I often reflect upon the word “morality,” the most troublesome and confusing word of all. There is no single or supreme morality; there are many, each defining the mode by which a system of entities optimally interacts. The eminent entomologist Fabre, observing a mantis in the act of devouring its mate, exclaimed: “What an abominable custom!” The ordinary man, during a day’s time, may be obliged to act by the terms of a half dozen different moralities. Some of these acts, appropriate at one moment, may the next moment be considered obscene or opprobrious in terms of another morality. The person who, let us say, expects generosity from a bank, efficient flexibility from a government agency, open-mindedness from a religious institution will be disappointed. In each purview the notions represent immorality. The poor fool might as quickly discover love among the mantises.
-- Jack Vance, The Book of Dreams
[T]he superstition that the budget must be balanced at all times, once it is debunked, takes away one of the bulwarks that every society must have against expenditure out of control. . . . [O]ne of the functions of old-fashioned religion was to scare people by sometimes what might be regarded as myths into behaving in a way that long-run civilized life requires.
Saturday, February 09, 2019
Love among the mantises
The economics of a proto-post scarcity society
I've spent enough time discussing how Rick Webb doesn't understand economics, instead retrojecting hollow capitalist tropes on a fictional television show. But it's worthwhile to discuss the economics of "proto-post scarcity economy." However, without the specific historical context, it's impossible to talk about how a hypothetical economy "actually is"; the best I can do is lay out a kind of general framework.
Economics is the science of how we make mutually exclusive choices, usually (but not always) choices about material things. How do we manage scarcity? So the first thing is to think about what is scarce. There are three things that are always scarce: unique things, land, and human time. And even if some resources are not scarce, a society might still want to use them efficiently. Finally, there are things that are still so expensive that not everyone who wants one could have it.
Unique things are scarce. There's only one Mt. Everest, and only so many people can climb it in a year. There are only so many great bass fishing spots, only so many Hawaiian beaches. Only so many people can use pristine natural parks and forests. There's only one Mona Lisa. How does a society get to decide how to use inherently unique things?
Land is scarce. Although we can improve some of the marginal land, there is a finite amount of land on the Earth. We can probably house a lot of people in urban high-rises, but only so many people can have their own castles, McMansions, or even detached ranch houses with big back yards. Only so many people can have their own farms or vineyards. A society cannot make more of this kind of land by building up. Even if the society builds up, penthouse apartments will be scarce. Apartments with a view of something other than the wall of the next building will be scarce. Again, how does a society allocate scarce land?
Human time is scarce in the sense that each person can do only so many things in a day. If something one person wants requires the effort or attention of another person, that effort or attention is scarce. Let me define a "job" in this context as human effort or attention for the benefit of other humans (even if doing that job is somehow beneficial to the "worker"). There will be "good jobs", where there are more people who want to do that job than there is "demand" for that job, and "bad jobs", where there are fewer willing people than demanded. Ideally, we want everything in equilibrium, where all jobs are "neutral": there are exactly as many people who want to do that job as there is demand for that job. How would a society do so?
Finally, a society would want to use even non-scarce resources efficiently. For example, a society might be able to produce as many shoes as people wanted, and if everyone woke up one day and decided they all wanted twice as many shoes, the productive capability would allow that with no other trade-off. Even so, it would make little sense to produce more shoes than people actually wanted. Even if there is no scarcity, a society might have to still track how many and what kind of shoes people want, and produce just those shoes and no more.
The answers to these questions depends in part on production technology. If everyone has a Mr. Fusion, a replicator, and a transporter, most of these problems go away, especially if the replicator can replicate most anything. For example, if a replicator can make the finest cuisine, there is no need for restaurants. If individuals' replicators can make most anything, there is no need to have factories or distribution networks. Similarly with transporters: if I can get in my personal transporter and just go anywhere, there's no need for trains, planes, and automobiles.
But replicators seem quite advanced. It's likely that a planet-bound proto-post scarcity society would instead use mostly automated factories, which are themselves constructed mostly automatically. Even if we can produce as many factories as we want to produce as many goods as we want, we would, I think, still want to be efficient about production, distribution, and expansion.
However, the above raises perhaps the most important issue: what does it mean to say that we can produce as many factories as we want to produce as many goods as we want? If some society produces some amount of goods but could relatively easily produce twice as much, why wouldn't people not want twice as much? At what point do we stop wanting more stuff? And, because people's preferences and desires are socially constructed, how do people stop wanting more stuff?
