The Equanimist

A Short Note on the Primary Superiority of Fiat Currency-based Socioeconomics to Commodity-based Socioeconomics

Posted in *HIGHLIGHTS, Economics, Economy, Philosophy, Socioeconomy by equanimist on June 10, 2010

Work is not used to put people to money (so long as “excess” of any product can be created) but money is used to put people to work.

Fiat currency is not a commodity but a tool. That it can be used as currency of actualized human potential is its primary virtue. Otherwise, we might as well use something like gold, which may tend to approximate (but is no) ideal fixed-quantity commodity.

As has been demonstrated time and again, there is an extremely acquisitive and (very nearly) equally thrifty minority who will part with what they’ve got “over their dead bodies”.

Still, there is a human potential greater than the relatively small portion of currency that this de facto steward class makes available to effect productivity and, otherwise, peace and prosperity.

Fiat currency takes control of this natural tyranny putting people to work (and, otherwise, keeping others from it). The work people do (and, otherwise, the work that they don’t do) makes our lives better.

Fiat currency representing the work that has been done and approximating, at any given instant, that which can be done by same population with improved technology in future accomplishes in this way what commodities cannot: stabilization as the result of primarily peaceful transitions—a modulation (i.e., minimization) in amplitude of cyclical socioeconomic transitions between peace and war, if you will.

Commodity-based socioeconomics, on the other hand, must include physical reclamation of actual assets for redistribution or debt (forgiven cyclically) in place of fiat currency! That entails a lot of dead bodies, as has been demonstrated.

Prelude to Part II in mixed metaphor, "On Natural Rights" (Update 1)

Posted in *HIGHLIGHTS, Economy, Philosophy, Poetry, Public Policy, Socioeconomy, Untitled Work Number I by equanimist on March 21, 2009
The natural world!
O, to be better by fine margins!
How will we know who is best?
We will fight. Winner, take all.

Drop what you are doing for the competition. The first place finisher will get a gold medal ($953/oz.); second place, a silver medal ($13.73/oz.); third place, bronze (something greater than zero/oz.). Never mind how impossibly small the difference between first and third might be.

Everybody else is worthless. Finito, Benito!

It is the natural prerogative of winners to dispense with losers. But, winners cannot expect to lord it over losers when they are better by fine margins.

Sayeth the businessman, son of steel workers, “This country – to which I owe everything – this, my country that raised me and made possible the extraordinary life that I lead, having taken everything, I will burn her tits. I will raze her to the ground under me! To whom do I owe my allegiance? I owe nothing! I earned this right. And, I will take my business elsewhere.”

And, they band together to defeat winners.

An endless cycle of winners and losers.

O, to exist in the natural state!

Let us not accomplish anything at all. Why should we when we can ravage the cupboard?

We will wear our balls hanging out and the women folk gather fruits and nuts; and, we will hunt within our domains.

Response to Global Trends 2025, Part I: Country at a Crossroads

Posted in *HIGHLIGHTS, National Security, Politics, Public Policy, Socioeconomy by equanimist on November 26, 2008

US technological and strategic advantages are not insuperable and, the US has lost luster (if not real ground). To retain (or regain) global standing, US “elites” must voluntarily or US stewards must demand that they take aggressive proactive roles developing innovations that will assure continued great power status or be willing to (1) leave successive generations a weaker and increasingly less relevant US, (2) experience real declines in domestic standards of living and (3) leave the US and its allies prone to a hostile multi-polar world wherein destruction might be mutually assured and success might be mutually precluded. Will the US rise to the challenges of 21st century leadership?

First on a long to-do list is an overdue green revolution. The world wants power to fuel rising standards of living. Fossil fuels will be insufficient to supply demand (esp. within a context of global climate change). Whoever develops cost-effective low-impact energy solutions to meet ever increasing energy needs will wield extraordinary power in a new middle-class world. Alternatively, it seems only reasonable to assume that emerging-power energy requirements will significantly raise the possibility of international conflict.

Second, significant overtures ought be made to bring China and Russia into the Western fold. Western powers ought not appease these rising Eastern powers and, there is no sense in antagonism. (Does Poland need missile defense, for example? Should not a meaningful US umbrella suffice?) Western civilization is not a cult of democracy but a democratic solution to the problem of good governance. Is there no room in the West for liberalization on different tracks? Is there no possibility that we might learn something new? We are not so young or so unstable that we cannot stand a little competition. Parallel development of effective governance strategies ought not be viewed with fear but with healthy skepticism. China, in particular, does seem to be following a liberalization strategy and, as such, may be seen to approach Western-style socialized democracy vis-a-vis democratized socialism.

Third, while excessive nationalism is generally insupportable and counterproductive, the US is clearly spread too thin. More care must be taken that globalization is not a race to the bottom. Global Trends warns against some vague “protectionism” that might be better described as isolationism (and xenophobia?) That the US cannot recoil from the world does not admit that the US can afford the consequences of too liberal foreign policies. A balance must be found between the national and global interest.

