Does that include people who hunger strike themselves to death? (which has happened).
That's an issue of Want vs. Need. As long as they still had access to food, the Need for food was fulfilled. Eating itself is a matter of Want. One of the main points of Maslow is that the decisions you can make are determined by the resources you have available, and there's a rough priority in acquiring resources. You can only choose not to eat if you have access to food. If you don't have access to food, gaining that access in *any* form is higher priority than figuring out how to gain continuous access to food (i.e. Safety). This is one of the biggest problems the poor have in getting ahead - they're too busy making short-term survival decisions at the cost of long-term success.
Reality disagrees with Maslow. See also everyone who has ever voluntarily died for a cause.
Or hell, look at hunger strikes. The fact that they exist at all totally contradicts Maslow.
I'd just like to state I brought up Maslow only to show that "money isn't everything" (or even -necessarily- that important) when it comes to motivating people to do their best. So, in that sense your examples of hunger strikes and whathaveyou is aligned to my overall point, regardless of what it reflects on Maslow.
If you don't have access to food, gaining that access in *any* form is higher priority than figuring out how to gain continuous access to food (i.e. Safety).
No, that's clearly not true. If people are on a hunger strike by refusing food, and the people providing them food say, "Fine, we're not going to provide food for you any more," the people participating in the hunger strike aren't going to immediately drop everything to forage for food so they can say, "Thank goodness we once again have food to refuse so the hunger strike can begin again." That's ridiculous.
Again, if you want to get into a debate about Maslow, then please create another thread about it. We shouldn't bog this thread down with a discussion over a theory that has no merit.
I'd just like to state I brought up Maslow only to show that "money isn't everything" (or even -necessarily- that important) when it comes to motivating people to do their best. So, in that sense your examples of hunger strikes and whathaveyou is aligned to my overall point, regardless of what it reflects on Maslow.
I mean, yes, but how else would you motivate people?
You could motivate them by threat of starvation. You can motivate them by putting a gun to their foreheads and telling them to work, threatening to end their lives. You can motivate them by threat of disenfranchisement.
However, none of these are going to prove as useful, and all of these are going to prove more problematic, than a system in which people are motivated to work to advance themselves. Hope for a better tomorrow proves a far more useful motivator than the threat of death.
And, does your "Sum(r) <= Sum(g)" take into account debt, or negative wealth, of individuals or societies?
Yes, it's just a tautology in the long run.
Sum(g)= total value of all economic output over a given time period. In the long run (as t->infinity), then sum(g)->the total value of all wealth in the economy. Sum(r) = total return on capital investments over a given time period. Since the total return on capital investments cannot (by definition) exceed the total value of all wealth in the economy, then Sum(r)<=Sum(g) in the long-run.
Based on that logic, I understand.
But, I thought "return on capital" didn't take into account all capital. So, given a system that only has 2 participants, Jimmy and Timmy. If Jimmy makes +$3 by investing and Timmy makes -$3 by doing nothing, then the overall growth of the system is 0, but the "return on capital" is +3.... Or am I just being silly?
I'm not going to comment on exactly how "return on capital" is defined by Picketty, whether it includes losses through non-investment of capital. I'm not sure of the answer, and it's irrelevant to the point I'm making.
At any snapshot in time, r > g is fine. But over time, that sum(r) > sum(g) is going to become unsustainable. In your example, eventually Jimmy will control all the wealth in your 2-person economy, and there will be nowhere for his "r" to come from.
This would be cleaner with integral notation, but I assume some members of my audience either never learned calculus or forgot it so I'm trying to keep it straightforward.
Reality disagrees with Maslow. See also everyone who has ever voluntarily died for a cause.
Or hell, look at hunger strikes. The fact that they exist at all totally contradicts Maslow.
I'd just like to state I brought up Maslow only to show that "money isn't everything" (or even -necessarily- that important) when it comes to motivating people to do their best. So, in that sense your examples of hunger strikes and whathaveyou is aligned to my overall point, regardless of what it reflects on Maslow.
The further down the heirachry of needs you go, the more oppressive the motivation methods become, right? Better to motivate with money than starvation.
The higher you go, the more subjective and optional the motivations become. How do you consistently and reliably use "esteem" to reward people? And even if you find a way to do that, what if I decide I'd prefer going back to sleep in my warm bed over my daily esteem allotment?
