honors economics preindustrial economies & the money illusion
DESCRIPTION
HONORS ECONOMICS PREINDUSTRIAL ECONOMIES & THE MONEY ILLUSION. THE GREAT DIVERGENCE. CALCULUS. GUNPOWDER / EYEGLASSES. PRINTING PRESS / MECHANICAL CLOCK. TRIGONOMETRY / PAPER. IRON / STEEL. THE WEST & THE REST. 25¢. 34¢. 3¢. 17¢. 20¢. 23¢. 23¢. 14¢. 2¢. - PowerPoint PPT PresentationTRANSCRIPT
HONORS ECONOMICSPREINDUSTRIAL ECONOMIES &
THE MONEY ILLUSION
THE GREAT DIVERGENCE
IRON / STEEL
TRIGONOMETRY / PAPER
PRINTING PRESS / MECHANICAL CLOCK
GUNPOWDER / EYEGLASSES
CALCULUS
THE WEST & THE REST
25¢
23¢
17¢
34¢
14¢
20¢
3¢
23¢
2¢
MING DYNASTY RENAISSANCE / COLUMBUS MUGHAL EMPIREOPIUM WAR INDUSTRIAL REVOLUTION INDIA BRITISH COLONY
CHINESE REVOLUTION WWI, WWII, DEPRESSION GANDHI /INDEPENDENCE
THE ECONOMY HAS LEFT THE BUILDING
PRODUCTION POSSIBILITY FRONTIER
♂
WA S T E D P OT E N T I A L
♀
INDUSTRIOUS vs. INDUSTRIAL REVOLUTION
TWO WAYS TO INCREASE PRODUCTION:1) WORK HARDER (INTENSIVE GROWTH)2) WORK SMARTER (EXTENSIVE GROWTH)
=====
THE REST: (CHINA, INDIA, etc.) NO FRONTIER NO MORE LAND TO USE FARM LAND MORE INTENSELY (RICE CULTIVATION)GROWING POPULATION INCREASED LABOR INPUTSNO CHEAP ENERGY – NO MORE FORESTS
THE WEST: (ENGLAND, FRANCE, etc.)DISCOVERY OF AMERICA PLANTATIONAGRICULTUREBUBONIC PLAGUE INCREASES LAND-LABOR RATIO CAPITAL INPUTS / INNOVATIONCHEAP NEW ENERGY SOURCES (COAL) NEAR WATERWAYS
CARMEL
MAHO
PAC
BREWSTER
OSSIN
ING
PUTN
AM VALLEY
FOX LANE
YORKTO
WN
HEN HU
D
AGRICULTURAL DIVISION OF LABOR
CLERGYNOBILITY
LONG DISTANCE MERCHANTS
P E A N TAS S MONEY EXCHANGES
BARTER EXCHANGES
MONEY CHANGES EVERYTHING
MEDIUM OF EXCHANGE:
MONEY = LOWEST COMMON DENOMINATOR ALLOWS EFFICIENT TRANSACTIONS AMONG
ANONYMOUS INDIVIDUALS WITH DIVERSE PRODUCTSSTORE OF VALUE:
MONEY = PRESERVES VALUE OVER TIMEBORROW FROM THE FUTURE INCOMEWORK NOW, SPEND LATER INTERTEMPORAL SUPPLY & DEMAND IMBALANCES“Pecunia non olet”
UNIT OF ACCOUNT: MONEY = SCORECARD / PRICING THE PRICELESS
BARTER EXCHANGESANDREW
WANTS COWS, SELLS CHICKENS
ALEX
WAN
TS C
HICK
ENS,
SEL
LS G
RAIN
ANTHO
NY
WAN
TS GRAIN, SELLS CO
WS
1 CHICKEN = 4 GRAIN1 COW = 7 GRAIN
EXCHANGES WITH MONEYABIGAIL
WANTS COWS, SELLS CHICKENS
AMAN
DAW
ANTS
CHI
CKEN
S, S
ELLS
GRA
INALYSSA
WAN
TS GRAIN, SELLS CO
WS
1 CHICKEN = 4 GRAIN1 COW = 7 GRAIN
1 GRAIN = $1
$$$
$$$$
$ $$$$
$$
$$$$$$
$$$ $
$$ $
$$
$ $$
$$$ $
$ $ $ $ $$$ $ $ $
$ $$ $
$ $ $ $ $
$
SEX FOR IDEASConventional Economics (“No Free Lunch”) sees
exchange as ZERO-SUM: You Get something, You Give Something
Recently, Some (“Whole > Parts”) see exchange as positive-sum: SEX FOR IDEAS.
CONSUMPTION INVENTION / PRODUCTION (SHOPPING = SOCIALLY
BENEFICIAL)• READING WRITING• LISTENING SPEAKING• “DRESS-UP” GROWING UP
IMPLICATIONS:INVENTION = SOCIAL; ORIGINAL INVENTORS = RANDOM MUTATIONS ≠ IMPORTANTLITERACY, TOOL-MAKING, & INTERACTION = KEY EXCHANGE = INNOVATION (CHINA, TANZANIA)EVOLUTION = COOPERATIVE (NON-ZERO), NOT
COMPETITIVE WOMEN > MEN
THE KULA RING
KULA RING, PART IIPROBLEM:
How to trade diverse products among anonymous individuals?
– How much should you produce?– How much should you charge?– How much should you pay your employees?– How much should you pay for raw materials?– How do you communicate this information to others?– What job should you choose? What training?
