hairyfigment (hairyfigment) wrote,

weird economics

This post consists of a rough draft of my favorite plan to end poverty and wage slavery in America. My dream Congress would threaten to put this plan into operation unless experts produced a better plan.

I would start by offering a reward of $X per year to any worker who designs him-or-herself out of a job. Simultaneously, we’d either start offering every citizen a lesser yearly amount (hereafter Social Credit) or give a lesser amount to the other workers who ‘lose’ their jobs to innovation.

Meanwhile, we’d declare that only the U.S. government can create US currency, and forbid banks to create money (except maybe if they call it something else, and make sure people know the government doesn’t consider it US currency and will not accept it for taxes or other payments. It probably depends if we can avoid Gresham’s Law.) Private banks could avoid violating this law by explicitly distinguishing savings accounts – where you can always get your money back, because the bank must keep that money on hand – from investment accounts, where you might not get it back because the bank has loaned it out. Today most of the money “in the bank”, and from what I read most of the money in the world, does not physically exist. (Fractional reserve laws say they can loan out money that officially remains in the bank.) We would, however, temporarily accept people’s bank accounts at face value if they want to switch to the new public Bank of the United States. And we’d have various other means to fight inflation so we can keep creating new money for Social Credit.

First, we’d make a deal with producers of consumer goods. If they lower their prices instead of increasing them, we’ll give them the difference when we see the receipts. People who refuse to make this deal will tend to lose out in the market, assuming others in their industry accept. People who make the agreement and then break it open themselves to harsh legal penalties, including at a minimum the loss of any money they make from their crime and then some. In principle we could confiscate all their assets except the Social Credit, which the theory regards as everyone’s birthright as a human – an inheritance from all the people who made this system possible. (If it works in the USA we can theoretically extend the benefits to people elsewhere.)

Medical care and land may present special problems. (We need both, and we can’t mass-produce them yet.) In the first case, we want more medical personnel. We can improve the situation by offering to pay all costs of education for any remotely qualified applicant – hopefully we can trust medical schools to pick them knowing that if the public hears enough stories of fake students, payments and thus demand for the schools’ services will diminish sharply – and in return the applicant will agree never to charge more than what we want them to charge for medical services. Perhaps we could also make it easier for qualified doctors to immigrate. It should go without saying that my government would offer universal health care. For those who’ve never had occasion to follow this debate, private health care doesn’t work. It suffers from adverse selection, meaning that insurance companies don’t want people who need health insurance. They need their healthier customers to balance the company’s losses. Once the healthier people figure this out and leave, it begins a death spiral where the company has to increase rates, thereby driving more people away.

We can apply the medical services tactics to any services (say, teaching) that we decide we literally need. Other jobs that we can’t automate will increase in price, and I expect we’ll decide to do without some of them.

When it comes to land or shelter, I feel less confident of my solutions. But perhaps the government could buy houses and land slowly, “selling” it with a contract that keeps the price low.

As a reserve measure we can keep the right to use Silvio Gesell’s suggestion for “free money”. This means we can have money decrease in official value with time – so that a dollar bill will decrease 10 cents in face value after a certain period – if the owners choose not to invest it and if we decide the measure seems necessary to fight inflation. Though I’d prefer not to actually use this option given how economically regressive it sounds. The decision would always rest with the experts.

As the anti-inflationary tactics start to prove themselves we could increase the Social Credit until everyone could live on it if they chose to do so. We could also cut taxes, starting with the taxes of the poor. I would suggest that in the meantime we cut what I consider foolish expenses, like drug Prohibition. The DEA would survive in some form, but could only go after improper use of antibiotics. I’d even restrict the FDA to enforcing labels (“This product will kill you,” “This product will get you hooked and kill you,” “This product does not work.”)

We could easily make the Social Credit and Social Security non-cumulative and reduce payroll taxes accordingly, in such a way that SS payments would increase again if we ever reduce the Social Credit to less than most people's payments for some reason. I doubt we would. If we can increase it that far in the first place, I doubt we'll have much trouble keeping it there.
  • Post a new comment


    default userpic
Hi HF. This is Scott Rassbach, from Tim's blog.

I see a few problems with this idea, which would be difficult to overcome.

1) Socially, you are basically finding ways for people to be out of work. People who are out of work are often bored. A certain percentage of Bored people do stupid, criminal, or destructive things. (A certain percentage do creative, socially advancing, or constructive things, as well, but we rarely hear about those). We'll either need something for them to do (and not something voluntary), or we'll need a larger police force.

2) Motivation: If you get social credit for engineering yourself/others out of a job, what do you get when you go and get another job (say, chef or content generator for a newspaper/blog?) Do you keep that credit, or is it subsumed in your work?

3) Producers lower their prices, get the credits, then sell the products overseas. Or they give them away (and thus get the full 'retail' price of the product), and then the recievers of the product sell them. How does this work for used items? What about small businesses, that can't afford accountants to do the paperwork necessary to recieve the SC, but also can't lower their prices enough to compete with the big guys and stay in business?

