mmt@dciem.UUCP (Martin Taylor) (12/03/83)
==========
From Michael Condict:
It always befuddles me how people who know a little (or even a lot)
of economics can let it lead them into gross violations of common sense.
It seems that talking about M1 vs. M2 money, reinvestment of deferred income an
d
all sorts of abstract financial concepts makes one forget a very basic fact:
money is not wealth, it is just a rather bizarre and complicated
symbolic representation of wealth which people manipulate and abuse in order
to attempt to acquire real wealth, which is of course measured by standard
of living and the ownership of luxurious possessions.
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The intent of this comment is painfully true. Money is NOT a resource.
You can't eat it, build with it, or efficiently clothe yourself with it.
But neither is it a representation. It is a transmission medium, or
perhaps better, a channel through which information about value is
passed. Value is what you would swap for what you want, and money
can pass that information. Uncertainty about value is noise in the
channel, and is a major cause of inflation (maintaining information
rates in the face of added noise).
==========
From Michael Condict:
(1) it takes materials and labor to build things, (2) both of
these are available at limited rates, whether or not they are inexhaustible
in the long run, (3) things like homes, cars, tvs, and movies that you
enjoy did not grow on a tree, their production consumed some part of the
available labor and materials. There is an obvious sort of conservation
law in operation here: output=input. From this, without knowing whether
the economy functions by money or by barter or by theft and coersion we can
all the same quite easily conclude that (4) the higher the percentage of our
available materials and labor we spend on sending somebody to the moon or on
putting missiles in a silo, the less is available for building cars, tvs and
all the things we the common people actually use.
This logic is irrefutable, yet apparently impenetrable to many economists.
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The logic is refutable. Value is contained not only in materials
and labour, but also in structure. This structure is not only in the
objects constructed but also in the social patterns that arise because
of economic activity. The Huntsville infrastructure was a value
sustained by the channel whose end-point was NASA "wastage(?)".
There IS benefit in building worthless things that are left in
holes in the ground or are shot into space.
To change the metaphor (only slightly: thermodynamics and information
theory are tightly linked), consider the economy as a heat engine
with money as the working fluid. There must be a source (raw materials)
and a sink (final wastage of derelict objects). Between, there can
be many loops, but the work that is done can be sustained only by
the basic heat flow. An engine of 100% efficiency can reduce that flow
to zero, but such efficiency cannot be attained in practice. In
economic terms, money used for wasted objects is useful, but not
as useful as that spent on objects that themselves are useful.
These objects participate in further energy (money) loops, contributing
more.
We don't have economic perpetual motion machines any more than we
have physical ones. Both are powered by physical energy, the economic
machine by materials handling as well.
--
Martin Taylor
{allegra,linus,ihnp4,uw-beaver,floyd,ubc-vision}!utzoo!dciem!mmtlaura@utcsstat.UUCP (Laura Creighton) (12/03/83)
Ah, but Martin, I *do* think that we have a perpetual motion machine. (so it looks like a Rube Goldberg machine :-) ). We also manage to cheat entropy a little bit. The other day, somebody offered me money to goo and look at his computer installation and tell him what was wrong with it. All that it required on my part was thinking. Now thinking is a rather neat thing. I do it all the time. All you have to do is feed me and keep me warm and I will go on thinking. Every so often, people will decide to throw money at me for doing what i would be doing even if they weren't paying me -- namely thinking. This is astonishing when you really think about it. The question is "what is real"? You really want your money to represent something if only "that I consider this valuable". So. We all need food. Up in this marvellous climate that you and I share ( :-) ) we all need a place to keep warm in at night so that we don't freeze. If we get sick, or in an accident, we need a doctor and perhaps some drugs. It is arguable that there are other psychological needs (such as the need to be loved) but you know far more about them than I do. All the rest are *wants* not *needs*. Now it strikes me as very strange to build a whole world based on wants. i want lots of things which I know I will never have. (To begin with, I would like to be 5'7"). In grasping something and saying "i want this" you actualy saying "i want what I expect this to be". Now as you see this works better when "what you see is what you get" but this may have nothing to do with the price of an object. Thus it costs me nothing to tell somebody that he needs another disk drive but that is still worth money -- so indeed it is his expectation which is really worth the money, not my service. I find this all very, very strange and hard to think about. but I still think that I just "got something for nothing". I am not sure whether it is the money that i got for nothing or whether it is the thoughts that i got for nothing, though... Laura Creighton utzoo!utcsstat!laura
condict@csd1.UUCP (Michael Condict) (12/05/83)
Martin Taylor appears to provide examples of exactly the sort of ivory-tower, blind-to-the-obvious reasoning that I was complaining about in my original note about the economic uselessness of useless things. First he says that my logic (which concluded that materials and labor spent on useless things lower the amount of materials and labor available for useful things) is refutable, because "structure" has "value" too. This sort of jargon makes me exasperated, not to say frustrated. Of course bridges and roads require materials and labor to keep in repair. But in that respect they are just like tv sets, which we buy every so often because they wear out. If there is something special about "infrastructure" and the way it relates to my logic, he did not point it out. Second, he throws in a metaphor about the economy being like a heat engine. My first reaction is that metaphors are for people who want to prove something about A but can't, so they say A is like B and then prove it about B. If you can't see anything suspicious about this reasoning send me mail and I'll prove to you that 1=0. My second reaction to this particular metaphor was, okay, let's accept it for the moment and see what happens. Well, when I'm using a heat engine, I don't want any of its output to go to useless things (like running the air-conditioner in my car with the windows wide open). Rather, I want all of it to be used for, say, making me go faster. The reason I feel this way sounds remarkably like my logic in my previous message: my heat engine converts fuel to work at a limited rate, and in some circumstances, this rate is inadequate (I love acceleration), so naturally I don't want to reduce the rate at which useful work is performed by wasting some of it. Finally, Mr. Taylor's aruments about loops and working fluids in the economic heat engine were obtuse far beyond my poor abilities to make intelligent responses to them, so I won't, except to say (humorously) that it sounds like he is claiming that the economy is fuel-injected and turbo-charged. M. Condict ...!cmcl2!csd1!condict Courant Inst., New York U.