tag:blogger.com,1999:blog-7820485130017459619.post4368996169595305765..comments2023-10-24T01:46:47.151-07:00Comments on CynicusEconomicus: Reforming Money - Fixed Fiat CurrencyUnknownnoreply@blogger.comBlogger63125tag:blogger.com,1999:blog-7820485130017459619.post-5517575237855789842009-08-02T10:51:14.455-07:002009-08-02T10:51:14.455-07:00Lemming:
The system will work under all conditio...Lemming: <br /><br />The system will work under all conditions, as it only seeks to represent the economy, not alter it. I am still working on the idea (refining it for academic economics), and there are very limited problems with the system due to the representational nature of the money. If oil went into decline, there would be a move from steady deflation to steady inflation until such time as a replacement for oil was introduced. <br /><br />Oil is an interesting example, due to its centrality in modern economies. I am not sure any other factor might cause a steady inflationary effect, excepting massive but steady demographic change. <br /><br />Under the current system, they have no solution to this kind of problem, and would seek to remove the inflation through interest rate rises. As if that would create more oil.....Markhttps://www.blogger.com/profile/14983165364072918091noreply@blogger.comtag:blogger.com,1999:blog-7820485130017459619.post-37565305221157091602009-08-02T04:58:38.239-07:002009-08-02T04:58:38.239-07:00I am under the impression that our current non-fix...I am under the impression that our current non-fixed fiat system is structurally dependent on growth - although I have not yet found anyone who can confirm this. Would the fixed fiat system rely on growth for stability?<br /><br />Could the new system work well in a state of permanent recession due to the global oil supply declining, say? (Or is asking free market economists about permanent recession like asking about what it's like to live in another dimension i.e. impossible to imagine?!)Lemmingnoreply@blogger.comtag:blogger.com,1999:blog-7820485130017459619.post-70270817294871255112009-07-28T19:46:16.789-07:002009-07-28T19:46:16.789-07:00I do encourage other interested people to debate t...I do encourage other interested people to debate the topic of the labour theory of value here:<br /><br />http://socialdemocracy21stcentury.blogspot.com/<br /><br />I have added an appendix in the comments section.Lord Keyneshttps://www.blogger.com/profile/06556863604205200159noreply@blogger.comtag:blogger.com,1999:blog-7820485130017459619.post-30946040058342791592009-07-28T19:44:53.663-07:002009-07-28T19:44:53.663-07:00Yes, point taken: I apologize for distracting atte...Yes, point taken: I apologize for distracting attention from the highly original and important substance of the post, which is the idea of a fixed fiat currency and how it would work.<br /><br />This is a very impressive and original contribution to the theory of money, and is (to my knowledge) not discussed or even proposed in mainstream economics.<br /><br />I accept that steady deflation in a booming economy might have advantages, and that the value of money would probably increase rather than decrease in such a system.Lord Keyneshttps://www.blogger.com/profile/06556863604205200159noreply@blogger.comtag:blogger.com,1999:blog-7820485130017459619.post-81775684416399288892009-07-28T18:50:29.866-07:002009-07-28T18:50:29.866-07:00I believe the examples and indeed the idea of labo...I believe the examples and indeed the idea of labour units of value to somewhat too simplistic and only applicable to totally agrarian pre-oil economies.<br /><br />True values should measure labour plus its reward in its efficacy in providing energy, all of which (save nuclear) is given by sunlight or stored sunlight (coal and oil). That then adds the complicaton of energy ratio (see http://www.energybulletin.net/primer) not to mention peak oil which references are too numerous to mention. <br /><br />There is no doubt in my mind that with the continually exploding world population and declining resources, discussions about financial models need to encompass these issues or the result will be disaster and nobody will even be thinking about stability of markets.tazzydemonnoreply@blogger.comtag:blogger.com,1999:blog-7820485130017459619.post-74074386659290678702009-07-28T17:05:44.806-07:002009-07-28T17:05:44.806-07:00I've just realised that I may be forgetting on...I've just realised that I may be forgetting one of the fundamental sections of the article: <i>IOU money</i>. I will go back and re-read it.Lemmingnoreply@blogger.comtag:blogger.com,1999:blog-7820485130017459619.post-8751508008078062362009-07-28T17:00:45.178-07:002009-07-28T17:00:45.178-07:00I see what you are saying. But turning it around, ...I see what you are saying. But turning it around, if we did impose a fixed fiat currency system and this didn't fit with people's tendency towards manias, wouldn't the markets perhaps find a way of circumventing <i>that</i>, introducing its own 'unofficial' inflatable currency somehow? As usual, I haven't thought it through fully, but I imagine that keeping the markets' more creative elements in check might involve a lot of heavy-handed regulation - which I know you are not keen on.Lemmingnoreply@blogger.comtag:blogger.com,1999:blog-7820485130017459619.post-85853218287323826722009-07-28T16:34:52.627-07:002009-07-28T16:34:52.627-07:00Lemming:
An interesting point. However, if there...Lemming: <br /><br />An interesting point. However, if there is a flaw in the way that all economic activity is stored and represented, then the potential for markets not to work effectively will be greater. <br /><br />I accept that markets are not perfect, which is why I accept that there will always be manias. Even a less imperfect representation of economies and economic activity will not entirely fix the human based imperfections in a human system. <br /><br />Markets will always be imperfect in that they are subject to irrational subjective evaluations. No system can entirely remove this, but the effects might be ameliorated. <br /><br />The invisible hand of markets is therefore imperfect, but perhaps less imperfect than alternatives. The aim is to make it less imperfect whilst accepting that it can never achieve perfection.Markhttps://www.blogger.com/profile/14983165364072918091noreply@blogger.comtag:blogger.com,1999:blog-7820485130017459619.post-9468874541319934142009-07-28T16:17:41.237-07:002009-07-28T16:17:41.237-07:00Mark, yes, I think the berries debate was just too...Mark, yes, I think the <i>berries debate</i> was just too easy a thing to latch onto and argue about while we digested the main substance of your piece.<br /><br />Having read it once a few days ago, the thing I'm not sure about is how Adam Smith's Invisible Hand fits into this. How is it that the Invisible Hand doesn't already circumvent the deficiencies in the current flawed bubble-prone system? Isn't the idea that the market always finds a way around any difficulty, and tends towards the optimum solution for society's benefit? Why, then, doesn't it effectively introduce its own methods for suppressing bubbles spontaneously? The fact that it doesn't, suggests to me that the free markets don't always provide the optimum solution as you believe.Lemmingnoreply@blogger.comtag:blogger.com,1999:blog-7820485130017459619.post-64372145333555980402009-07-28T13:55:29.860-07:002009-07-28T13:55:29.860-07:00Lord Keynes:
Sunlight soil etc. This is no differ...Lord Keynes:<br /><br />Sunlight soil etc. This is no different from the idea that the pearl was shaped by non-human hands or the 'valueless' rock you mentioned earlier being shaped by geological forces. <br /><br />In all cases, the same arguments as those already outlined apply. In the case of the rock, it will achieve value through being turned into a wall through labour. In the case of the pearl it is the difficulty of finding and recovery that gives its value (labour). I am not confusing input factors with value. I am simply pointing out that labour is required to turn input factors into value in economic terms. <br /><br />In all cases, I am talking about value in economic terms. Thus the example of a 'kind word from a wife'. This has a subjective value to the recipient, but would require, for example, the person to use his labour to turn the kind words into the words into a play or song to have economic value. Without such an input, in economic terms, the words have no value. <br /><br />The introduction of a suggestion that I am confusing factors of production with value is a red herring. Until a person takes the products of the soil etc. and does something with them, they have no value. For example, woodlands are filled with edible mushrooms which are never picked. <br /><br />They may have a potential value of £50 per kilo, but unless they are found and picked and presented for exchange, they only have potential value. Without being picked, how might they have value in economic terms? <br /><br />I will leave this debate here. The debate has simply served to distract attention from the ideas which have been outlined in the original post, which is disappointing.Markhttps://www.blogger.com/profile/14983165364072918091noreply@blogger.comtag:blogger.com,1999:blog-7820485130017459619.post-91569874080072805532009-07-28T03:56:44.615-07:002009-07-28T03:56:44.615-07:00See my Blog on the Labour of Value
