16 February 2013

The Resource Based Economy mind virus

We've seen the Zeitgeist films and sadly they're still taking a hold on impressionable young minds that could be doing something useful instead. Despite its shoddy research, its baseless assertions and its gross generalisations (or perhaps because of them), a few things about the films stand out:

  1. We have to get rid of all monetary systems.
  2. The answer to all our woes is a Resource Based Economy.
Bad ideas have a habit of outliving good ones, perhaps because they are neat, plausible and wrong. These are all hallmarks of the kind of thinking that does not require much thinking, and as we know thinking is the hardest work of all. Perhaps this is why the bad ideas keep being perpetuated, while paradoxically the good ones are also neat, plausible and slightly less wrong. Why the good ideas don't get perpetuated as readily is beyond me.

Here's an image of Frank Zappa. Because Zappa is god.


Why should we get rid of a monetary system?

The Zeitgeist films try very hard to blame all our current problems on a monetary system. This is probably because the Zeitgeist movement conflates a fractional reserve banking system with monetary systems everywhere. Most people are economically illiterate and the notion that money is the root of all evil is not exactly a hard-earned conclusion.

"Money is a matter of functions four, a medium, a measure, a standard, a store".

Let's picture a world without money to highlight why there is money in the first place: If all we have are commodities without a currency to mediate, we are reliant on the coincidence of wants. To simplify the point, let's forget all the other complications such as a lack of a store of value, a lack of a unit of account, a lack of a standard for deferred payment, and all the other benefits that money gives us. Let's just focus on the coincidence of wants.

Suggest that you are a dental floss salesman from Montana. You go to the dentist. Your dentist is already well-stocked when it comes to dental paraphernalia and he does not require more dental floss. You are living in a society that has been exorcised of all money. How do you pay for your dentist visit?

This is perhaps why some anthropologists claim that debt is the first instance of money. Maybe some barterers got sick of getting the same goods from the same people and just said let's stick to I.O.U.s. Just like Menger's original account of where money originated, this is pure speculation and the functions of money do not rely on the order of things. It does however show two things:

  1. Without money, we still need a coincidence of wants. This coincidence of wants presents an unsolvable problem. To be more succinct, it is impossible to please everyone.
  2. The Resource Based Economy relies on commodities and conveniently ignores services that are provided by skilled people. This is perhaps because its chief evangelist is not a trained engineer and is unfamiliar with the kind of perseverance it takes to become skilled in a discipline. The Resource Based Economy just assumes we'd all be happy to get our daily bread from spambots and go on our merry way while automatically just obtaining the kind of skills required to maintain the spambots. If this is the case, why is there such high incidence of crime amongst people on welfare who do have the bare minimum that anyone could ask for given to them? But I'm getting ahead of myself, let's see what an RBE is.

 What is a Resource Based Economy?

Before we get to the Venus Project, it is worth noting what economics is. Economics is a social science primarily concerned with the production, consumption and distribution of resources. A Resource Based Economy thus refers to an economic problem per definition. Any notions that a Resource Based Economy is a radically new idea are thus misguided and testifies plainly of ignorance of economics as a field.

The Zeitgeist evangelists are familiar with the term as a reference to a system where information, goods and services are freely available. Their Resource Based Economy (RBE) relies fundamentally on the "average man" - a notion that first inspired the Socialism and Communism from which Zeitgeist bildungsphilisters are trying to separate themselves at all non-monetary costs.

This begs quite a few questions:
  1. Where do these skills and services come from? The information content of virtually any tertiary education is already freely available (see Khan Academy for one), but this has not yielded the masses of skilled semi-professionals that it could have yielded. By contrast, voluntary free association has yielded many fruitful projects, amongst them Wikipedia and SETI@home (and no, these are not examples of gift economies, these are examples of Collective Intelligence). 
  2. What about people who prefer having more of a given commodity than is provided by the spambots? We are told that the Venus Project does not rely on bartering or on a monetary system. What if I like hoarding chickens and I end up with more chickens than anyone in the Venus Project? Are the spambots going to dish my chickens out to all and sundry, in which case I have no more incentive to keep them in addition to experiencing the tyranny of social engineering first hand? What if my chickens require more land than my allocated land? Will the Venus Project assure me the property rights to enlarge my coop, or will I have to conduct a chicken coup d'edat? Death to the naked apes! Power to the flightless birds!
  3. How does this system deal with scarcity? Some commodities are in fact scarce and this is more or less reflected in their monetary value, give or take a few hiccups. If we share scarce resources equally, we'd all be fitted with essentially a pittance of that resource that is of no use to anyone.
  4. How does this system prevent bartering, trading and all the other innately human impulses that give rise to inequality in the first place?

The dangers of this system are not contained in its misguided calls for getting rid of currency, but in its social engineering implications. Social engineering is nothing new: It has been tried and tested and it doesn't work. The reason why it doesn't work is because the needs and wants of a group of individuals cannot be accurately portrayed by merely averaging out their individual whims and conveniently ignoring the outliers. Many of the brightest, most highly qualified engineers have tried, and failed. This is nothing but the principle of 'from each according to their ability, to each according to their need' in denial and in disguise.

Is it a good idea to unravel all the gains of the Age of Enlightenment to return to a serfdom? Except now it's an improvement because of social engineering, scientific socialism, and the consolement that the serfdom is run by the same kind of bots that crashed Wall Street?

14 November 2012

Open letter opposing etolls

This is my letter of complaint regarding the etolls. I decided to replicate it here because I received no acknowledgement that my letter has in fact been received. Government seems hellbent on rubberstamping this bullshit through, so I am merely putting this out there so they can't act surprised when they sit with the tax revolt and the civil disobedience when they try to go through with this highway robbery.

