It isn’t the amount of money that a society has in circulation, whether dollars, euros, beads, or wampum. Rather, it is the availability of the things that create well-being—like antibiotics, air conditioning, safe food, the ability to travel, and even frivolous things like video games. It is the availability of these “solutions” to human problems—things that make life better on a relative basis—that makes us prosperous.
This is why prosperity in human societies can’t be properly understood by just looking at monetary measures of income or wealth. Prosperity in a society is the accumulation of solutions to human problems.
These solutions run from the prosaic, like a crunchier potato chip, to the profound, like cures for deadly diseases. Ultimately, the measure of a society’s wealth is the range of human problems that it has found a way to solve and how available it has made those solutions to its citizens. Every item in the huge retail stores that Americans shop in can be thought of as a solution to a different kind of problem—how to eat, clothe ourselves, make our homes more comfortable, get around, entertain ourselves, and so on. The more and better solutions available to us, the more prosperity we have.
The long arc of human progress can be thought of as an accumulation of such solutions, embodied in the products and services of the economy. The Yanomami economy, typical of our hunter-gatherer ancestors 15,000 years ago, has a variety of products and services measured in the hundreds or thousands at most. The variety of modern America’s economy can be measured in the tens or even hundreds of billions. Measured in dollars, Americans are more than 500 times richer than the Yanomami. Measured in access to products and services that provide solutions to human problems, we are hundreds of millions of times more prosperous.
Growth as the Rate of Solution Creation
If the true measure of the prosperity of a society is the availability of solutions to human problems, then growth cannot simply be measured by changes in GDP. Rather, growth must be a measure of the rate at which new solutions to human problems become available. Additionally, since problems differ in importance, a new view of growth also must take this into account; finding a universal flu vaccine is more important than creating a crunchier potato chip. But in general, economic growth is the actual experience of having one’s life improved. Going from fearing death from a sinus infection one day to having access to life-saving antibiotics the next isgrowth. Going from sweltering in the heat one day to living with air conditioning the next is growth. Going from walking long distances to driving is growth. Going from needing to go to a library to look up basic information to having all the information in the world instantly available to you on your phone is growth. (Obviously, some solutions, like air conditioning, may create other problems, like global warming. How to make the trade-offs between solutions and problems is one of the central challenges of any society—an issue we will return to later in this essay.)
This all implies that we must find new ways to measure progress….
Democracy — A Journal of Ideas
Capitalism Redefined
Nick Hanauer & Eric Beinhocker
See also Eric Beinhocker, A Truer Form of Capitalism [points out that Ayn Rand was down on economic rent as market distorting]
See also Eric Beinhocker, A Truer Form of Capitalism [points out that Ayn Rand was down on economic rent as market distorting]
This is making a splash. The frame is beginning to change with pretty remarkable speed.
13 comments:
This is why I love MMT. It takes a much more anthropological viewpoint to the government spending issues. All the hocus pocus in Washington should just be a means to the end of creating wealth in real terms. Unfortunately, 99% of the country wants to obsess over the finances.
Well all of these items/systems of real wealth are meaningless if we dont have the currency balances available to facilitate the human exchange of these items of real wealth... rsp,
Right, a monetary production economy needs an elastic money supply which is why endogenous money is key.
We don't need an elastic money supply; we need a money supply that grows at the correct rate and NEVER contracts.
Or would you like it if your blood supply was lent into existence, Tom?
Two forms of money can be spent into existence with no need to ever contract. They are:
1) fiat - appropriate for government since government is force.
2) common stock - appropriate for the private sector since the private sector should not be based on force but on voluntary cooperation.
Actually, TJG, I wish MMTers would spend a lot more time talking about what needs to be done and come down out of the abstract and politically neutral heights of macroeconomics - and also stop imagining that every problem can be solved with a sufficiently large tax cut or simply by government "spending" in general, without regard to details.
We can't fix our sick planet and sick society just by applying the sectoral balances equation, because that equation will still hold true whether we build a paradise or a hellhole.
Whatever society we aim for along with whatever economic system brings it to bear, I hope it includes something akin to this:
http://www.nytimes.com/2013/11/17/magazine/switzerlands-proposal-to-pay-people-for-being-alive.html?_r=0
Actually, TJG, I wish MMTers would spend a lot more time talking about what needs to be done and come down out of the abstract and politically neutral heights of macroeconomics - and also stop imagining that every problem can be solved with a sufficiently large tax cut or simply by government "spending" in general, without regard to details.
I think that the MMT economists, and Warren Mosler especially, have been pretty upfront with detailed policy proposals based on a highly developed macro analysis. I agree that it's not comprehensive but it is way ahead of where most other macro folks are with respect to detail and substantiation.
