Now available

 

FunnyMoneyArtPowell-final

Thus ebook will be priced at 99 cents in accordance with the principles of marginal cost and elasticity of the demand curve.  Both are explained in the book.

March 2, 2016:This book is now available on Amazon Kindle at http://www.amazon.ca/gp/product/B01CH1LF6W?*Version*=1&*entries*=0

March 4, 2016:  Now available on Smashwords at:https://www.smashwords.com/books/view/620310

Now waiting for Smashwords to distribute it to various bookstores.

Here is a coupon to get this book for free until April 19, 2006 at Smashwords.  The code is HS63E.  Use the link above.

A mountain lake in British Columbia

economics102

Emotions and denial in the U.S. election

Some of us were raised to believe elections should involve a rational discussion of issues and voting for the candidate which best represents our point of view.  The current U.S. election appears to ignore this tradition and be based mostly on emotion and denial.

I believe the major economic issue facing the world today is that we have used up the most easily accessible energy and mineral resources  Yes, there are lots left but they are so difficult and expensive to extract that they are probably not useful to us.  The result is that we are heading into a prolonged period of economic decline.

Lots of people recognize we are experiencing some serious economic problems although very few understand the problem or agree with the above explanation.  Too many people, especially economists and politicians believe  with the right policies we will soon return to economic growth.

From where this blogger lives, about 200 miles north of the Canada-United States border, it appears one of the candidates is basing his campaign mostly on a strong appeal to emotions, especially fear.  This is a problem as generally emotions overrule rationality.  All the rules of managing an election and predicting its results are out the window. Rational responses to outrageous statements are meaningless to those swayed be emotion.

The outcome of this election is very uncertain.  Most if not all writers have biases even if they think they are being objective.  Therefore we need to be careful in evaluating analysis of this election.  A lot of what is being written many be wishful thinking.

The other side of this election is based on denial that there is an economic problem.  They want us to have faith that she will be able to solve impossible economic problems.

This guy has written a book about how to adapt to a down economy.  (See the top of this weblog.) It will be difficult and a lot of people will have to accept a lower standard of living.  The fear is justified.

Whoever wins this election the economic problems will still be there along with all the emotions and denial.  Not a promising outlook.

Why we have injustice

Ensuring justice is one of the most essential functions of government because without it one has anarchy.  It is also one of the most difficult because injustice is pervasive throughout society and history and is a part of a lot of personalities

The easiest thing about injustice is to document it and some people make careers out of doing that.  The most difficult thing is to correct it.  Often ideas for correcting injustice are a function of the personality of the person speaking.  For example, some people like to tell others how to live their lives and these people promote solutions that do that.  .

What is injustice?  My favourite verse from the Panchatantra, an ancient book of wisdom literature from India, may help answer the question.

Forget your prosings manifold,
the moral law is easily told.
To help your neighbor, that is good,
to hurt him, that is devilhood.

This simple verse is a lot more complex than it first appears because psychological violence has to be included in the devilhood.  From this it follows that whenever somebody is hurt by another person, physically or psychologically, they are the subject of an injustice.  This is a general definition and calls into question the commitment by our society to law and order. Some laws, especially those that legislate morals, values, sexuality and religion are themselves unjust.

There are two sources of injustice.  The first arises from a shortage of resources such that not everyone can have a comfortable standard of living.  Shortages can be temporary such as during a famine or they can be long term such as we are now experiencing where we have used up the most easily accessible energy and mineral resources and those that are left are expensive to extract.  This is a long-term problem and to deal with it we have to reduce population and move to a more sharing economy.  Easy to say but difficult to do.

This guy believes everyone should have the opportunity for the same standard of living as most other people.  If I am right in thinking we are in for a long period of a down economy then  we will have to go through a painful adjustment in which many people will think they are being treated unjustly.  Justice will require the pain be felt equally.

Most of us most of the time think and act in our own short-term interests as opposed to the long-term interests of the community.  This in itself will lead to some injustice.   Economic injustice is even worse because of the corporate culture of greed.  Many people believe firms have a responsibility to maximize their profits regardless of ethics.  The result is that we live with a highly exploitive economy.

The second source of injustice is the negative aspects of human personality.  There are people who like to hurt others, who are greedy, who are inconsiderate or who like to tell others how to live their lives.  To satisfy these personality traits these people inflict injustices upon others.  These are difficult injustices to deal with because we are dealing with people and people who often have a strong commitment to their behaviour. Sometimes they may not see their behaviour as being unjust. The most evil of all people are those who try to force their morals, values, religion or sexuality upon others.  Over population makes it difficult escape from injustice inflicted by others.

There are two ways of hurting other people.  One can deliberately do something that hurts another or one can refuse to do something another person wants you to do.  The second way will at least stress a relationship and may even terminate it.  We do not have to have relationships with everyone.