Economics is the science of how we make mutually exclusive choices, usually (but not always) choices about material things. How do we manage scarcity? So the first thing is to think about what is scarce. There are three things that are always scarce: unique things, land, and human time. And even if some resources are not scarce, a society might still want to use them efficiently. Finally, there are things that are still so expensive that not everyone who wants one could have it.
Unique things are scarce. There's only one Mt. Everest, and only so many people can climb it in a year. There are only so many great bass fishing spots, only so many Hawaiian beaches. Only so many people can use pristine natural parks and forests. There's only one Mona Lisa. How does a society get to decide how to use inherently unique things?
Land is scarce. Although we can improve some of the marginal land, there is a finite amount of land on the Earth. We can probably house a lot of people in urban high-rises, but only so many people can have their own castles, McMansions, or even detached ranch houses with big back yards. Only so many people can have their own farms or vineyards. A society cannot make more of this kind of land by building up. Even if the society builds up, penthouse apartments will be scarce. Apartments with a view of something other than the wall of the next building will be scarce. Again, how does a society allocate scarce land?
Human time is scarce in the sense that each person can do only so many things in a day. If something one person wants requires the effort or attention of another person, that effort or attention is scarce. Let me define a "job" in this context as human effort or attention for the benefit of other humans (even if doing that job is somehow beneficial to the "worker"). There will be "good jobs", where there are more people who want to do that job than there is "demand" for that job, and "bad jobs", where there are fewer willing people than demanded. Ideally, we want everything in equilibrium, where all jobs are "neutral": there are exactly as many people who want to do that job as there is demand for that job. How would a society do so?
Finally, a society would want to use even non-scarce resources efficiently. For example, a society might be able to produce as many shoes as people wanted, and if everyone woke up one day and decided they all wanted twice as many shoes, the productive capability would allow that with no other trade-off. Even so, it would make little sense to produce more shoes than people actually wanted. Even if there is no scarcity, a society might have to still track how many and what kind of shoes people want, and produce just those shoes and no more.
The answers to these questions depends in part on production technology. If everyone has a Mr. Fusion, a replicator, and a transporter, most of these problems go away, especially if the replicator can replicate most anything. For example, if a replicator can make the finest cuisine, there is no need for restaurants. If individuals' replicators can make most anything, there is no need to have factories or distribution networks. Similarly with transporters: if I can get in my personal transporter and just go anywhere, there's no need for trains, planes, and automobiles.
But replicators seem quite advanced. It's likely that a planet-bound proto-post scarcity society would instead use mostly automated factories, which are themselves constructed mostly automatically. Even if we can produce as many factories as we want to produce as many goods as we want, we would, I think, still want to be efficient about production, distribution, and expansion.
However, the above raises perhaps the most important issue: what does it mean to say that we can produce as many factories as we want to produce as many goods as we want? If some society produces some amount of goods but could relatively easily produce twice as much, why wouldn't people not want twice as much? At what point do we stop wanting more stuff? And, because people's preferences and desires are socially constructed, how do people stop wanting more stuff?
Sunday, February 03, 2019
Money in Star Trek
Rick Webb constructs money in Star Trek. Not "Federation credits", which can be explained simply as a plot device, but honest-to-god money.
Although Webb posits that there's more than enough for everyone, he believes the Federation carefully accounts for every citizen's consumption.
Webb continues,
Whatever we call it, Webb posits something that works exactly like money in a market economy, except for one crucial feature: Webb's money does not ration consumption. Webb thinks the Federation is doing all the work of managing a currency for literally nothing but some sort of subconscious appeal. It makes absolutely no sense. Just accounting for everything doesn't mean the "economics still happen." For the economics to actually happen, there has to be people optimizing the use of scarce resources. The citizens of even a proto-post scarcity society do not, under ordinary circumstances, optimize the use of scarce resources, so there's no economics.
Although Webb posits that there's more than enough for everyone, he believes the Federation carefully accounts for every citizen's consumption.
The amount of welfare benefits available to all citizens is in excess of the needs of the citizens. Therefore, money is irrelevant to the lives of the citizenry, whether it exists or not. Resources are still accounted for and allocated in some manner, presumably by the amount of energy required to produce them (say Joules). And they are indeed credited to and debited from each citizen’s “account.” However, the average citizen doesn’t even notice it, though the government does, and again, it is not measured in currency units — definitely not Federation Credits. . . . This massive accounting is done by the Federation government in the background.But why would the Federation do such a thing? It makes zero sense to account for something that's not scarce. We account for scarce things, like the social product of others, because it's important to use every little bit wisely. But Webb assumes that there are excess welfare benefits: under ordinary circumstances everyone can use as much energy (or whatever) as they want. So why account for it in detail.