The convenient thing about money is that it's liquid and can assist with pretty much everything in the heirarchy. Need food? Money buys it. Want self-actualization via pursuing your dream to become a philosopher? Money can help you get a degree in philosophy, and enough money will give you the financial independence to sit around philosophizing instead of working.
At any snapshot in time, r > g is fine. But over time, that sum(r) > sum(g) is going to become unsustainable. In your example, eventually Jimmy will control all the wealth in your 2-person economy, and there will be nowhere for his "r" to come from.
Only if you assume Timmy can't go into debt. That's not a value assumption.
The further down the heirachry of needs you go, the more oppressive the motivation methods become, right? Better to motivate with money than starvation.
I was assuming you didn't want people in your civilized society to starve. Maybe that wasn't a value assumption.
But, if you look at "wealth vs happiness" graphs, they start tapering off after "needs and safety" requirements are met, or perceived to be met.
The convenient thing about money is that it's liquid and can assist with pretty much everything in the heirarchy. Need food? Money buys it. Want self-actualization via pursuing your dream to become a philosopher? Money can help you get a degree in philosophy, and enough money will give you the financial independence to sit around philosophizing instead of working.
Right. It's not "money" people really want; it's what money can be used to get, or what it represents.
Or -at least- that's probably how it should work. I suspect many people in today's society have started wanting money for it's own sake.
following TC logic, we should also list capitalism as a crime, since is very close to slavery.
kidding (or not) aside, following the TC question: If not, aren't you concerned about the fruits of your labor being taken from you?
the thing is, social walfare exist because:
1- not everyone came to the world with the same opportunities, its fair than you have a better life because you born in a wealthy home in america and not starving in africa?
2- what is "your labor"? a lot of wealth come from not only your labor, but natural resources, that resource are from everyone (or no one).
3- you want laws, protection (aka police and military) and other public goods? you have to pay for them.
4- even if other people were "lazy" and your tax pay for they life , there is still the "social peace" argument, i think everyone prefer to live in a more equal country (http://en.wikipedia.org/wiki/List_of_countries_by_income_equality)
there are more arguments, but the logic "my work, my money" is flaw in a lot of sense (even if in theory sounds good).
At any snapshot in time, r > g is fine. But over time, that sum(r) > sum(g) is going to become unsustainable. In your example, eventually Jimmy will control all the wealth in your 2-person economy, and there will be nowhere for his "r" to come from.
Only if you assume Timmy can't go into debt. That's not a value assumption.
First of all, it is a valid assumption; there are only two economic actors in your example, so there's no one for Timmy to go into debt to. Jimmy won't buy Timmy's bonds (or whatever debt instrument he's using) because Jimmy sees that Timmy is hemorrhaging money and has no way to make it back.
But let's say we let Jimmy go into debt somehow. He can't go into debt forever. There is a finite limit, just like there's a finite amount of wealth in the economy. Eventually all the wealth + debt carrying capacity of the economy will be exhausted and r>g will be unsustainable.
The further down the heirachry of needs you go, the more oppressive the motivation methods become, right? Better to motivate with money than starvation.
I was assuming you didn't want people in your civilized society to starve. Maybe that wasn't a value assumption.
Right, I'm saying it's preferable to motivate people with money as opposed to starvation.
But, if you look at "wealth vs happiness" graphs, they start tapering off after "needs and safety" requirements are met, or perceived to be met.
No one's forced to just keep acquiring money forever. Look at the example I gave of someone who "retires" to live their dream of becoming a full-time philosopher. Money can be freedom to pursue what you want in life. The fact that many people don't treat it that way isn't a knock against money as an effective motivator.
The higher you go, the more subjective and optional the motivations become. How do you consistently and reliably use "esteem" to reward people?
I'm a high school teacher. That's pretty much ALL I use.
It seems to work on the majority.
Except you also motivate your students with huge sums of money, namely their entire lifetime earning potential. How many students would come to class if no future employer or college was going to care about their grades and whether they have a diploma?
Also parents are helping you motivate your students in a variety of ways.
If a student doesn't care about their future earnings and doesn't have a parent or two involved in their life, how likely are they to come to class? I'm guessing all the "esteem" in the world isn't going to matter much.