I would like to see a book forthcoming that updates John Kenneth Galbraith's The Good Society and Economics and The Public Purpose in terms of MMT. JKG targets the fundamentals pretty well. MMT shows how to get there. This new book could be a collaborative effort of MMT professionals and others interested in MMT. Could be cranked out as an ebook pretty quickly drawing largely on existing material and adding organization.
I think that the MMT economists, and Warren Mosler especially, have been pretty upfront with detailed policy proposals based on a highly developed macro analysis.
No they haven't, Tom. Warren routinely dismisses all of the important details as "political questions." There is no well-developed MMT position on health care policy, education policy, energy policy, transportation policy, income distribution policy, or other public investment and infrastructure priorities.
There is some retirement policy stuff, but it is only aimed at getting rid of the payroll tax, with no details on the future shape and scope of Social Security, and how large a role Social Security should play vis-a-vis private sector retirement plans.
There is the job guarantee, but Warren's version of the JG is extremely minimal - a minimum wage "starter job" whose chief requirement seems to be only that people show up on time - and he explicitly frames it as not "interfering" with the private sector.
The one area were there is substantial detail is in Warren's bank reform proposals.
I don't think this is that much of an issue pertaining to MMT specifically. I think it's an inherent limit on macroeconomics. Macroeconomics is a general, abstract framework for understanding a limited dimension of society. To the degree some macroeconomic framework is accurate, it will be accurate no matter what set of political and policy choices are implemented. It is not public policy, and people shouldn't confuse it with public policy.
But MMT seems particularly math averse compared to other approaches to macroeconomics, and so it is even more difficult to derive prescriptive results from it.
Ah yes. Once Warren Mosler has secured the banking system, even from itself, the rest is mere political concerns.
Well, just what isn't political and unjust about government backing for what should be purely private businesses, the banks? Huh, Warren?
There are no alternatives to government-backed banks, you say?
That's just wrong. Shares in equity is a perfectly ethical form of endogenous money creation as is purely private credit creation.
But why share, when one can legally steal?
Dan, the MMT economists aren't running for office and they are dealing with pretty small subset of macro. They are swamped with teaching loads, publishing, answering questions, and blogging about MMT. I seriously doubt that there will be a comprehensive policy formulation from them.
Warren ran for office and presented a more comprehensive policy statement in connection with that. I agree it is hardly comprehensive of the broad range of issues.
If a comprehensive policy formation is to be offered it will be done by policy types that have the economic chops to understand the policy implications of MMT and a lot of other things, too, not just economics but also the rest of the social science and social and political thought.
To my knowledge there is as yet no comprehensive policy formulation on the table other than the political platforms of the various parties.
To develop a comprehensive policy platform on the left I would look at the party platforms of progressive and "green" parties internationally and integrate knowledge like MMT into them to come up with a carefully documented book on global policy viewing the global economy as a closed system.
I would use a general systems approach rather than one derived from poli sci or economics. I would think that the optimal scenario for doing this would to get a transdisciplinary team of experts funded for this purpose by someone like Soros. This is the purpose in a way of INET but INET is not it. Then a PR team would have to be funded to sell it to voters and people of influence.
I'd ballpark the ramp up and roll out cost in the tens of millions of USD to be effective as quickly as needed given the challenges. Sounds like a lot of money but it isn't even a drop in the bucket of what's at stake.
I would use a general systems approach rather than one derived from poli sci or economics.
You'd better include such things as ethics and justice or you're likely to have helped bring in the 666 money system.
Yes, you can scoff at the Bible if you will but who will defend you if you scoff at justice and ethics too?
Moreover, the fascists have constantly outmaneuvered you Progressives perhaps because some of them, unlike you, actually believe in the God you think you're too smart for? Well, if you're so smart then why are you losing? Heck, even Mosler may be playing you guys.
I don't expect you guys to join a church but if you can't comprehend the need for ethics and justice then what good are you?
I don't really disagree with you much Tom. But maybe less time should be spent on framing and more time on extending the theory into new areas and engaging in policy discussions.
Dan, I think they go together. The framing sets the context for the undertaking, defines the key concepts, lays a foundation for the good society, and so forth. This is the philosophical foundation that is substantive, normative, and methodological.
The various policy sections — health care, education, employment, foreign policy and so forth — are spokes that radiate out from this hub.
The framing establishes the vision and the policy choices articulate how the vision will be actualized.
The foundation can be labeled, as was the New Deal. This could be called the Fair Deal. It could be based, for example, on the Declaration of the Rights of Man and the Citizen (1789, revised 1793) as updated by the Universal Declaration of Human Rights (1948)
Post a Comment