Webb continues,
So, behind the scenes there is a massive internal accounting and calculation going on — the economics still happen. They just aren’t based on a currency unit, and people don’t acquire things based upon a currency value. People just acquire things from replicators, from restaurants such as Sisko’s or coffee shops like Cosimo’s, or, presumably, get larger things from dealerships or (more likely) factories. This could still be called “buying,” as a throwback.This activity is buying. And if you keep accounts, your unit of account is currency by definition, even if that unit represents a physical quantity. Webb sees the contradiction, but doesn't resolve it:
It is tempting to argue here that the massive accounting system uses a unit called the Federation Credit, but i don’t believe that’s the case. If it were, the credit would be too much like money because a) accounting is done in it, b) it is issued by a governing body (like a fiat currency) and c) it is fungible, i.e. you can already buy things with it and if you could buy things with it AND a and b were true, it would pretty much be a currency. This would fly in the face of Roddenberry’s absolute diktat that the Federation has no currency.It doesn't matter whether we call it Federation Credits, if we're accounting in it, it's money. Even if the money in some sense represents energy, it's still money. Accounting is done in it. It's a fiat unit issued by the government, i.e. each citizen's welfare benefit. Citizens can "buy" things with it: when they use energy, Webb assumes their account is drawn down. Furthermore, Webb assumes that this money is an incentive, that people will do "menial jobs that cannot be done in an automated manner ... [because] there is some small, incremental increase in your hypothetical maximum consumption, thus appealing to the subconscious in some primal way." This is money. Currency. Moolah. Cash.
Whatever we call it, Webb posits something that works exactly like money in a market economy, except for one crucial feature: Webb's money does not ration consumption. Webb thinks the Federation is doing all the work of managing a currency for literally nothing but some sort of subconscious appeal. It makes absolutely no sense. Just accounting for everything doesn't mean the "economics still happen." For the economics to actually happen, there has to be people optimizing the use of scarce resources. The citizens of even a proto-post scarcity society do not, under ordinary circumstances, optimize the use of scarce resources, so there's no economics.
Friday, February 01, 2019
Central planning in Star Trek
In my previous post, I talked about how Rick Webb, in his essay, The Economics of Star Trek: The Proto-Post Scarcity Economy, doesn't understand market economics. In addition, Webb also doesn't understand central planning.
Webb believes that the presence of individual choice decisively disproves central planning. He concludes, "The Federation is clearly not a centrally planned economy"* presumably because "[i]ndividual freedom of choice is very obvious." Webb claims to know that individuals have freedom of choice because "[e]veryone chooses their careers." Well, everyone, that is, who has made it in the glamorous and dangerous world of interstellar exploration. Gene Roddenberry et al. are not going to show us all the people who wanted to be starship captains but didn't get into Starfleet Academy.
*Italics omitted
(One hilarious irony is that in Star Trek, like every other military, even in the most fanatical market economy, the United States, Starfleet is most probably a centrally-planned organization. As far as I know, no one has managed a military organization with market economics: the 1st Infantry Division is not a profit-maximizing economic actor. If Webb can see a market economy in a military, he can see a market in anything.)
We cannot conclude that the Federation lacks elements of central planning. Not just because the Federation is a fictional society and has no underlying economic organization at all, but also because we don't know the the actual contingent problems a proto-post scarcity society would have to solve, and we don't know the historical context, i.e. the existing political and economic power relations, they have to solve them under. Even if we were to assume the present-day United States leads the way to a proto-post scarcity society, we cannot reliably project more than a some few tens of years; we definitely cannot predict what would happen three centuries from now.
Still, it's important to be more definite about what we mean by "central planning". There is at least a grain of truth underneath Webb's idea. It's logically impossible to run a market economy without some households making some choices, and it is logically possible to run a centrally planned economy with households having no choices at all. But just because it's logically possible doesn't mean it's necessary or even desirable to run a centrally planned economy exclusively by pointing guns at people's heads and telling them what to do.
How much economic choice people have is dependent first on the wealth of a society. Until the middle of the 20th century, the vast majority of people in the United States were farmers. A person could choose their occupation, so long as almost all of them chose to be farmers. And if we look at the beginnings of our capitalist market economy, most of these farmers had to be rather violently pushed into selling their labor on the market (see, e.g., The Invention of Capitalism by Michael Perelman.) Not having a lot of choices doesn't mean we're not in a market economy. Similarly with the Soviet Union and mid-20th century China. Both were extremely poor societies — immediately after the revolution, Russia was running its entire productive capacity and railway transportation on firewood — so there were just not a lot of choices to be had, regardless of economic organization.