The convenient thing about money is that it's liquid and can assist with pretty much everything in the heirarchy. Need food? Money buys it. Want self-actualization via pursuing your dream to become a philosopher? Money can help you get a degree in philosophy, and enough money will give you the financial independence to sit around philosophizing instead of working.
Right. It's not "money" people really want; it's what money can be used to get, or what it represents.
Or -at least- that's probably how it should work. I suspect many people in today's society have started wanting money for it's own sake.
That's the beauty of money, it doesn't matter what the person values, they almost always want money because it can help them achieve it. That's why it's such a great motivator.
"I want a nice car and a nice house." Money.
"I want to spend more time with my family." More money in your pocket means you need to work less and can choose to have more free time.
"I want to help the city's homeless." Money; start a foundation or a program.
"I want to learn X." Money; go to college.
"I want to give my kids a good future." Money for their education, money also lets you spend more time with them.
The higher you go, the more subjective and optional the motivations become. How do you consistently and reliably use "esteem" to reward people?
I'm a high school teacher. That's pretty much ALL I use.
It seems to work on the majority.
As a former High School student I can assure you that for many students "esteem" is not what the students are shooting for. I personally was motivated by money. I recognized that doing well in High School would give me a better chance at going to a good college which would give me the most potential to make money. If I went to school knowing that as an adult all jobs were equal I wouldn't have given a ***** about school and probably would have played more Gameboy during class. Perfect example of this is despite being in AP Calculus, when I had to take the state required math test that has zero meaning to the student and only measures the school's ability to teach math I bubbled every answer as C and got out of there as quickly as possible to go to my real classes. Making that score available to the teachers would not have changed my behavior (heck it might have been available to them I cant remember) and knowing that my parents would see that score did not effect me in the least, but if that score would have been available to colleges I most certainly would have actually taken the test for real.
The convenient thing about money is that it's liquid and can assist with pretty much everything in the heirarchy. Need food? Money buys it. Want self-actualization via pursuing your dream to become a philosopher? Money can help you get a degree in philosophy, and enough money will give you the financial independence to sit around philosophizing instead of working.
Right. It's not "money" people really want; it's what money can be used to get, or what it represents.
Or -at least- that's probably how it should work. I suspect many people in today's society have started wanting money for it's own sake.
That's a baseless suspicious from you. Money for it's own sake makes little sense.
Some people being motivated by money and while other's aren't is something that is rooted in the structure of consumer's behavior. Some people just have a higher distaste for laboring in undesired activities relative to consumption and because of that they start to reduce their labor supply earlier in the income axis or will be more inclined to supply labor of a type of his liking.
In simpler terms, people goal are normally to achieve a better position in life and that position is a set of many different things (money, free time, health, etc). Their decisions are then based on the available opportunities as well as their present position, so there's not a answer to what motivate people. It's many things that do that.
The special thing about money is that it buys so many different things that it almost surely will motivate you, either by giving you a trip to relax or by letting you invest on your career to earn more money later. But there are things that money can't buy (like free time) and people lacking it too much is when they start to not get motivated by it.
First of all, it is a valid assumption; there are only two economic actors in your example, so there's no one for Timmy to go into debt to. Jimmy won't buy Timmy's bonds (or whatever debt instrument he's using) because Jimmy sees that Timmy is hemorrhaging money and has no way to make it back.
Again, I'm not an economist. But, even I know that buying and selling debt is a billion dollar industry.[1] I also know the point of many lending agencies is they don't WANT the person they're lending money to to be able to pay it back.[2][3]
Ever heard of "debt bondage?"
But let's say we let Jimmy go into debt somehow. He can't go into debt forever. There is a finite limit, just like there's a finite amount of wealth in the economy. Eventually all the wealth + debt carrying capacity of the economy will be exhausted and r>g will be unsustainable.
What if I said "Jimmy" was "The US" and "China" was "Timmy."
So -if I'm reading this right- we currently owe China ~13 trillion dollars, but only have $1.34 trillion in circulation.[4]
Total to everyone, the US owes ~16 trillion, but only has 12 times less than that in circulation. If the US recalled every dollar to pay back it's debt, it would still come up very very short.
While this might not show debt is "limitless," it certainly doesn't show it's finite.
Right, I'm saying it's preferable to motivate people with money as opposed to starvation.
Yes, sorry, I misread. You are correct.