If you'd also like to add your voice, feel free to get the details from the government gazette and email these clowns. Also please support Outa if you can. Government is a gang of thieves at large (apologies to Rothbard).

Kindly note that I am opposed to etolling and any means of tolling any public road. I feel that the fuel levy should be sufficient to maintain roads and that tolling is not an efficient nor desirable means to pay for road maintenance. The treasury should foot the bill, as we pay taxes for maintaining infrastructure. We do not pay taxes for upgrading official presidency residences like Nkandla, nor do we pay taxes for petty lawsuits to protect the 'dignity' of a certain privileged elite. Taxes should go towards the benefit of the public. Everyone benefits when government does its job of maintaining public resources.

I am opposed to the user pay principle, because many road users from as far as Durban and even Cape Town do in fact use the Gauteng roads to transfer goods into and out of the province.  Furthermore, if one would like to maintain the user pay principle, then ALL of the road users - including ministers of parliament and public transport users - should pay for the privilege of using the road. A principle is only valid if it counts for everyone. There can be no exceptions, because if there are, the principle does not hold.

Since the government has been collecting fuel levies for quite some time, from all users, by means of the national fuel levy, there should have been enough funding available to maintain the road. The fact that there may not be, is not a valid reason to fleece the public some more. Rather, it is reason enough for the powers that be to abdicate.

In addition, I feel that the government is being dishonest here. We were not given 30 days to comment on the tolls, we were given less. Also, we should have been given this opportunity BEFORE any construction on the gantries started, not AFTER they have been constructed. Most of  the costs go towards paying for toll collecting fees (85c out of each Rand according to public information sessions), so this is ridiculous. These are externalities and do not relate directly to building and maintaining the road at all. Also, the tariffs are allegedly not new, this according to the Justice Project SA.

Finally, I feel that government should be responsible with managing public resources. It was irresponsible to gamble public pensions on this 'white elephant'. The road should have been maintained already, we already paid to maintain it and this was arguably the least efficient means that government could have gone about maintaining the road. Government should foot the bill and stop fleecing the public every time it makes a mistake.

26 August 2012

Money versus 'Resource based economics'

There's still mass confusion ruling in the midst of the Zeitgeist movement and the Venus Project zealots. The Zeitgeist movement thinks we do not need money because a fraction of the monetary system we currently have is fractional reserve banking, while the Venus Project thinks it's easy to do a bit of finely tuned central planning and cater for everyone's subjective evaluation of goods and services. Here are some basic questions about money that I tried to answer:

How is money generated?

Money is a medium of exchange. It is generated by manufacturing it, just like any other product. Unlike any other product, money (as in currency) has the highest marketability and serves as the greatest store of value. Any currency has to have these 2 properties. I'll illustrate this with an egg:  Suggest that you are an egg farmer.

Highest marketability merely means that everyone is happier when you pay them in money than when you pay them in eggs. On your egg farm, your workers will be happier when you pay them in money than when you hand them a tray of eggs for a day's work. In turn, you can get eggs with money, but you can't usually trade eggs for something else in the barter or direct exchange way.

A store of value means you get a bit more time to decide what you'd like to trade. This means you aren't limited by how long your eggs stay fresh in order to make purchases in the direct exchange/barter way, but you can shove all the money under your mattress for a rainy day.

As you can see, our current system separates the basic economic principle of exchange from money entirely. In short, 'let them eat credit'. You don't exchange your eggs on your egg farm for a car with money serving as a convenient medium of exchange. Instead, your car is usually bundled with financial services, guarantees that you won't default, monthly instalments and insurance to the extent that it's more about currency than exchanging goods and services for other goods and services.

For this reason, amongst others, the Rothbards of the world believe we should stick to an objective standard for money. The first known cases of money did this, with measures of silver equal to a certain amount of grain. Which leads us to your next question:

What conditions exist when this money is created?

It varies. Money as in a medium of exchange is usually created whenever you have something that I value and I have something you value, but we don't value them equally and we find something that has a higher marketability and serves as a store of value. This could be anything, from the Roman Empire's silver coins (which served as currency as far as India and existed side-by-side with bartering), to cowrie shells, which was the currency of choice in Africa for hundreds of years. By the way, cowrie shells also cast doubt in the notion that there is no empirical observation of currency taking root, besides the fact that debt is also currency.

The exact material used for money depends on many factors. In history, the most common denominator is usually some precious metal, like gold. This is because it is scarce, its purity can be determined objectively and it can be weighed objectively, so it serves as a standard. I still think we should use beer as our currency. Often, people were not happy with the authorities meddling with the purity of commodity money, which brings us to:

Who owns the 'right' to create money?

Everyone does. At least that's the ideal of people like Friedrich Hayek. This also happens whenever a certain currency is inflated to such an extent that its marketability is no longer more significant than something else, like the Zimbabwean Dollar that was neglected in favour of American Dollars, or mobile phone credit that is used as currency in Iraq. It's also the idea of bitcoin and other newer versions of digital currency. In reality, the authorities keep a tight grip on money creation as it's easy to launder money, in which case they lose out on taxes, or to counterfeit money, in which case we may be defrauded. 

What purpose does interest serve?

Without interest, money lenders have no incentive to lend to those who need money. This is an awkward position for many small businesses and the poorest of the poor, many of whom are women in impoverished communities building businesses with loan shark money. I'd think interest serves everyone's interests.

Without currency there is no economy!!!! So why are we not taught about currency and the creation thereof?

I'd take that one step further: Without currency, there is no civilisation. We live in the information age, where we are quite capable to teach ourselves nearly anything we'd like to know. We do have currency so going back to a stage where we no longer have currency is not progress, it's regression. If anything, we'd have to invent and embrace the next stage of our evolution. In other words, build the future.

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