On the other side, in a very rich society, at least some people will have a lot of choices, regardless of economic organization. And rich or poor, people in high status and high demand jobs will be those who want those jobs. Regardless of organization, it's pointless and stupid to force a person to be a doctor if there are 10 other people, just as intelligent and hard-working who want to be doctors. We really can't tell the form of economic organization just by looking at a few people in a high status jobs.
Just as Webb doesn't understand market economics, he doesn't understand central planning. His ignorance is perhaps more understandable: there have been only two societies — the Soviet Union until 1980 and the People's Republic of China until the 1970s — that have engaged in central planning in a big way, and both of them were not only poor, but fighting cold and proxy wars against the United States, so information about their economies is hard to come by, and propaganda about our "enemies" easy to obtain. Still, a little common sense can go a long way.
There are two basic types of central planning: command economics and state ownership. A society can combine these two types and can combine them with a market economy. Central planning and markets are not logically exclusive.
The first type of central planning is a command economy. In a command economy, the government just tells people what to produce and where to distribute it. The precise form of a command economy depends on the specific technology of production and economic problems to be solved. In a very poor mostly subsistence economy, the government will decide they need more tractors, round up a bunch of farmers, tell them to build and operate more tractor factories, and give the tractors to those who are still farmers. If Ivan or Chen doesn't want to leave his farm and build tractors, well, too bad: do it or go to jail. (Note that most modern "market" economies kicked off industrialization just as coercively. They simply dispossessed a bunch of farmers or expropriated the commons necessary for their subsistence viability, and said, "Hey, if y'all want to get money for food, come build and work at this factory over here." Sure, they had a choice: work or starve.) In a richer country, the commanders have a wider range of options, and their actions will depend on the actual problems to be solved.
A country usually employs a mostly command economy when it is fighting a "big" war. i.e. a war that requires the country to employ almost all of its surplus to fight the war. Every country, Allies and Axis, the capitalist United States and the communist Soviet Union, ran the Second Imperialist War as a command economy. This type of command economy works directly at the firm level: the central planners look at the existing productive capacity of firms, and tell each firm, "You produce this many tanks, you produce this many planes, you produce this many bullets, bombs, and shells, etc." There's no point in the central planners telling each individual where to work: each person works at one of the local factories, or they starve or go to jail. Even though there's usually a severe labor shortage in wartime, workers do not engage in market competition for wages. They take the pay and/or rations set by the government. This kind of economic organization appears very desirable. As I note above, every country — capitalist and communist — in a "big" war has employed command economics to a significant degree.
Modern corporations and military organizations have an internal command economy. Although corporations compete with each other in a market economy, internally, almost every corporation in every country is a centrally planned command economy. The employees do what the central planners, i.e. the board of directors and the senior management, tells them to do, and they use the resources the central planners give them to do it. Again, a corporation that tries to structure its internal organization along market lines risks failing as spectacularly as Sears. There are employee- and employee/customer-owned corporations, but that just means the employees (and customers) choose the commanders: these corporations are still internally centrally planned command economies.
The second form of central planning is one where the state owns and operates firms and/or controls a substantial amount of financial capital. One example is Norway, with both state ownership of significant firms and a large sovereign wealth fund.
Webb believes that the presence of individual choice decisively disproves central planning. He concludes, "The Federation is clearly not a centrally planned economy"* presumably because "[i]ndividual freedom of choice is very obvious." Webb claims to know that individuals have freedom of choice because "[e]veryone chooses their careers." Well, everyone, that is, who has made it in the glamorous and dangerous world of interstellar exploration. Gene Roddenberry et al. are not going to show us all the people who wanted to be starship captains but didn't get into Starfleet Academy.
*Italics omitted
(One hilarious irony is that in Star Trek, like every other military, even in the most fanatical market economy, the United States, Starfleet is most probably a centrally-planned organization. As far as I know, no one has managed a military organization with market economics: the 1st Infantry Division is not a profit-maximizing economic actor. If Webb can see a market economy in a military, he can see a market in anything.)