I don't like making too many assumptions when debating on the internet; there are a lot of weirdos out there, as I'm sure you know. My mistake here.
Except you also motivate your students with huge sums of money, namely their entire lifetime earning potential. How many students would come to class if no future employer or college was going to care about their grades and whether they have a diploma?
With all of that pay off decades away; I assure you, your average teenager isn't that far sighted.
If a student doesn't care about their future earnings and doesn't have a parent or two involved in their life, how likely are they to come to class? I'm guessing all the "esteem" in the world isn't going to matter much.
Again, I don't think many(no all, many) parents are using strictly monetary incentives. Things like "being a good person" or "success" while not as concrete as a dollar sign, seem to be the carrot of choice.
Unless the person is a psychopath, things like embarrassment and other emotional cues are better.
As a former High School student I can assure you that for many students "esteem" is not what the students are shooting for. I personally was motivated by money.
First of all, it is a valid assumption; there are only two economic actors in your example, so there's no one for Timmy to go into debt to. Jimmy won't buy Timmy's bonds (or whatever debt instrument he's using) because Jimmy sees that Timmy is hemorrhaging money and has no way to make it back.
Again, I'm not an economist. But, even I know that buying and selling debt is a billion dollar industry.[1] I also know the point of many lending agencies is they don't WANT the person they're lending money to to be able to pay it back.[2][3]
Ever heard of "debt bondage?"
In our hypothetical, the endgame already has Jimmy taking all of Timmy's money. Jimmy has no incentive to put Timmy into debt bondage because he can't extract more money from Timmy than he's already extracting.
But let's say we let Jimmy go into debt somehow. He can't go into debt forever. There is a finite limit, just like there's a finite amount of wealth in the economy. Eventually all the wealth + debt carrying capacity of the economy will be exhausted and r>g will be unsustainable.
What if I said "Jimmy" was "The US" and "China" was "Timmy."
So -if I'm reading this right- we currently owe China ~13 trillion dollars, but only have $1.34 trillion in circulation.[4]
Total to everyone, the US owes ~16 trillion, but only has 12 times less than that in circulation. If the US recalled every dollar to pay back it's debt, it would still come up very very short.
While this might not show debt is "limitless," it certainly doesn't show it's finite.
China and other debt-holders don't have infinite demand for US bonds. There is some point at which they would not keep buying bonds, either because they don't want them anymore or because they don't physically have the money to pay for them. Yes, debt (especially on a national scale) can get extremely large, but it's not boundless. You couldn't go infinity dollars into debt. That means it's finite; finite = not infinite.
Also, "dollars in circulation" is a pretty meaningless benchmark for debt. Something like GDP is at least representative of national productivity.
In our hypothetical, the endgame already has Jimmy taking all of Timmy's money. Jimmy has no incentive to put Timmy into debt bondage because he can't extract more money from Timmy than he's already extracting.
But, that's not what happens in the real world.
The deeper in debt you are, the harder it is to get out. Even if they're already getting everything, they want to make sure they can get everything for as long as they can.
China and other debt-holders don't have infinite demand for US bonds. There is some point at which they would not keep buying bonds, either because they don't want them anymore or because they don't physically have the money to pay for them. Yes, debt (especially on a national scale) can get extremely large, but it's not boundless. You couldn't go infinity dollars into debt. That means it's finite; finite = not infinite.
Also, "dollars in circulation" is a pretty meaningless benchmark for debt. Something like GDP is at least representative of national productivity.
But, again (and maybe I'm misunderstanding) I think this throws the whole "sum(r) = sum(g)" argument out of whack. If someone can owe someone else 12 TIMES the total amount of money in the system, how can you say "total growth" would necessarily equal "total returns?"
And, if the 'bottom' isn't at 12 times the total, than where is it? I see no reason NOT to assume the amount of debt is effectively 'infinite,' or -at least- "indefinite."
I would like to interject here and point out that the US is not indebted to China for $13 trillion USD. The vast majority of US debt is owed to sources within the United States. China's total holdings according to the US Government Accounting Office totals around 1.1 trillion, or 6.85% of the total debt. While not an insignificant amount, China is hardly the primary creditor of the USA and has in fact lowered its stake in US holdings as of 2012.
