Common Sense
Taking back from the "experts" the ability to decide what future we want for ourselves
Let’s get radical. In the Latin sense, of “going to the root”.
Let’s dig deep, below the surface conventions of the economy as numbers that represent unqualified growth in volumes of transactions measured in prices paid in money. Or, more correctly, numbers that measure unqualified growth in money, expressed in acronyms: GDP; NAV of AUM; NPV. Jargon. Meaningless to all but those who profess to be experts in these acronyms, and the numbers that they represent.
Let’s look beyond the numbers, to the transactions that actually make up the economy, and to the people who participate in those transactions.
What are these transactions? And why do people participate in them?
These transactions are exchanges of technology surpluses. And people participate in these exchanges so that we all can eat. Every day. Forever. And not just eat, but live the lives we want to live, as best we can.
The alternative to participation in these exchanges is that we each have to forage for whatever nuts and berries we can find present naturally, in the places that we live.
Technology gives us more and better choices. And more predictability and reliability.
We all know this. It’s just common sense.
Technology requires that we concentrate our energy and attention, to learn how the world about us works in some particular way and figure out how we can change the way the world works to make it work a way we choose to make it; and then to apply that learning to make the changes that we choose to make.
The wording here is maybe a little technical, and stilted, but we all know this. Again, it’s common sense.
Technology often requires cooperation. It takes two or more people to do the work, collaborating to co-create the world the way we choose to make it. And somebody has to be in charge, to coordinate and synchronize the actions of diverse collaborators. So technology also requires hierarchies of command and control.
More common sense.
The good thing is that technology also creates changes in abundance. Surpluses that can be shared with others, who did not participate in their collaborative co-creation themselves, directly.
These surpluses can be shared with others in exchange for surpluses of other technologies that others have collaborated to co-create.
Voila! Many working collaboratively, through concentration and exchange, can live better, though more and more diverse technology surpluses, than any one of us can live, going it alone.
This is our uniquely human way of being in a world of technology surpluses that we make through co-creative collaboration and exchange, out of the world of Nature into which we all are born.
Maybe a bit of a cumbersome way of describing all this, but still, common sense.
This world is not made up of numbers and prices. It is made up of people, and work.
More common sense.
It is a world in which the quality of life made possible through the exchange of technology surpluses is paramount. And this quality of life includes social concepts of equity and fairness, and accountability and inclusiveness and caring for others, even when others cannot care for themselves. There are limits to our caring for others, of course. Equity and fairness applies even in relationships of caring. The social fabric can be stretched, but it also can be broken. Laws are needed, when these breaks occur. To correct the person who is causing the break, or if the case is sufficiently extreme, to exclude them for the networks of caring that hold society together.
These, however, are the outliers. Our concern in this reflection is with the core. The heart of the social network of being human in the world. And its soul.
In small societies social networks of collaboration and sharing can be constructed and sustained through interpersonal relationships, and policed through social shaming and shunning.
More common sense.
As societies become larger, and their technologies more diverse and their enterprising hierarchies more insular, interpersonal relationships need to be replaced with something else. That something else, almost without exception, is Money, some token that is accepted as a placeholder for a debt owed for a surplus given for which no surplus has yet been received in return. These tokens can be saved, and used later to participate in other exchanges for other technology surpluses provided by other co-creative collaborators in a society that prospers within an economy that offers greater material abundance and diversity of technologies than would be possible without the use of these tokens that we call money.
OK. Maybe this is not (yet) part of our common sense. But when you think about it, it makes perfect sense.
Money can be saved. And savings can be aggregated. And aggregations of savings can be used by enterprising individuals to organize new enterprises of collaboratively co-creative individuals putting new learning about the world into action collaboratively co-creating new technology surpluses that add to the choices available in society for how its members can choose to shape their individual lives and lived experience: standards of living and quality of life. This is Finance: aggregating surpluses saved as money and deploying those aggregations to give enterprising visionaries the money they need to realize their vision, for more abundance, and better choices.
This is probably not yet part of our common sense. But it is perfectly sensible.
These standards of living and qualities of life cannot be reduced to a price, or quantity of money, except as the most inexact approximation of the power to choose from among the possibilities.
So, a number is not really a good way of measuring the sufficiency of an economy, or the goodness of the society that economy keeps ongoing.
If a number is not good as a measure of sufficiency and goodness, and what we want in our economies and societies is sufficiency for goodness, then numerical growth in numerical approximations of sufficiency and goodness also cannot be good as indicators of whether we have what we want, or should be making some kind of course correction.
And yet that is exactly what we are being taught to believe is true today.
So we have to get radical, in the Latin sense of “going to the root”, and return to our own common sense, to “root out” the lie that is inside that “truth”.
When we do, we see that we do not actually need (or even want) experts in counting and numbers to decide for us what kind of economy we want to be creating in order to live the quality of life within the standard of living we want to live.
We can decide that for ourselves. Using our own common sense.