One of the dangers in fighting injustice is that it is easy to replace one with another. Feminism and black lives matter are good examples.  Women do sometimes experience  injustice and it is wrong for police to kill. However men also experience a lot of injustice and even more when women demand special privileges.  Police do not always care about the colour of the people they kill.  The greatest injustice against women is that so many end up being lonely old ladies.  When a police officer kills somebody they are denying that person the most fundamental premise of justice – the right to answer charges against you.

One of the ways to control other people is to make them feel guilty.  A lot of the feminist and black rhetoric is intended to make men  and white men feel guilty. We have to suspect some people are trying to power trip us.  If you acknowledge that others than just your group suffer injustice, it is more difficult to impose the guilt trip.

It is easy for judicial systems to become a source of injustice.  Just ask non custodial parents. Here in British Columbia and probably around the world the feminists have been so successful with their sophisticated arguments (based on sophistry) that fathers are treated to a lot of injustice.  We are assumed to be criminals, our children are kidnapped and we are denied the basic principles of justice. It can be very painful to be a caring parent and have your children taken away.

A problem with the courts is a commitment to the rule of law.  Some laws are unjust and sometimes laws are applied to situations they were never intended to cover.  Judges are/shoud be appointed because of their wisdom and we should demand that they earn their high wages by doing justice rather than just enforcing laws.  Judges should have a responsibility to overrule a law they believe unjust and should be required to state their reasons.

Referring back to the verse about hurting people, maybe the guideline for judges should be to minimize the pain.

I want to close this post with three further ideas all of which are sort of related.  The first is that justice and the lack of it are religious issues.  The Buddha tells us the first truth is that there is suffering.  He should have added that there is also pleasure and we should try to minimize one and maximize the other.

The second idea is that sometimes there are no satisfactory answers.  People will probably continue to hurt each other forever.  One of the functions of religion is to help us cope with this.

Finally, all of us should strive for the best possible relationships and for this we need a more or less equal exchange.  A person who has a psychological need to hurt others may be able to find someone with a need to be hurt.  For the rest of us, we need to go back to the verse near the top of this post.

Incomes keeping up with cost of living

“Can someone explain to me why it’s so hard for companies to increase wages in Vancouver?”

This question was asked recently on the Reddit Vancouver forum.  I suspect it is a question which could be asked in many cities across North America and around the world. The question was asked because for many people the cost of housing and the cost of living in general has been rising faster than incomes.

A number of reasons were given in the discussion – maximizing profits for shareholders, a cultural shift towards laziness, in some fields there is a conspiracy to drive down wages by saturating the field with desperate new grads willing to work for peanuts, foreign buyers are driving up the cost of housing, and supply and demand.

Having studied economics this blogger prefers the last one, supply and demand for bodies, but also believes it is a symptom of a much larger problem.

For the most part wages are, with some exceptions,  determined by supply and demand. When unemployment rates were low, workers were able to demand and receive a living wage.  As there have been more and more unemployed people we are seeing more people not keeping up with the cost of living.  Some employers have learned they can do well by paying higher than going wages.  But this works because they can attract the best workers and probably would not work for all firms.

The exceptions to the law of supply and demand are those occupations which are protected from competition by government legislation such as licensing requirements.  Very often licensing is said to be required to protect standards of service to the public.  Doctors must be licensed to ensure we get quality medical care but the licenses also restrict competition and keep doctors incomes high.  Teachers are paid well because they have licenses and strong unions in a legal monopoly.  People are required to send their children to school and mostly the schools are operated by the state.  Government employees also have strong unions and employers that have a monopoly.

The moral of the story is that if you want to have the wages to support a good standard of living, choose an occupation that is legally protected from competition.

Most of us are aware the economy is going through a difficult time but believe it will return to continuous growth.  This blogger is an exception.  Our economy is in trouble because we have used up the most easily accessible energy and mineral resources.  There are lots left but the energy and effort required to extract them make them mostly useless.  If this theory is correct, then we are probably faced with a long period of economic stagnation during which the standards of living of a lot of people will go down.

The answer to the question is that it is hard for companies to increase wages in part because wages are determined by supply and demand and in part because the economy is started into a period of decline during which it will be hard for companies to even stay in business.

How can we afford a universal basic income?

How can we possibly afford a universal basic income?

This appears to be the strongest argument against an income scheme. It also illustrates one of the basic problems in economic analysis.

When macroeconomic professors stand at the black board they generally draw an x-shaped graph and label one line to represent the real or physical part the economy and the other to represent the financial side. This is an important distinction because if one analyses economic problems only in financial terms the complexities of the financial system get in the way of clearly seeing problems.  Too often economic problems are analyzed in financial terms.

In the case of the universal basic income the question should be are we capable of producing enough goods and services to provide everyone with the desired standard of living.  The answer should determine the level of the basic income.