For anyone who...<b>See my Blog on the Labour of Value</b><br /><br />For anyone who is interested, please see my post on my blog on why the Labour of Value is wrong:<br /><br />http://socialdemocracy21stcentury.blogspot.com/<br /><br />A sample:<br /><br />It seems to me that Cynicus Economicus has confused factors of production (or factor inputs) with value.<br /><br />It is undoubtedly true that labour is a fundamental factor of production for many goods, most notably manufactured goods.<br /><br />However, it is simply not true that it is the only factor of production: there are 3 recognized factors of production:<br /><br />(1) natural resources, including land, raw materials, water, and energy.<br />(2) labour,<br />(3) capital goods, and<br />(4) entrepreneurship.<br /><br />Factors of production are the inputs that are combined and used to transform things into goods and services. Labour is undoubtedly a major input, and capital goods and entrepreneurship also depend on human labour to a great extent.<br /><br />But natural resources, factor (1) above, do not always depend on human labour. It is easily demonstrated that labour is not the only important input into production: for example, when farmers grow crops, there are fundamental natural inputs (soil, rain, sunlight) without which production could not occur.Lord Keyneshttps://www.blogger.com/profile/06556863604205200159noreply@blogger.comtag:blogger.com,1999:blog-7820485130017459619.post-28649597213560110672009-07-28T00:19:03.665-07:002009-07-28T00:19:03.665-07:00Getting back to part of the original ffc argument ...Getting back to part of the original ffc argument and away from the berries and value of labour arguments, I would like to draw attention to the Fred owing lots of asset backed gardening work to the population of his town. Given that he is clearly over consuming and it has been calculated that there is no way in hell he is ever going to do the gardening and hasn't got enough tools to give to his debtors one must argue where this leaves the townsfolk - what do they do? One could argue that they would have to accept their losses and move on, which many may well do, although being human some will get angry and annoyed and seek revenge for getting ripped off and give Fred a right good kicking. Lets just hope for the sake of our Western hides that China has the temperament of the former type of townsfolk...ginger tosserhttps://www.blogger.com/profile/14954116470256007245noreply@blogger.comtag:blogger.com,1999:blog-7820485130017459619.post-21108918686997511512009-07-27T14:11:32.964-07:002009-07-27T14:11:32.964-07:00Ref. wild berries. Said people desiring the berrie...Ref. wild berries. Said people desiring the berries are not paying for the berries, they're paying for the right to have (limited) access to the owner's land including specifically the right to pluck the berries.<br /><br />Assuming rational people on both sides, the price for this Limited Access Right will be determined by the value of berries at the (super)market minus a discount for having to put in the labour of extracting the berries from the tree themselves. <br /><br />Granted in this case the exchange only takes places because said people value berries. Crucially however the price/value of berries as exchanged at the market is entirely determined by labour:<br /> - labour involved in preparing land, sowing<br /> - labour involved in harvesting<br /> - labour involved in bringing it to market<br /><br />Nevertheless, I think it is fair to say that berries can have value without the application of any labour whatsoever, but in this case it is outside the realm of economic discussion. <br /><br />I guess this is what CE is getting at that any value in the economic sense by definition involves a bare minimum amount of labour, e.g. the labour required for the seller engaging in the exchange.<br /><br />Perhaps then this is my main point in what is admittedly a thoroughly confused non-contribution to the berries debate:<br /><br /> 1. Economic activity/exchanges, and value in the economic sense always involve some labour, e.g. labour involved in the exchange<br /> 2. Things can have value in a non-economic sense (random berries found, serendipitously, on common land and plucked for personal consumption; ie. no exchange)<br /> 3. The berries value debate perhaps is a case of comparing apples with pears*. With CE using term value as per 1, and LK using the term value, at least in those instances where it involves no labour, as per 2.<br /><br />* sorry for introducing even more fruit into the berries debate.