Even loan sharks have to look at Cost v Benefit after a while. If China did have 13 trillion of the US's debt that would be 13 trillion that they couldn't effectively use towards any other meaningful program within China with no real benefit. Calling it all in would result in either a snub, war, or the US simply printing 13T worth of bills, causing hyperinflation and making the debt worthless anyway. There is always a meaningful limit.
In our hypothetical, the endgame already has Jimmy taking all of Timmy's money. Jimmy has no incentive to put Timmy into debt bondage because he can't extract more money from Timmy than he's already extracting.
But, that's not what happens in the real world.
The deeper in debt you are, the harder it is to get out. Even if they're already getting everything, they want to make sure they can get everything for as long as they can.
Our example is a basic model. It's much simpler than the real world because there are only two actors.
In our simple hypothetical, Jimmy is already getting every dollar out of Timmy forever. He doesn't get any benefit from putting Timmy into debt.
China and other debt-holders don't have infinite demand for US bonds. There is some point at which they would not keep buying bonds, either because they don't want them anymore or because they don't physically have the money to pay for them. Yes, debt (especially on a national scale) can get extremely large, but it's not boundless. You couldn't go infinity dollars into debt. That means it's finite; finite = not infinite.
Also, "dollars in circulation" is a pretty meaningless benchmark for debt. Something like GDP is at least representative of national productivity.
But, again (and maybe I'm misunderstanding) I think this throws the whole "sum(r) = sum(g)" argument out of whack. If someone can owe someone else 12 TIMES the total amount of money in the system, how can you say "total growth" would necessarily equal "total returns?"
And, if the 'bottom' isn't at 12 times the total, than where is it? I see no reason NOT to assume the amount of debt is effectively 'infinite,' or -at least- "indefinite."
If "indefinite" means "sometimes difficult to calculate and sometimes very large" then yes, the debt carry capacity of powerful nations is indefinite. This is not the same thing as "infinite." Nothing in economics is infinite, because economics deals with finite quantities of goods, money, and people. Infinite debt is impossible because there isn't infinite value to loan.
At the end of the day, debt requires two things like any transaction: a debt buyer and debt seller. In other words, someone has to be willing to loan you the money. Sum(g) reflects all the economic growth across the whole economy over a period of time. When the period of time becomes long enough, sum(g) = the total value of everything in the economy. All loans must come out of that "total value of everything in the economy" pool. There's no where else for them to come from.
You seem to think you've found a counterexample when you ask how "someone can owe someone else 12 TIMES the total amount of money in the system." There are at least two problems with that statement. First of all, sum(g) represents all the value in the whole world, not just the United States. So focusing on US currency levels is meaningless. Second, the total amount of currency is very different than the total amount of value produced over a given time period, which is what sum(g) represents. On a long-term timescale, sum(g) represents the value of everything. Cash, real estate, capitol (like cars, industrial equipment, ships, planes), infrastructure, commodities, extracted natural resources, intellectual property and trade secrets, investments in future growth (like public or private R&D), plus anything and everything else with economic value.
The amount of currency in circulation has no bearing on the magnitude of sum(g). We could have an entirely barter economy with no currency at all, yet still have a positive sum(g). And the US GDP last year was about $16.8 trillion, which is obviously much larger than the $1.34 trillion cash we have in circulation. GDP is an approximate measure of value generated over the course of a year, so you can see that the US's slice of sum(g) for a given year is much larger than its total currency in circulation.
Our example is a basic model. It's much simpler than the real world because there are only two actors.
In our simple hypothetical, Jimmy is already getting every dollar out of Timmy forever. He doesn't get any benefit from putting Timmy into debt.
The point of an simple example is to simply it without changing the basic underlying fundamentals. If the US can owe(to whomever) 12 times more money than exists, I think it would be changing the fundamentals to say Timmy can't go deeper into debt.
Regardless of those numbers (which I see you disagree with later on), this is also played out with Payday Loans and Predatory Lending in general. On a smaller scale, the majority of collage students go deep into debt, many times what they're worth originally. I think it would be an over simplification to simply say "this doesn't happen" when it so clearly does, all the time. Debt bondage is -and has been- a real thing, and when my objection was "And, does your "Sum(r) <= Sum(g)" take into account debt, or negative wealth, of individuals or societies?" I think removing debt is a bit of a question beg on your part. I can't prove my point about "negative wealth" without looking at negative wealth in the real world, and to ask me to do otherwise is unfair.
