Tuesday, November 2, 2010

Why bother to vote?

Yes, I voted but I'm not sure why. All the candidates appear to present the same proposals in different colored wrappers, especially in their ideas of how to fix the economy.

Back in the eighteenth century, Adam Smith suggested that the economy ought to be based on land, labor, and capital. He then dealt with the fallacy that money is wealth by explaining that money is not wealth, it is an instrument for dealing with wealth.

Then in the nineteenth century, Henry George agreed with Adam Smith's contention that the economy ought to be based on land, labor, and capital. He then dealt with the fallacy that land is property by explaining that land is not property, it is a place to put property.

But none of the candidates on the ballot are willing to give up either of these fallacies, thus rendering it impossible to base the economy on land, labor, and capital.

Instead, we have an economy based on a monumental pyramid of derivative investments piled on top of a Ponzi scheme of endlessly escalating land prices, which is inherently unstable. The game of Monopoly was originally invented to provide a hands-on demonstration of the instability of such an economy.

Here's what appears to be happening. Increasing prices for building sites require businesses to borrow ever higher piles of money to acquire new sites when doing so would improve efficiency, thus lapse into lower efficiency. Workers need higher and higher wages just to pay the ever-increasing mortgages on their homes, the increased house prices being the land, not the houses. Businesses lapsing into lower efficiency lay off a few of their workers, who then default on their mortgages, and get their homes foreclosed, and the whole scheme collapses.

A very few economists (Fred Foldvary and Mark Wadsworth, just to name a couple) appear to be aware of what's going on. They realize that in order to base an economy on land, labor, and capital, the parties that provide these elements need to receive the benefits of what they're providing.

The value of land is provided by public agreement as to who owns what plot, and the value is enhanced by public improvements and other government action, therefore this value ought to be recovered for public use, perhaps by a land value tax as proposed by Henry George.

The value of labor is provided by the laborer, and therefore ought to be all his, not tapped off by income taxes.

The value of capital is provided by those who willingly give up a portion of their wealth in order to provide means of improving the efficiency of the laborers, and ought to be all theirs, not tapped off by sales taxes, "capital gain" taxes (Hey, who are we kidding here, capital doesn't gain, it depreciates!), and such like.

But none of the candidates I just got finished voting for has got a clue. Every last one of them is proposing ethereal fantasy plans for keeping the Ponzi scheme going a bit longer, usually at the cost of increasing the national debt. I have no idea who even owns our national debt. For all I know, maybe China, or Iran, or Afghanistan, or Venezuela, or somebody else who doesn't like us.

I feel like a mouse who just voted for what color of cat is going to get to eat me.

1 comment:

Mark Wadsworth said...

Thanks for the mention.

I'm glad that Adam Smith said that money was a way of dealing with wealth, as I had come to a similar conclusion. 'Money' is ownership and not 'the wealth itself'.