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-7820485130017459619.post-30576409534746733562009-07-27T10:58:14.959-07:002009-07-27T10:58:14.959-07:00Surely the individual example of the berries is ir...Surely the individual example of the berries is irrelevant. The market price for berries is set by the effort needed to produce them on average. An individual may be fortunate enough to receive a windfall, but that doesn't detract from the argument that the price is set by the typical labour involved in producing them.Lemmingnoreply@blogger.comtag:blogger.com,1999:blog-7820485130017459619.post-23167383465872039522009-07-27T05:50:45.605-07:002009-07-27T05:50:45.605-07:00Anyway this is all a big distraction. I suppose i...Anyway this is all a big distraction. I suppose it shows that there are no solid arguments against the main suggestion: fixed currency. Only distracting side-issues.pocmlocnoreply@blogger.comtag:blogger.com,1999:blog-7820485130017459619.post-90389488413353625482009-07-26T20:43:05.974-07:002009-07-26T20:43:05.974-07:00"Without the human infrastructure, which is t...<i>"Without the human infrastructure, which is the drafting of law, the enforcement of law, and so forth, why would they pay the individual for the berries?"</i><br /><br />Answer: (1) the accidental fact that they happen to have grown on his land and (2) their subjective desire for the fruit. <br /><br />Without (2), they would not pay. <br />The "human infrastructure of law," property rights and ownership do <b>not create their internal subjective desire for the wild berries.</b><br /><br />You say:<br /><br /><i>value is subjective and value is created through labour</i><br /><br />There is a fundamental contradiction here.<br /><br />If the value is subjective, then it is <b>not</b> created only through labour. <br /><br />It is created through the <b>subjective desires of buyers,</b> whose subjective valuation of a commodity can be utterly divorced from the labour that went into it (in the case of the wild fruit trees growing by accident on the man's land, there is no labour whatsoever). <br /><br />These subjective attitudes to the values of goods and services are influenced by supply and demand (that is, quantity available for sale), which together cause prices.Lord Keyneshttps://www.blogger.com/profile/06556863604205200159noreply@blogger.comtag:blogger.com,1999:blog-7820485130017459619.post-55416403820139403992009-07-26T20:07:23.267-07:002009-07-26T20:07:23.267-07:00You have not answered the following question:
&qu...You have not answered the following question:<br /><br />"Without the human infrastructure, which is the drafting of law, the enforcement of law, and so forth, why would they pay the individual for the berries?"<br /><br />Ref your comment: <br /><br />"For instance, the stones on the man's farm will have no value, despite infrastructure of ownership, as you call it."<br /><br />For example, if people wished to build a wall with the stones, then the stones would have a value for exchange. As I have said, value is subjective and value is created through labour. The 'valueless' stones gain a value when turned into the wall through the labour in transportation and the labour of building the wall.Markhttps://www.blogger.com/profile/14983165364072918091noreply@blogger.comtag:blogger.com,1999:blog-7820485130017459619.post-72478761806049430972009-07-26T18:59:28.398-07:002009-07-26T18:59:28.398-07:00The holding of the land by an individual means som...<i>The holding of the land by an individual means somebody at some time must have undertaken some labour for it to be owned.</i><br /><br />That labour is utterly irrelevant to the existence of the wild fruit trees which grew by chance. They could have grown on parts of the property that the owners now or in the past never even cultivated or worried about.<br /><br /><i>It is the infrastructure of ownership that provides the value in the berries that are sold. Without the human infrastructure, which is the drafting of law, the enforcement of law, and so forth, why would they pay the individual for the berries?</i><br /><br />The ownership of the berries or even the land does not give the fruit value: for this argument to work, you have to believe that things that are owned will always have value.<br />For instance, the stones on the man's farm will have no value, despite infrastructure of ownership, as you call it.<br /><br />In neoclassical economics,<br /><br /><i>the value of an object or service is often seen as nothing but the price it would bring in an open and competitive market. This is determined primarily by the demand for the object relative to supply. Many neoclassical economic theories equate the value of a commodity with its price, whether the market is competitive or not. As such, everything is seen as a commodity and if there is no market to set a price then there is no economic value …. Economists such as Ludwig von Mises asserted that "value," meaning exchange value, was always the result of subjective value judgements.</i><br /><br />http://en.wikipedia.org/wiki/Value_(economics)<br /><br /><br />Thus the property ownership is not the cause of the berries' value, but the subjective value judgements of people who wish to have them.Lord Keyneshttps://www.blogger.com/profile/06556863604205200159noreply@blogger.comtag:blogger.com,1999:blog-7820485130017459619.post-45318232832118576902009-07-26T18:21:08.370-07:002009-07-26T18:21:08.370-07:00Lord Keynes:
The holding of the land by an indivi...Lord Keynes:<br /><br />The holding of the land by an individual means somebody at some time must have undertaken some labour for it to be owned. Even if 'given' the land, without any monetary or barter exchange, somebody must have persuaded another person of why the land should go to them, or someone must have actively claimed the land.<br /><br />Even if the land were given to the person without any reason, it still required some form of title to be bestowed upon the person, such that they own the land, there must be a legal system which upholds ownership, and so forth - each stage requires human labour to make 'ownership' of the land to work. <br /><br />Even if the land is handed down through ten generations, the 'ownership' of the land is supported by the infrastructure of ownership, and that is the endeavour of human labour. It is the infrastrucure of ownership that provides the value in the berries that are sold. Without the human infrastructure, which is the drafting of law, the enforcement of law, and so forth, why would they pay the individual for the berries?Markhttps://www.blogger.com/profile/14983165364072918091noreply@blogger.comtag:blogger.com,1999:blog-7820485130017459619.post-85516929795685225322009-07-26T16:20:14.494-07:002009-07-26T16:20:14.494-07:00Please provide any item (excepting things which mi...<i>Please provide any item (excepting things which might have no value in exchange e.g. the kind word from your wife) and I will do the same thing as with the rare and valuable object and the pearls, and demonstrate that their value (in economics) is created in some way in human labour.</i><br /><br />A man owns some land and one day notices that some wild fruit trees are growing on it. One day people come past his land notice, the fruit trees and offer him $1 for 2 pieces of fruit that they themselves will pick and keep. He agrees. <br />However, he has done no work whatsoever: he did not plant the fruit trees, water them or take care of them. He simply sits in his house and takes money off people before they pick the fruit.<br />The value of the fruit is not created by, or caused by, human labour at all.Lord Keyneshttps://www.blogger.com/profile/06556863604205200159noreply@blogger.comtag:blogger.com,1999:blog-7820485130017459619.post-87192785729720372422009-07-26T15:11:31.428-07:002009-07-26T15:11:31.428-07:00"No,but would anyone pay for an a pearl if th..."No,but would anyone pay for an a pearl if they could find them all around them at any time?<br />This is the key question."<br /><br />No, and hence you are right, the value comes from labour.<br /><br />But, the natural object still has value; people still want to own them - here at the coast, shells are valued; people display them in their houses. But no-one buys or sells them because they are available to be picked up on the beach. So they have 'value' to people, but they don't have financial or exchange value. They're worth 'something', but they're not worth money.pocmlocnoreply@blogger.comtag:blogger.com,1999:blog-7820485130017459619.post-8210386725856878132009-07-26T12:56:34.835-07:002009-07-26T12:56:34.835-07:00I understand entirely the idea that labour is the ...I understand entirely the idea that labour is the root of all economic activity. I think that all these individual examples being discussed are a red herring. <br /><br />Of course some individuals are 'lucky' or 'unlucky' in their transactions, and the value of new inventions must always be a process of trial and error for the markets. Some products have a premium price because of advertising or reputation - justified or not - but the markets will always tend towards introducing cheaper alternatives which are just as good. The 'premium' producer must work hard to maintain the reputation and high price. <br /><br />The market will *eventually* set the 'correct' average price for any item or commodity and this must be based on the value of the labour required to produce it. What else could it be based on?Lemmingnoreply@blogger.comtag:blogger.com,1999:blog-7820485130017459619.post-49562818815262603462009-07-26T09:37:50.762-07:002009-07-26T09:37:50.762-07:00One of the great advantages of a fixed fiat curren...One of the great advantages of a fixed fiat currency system is that it provides for a system which will achieve steady and consistent inflation. <br /><br />i believe you were meant to say<br /><br />One of the great advantages of a fixed fiat currency system is that it provides for a system which will achieve steady and consistent *deflation*.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-7820485130017459619.post-55764497565359224182009-07-26T07:02:21.561-07:002009-07-26T07:02:21.561-07:00pocmloc:
I appreciate your efforts to steer a mid...pocmloc:<br /><br />I appreciate your efforts to steer a middle ground, but would anyone pay for an a pearl if they could find them all around them at any time?<br /><br />This is the key question. <br /><br />As a note, my last comment was written before seeing your post.Markhttps://www.blogger.com/profile/14983165364072918091noreply@blogger.comtag:blogger.com,1999:blog-7820485130017459619.post-47705103602147851932009-07-26T06:53:33.009-07:002009-07-26T06:53:33.009-07:00Previous post continued....
In another example, h...Previous post continued....<br /><br />In another example, how about the value of an ink stand in Ming dynasty China. If a tradesman appeared in a particular publication of the time (called the 'Essential Criteria') then the value of their manufacture would be increased. The author laboured to be the arbiter of 'good taste' and the result was that he published, and his labour increased the value of items he favoured, in particular antiquities. His labour, his writing of the book was the determinant of value, not the intrinsic value of the items. <br /><br />It might take another manufacturer the same time to manufacture the ink stand, the ink stand might be identical to another manufacturer's ink stand but it does not determine the value. The value is determined in the labour of writing the book 'the essential criteria'. There is nothing intrinsically more valuable in the item than that which is produced by equal skill with an equal input of labour and materials, excepting the recommendation. <br /><br />Or take the case of Attic vases, which had the name of the manufacturer emblazoned on their wares. The value was not determined by the intrinsic value of the labour in the vase, but by the name that was attached to the vase. In one case, the manufacturer even advertised that his vase was reflecting the fashions of the time. <br /><br />In all of these case, the value of labour is variable, but the value is not intrinsic in the output, or any inherent attributes of the item, but in how the labour is subjectively valued and the labour that creates the value.<br /><br />The subjective value is created by a value of labour which goes beyond the process of manufacture, and is rooted in how the materials are converted into a value that is in turn rooted in relative value of human labour. <br /><br />As with the pearls, if they were to be found everywhere, they would have no value in the economy, but might have an aesthetic value to an individual that makes no impact upon the economy. It is the process of labour that determines all value, but that labour adds inconsistent value. <br /><br />At each point, how we subjectively value human labour, whether through talent, the ability to acquire scarce materials, the ability to convince others of the social cachet of item 'x', the only source of value is resultant from human labour. <br /><br />The exception I will accept is hinted at by Adam. If you are starving, the nutrition in wheat has an intrinsic value to humans. If you are thirsty water has an intrinsic value. However, these only become the realm of economics if some kind of exchange takes place. Any item that is involved in exchange enters the realm of economics, and any exchange involves labour. Somebody must at least labour to acquire the item, and then present it for exchange. At such a point, even with food and water, it has become an economic item that is represented by labour. Before that, it has no economic value. <br /><br />This is not a circular argument, as economic value must be delineated in some way. Otherwise the 'kind word of your wife' enters the realm of economics. Whilst this is a form of exchange, it makes the subject of economics as beyond any reasonable limits. All human interaction is some kind of exchange. <br /><br />The only restriction on the challenge is that I have a limit of time, and will only be able to answer the first examples as presented. I will try to answer at least three of these.Markhttps://www.blogger.com/profile/14983165364072918091noreply@blogger.com