We cannot conclude that the Federation lacks elements of central planning. Not just because the Federation is a fictional society and has no underlying economic organization at all, but also because we don't know the the actual contingent problems a proto-post scarcity society would have to solve, and we don't know the historical context, i.e. the existing political and economic power relations, they have to solve them under. Even if we were to assume the present-day United States leads the way to a proto-post scarcity society, we cannot reliably project more than a some few tens of years; we definitely cannot predict what would happen three centuries from now.
Still, it's important to be more definite about what we mean by "central planning". There is at least a grain of truth underneath Webb's idea. It's logically impossible to run a market economy without some households making some choices, and it is logically possible to run a centrally planned economy with households having no choices at all. But just because it's logically possible doesn't mean it's necessary or even desirable to run a centrally planned economy exclusively by pointing guns at people's heads and telling them what to do.
How much economic choice people have is dependent first on the wealth of a society. Until the middle of the 20th century, the vast majority of people in the United States were farmers. A person could choose their occupation, so long as almost all of them chose to be farmers. And if we look at the beginnings of our capitalist market economy, most of these farmers had to be rather violently pushed into selling their labor on the market (see, e.g., The Invention of Capitalism by Michael Perelman.) Not having a lot of choices doesn't mean we're not in a market economy. Similarly with the Soviet Union and mid-20th century China. Both were extremely poor societies — immediately after the revolution, Russia was running its entire productive capacity and railway transportation on firewood — so there were just not a lot of choices to be had, regardless of economic organization.
On the other side, in a very rich society, at least some people will have a lot of choices, regardless of economic organization. And rich or poor, people in high status and high demand jobs will be those who want those jobs. Regardless of organization, it's pointless and stupid to force a person to be a doctor if there are 10 other people, just as intelligent and hard-working who want to be doctors. We really can't tell the form of economic organization just by looking at a few people in a high status jobs.
Just as Webb doesn't understand market economics, he doesn't understand central planning. His ignorance is perhaps more understandable: there have been only two societies — the Soviet Union until 1980 and the People's Republic of China until the 1970s — that have engaged in central planning in a big way, and both of them were not only poor, but fighting cold and proxy wars against the United States, so information about their economies is hard to come by, and propaganda about our "enemies" easy to obtain. Still, a little common sense can go a long way.
There are two basic types of central planning: command economics and state ownership. A society can combine these two types and can combine them with a market economy. Central planning and markets are not logically exclusive.
The first type of central planning is a command economy. In a command economy, the government just tells people what to produce and where to distribute it. The precise form of a command economy depends on the specific technology of production and economic problems to be solved. In a very poor mostly subsistence economy, the government will decide they need more tractors, round up a bunch of farmers, tell them to build and operate more tractor factories, and give the tractors to those who are still farmers. If Ivan or Chen doesn't want to leave his farm and build tractors, well, too bad: do it or go to jail. (Note that most modern "market" economies kicked off industrialization just as coercively. They simply dispossessed a bunch of farmers or expropriated the commons necessary for their subsistence viability, and said, "Hey, if y'all want to get money for food, come build and work at this factory over here." Sure, they had a choice: work or starve.) In a richer country, the commanders have a wider range of options, and their actions will depend on the actual problems to be solved.
A country usually employs a mostly command economy when it is fighting a "big" war. i.e. a war that requires the country to employ almost all of its surplus to fight the war. Every country, Allies and Axis, the capitalist United States and the communist Soviet Union, ran the Second Imperialist War as a command economy. This type of command economy works directly at the firm level: the central planners look at the existing productive capacity of firms, and tell each firm, "You produce this many tanks, you produce this many planes, you produce this many bullets, bombs, and shells, etc." There's no point in the central planners telling each individual where to work: each person works at one of the local factories, or they starve or go to jail. Even though there's usually a severe labor shortage in wartime, workers do not engage in market competition for wages. They take the pay and/or rations set by the government. This kind of economic organization appears very desirable. As I note above, every country — capitalist and communist — in a "big" war has employed command economics to a significant degree.
Modern corporations and military organizations have an internal command economy. Although corporations compete with each other in a market economy, internally, almost every corporation in every country is a centrally planned command economy. The employees do what the central planners, i.e. the board of directors and the senior management, tells them to do, and they use the resources the central planners give them to do it. Again, a corporation that tries to structure its internal organization along market lines risks failing as spectacularly as Sears. There are employee- and employee/customer-owned corporations, but that just means the employees (and customers) choose the commanders: these corporations are still internally centrally planned command economies.
The second form of central planning is one where the state owns and operates firms and/or controls a substantial amount of financial capital. One example is Norway, with both state ownership of significant firms and a large sovereign wealth fund.
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