Web of Wealth - Latest Blog Entries

Four Types of Economy

Thu, 25 Mar 2010 19:46:00 +0000

In his paper "In search of the eternal coin - a long finance view of history", Dr Malcolm Cooper has written a history of the eternal coin. The eternal coin is an imaginary construct (Cooper calls it a thought experiment), so it's a curious kind of history, retelling the past through the lens of an imagined future. Cooper singles out a number of historical vignettes, which display different elements of a system of value. As I see it, these vignettes can be grouped into four types of economic system, which correspond roughly to the four types of trust identified in Aidan and John's book. Hierarchical Authority. This is exemplified by the ancient empires of Egypt, Mesopotamia and China (Ozymandias), and by the Feudal systems of Northern Europe (Domesday). The ancients believed that material wealth accumulated in this world could be carried into the next world. Mediaeval kings and barons donated substantial proportions of their material wealth to the Church, in the belief that this would produce favours in the next world. Commodity. The Industrial Revolution establishes factories for the production of commodities. Economic activity starts to be focused on the production of commodities, rather than the production of an agricultural surplus. An important transition point is the Confederate system, in which the coinage is explicitly linked to cotton futures. Network. The Roman Empire is the first economic trading system identified by Cooper in which coinage is widely used for the purpose of trade. This system is echoed by the guild system of the late middle ages. Globalization gradually increased, from the emergence of banking and the invention of the telegraph. The point here is that wealth increasingly comes from the activity of trading itself, rather than any particular goods and services being traded. Mutual Aid. The final type of economy might be the kind of system advocated by Kropotkin, which has perhaps never actually existed. Alternatively, we might look at a romanticized notion of primitive man (such as American Indians) living at one with nature.

Robin Hood Tax

Tue, 09 Mar 2010 13:46:00 +0000

The Robin Hood tax, currently being advocated by a bunch of romantic celebrities and luvvies, does appear to have some support from respectable economists, despite the systematic demolition by reasonably sympathetic journalists such as Tim Harford. http://timharford.com/2010/02/if-that%e2%80%99s-the-robin-hood-tax-i%e2%80%99m-the-sheriff-of-nottingham/ Most of the arguments against the tax, whether motivated by a disinterested love of truth or a covert love of bankers, are couched in terms of the effectiveness of the tax as a short-term instrument. For example, it is argued that it will fail to take money out of the bankers' pockets because the tax will be passed on to the customers of the banks, and that it will fail to reduce the volatility of the international money system because it will encourage larger and more infrequent payment. From a longer-term systems perspective, I am interested in the nature of the tax as an intervention into a large complex system, for example as measured against Donella Meadows' leverage points. The tax doesn't look to me like an intervention capable of making the kind of profound and lasting change that is needed to the financial system. At best it represents a negative feedback loop that produces a damping effect on some parts of the system, without changing the structure or values of the system itself. It is therefore a distraction from the real issues.

How an Economist's Cry for Ethical Capitalism was Heard

Fri, 05 Mar 2010 08:13:00 +0000

Article on Noreena Hertz from Fast Company, November 2009. http://www.fastcompany.com/magazine/140/cassandras-revenge.html Hertz -- part activist, part detective -- argues that both economics and business need to be put back into the human social context. "Over the past 30 years, economics became a narrow field completely out of touch with reality," says Hertz, 41, who sees the discipline as a jigsaw puzzle. "I don't believe you can reduce the world to a mathematical formula. I start with the world, assume it's complicated, and ask where can I get help from a whole range of disciplines." Drawing on subjects as diverse as anthropology, physics, geopolitics, and neurology, Hertz's economic vision is at once eclectic and holistic, which may explain her apparent ability to foresee dangers and opportunities others do not. It is also relentlessly pointed, serving an explicit agenda -- making corporations realize that they can no longer operate in their Adam Smith -- designed bubble.

The creation of wealth

Mon, 25 May 2009 09:18:00 +0100

Let's keep the creation of wealth as a bit of a mystery for now. What we know is that when people get together to meet each other's needs in a mutual way, a surplus is generated and the system comes to raise the living standards of everyone in it.

There are two directions I want to go from there. The first is that if we want to use money to facilitate the exchanges involved, there is no reason for such a body of people not to create the exact amount of money they need to do so, and this costs essentially nothing.

The second is that as the system gets larger, each person needs to be able to tell what to create for others that is particularly valuable or a particularly good use of their talents. This is simply an information system that transmits how much value people are finding in products and services. Money and prices play this role but are not necessary to it.

So, Wealth creation

Thu, 21 May 2009 10:28:00 +0100

I pay careful attention to the use of the word wealth in the FT and the Economist. It seems always to mean a serious stash of money.
Why would anybody use a serious word so carelessly?

Wikipedia does far better : Wealth derives from the old English word "weal", which means "well-being." The term was originally an adjective to describe the possession of great qualities.

Or Wiktionary: Weal; welfare; prosperity; good; well-being; happiness; joy; Riches; valuable material possessions; A great amount; an abundance or plenty; Power, of the kind associated with a great deal of money.

The last gives us the depleted meaning at the end.

This is not a trivial problem because the abuse of power to control the creation of money has substantially destroyed our democratic institutions, thus undermining the real meaning of wealth.