Sunday, May 20, 2012

Money and control systems

"Our main task, therefore, will be to confirm the reader’s instinct that what seems sensible is sensible, and what seems nonsense is nonsense," said John Maynard Keynes in his 1929 pamphlet "Can Lloyd George Do It?". This is the chief task of any honest economist: not to explain a recondite and subtle science to the ill-informed layman, but rather to cut through the mass of lies and bullshit that cowardly, dishonest, and lazy economists have promulgated to confirm to the lay person that many of her instincts are correct. Of course, economics, especially macroeconomics, does have some counter-intuitive elements, but those counter-intuitive elements derive directly and simply from an intuitive basis. Bullshit — myths, lies, equivocations, circumlocutions, and willful ignorance — always grows around the justification of any class rule. Money is, of course, the basic justification for the rule of the capitalist class, and the basis of any class rule can never stand honest, clear-sighted scrutiny; class rule draws bullshit like nectar draws hummingbirds. To start to cut through the bullshit, therefore, we have to understand the nature of money: money is the primary element of a socially constructed economic control system.

What is a "control system"? There are many complex systems that we can usefully divide into a concrete real system and an abstract control system. For example, we can divide up a jetliner into its real system and its control system. The real system consists (primarily) of the engine(s), wings, horizontal and vertical stabilizers, and fuselage: the components that generate and/or directly respond to the four fundamental forces of flight: lift, thrust, gravity, and drag. The control system consists of everything in the cockpit: the yoke, pedals, and throttle; the gauges, dials, and indicators; and, of course, the pilot(s).

The division between real and control systems is not and cannot be absolute: for it to be a control system, the control system must somehow physically modify and respond to the real system. Turning the yoke changes the physical position of the ailerons, which affects the physical lift generated by the wings, causing the aircraft to turn. A change in the attitude of the aircraft causes a physical change to the attitude indicator (artificial horizon). Furthermore, the purely real system can have control effects. On an ordinary aircraft, the horizontal stabilizers on the tail generate a small amount of negative lift (the aerodynamics push down on the tail); when the pitch of the aircraft changes, the force on the tail changes in such a way that the aircraft returns automatically to a stable pitch. The horizontal stabilizers directly control the attitude of the aircraft.

But while the division is not absolute, it is determinable. The key is abstraction. The real system is directly connected to real-word physics. The fuselage must be streamlined to minimize drag. The wings must be shaped just so to generate lift. The engines must combine fuel and oxygen together (and do a lot of other mechanical things) in very specific ways to generate thrust. In contrast, the control system is much less connected to real-world physics. There's no particular extrinsic physical reason we have to use yoke, pedals, and throttle in the specific way that we usually do to control an airplane; we could, if we chose, use knobs, buttons, and switches. All that's necessary is that the control system have the degrees of freedom necessary to represent all desired change and states of the real system. But fundamentally, the more concrete a component is, the more it is part of the real system; the more abstract, the more it is part of the control system. Another key indicator is "removability": we can remove the entire control system of an aircraft and it will still fly; we cannot remove the real system, no matter how the control system is arranged.

Similarly, we can divide economics into a real system and a control system. The real system is people physically working to produce goods (physical things) and services for exchange with other people. The control system is money and the financial system. Work and exchange are concrete: we must do very specific physical things to produce a loaf of bread, a coat, a hat, a computer, or an aircraft. The control system of economics is money. Money is abstract: there's no particular physical reason we have to use small pieces of paper printed in green with pictures of dead presidents on them to control who works where and who consumes what's produced. Indeed, while money exists throughout recorded history, there have been many different control systems, notably communalism, barter, as well as slavery, and serfdom. We could have a real economy without any control system (pure barter), but we have no economy at all if we have only money, without people working and exchanging goods and services.

Indeed, the idea that money itself is part of the real economy, as ineluctable and directly physical as the horizontal stabilizers, is so nonsensical that it takes the most elaborate theological faith to hold that view. That's one reason it's so difficult to argue with hard-money libertarians; like Christians, they are so committed to a nonsensical delusion that they lose the ability to discuss the issue in good faith. Money might or might not be the best control system*, but the intuitive idea that money really is a control system is one that must be grasped and held onto despite the sophistry of the economic theologians.

*It's not the best, but it's better than some others.

2 comments:

  1. I've always thought "money" is simply a way to avoid the inefficiencies of barter. It could be pieces of paper (or digits in a computer), but in theory it could just as easily be shells, twigs or anything else. The real value is from the goods and services produced by human beings, and money is simply a kind of oil that smoothes the exchange and trade of these goods.

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  2. Indeed. A lot of people have been taught that. Money does serve as a (relatively) efficient medium of exchange, but it does a whole lot more. It has to: without the control system aspect of money, there wouldn't be investment and commercial banks and insurance companies. The essence of money is not its role as a medium of exchange, but as a medium for loans.

    A good book to read on this subject, which I'll be mentioning soon in a post, is David Graeber's Debt, the First 5,000 years.

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