Fourth, the US must reinvest in infrastructure (to include human capital). Among themes that recur in Global Trends, the US despite extraordinary natural, intellectual, cultural and technological resources is losing ground. The implication is US infrastructure is failing for lack of maintenance. The Ayn Rand model of Greenspan’s “free-”market capitalism is failing. Too liberal market policies have resulted in nearly four decades of radical redistribution of wealth on the one hand and decelerating pace of US innovation on the other. For as long as US stewards continue to indulge libertarian market fantasies and refuse to make hard choices, US infrastructure will deteriorate because self-interested individuals cannot be counted upon to make consistently wise strategic decisions. Isn’t that why we adopt governance over anarchy in the first place? Complacency and profit taking (profiteering?) have left the US vulnerable and pose real danger to US standing.

The Myth of the Pay Incentive (a follow-up note on innovation)

Posted in *HIGHLIGHTS, Philosophy, Political Economy, Public Policy by equanimist on November 16, 2008

Previously, I wrote a little note (“A Note on Innovation”) in which I argue that US-style “free-”market capitalism is collaboration inhospitable; that so-called “performance-based pay is profit-driven; and, as such, innovation-irrespective “performance-based” pay packages favor cheap, outmoded and proprietary goods and services (what some might call “crap”).

To fill the gaps left in this short note, I submit that “free-”market capitalism is just a feature on the US-economic landscape – a landscape strewn and dotted with (1) legislation (2) efficacy-driven market-share competition (3) strong perceived need and (4) pay promises that are only valuable on innovation, all of which do spur innovation.

Take, for example, the so-called “Big Three” (viz., GM, Ford and Chrysler).

Big Three executives command exorbitant pay packages relative to foreign peers. If innovation were a function of high pay (or vice versa) then Big Three executives should have radically advanced the industry in recent years. Have they? Have US automakers radically advanced the auto industry? The answer seems a resounding, “No.

Focus in on just one decades-old concern, fuel efficiency. Aside from a few so-called “econoboxes”, the Big Three have failed to produce even fuel-efficient vehicles, let alone the most fuel-efficient cars in any class. Legislation, such as CAFE standards that US car makers fight tooth and nail, has advanced fuel efficiency. So, despite Big Three executive pay packages (often multiples of foreign counterparts’ executive pay packages), the Big Three are not generally “innovative” and, the Big Three have consistently fought innovation. As a result, the Big Three have consistently lost market share to foreign rivals who have innovated.

Even in this soft economy, foreign car makers continue to grow market share. Why? When oil prices exploded, “patriotism” (decidedly anti-free market force) and advertising lost out to real efficacy-driven market-share competition and, foreign car companies were ready with many fuel-efficient cars. They were ready not because German and Japanese auto execs command extraordinarily high salaries that spur innovation but because foreign car makers have long competed for market share where gas is costly. That is, efficacy-driven market-share competition – competition, for example, to save consumers real dollars when real dollars really add up – is a powerful economic force.

Still, while efficacy-driven market-share competition may be sufficient to spur innovation, innovation is often product of something altogether other than market forces: strong perceived need (often subsidized by government and government entities). “Necessity,” as they say, “is the mother of invention.”

Since ancient times, battlefields have been rife with innovation. Likewise, at all times, implacable scientific minds and engineers have made manifold innovations (often in so-called “free time”). Some of history’s greatest innovators (often members of the leisure class – often subsidized) have toiled because they “needed” to know – they “had to” – had to satisfy themselves!

Strong perceived need is vital to innovation and much would not proceed if it were not for the very anti-free market force of subsidies that furnish resources and opportunity. Ergo, to this day so-called “free-”market governments fund agencies, academic institutions, departments and scientists within same in addition to private contractors. Why? Because “free-”market forces and “performance-based” pay are insufficient to spur myriad innovations that keep countries like the US one step ahead of the competition.

These government and academic scientists and engineers do not generally receive “performance-based” pay but graded pay (an extreme whereat there is no remunerative reward for innovation). The pay is so bad that many flee the very projects they most cherish to make money in the “private” sector (a sector not known for paying scientists and engineers sums to rival executive pay packages). That is, low pay packages may actually stifle US innovation by driving scientists and engineers away from basic science to more lucrative careers in business, sales and pharmaceuticals (where they have devised a way to make medicine pay: cure nothing, treat everything).

So, legislative (and litigious) processes spur innovation. Efficacy-driven market-share competition spurs innovation. Strong perceived need inspires innovation. Subsidies often make innovation possible. But, in no case does pay per se spur innovation (though, as indicated, too low pay may hamper innovation).

How can remuneration spur innovation? Well, that guy in the garage building a better mousetrap – if he isn’t some wonk like me who simply must satisfy himself – is probably sick to death of slaving away while executives make fortunes off the sweat of his brow. He becomes the so-called “entrepreneur”. That is, the promise of future pay that will only materialize as the result of innovation is a powerful incentive.

Thus, innovation is spurred by (1) reasonable mandates, (2) efficacy-driven market-share competition, (3) perceived need and curiosity and (4) the promise of pay for innovation. Innovation is not a function of regular or so-called “performance-based” pay (i.e., pay packages linked to short-term value of profit shares).

Until and unless (1) government mandates innovation; (2) competition fuels innovation; (3) innovation is cheaper than existing technologies or subsidized; (4) necessity demands innovation; and (5) pay packages are restructured to drive innovation per se, innovation will progress at a sub-maximal rate because “performance-based” pay is both irrespective of and insufficient to spur innovation.