3.a) producers lower their prices, and flood overseas markets with cheap goods, which in turn strains trade relations, and requires the imposition of tariffs by other countries on US goods, or they start a trade war, continuing to cut their prices.

3.b) what about importers? Social Credit may be very attractive to China, which can then flood the US market with basically free goods produced by slave labor, thus putting more US workers out of jobs, and requiring more social credit.

4) what about 'monopolies', like electricity, gas, or oil?

5) what about commodities with variable prices, like orange juice or wheat?

6) How do stocks kind of fit into it?

7) You are talking about some serious revisions to the way banks do business. How are you going to convince them to go along with it?

8) The current US government operating method involves borrowing imaginary money from the world banks, and spending it in the economy. How are you going to deal with that issue, as well as the fact that the banks of the rest of the world are not going to buy into your social credit idea, as it's not in their best interest?

It's a neat idea, but I have trouble seeing how it could be implemented in the real world. It goes against the self interest of the majority of the sectors you're trying to reform. It also requries a number of liberties to be trampled, and a general reduction in 'quality of life' for the very people you're trying to help. The rich people aren't going to give up their money, and have the wherewithall to pay for their luxuries.
1&2: Yes, that's a feature. Not the supposed crime increase, but the rest of it. By a startling coincidence, I'd like more people to find purpose in the practices of my religion instead of in money. And even if they reject my version of purpose, I want them to think about what sort of life they'd find worthwhile. I don't want them to focus on what they need to stay alive. It seems to me that making people focus on the "bottom line" works against democracy in the long run. If we want to preserve democracy indefinitely, we want citizens who tend to think first about the good of the nation and the preservation of freedom. By preference we want citizens who'd sacrifice their lives and perhaps even the lives of their families to prevent tyranny. The current system rewards the opposite. It rewards slavish devotion to bosses. It almost requires a single-minded attention to personal finances and "security".

As for crime, if we do need a larger police force then the cause of this problem will also produce more people who want the job and don't much care about money. But note that if I had my way I'd end many of the laws that occupy police now. And Social Credit would weaken the argument for keeping those laws.

3: Give them away? Ah yes, I didn't mention that the plan will reimburse sellers for a certain fraction of the current price if they subtract that fraction. (This doesn't change if they charge even less.) Also, my writing style may have misled you on the definition of SC; I meant this to refer to the yearly payments that every citizen receives as a collective reward or inheritance from the nation's getting its act together. Getting back to the point, do you think reimbursement and/or SC would increase exports? It seems like the increase in local demand would have the opposite effect. I don't know how we'd handle used items or whether we need to. I don't know if I understand why a business would need an accountant to keep track of receipts.
3b: Aside from the problem of slave labor, which might induce us to ban the products if we can, does this matter? Our citizens get the goods they want, people elsewhere get money and nobody goes hungry.

4: Excellent question. But if any provider accepts our deal, we can help them replace everyone who refuses. Or, you know, look into a government solar power satellite. (I gather a space elevator would have a fatal flaw.)

5: Presumably we'd set a maximum price for sellers who want reimbursement.

6: Since people don't need to buy stocks to survive, it doesn't seem to matter of their price increases without limit. Am I missing something here?

7: What? I won't. Banks will tend to object to this plan, since it forces new laws on them and creates a competitor who doesn't have to make money. (Those who survive might actually have to respect their customers.) But if enough people start hear about Social Credit and start thinking we all deserve wealth, the sane bank owners will start to see the virtues of my proposed economic commission.

8: We have no need to borrow money. It doesn't matter if it comes from some bank's magic accounting or out of the government inkwell, we still have to find ways to prevent inflation.

I question the supposed reduction in quality of life for the majority. And I don't quite know what you mean by liberties, since all of this with one exception (or two counting the possible answer to Gresham's Law) seems to fit the supposed moral principle of libertarians.
Well, I can see no point in arguing with you. Your plan has serious flaws which cannot be brushed away with "people will see the value in it, and adopt it." You assume people are rational. They are not. You assume people will subsume their self interest AS THEY SEE IT to the greater good, or to what would actually help them in the short or long term. They will not. If they did, we'd all be fit athletes who didn't smoke.

It's a nice plan. Unfortunately, the number of players who have to work against their self interestas they see it in order for it to be implemented is so startlingly high, it will never get implemented.

But hey, committed dreamers can accomplish a startling amount. Go for it.
Parts of this plan sound like Kurt Vonnegut's first novel, "Player Piano."
Sort of. As I understand it, the government in that book made a strange attempt to stop people from thinking about purpose by assigning make-work. That just pissed people off.
Parts of this plan sound a lot like something Robert Anton Wilson laid out in one of his books; I haven't read him for a while but IIRC it was in one of the volumes of the Cosmic Trigger trilogy. I specifically remember, though, that "automate yourself out of a job and receive a $50,000 pension for life" was a major part of the plan.
I know he put something like this in Schrödinger's Cat. I didn't think it would work without a few changes.