Thursday, February 26, 2015

Economics - Market Transcendence

The combination of our educational systems complete abrogation of teaching economics and the devaluation of enterprise in Canadian society at large has fostered a societal ignorance of the economy. It is as though the separation of us from human endeavours associated with enterprise is possible. The very essence of humanity is the exchange of goods and services, economics is the medium of expression; a means by which we can observe the vast complexity of human exchange. The attempt by many in the world of academics to marginalise the market based economy has put us in pearl of leaving unexplored the most relevant of human studies. The financial representation of the human reality and its influences on our behaviour is the most useful of lenses to view the world. Markets, when properly facilitated provide wealth and prosperity, the wealth and prosperity that facilitates all the rest of the social complex. The unprecedented wealth we enjoy in western society today can be squarely attributed to the unique dynamic that a market based economy in concert with democracy produces.
The generalised state of unawareness regarding matters relating to the economy allows the propagation of policy that ignores the value of the market or worse seeks to curtail the market as the primary means by which we supply people with goods and services. The amount of distortion that takes place around economic policy in the political process is contorting the public’s view of economic policy in a manner that is detrimental to the country as a whole. So much of the political process’ address of economic issues is consumed by class warfare; a particularly pernicious political element being people promoting redistributionist policy. Redistributionists would do better to focus on a state of generalised prosperity rather than a state of generalised equality.  Rather than taking from productive people, provide equitable access to a growing pie. The question of paramount importance is that, in order to promote the wellbeing of people we need a vibrant economy, and a vibrant economy starts with business being able to respond to opportunity absent distorting policy.

The most common of distortions is the linking of capitalism to negative outcomes related to displacement, dislocation and exploitation. Capitalism is a means of exchange ONLY, capitalism if un-distorted by authority will distribute wealth broadly. Marx linked the painful events for the working peoples around the industrial revolution to capitalism, wrongly. The causes of dislocation and poverty as the industrial revolution unfolded, where a product of disequilibrium of labour supply in the context of new technology. This disequilibrium in concert with government failing to respond to a changing circumstance, or perhaps in some cases exacerbating dislocation with policy that exploited the vulnerable, was the cause for the pain experienced by the working classes. Capital is a mere abstract representation of human action, if something bad happened or happens, it is the product of human thought as opposed to capitalist process. Capital allows for the aggregation of energy (Capital) which is fungible, this aggregation of capital does afford power to the holder and raise the possibility of the power being misapplied. The misapplication of power happened throughout history absent capitalist processes, and in regimes that sought to function by eliminating the pooling and use of capital through central planning, evil happened; evil happened on a grander scale in these regimes because power was concentrated with one government, instead of a million capitalists. While capitalism can greatly enhance human progress by providing a fungible energy resource to apply to any human endeavour, it is value neutral – it cares little whether it is directed to good or evil – remember if you don’t like what you see it is us your looking at. In the presence or absence of capital processes, evil can occur or the beauty that resides in humanity can shine. What this document advocates is an enlightened capitalism, where there is a culture and regulatory commitment to universal prosperity by giving access to an ever growing human dynamic.      

Social issues around meeting humanitarian obligations are best met by providing a floor on human existence and then providing access to the education necessary for people existing at that floor to progress. The presence of universal healthcare is mute when universal prosperity is present. Social services are only relevant when the economy is so poorly managed that people are unable to pay for the services they need. I offer these statements only to demonstrate how abundance transforms lives, realising there is a requirement at present for social services. The desire to promote a competitive and productive economy stems from the view that prosperity fosters more prosperity. The key recognition necessary for people holding redistributionist inclinations is that the economy is unlimited. The economy can grow large enough to provide abundance to all people all the time. The abstract element of this realisation is that the economy is detached from the physical world as services represent a larger and larger portion of the overall economy. When services generate prosperity the wealth generated maybe directed at physical requirements and so draw on raw resources, but equally likely outcome is that wealth will be directed at services. Read these words, there is no limit to the size of the economy and the abundance it can provide. As the economy grows, equitable access brings people off the floor to various socioeconomic circumstances depending on their abilities, chosen life cadence and circumstance. All it really takes for this realization to take hold is to concede that abundance is at least as common as scarcity and the both scarcity and abundance are a mental construct.  

Human endeavour emerges out of the entire panoply of resources, circumstances and environmental variants. Human actions in the context of what earth offers reaches unfathomable complexity, just trying to contemplate the most basic of human endeavours soon becomes intensely complicated. The Dali Lama teaches a concept called Dependant Origination, of which one element relates to time, as the origination of the present is dependent on the past and the future, the present can only exist in the context of the past and the future. The second element relates to the physicality and thought of the origination of an item. The example of a clay pot it used, when one begins to contemplate a clay pots creation, one begins with the creators thoughts of the design, the gathering of the clay, the composition of the clay, the temperature of the kiln, the make-up of the glaze, the construction of the kiln; as one embarks on this process with one of humanities most basic and early furnishings, the level of complexity is staggering. Some elements occur in a state of tacit awareness, knowing what thought process the pot maker went through in the creation of design is almost unknowable absent perhaps years of exposure to her actions. Now imagine the process with a computer, and staggering complexity takes on an exponentially more complexity. Our market place does all this absent any central knowledge bank; the complexity of human action is managed and valued by each other’s perception of the value of one good relative the other. There is absolutely no facility available to humanity to manage the mass of human action; it simply must emerge out of the natural inclination for people to engage each other in the context of their respective needs and desires – people left to their own interest and good intent will make a million flowers bloom.    

