[p2p-research] The problems of debt

[Ryan Lanham]

In the past and present, people of enormous productivity (e.g. capitalists)
consumed significantly in a way that others see as wasteful.  Indeed it is.
But they view this as a reward for their huge productivity.  Measuring
productivity and value creation is hard.  No one knows exactly how to do
it.  But we do know that people will argue that their capacity for value
creation is greater than it might actually be.  In other words, people
negotiate for their own benefit rather than society's.  If society does a
bad job at evaluating value of productivity, systems become very
inefficient, and the machines of society too often produce stuff people
don't want as much as they could have if the machines had been used
efficiently.

In capitalism, the more value you create.  The more you get to consume.  In
any other system, immediate imbalances are inevitable.  The only possible
non capitalist system that can work, in my view, is one where moral
responsibility to the society is a sort of currency...as in Nordic
countries.  In those places, value producers subordinate their own desires
to those of others.  Why?  Who can say.



On Sun, Jul 11, 2010 at 10:50 AM, Ryan Lanham <rlanham1963 at gmail.com> wrote:

> Money is, in simplest terms, a machine.
>
> It isn't like a machine.  It IS a machine.  It is a machine that either
> makes something others want (value) or it is a machine that makes things
> only a consumer wants (i.e. consumption).
>
> If it makes consumption, it is used up.  If money makes value, like all
> machines that can be used more than once, it is a value multiplier.
>
> If someone uses money to create value, then they are productive.
> Productivity leads to happier worlds because people have things others
> want.  In an eastern-styled anti-desire world, these systems do not
> apply...though there is ample evidence, given free choice, nearly everyone
> wants something that is scarce.  Wanting fewer things that are scarce is a
> sort of advantage in this new world, but it is a choice most would not want
> to make freely.  People like cars, tools, luxuries of all sorts...jewelry,
> prettier mates, etc.  These things cost machinery...money to produce.  If
> they don't create further value...then that is consumption.  Non productive
> consumption burns up capital.  It is a fire in the machine shop.  Granted,
> it is a necessary fire, but it is a fire none-the-less.
>
> Build a good machine...and value is created.  Build a worthless life or
> machine, and value is consumed.
>
>
> On Sun, Jul 11, 2010 at 10:33 AM, Ryan Lanham <rlanham1963 at gmail.com>wrote:
>
>> I've been asked to explain debt problems as influenced by technology.
>> I'll try.
>>
>> Here's my "theory".  Many others share or have versions of something
>> similar.  I claim no originality.  I've posted several versions on this
>> list.
>>
>> 1. Growth occurs when someone produces something others value.  The sum
>> total of value is the economy.
>> 2. In the past, it was a matter of work and labour to produce something of
>> value...like digging a hole where a hole was wanted.
>> 3. People learned to take money that was not in use and to use it by
>> borrowing it and then buying value-production which was then placed on sale.
>> 4. The process of 3 entails risk.  Risk was rewarded by profit.
>> 5. The system of 3-4 really works quite well so long as profit is likely.
>> 6. In a world where learning and high productive machinery requiring low
>> skill levels is readily available (i.e. post 1990 or so) making profit is
>> harder.  7. Item 6 is especially true if innovation is not protected by the
>> state (e.g. through intellectual property.)
>> 8. Because profit is harder especially in tangible goods and services
>> (because of technology and learning distribution) credit is harder.
>> 9. When credit became hard, the incentives to cheat increased.  People
>> lent money badly and then cleverly sold the bad loans to others who didn't
>> understand.
>> 10. When 9 happened, the state had to decide whether huge firms fulfilling
>> important institutional roles would die, or be saved.
>> 11. Nearly all states, especially in Japan and Europe, chose to save old
>> institutions (e.g. Royal Bank of Scotland), or in the US, AIG.
>> 12. There is now an open question as to whether markets can still create
>> value (e.g. the iPod) in such a way that debt is justified.  If not,
>> capitialism in the form that creates ready growth through using unused money
>> is screwed.
>> 13. When money goes unused, it is difficult to create new money and growth
>> of value.  There is no/little incentive to innovate.  This can be called
>> "deflation."
>> 14. Deflation is more dangerous to capitalism by far than inflation.
>> Deflation means shrinkage of an economy because unused money becomes more
>> valuable by sitting than by being used.  Thus, people become even more risk
>> averse.
>> 15. When 14 happens for a long time (e.g. Japan) then demographic and
>> institutional patterns start to become unsustainable.
>> 16. When 15 happens, we do not understand the long term outcomes, but they
>> don't seem good.
>>
>>
>> --
>> Ryan Lanham
>> rlanham1963 at gmail.com
>> Facebook: Ryan_Lanham
>> P.O. Box 633
>> Grand Cayman, KY1-1303
>> Cayman Islands
>> (345) 916-1712
>>
>>
>>
>>
>
>
> --
> Ryan Lanham
> rlanham1963 at gmail.com
> Facebook: Ryan_Lanham
> P.O. Box 633
> Grand Cayman, KY1-1303
> Cayman Islands
> (345) 916-1712
>
>
>
>


-- 
Ryan Lanham
rlanham1963 at gmail.com
Facebook: Ryan_Lanham
P.O. Box 633
Grand Cayman, KY1-1303
Cayman Islands
(345) 916-1712
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