Thursday, April 21, 2016

Chris Cook — Towards an Economics of Common Sense: The metaphysical and epistemological basis of economics

The first examination I ever failed was an Economics paper I took as part of an accountancy qualification. I could not understand the subject at all, as it seemed to bear no relationship to Reality as I experienced it. But since I needed a Pass, I learnt it all parrot-fashion, regurgitated it, duly passed, and mentally filed the subject in the bin.
However, in recent years, my work in that space where markets and the internet converge has led me to take a good look at the financial system, and to the subject of the Economics which provides a conceptual framework – and justification – for it.
I have come to realise that the problem lies in the metaphysical and epistemological basis of Economics – in other words, its relationship with the Reality which we experience. The assumptions, and definitions used are not only couched in language which might almost be designed to confuse, but are also crafted to suit the purposes of those who actually fund the academic development of the subject.…
The result of the development of Economics in the last 100 years or so has been to develop a bastard strain of Economics one of the principal purposes of which has been to justify the taxation of earned income – Labour, rather than the unearned income arising out of economic rents derived purely from the unearned privilege of private property in Commons such as Land.
The other principal purpose of Economics has been to rationalise the current system of Finance Capital, consisting of the Twin Peaks of Debt and Equity. Firstly, a monetary system based upon the creation of credit by credit institutions aka banks which has virtually no basis on the productive economy, and secondly, a system of absolute property rights – in particular the form of financial capital consisting of shares in a Joint Stock Limited Liability Corporation.…
The cleansing of our Economic Augean Stables might begin with a new set of Factors of Production.
  • Location – three dimensional spatial location.
  • Energy – in the form of electricity, the energy value of fuels, and from other sources.
  • Knowledge – the accumulated knowledge, experience and talent of a human during his lifetime, or the imperishable and timeless patterns of recorded knowledge and cultural artifacts he leaves behind.
Each of these Factors of Production has a value in use, and each of them is independent of the other two, although all three must necessarily be deployed together when humans act individually, or collectively via a protocol as an enterprise.
Many would agree that each of these Factors (with the exception of an individual’s lifetime knowledge) is in fact a Commons – owned by and available to all – and I agree with Henry George that those who have exclusive rights of use of a Commons should compensate those they exclude.…
I would not completely exclude an individual's lifetime knowledge since knowledge acquisition and deployment is a shared enterprise. Individuals don't come to knowledge and develop skill exclusively or even chiefly individually but socially as a shared enterprise, ascending a ladder made by others, and in a supportive environment. The "self-made man" is a myth.
The Systemic Fiscal Reform I advocate is neither a revolutionary appropriation by the State nor a redistribution of income. Instead I advocate a transition from the taxation of earned income (since there is no longer enough earned income left to tax) to the taxation of the privilege of exclusive use of Factors of Production.
(a) Location – a Land Value Tax, levied on the use value of location
(b) Energy – Taxation of the use of the Resource Commons, particularly a Carbon Tax; and
(c) Knowledge – a Limited Liability Tax levied on the gross revenues of the Corporation used to “enclose” Knowledge, through employment contracts and Intellectual Property.
There is no way that such systemic fiscal reform would ever be implemented by the institutions which currently exist. Turkeys do not vote for Christmas, and the privileged in control of the Institutions will not give up their privileges.…
No spoiler. You'll have to read the post. It's short and a good read.

Towards an Economics of Common Sense: The metaphysical and epistemological basis of economics
Chris Cook, former compliance and market supervision director of the International Petroleum Exchange

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