ANSWER: MONEY. (Gift-exchange) Necklaces (counter-clockwise) Bracelets (clockwise)
No profit. Gift = total value of goods
SAY’S LAWSUPPLY WILL CREATE ITS OWN DEMAND
HUMAN ACTIVITY IS EITHER WORK or LEISURE
Leisure = production for personal consumption Work = for sale to others
===Increasing SUPPLY of goods increase DEMAND for goods
===Zero-sum no free lunch
If you consume more, i must consume less ARTIFICIALLY stimulating demand = bad idea
The market is always rightUnemployment = vacation
PAST, PRESENT & FUTURE
PAST PRESENT FUTURE
CONSUMERS PRODUCERS
RENTS
SAVINGS
CREDIT
INVESTMENTS?? +/- ??
EXPORTS IMPORTS
SAVINGS
DEBT
COMMODITIES & ASSETSCOMMODITIES – OBJECTIVE, DEFINED CHARACTERISTICS &
HOMOGENOUS QUALITY – QUANTITY KEY
ASSETS – SUBJECTIVE OR INTANGIBLE DIMENSIONS & HETEROGENOUS QUALITY – QUALITY KEY
MARKETS = GOOD AT COMMODITIES / BAD AT ASSETSPREMODERN ECONOMY= BARTER = COMMODITIES
MODERN ECONOMY = EXCHANGE = ASSETSINT’L MERCHANDISE TRADE IN GOODS & SERVICES: $13 - $16 TRILLIONUS GDP: $14 TRILLIONGLOBAL GDP: $60 TRILLION GLOBAL FINANCIAL ASSETS: $140 TRILLION
• BUSHEL OF APPLES• GALLON OF GASOLINE• OUNCE OF GOLD• SHEET OF PAPER
• HIGH SCHOOL DIPLOMA• MEGAWATT OF ELECTRICITY• HEALTH INSURANCE
• METRIC TON OF CO2 • VOTE FOR PRESIDENT• MILLIGRAM OF PARACETAMOL
• PUBLICLY TRADED STOCKS • REAL ESTATE• SERVICE SECTOR JOBS• HEALTH
• TECHNOLOGY / PATENT • FASHION • CURRENCY • “BRAND NAME” MERCH’
• WORKS OF ART• CLEAN ENVIRONMENT• RELIGIOUS SALVATION• ADVICE
HUMAN BODY (AS AN ASSET) = $47 MILLIONBone Marrow: $23.0 MillionDNA: $ 9.7 MillionAntibodies: $ 7.3 MillionLung: $ 116,400Kidney: $ 91,400Heart: $ 57,000
HUMAN BODY (AS A COMMODITY) = $4.50
“FICTITIOUS” COMMODITIESMONEY IS STERILE : MONEY IS A VEILBUYING / SELLING MONEY = BUYING / SELLING AN INCH
• SIN OF USURY: CANNOT LEND MONEY AT INTEREST• RELIGIONS FORBADE FINANCIAL INSTITUTIONS (TEMPLARS)• FILTHY LUCRE: WALL STREET vs. MAIN STREET
TRAGEDY OF THE COMMONSLAND = NATURE; NOT PRODUCED FOR MARKET
• STRANGE IDEA: MANHATTAN FOR $24• NATIONAL BORDERS INVISIBLE FROM THE “BIRD’S EYE” VIEW• EMINENT DOMAIN: GOD KING LORD VASSAL SERF• PEOPLE BELONG TO THE LAND, LAND BELONGED TO THE PEOPLE• TRAGEDY OF THE COMMONS / ENCLOSURE MOVEMENT
SELLING ONESELFLABOR = HUMAN ACTIVITY; NOT PRODUCED FOR MARKET
• CANNOT SELL YOUR TIME WITHOUT RELIABLE CLOCKS (c. 1700)• PROSTITUTION & ORGAN SALE ILLEGAL• STADTLUFT MACHT FREI – WORKERS BELONGED TO THE LAND & LORD
C M C or M C M* Medium of exchange: Money mediates between commodities
CMCMoney = NEUTRAL: Money is a VEIL, a placeholder for the underlying
commodity exchange.Money = LIQUIDITY lubricating economic exchanges Loose Money &
SMALL CHANGE
Store of Value / Unit of Account: Money is a HOARD of value, commodities as CAPITAL = medium to transfer money.
MCM*Make $$$$ with $$$$. Money ≠ Medium: It can be purchased.
Commodities ASSETS / Fictitious Commodities: Nature = PropertyHumans = LaborMoney = Capital
Money = COMMODITY. FINANCIAL Institutions = MONOPOLISTS of money Sound Money
Since WWII, the US = the world’s BANK:We “BORROW” low (selling public/private debt abroad) & “LEND” high (buying EQUITY/ownership in foreign businesses) & pocketing the difference.
WHY?From 1914 to 1945, the world fought an expensive & destructive war
nearly 80% ($26 of $33 Billion) of the world’s GOLD = US: We had all the bracelets & necklaces.
US = CMC MCM Economy
• Rebuilt Japan• Marshall Plan• Bretton Woods System Redistribute the World’s Necklaces / Bracelets• Foreign Military Bases• American Consumerism & Debt
FINANCIALIZATION & DEINDUSTRIALIZATION of US domestic economy
GOV’T SPENDING
DEVALUATION
AUSTERITYDEVALUATIO
N
GOV’T SPENDING
AUSTERITY
APPR
ECIA
TIO
N
APPR
ECIA
TIO
N