The diagram applies to only a few people. To better understand our social system as a whole, we need to study the subject of theoretical macroeconomics. I have written a book on this past badly explained and much confused but vital topic. The following article is about it.
Making Macroeconomics a Much More Exact Science
Today macroeconomics is treated inexactly within the humanities, because it appears to be a very
complex and easily confused matter. But this does not give it fair justice, because we should be trying
to find a viable approach to the topic and examine it in a way that avoids these problems, and for us to better understand of what it comprises and how it works. Suppose we ask ourselves the question: “how many different KINDS of financial (business) transaction occur within our society?”
The simple and direct answer shows that that only a limited number of them are possible or necessary.
Although our sociological system comprises of many millions of participants, to properly answer this
question we should be ready to consider the averages of the various kinds of activities (no matter who
performs them), and simultaneously to idealize these activities so that they fall into a number of
commonly shared operations. This approach uses some general terms for expressing the various types
of these transactions, into what becomes a relatively small number. Here, each kind is found to apply
between a particular pair of agents—each one of which has individual properties. Then to cover the
whole sociological system of a country, it requires only 19 kinds of exchanges of the goods, services,
access rights, taxes, credits, investments, valuable legal documents, etc., verses the mutual and
opposing flows of money.
The argument that led to this initially unexpected result was prepared by the author. It may be found in
his working paper (on the internet) as SSRN 2865571 “Einstein’s Criterion Applied to Logical
Macroeconomics Modeling”. In this model these double-flows of money verses goods, etc., necessarily
pass between only 6 kinds of role-playing entities (or agents). Of course, there are a number of different configurations that are possible for this type of simplification, but if one tries to eliminate all the unnecessary complications and sticks to the more basic activities, then these particular quantities and flows provide the most concise yet fully comprehensive result, which is presentable in a seamless
manner, for our whole social system and one that is suitable for its further analysis.
Surprisingly, past representation of our sociological system by this kind of an interpretation model has
neither been properly derived nor formally presented before. Previously, other partial versions have
been modeled (using up to 4 agents, as by Professor Hudson), but they are inexact due to their being
over-simplified. Alternatively, in the case of econometrics, the representations are far too complicated
and almost impossible for students to follow. These two reasons of over-simplification and of complexity are why this pseudo or non-scientific confusion has been created by many economists, and it explains their failure to obtain a good understanding about how the whole system works.
The model being described here in this paper is unique, in being the first to include, along with some
additional aspects, all the 3 factors of production, in Adam Smith's “Wealth of Nations” book of 1776.
These factors are Land, Labor and Capital, along with their returns of Ground-Rent, Wages and
Interest/Dividends, respectively. All of them are all included in the model, as a diagram in the paper.
(Economics’ historians will recall, as originally explained by Adam Smith and David Ricardo, that there
are prescribed independent functions of the land-owners and the capitalists. The land-owners speculate in the land-values and rent it to tenants, whilst the capitalists are actually the owners/managers of the durable capital goods used in industry. These items may be hired out for use. Regrettably, for political reasons, the concept of these 2 different functions were combined by John Bates Clark and company about 1900, resulting in the later neglect of their different influences on our sociological system-- the terms landlord and capitalist becoming virtually synonymous along with the expression for property as real-estate.)
The diagram of this model is in my paper (noted above). A mention of the related teaching process is
also provided in my short working paper SSRN 2600103 “A Mechanical Model for Teaching
Macroeconomics”. With this model in an alternative form, the various parts and activities of the Big
Picture of our sociological system can be properly identified and defined. Subsequently by analysis, the way our sociological system works can then be properly seen, calculated and illustrated.
This analysis is introduced by the mathematics and logic, which was devised by Nobel Laureate
Wellesley W. Leontief, when he invented the important "Input-Output" matrix methodology (that he
originally applied only to the production sector). This short-hand method of modeling the whole system replaces the above-mentioned block-and-flow diagram. It enables one to really get to grips with what is going-on within our sociological system. It is the topology of the matrix which actually provides the key to this. The logic and math are not hard and are suitable for high-school students, who have been shown the basic properties of square matrices and the notation of the calculus.
By this technique it is comparatively easy to introduce any change to a pre-set sociological system that
is theoretically in equilibrium (even though we know that this ideal is never actually attained--it simply
being a convenient way to begin the study). This change creates an imbalance and we need to regain
equilibrium again. Thus, sudden changes or policy decisions may be simulated and the effects of them
determined, which will point the way to what policy is best. In my book about it, (see below) 3 changes
associated with taxation are investigated in hand-worked numerical examples. In fact, when I first
worked it out, the irrefutable logical results were a surprise, even to me!
Developments of these ideas about making our subject more truly scientific (thereby avoiding the past
pseudo-science being taught at universities), may be found in my recent book: “Consequential
Macroeconomics—Rationalizing About How Our Social System Works”. Please write to me
at chesterdh@hotmail.com for a free e-copy of this 310 page book and for any additional information.