor. Even then, though, by buying the patent they’d funded future inventions by the inventor.
Here’s the problem we’re having - you’re using your example of the island of 21 people to illustrate broad concepts, and I’m directly addressing the example. Some of what you’re talking about is subject to those changes of scale I referred to earlier, and thus doesn’t perfectly back up your points.
Sure.
Something that didn’t occur until groups much larger than 21 people started trading amongst each other, in the first agricultural societies. And wealth didn’t become something you got through trade and productivity, rather than through force (being the local ruler or one of his cronies) until much later than that.
Again, there’s a disconnect between your scenario and your points, and that’s what’s hanging us up here.
Other ideologies can keep people poor, though: that it’s wrong to own more than what you need to survive, that it’s wrong to charge interest on loans, that it’s wrong to pursue wealth instead of spending your time getting right with the Lord, etc. Anyway, property rights absolutely depend on force, and in a democracy, that means they depend on most people agreeing that property rights are a good idea and benefit them in the aggregate.
The rights aren’t disproportionate, there’s no aristocratic privileges by which only certain people may own land or factories or what have you, as other nations have practiced.
The law in the U.S. only prohibits advocating the violent otherthrow of the U.S. government. Urging people to vote Communist, or vote for the land-reform candidate or whatever, is fine. It’s when the line is crossed to revolutionary violence that the law is broken.
Sure, there’s a downside, but there are downsides to currency too. If your wealth is in the form of knives and grain, at least you have a knife and grain, it can’t ever lose all value to you the way currency can. One can be more suitable for a society, and the other more suitable for a different society.
It does, though. Say your rich guy got that way by owning all the land on the island, and he can enforce this because the others consider him a god-king. Now, suppose there are three land-owning god-kings. Would rents be lower in the first scenario, or the second?
It depends. If the man is wealthy because he demands rent for the unimproved land he owns, then the people gain nothing from his efforts; he is a rent-seeker. His removal from the economy, making himself an autarky, removes a deadweight loss (the rent).
If the man is wealthy because he started productive enterprises, like a bank and a factory, and uses the proceeds to hire laborers to make his life more comfortable, then the people are worse off if he removes himself from the economy. The wealth-creating bank and factory are presumably closed, as the man no longer needs the income, and thus can’t justify the capital risk.
I mean that currency isn’t universally superior to barter, and that your scenario is one in which it isn’t.
Kinda-sorta. You can wear pelts for warmth, or make tents out of them or whatever. Shells are art objects for jewelry. Something like banknotes or promissory notes, though, only have value because others believe they have value and can be exchanged for goods and services. They are otherwise useless scraps of printed paper.
Again, the tension between the points you’re making and your scenario. If the rich man is also the government, meaning he can forbid currency reform, land reform, etc, that changes things.
That’s true, but the line isn’t always so bright. Laws granting licenses to broadcast on certain frequencies benefit radio and TV stations more than they benefit me; it allows them to sell advertising and make money. But it benefits me too, it makes it possible for me to consume radio and TV entertainment without constant interference from competing broadcasters on the same frequencies.
Laws granting deeds to land benefit land-holders more than it benefits me (I don’t own much land), it allows them to charge rent to tenets. But it benefits me too, by allowing people to improve their land, building factories and such, which people wouldn’t do if they didn’t own the land under an immovable building. I am then able to buy the wares produced by said factories, and improve my quality of life.
It’d be a negotiation. If he owns the fishing rights, he only gets paid if people buy fishing licenses. If he demands gold shekels, and people have grain but not shekels and want to pay in that, they can hold out - they have the power to deny the man income, just as he has the power (in theory) to deny them fish.
It’d be one thing if everybody had everything they wanted: enough clothes, enough cars, enough roads, good schools, child care, hospitals, and doctors, houses, public transport, iPads, and iPhones.
But not everyone has everything they want: which seems like it means we need more people doing more work, not even fewer people doing even less work.