Knowledge is best applied at the point of action. Imagine a circumstance where the government with all its resources decided that by synchronising peoples food consumption with a view to bring better knowledge to the process by accessing professionals and by standardising everyone’s meals the government could buy food in bulk and get it cheaper. You might turn on your radio every morning and the government representative would provide the meal plan for the day, the ingredients for which you draw from a box of foodstuffs provided by the government. Begin the process of dependant originations on this process; it is impossible to know where to start. How would you manage leftovers, because it would be impossible for any government to predict the appetite of a given individual at any point in time. Extra food would have to be provided to ensure enough for big people even though most people are average, wasteful to say the least. As on begins to contemplate the government managing are meals for us, you realise what an absurd notion this is. Yet, in spite of thousand instances where central planning has failed, there are people still advocating it as a solution. Clearly, everyone can see that their lay knowledge applied at the point of action will generate a more appropriate result than profession knowledge at a distance. The closer the management of resources are to the point those resources are actuated, the more appropriate the use of those resources.  

Money measures and facilitates complex human action. The attachment of value to a given item in the context of other items or services value can only take place efficiently with an abstract representation and money is what we use. The more valuable an item the more of that item gets supplied. All the complexity associated with the delivery of a good or service is managed by itself as the spontaneous response to demand occurs. This process is so finely nuanced the details of value and production and delivery are almost unperceivable. Our society has been well rewarded for allowing humanity to manage its own affairs and its done nary a single central planner, it all happens out of spontaneous association. Please though, mine is only one word, take a look around, in every circumstance where there has been a central planning, government has reduced the population to impoverishment and subjected them to totalitarianism.

This position, of allowing humanities spontaneous actions to determine the action of the collective still allows for collective action. The critical point in accessing the value of spontaneous human action as a thought process is to consider policy creation in the context of the individual as opposed to the aggregate. Inherent in all human action is the choice of one person to do something, so this is the logical spot to start designing policy for collective, in contrast to planning for the aggregate. In this way knowledge is best applied and resources are most effectively distributed and utilised. Policy is “planned” in response to human action as opposed to policy that plans human action. As stated previously, the sum of human action is to impossibly complex to plan from a central point, to direct the actions of every individual is a Herculean task even if it were possible but policy can respond to trends that become apparent from the observation of human action. If provisions are made for the individual to accumulate wealth then society will be wealthy and for those who are unable to care for themselves special programs can be developed. Policy needs to be directed toward excellence and the outliers mitigated for, central planning for the aggregate tends to take policy to managing for the lowest common denominator. 

The single most critical thing for a successful society is the provision for people to be able to capitalise their efforts. Karl Marx spoke of this in great detail, where labour exercised action with the incremental valued added was extracted away from the labour to an extent they remained in subsistence. In an enlightened capitalist society we understand, if we want people to be capitalists they need to have capital. To the extent generosity is bestowed at large is the extent to which prosperity will be accelerated. By provisioning the masses with capital a virtuous upward cycle moves us from a world view of scarcity to a world view of abundance. The industrial revolution occurred absent the ability to manage the displacement that took place leaving people in an exploitable circumstance, Marx and Engels observed an injustice and we got communism. The unscrupulous leveraging of capital, over the offer of an honest days work created communism; a scourge that has demonstrated it’s ineptitude at every attempt at execution and yet people are still promoting it in varying degrees. I wonder when people will realise the source of the Marxist view and address it with generosity.

To bring people firmly to a state of believing in an enlightened capitalist economy they must see the fruits of others labour and see the path to access that abundance. The most effective way for people to progress, assuming they have skills to apply to occupation, is to allow them a means to accumulate a portion of the fruits of their contribution to capital. Generous credit policy to purchase a home is an excellent example of policy that empowers the individual. A young couple caught in circumstance where they are both working to pay rent and to feed their family are greatly support by a 100% loan on a home; as it releases them from the rental trap and puts them on the path of capitalising their efforts. A free education, as demonstrated later, provides the state with greater revenues and builds human capital reserves and empowers people. Generosity in human development and empowerment works. As demonstrated so aptly by the homestead acts, government gave land and on that foundation people responded by accumulating 25% of modern US capital reserves. The key to all successful economic policy is to seed prosperity with the individual and watch the collective result.

When prosperity is seeded with the individual, people are free. When prosperity is doled out from a central source people are controlled. The damaging precept of much government policy is the one of control. In all societies that focus on control of people, society entrenches in to a state of fixed stratification and the number of impoverished people grows. In Peru, for example, where the process to gain property rights is so convoluted that average people are unable to secure property, impoverishment grows. The back drop of Peru policy development has been one of an elite exercising control; that is the purpose of complex and convolute legislation, to facilitate access for the well capitalised and keep those who are without capital in a ready state of exploitation. This circumstance happens at the expense of the elite as well as generalised prosperity provides more opportunity for capital use and returns, a charming paradox. Contrast this with counties like Canada and the US, which have extended more opportunity to allow access to capital by appropriate rule of law and effected a more generalised state of prosperity. Seeding the individual with a generous means to accumulate and access capital is the ticket to prosperity. The chatter for equality will become muted when a generalised state of abundance transpires because equality is the language of the have nots, and talk of equality fades when the consideration is focused on the degree of prosperity.

The essence of any government action must be prudence. Generosity in prudence requires engaging in generosity in the context of return on investment. In the case of homesteading, assets that were idle came into action, people who received the land paid taxes to governments commiserate with the new assets value and infrastructure grew up around them. Government spending must be rationalised to government benefit in clear terms. Present funding through government rarely is submitted to the rigours of cost and benefit. The value of a Doctor to the tax roles is greater than the average, a doctor then represents an incremental benefit in tax revenue, the funds provided to the creation of a doctor need to be rationalised to the incremental benefit. The assertion of generosity here is in the creation of a value adding, wealth generating investments as opposed to grants without condition.  

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