There are a number of economic issues with which we need to deal:  we have extracted the most easily accessible energy and mineral resources and those left require a lot of energy to get; there are serious problems resulting from the fractional reserve way of creating money; the work ethic is a problem in a high technology world; and there is a need to recognize our economy, what we call capitalism,  is based on legislation which restricts competition and allows some people to make profits they would otherwise not get.

I believe most of these need to dealt with at the same time.  Certainly a UBI should be introduced at the same time as a reform of the financial system. These are complex emotional issues and will be extremely difficult to resolve.

The book Funny Money: Adapting to a Down Economy, by the author of this post discusses these issues. Please have a look at it.

Pricing solar energy – the marginal cost factor

 The costs of solar energy are falling quickly and will probably soon be cheaper than more conventional sources.  Does this mean we will once again have large quantities of cheap energy and a return to economic growth?  Maybe and maybe not.

There may not be an immediate drop in the consumer price of power.

The maybe is because of the economic principle that price is equal to the marginal cost of the last unit produced and sold.This means solar will not influence the grid price until the whole current power infrastructure has been replaced. Until then the price will be set by whatever is the most expensive conventional power still being produced.  

It also means firms producing solar power for the grid  will be able to reap some windfall  profits as their costs of production will be lower and falling. Given the current corporate culture that firms have an obligation to maximize their profits regardless we have to anticipate most firms will take full advantage of the windfall. We observe that lots of oil reserves can be extracted at costs much lower than the current marginal cost for more expensive oil. This means some firms and/or governments are reaping windfall profits

The bright spot will be if and when the cost of solar falls enough for small units to be economical and for consumers to be able to afford them.

A further complication is the debt factor.  How much of the debt used to build the current infrastructure is outstanding?  If a large amount has to be written off, it will probably come out of what is called high power money.  If this declines rapidly  it could affect the money supply and cause some economic decline.

As the price of solar falls no doubt lots of large companies will get involved but sadly most if benefits may go to the one per cent in profits and the rest of us will be left out in the cold.  Expect turmoil rather than growth.

Occupational licensing – income protection, competition and competency

As the economy tightens occupational licensing is becoming more prevalent and controversial.  This blogger sees it as involving three issues – income protection, competition and competency.

Occupational licensing is the trend to require people in more and more occupations to have licenses to practice.  It has traditionally been used for professionals and is usually said to be needed to protect the public from incompetent practitioners.  As more occupations have required licenses it appears to have gone to ridiculous extremes.

Regardless of the public protection arguments the main function is to restrict competition and it appears to be working according to an article which shows higher incomes for those so protected. This is good for workers who are protected but does nothing for people who remain unemployed or otherwise unprotected from competition.  Another way to help people with income problems would be a universal basic income.  A UBI would ensure all people would have the opportunity for a minimum standard of living.

A UBI would also allow us to maintain a market economy based on competition with all the benefits efficiency and individual decision-making.

Occupational licensing also restricts the right of consumers to make choices about the services we purchase.  A lot of us do not always have the knowledge to evaluate a practitioner.  This blogger likes Milton Friedman’s proposal for certification by private organizations rather than licensing by governments. There could be different levels or types of certification.  This would help those of us with out knowledge and maintain our right to make choices for ourselves.

There are other ways of resolving the issues that lead to occupational licensing and these ways would protect the incomes of everyone, allow more competition in the economy and protect us from our ignorance.

Power of individuals and the universal basic income

Proposals for a universal basic income are bringing out lots of arguments which show a lack of understanding of the UBI and the nature of money. Here is an example in an article from  The Independent.

The author of the article claims a UBI will open the door for increased government control over people’s lives. This blogger figures the opposite will be the case and an income scheme will be a tremendous transfer of power to individuals.

The first and most important thing to say about a UBI is that it needs to be a part of a radical overhaul of the way in which we exchange goods and services and the way in which we create money.  Probably the current economic crisis is the result of our having used up the most easily accessible of energy and mineral resources.  There are lots of these left but they require lots of energy to extract.  The fractional reserve way of creating money also has lots of problems and needs to be reformed.

There are lots of people who want to tell others how to live and those of us who value Independence will always have to be vigilant and assertive.  This is separate from the UBI and will be an issue regardless.

Money represents purchasing power and giving it to people empowers them in that they can make purchasing decisions according to their values. This is different from food stamps in that stamps are for specified products and can hardly be the equivalent of money. A UBI will be a tremendous transfer of power to individuals and one would expect a lot of people to object to this.  Some of those who object will likely be the bankers whose power derives from creating fractional reserve money.

Another UBI issue is dependency.  Some people including the author of the reference article fear it will make us more dependent upon the state. I beg to differ because we should think of the UBI as an inheritance.  We can have it because we have such large agricultural surplus which is based on hundreds of years of agricultural and technological development.  We should all have a right to a share of the agricultural surplus.

The universal basic income will lead to a revolutionary change in the way we exchange goods and services.  Many of the issues are discussed in my book Funny Money: Adapting to Down Economy.  I encourage  you to have a look at it.  Details at the top of this blog.

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