Infinite debt is impossible because there isn't infinite value to loan.
Well, in my original example, Timmy would never owe "infinite" dollars to Jimmy, or -at least- the universe would end first. So, I feel "indefinite" is 'good enough' to show my point.
If the amount of "negative wealth" someone can have is "arbitrarily large" then the lending could go on indefinitely, which is all that is needed in this case.
At the end of the day, debt requires two things like any transaction: a debt buyer and debt seller. In other words, someone has to be willing to loan you the money. Sum(g) reflects all the economic growth across the whole economy over a period of time. When the period of time becomes long enough, sum(g) = the total value of everything in the economy. All loans must come out of that "total value of everything in the economy" pool. There's no where else for them to come from.
Except, that's not what we're seeing. The amount of debt the US has isn't converging on $1.34 trillion, $16.8 trillion, or any other number.
It's not converging at all.
You seem to think you've found a counterexample when you ask how "someone can owe someone else 12 TIMES the total amount of money in the system." There are at least two problems with that statement. First of all, sum(g) represents all the value in the whole world, not just the United States. So focusing on US currency levels is meaningless. Second, the total amount of currency is very different than the total amount of value produced over a given time period, which is what sum(g) represents. On a long-term timescale, sum(g) represents the value of everything. Cash, real estate, capitol (like cars, industrial equipment, ships, planes), infrastructure, commodities, extracted natural resources, intellectual property and trade secrets, investments in future growth (like public or private R&D), plus anything and everything else with economic value.
The amount of currency in circulation has no bearing on the magnitude of sum(g). We could have an entirely barter economy with no currency at all, yet still have a positive sum(g). And the US GDP last year was about $16.8 trillion, which is obviously much larger than the $1.34 trillion cash we have in circulation. GDP is an approximate measure of value generated over the course of a year, so you can see that the US's slice of sum(g) for a given year is much larger than its total currency in circulation.
But, World Wide Debt is approximately 10-20 Trillion dollars more than the Gross World Product.[1][2]
Our example is a basic model. It's much simpler than the real world because there are only two actors.
In our simple hypothetical, Jimmy is already getting every dollar out of Timmy forever. He doesn't get any benefit from putting Timmy into debt.
The point of an simple example is to simply it without changing the basic underlying fundamentals. If the US can owe(to whomever) 12 times more money than exists, I think it would be changing the fundamentals to say Timmy can't go deeper into debt.
Regardless of those numbers (which I see you disagree with later on), this is also played out with Payday Loans and Predatory Lending in general. On a smaller scale, the majority of collage students go deep into debt, many times what they're worth originally. I think it would be an over simplification to simply say "this doesn't happen" when it so clearly does, all the time. Debt bondage is -and has been- a real thing, and when my objection was "And, does your "Sum(r) <= Sum(g)" take into account debt, or negative wealth, of individuals or societies?" I think removing debt is a bit of a question beg on your part. I can't prove my point about "negative wealth" without looking at negative wealth in the real world, and to ask me to do otherwise is unfair.
Jimmy and Timmy was your example, which I was using to help simplify my explanation. Debt just adds an illusory layer of complexity to the real world case. In all cases, the fundamental principle is the same: you cannot obtain more value than exists. Therefore in the long run sum(r)<=sum(g).
Infinite debt is impossible because there isn't infinite value to loan.
Well, in my original example, Timmy would never owe "infinite" dollars to Jimmy, or -at least- the universe would end first. So, I feel "indefinite" is 'good enough' to show my point.
If the amount of "negative wealth" someone can have is "arbitrarily large" then the lending could go on indefinitely, which is all that is needed in this case.
It's not arbitrarily large. It's bounded by the person's debt carrying capacity. In the case of the US we are nowhere near the limit because we're one of the most economically stable governments in the world. It's like claiming your credit card limit is "arbitrarily large" because you've never maxed out your credit card.
At the end of the day, debt requires two things like any transaction: a debt buyer and debt seller. In other words, someone has to be willing to loan you the money. Sum(g) reflects all the economic growth across the whole economy over a period of time. When the period of time becomes long enough, sum(g) = the total value of everything in the economy. All loans must come out of that "total value of everything in the economy" pool. There's no where else for them to come from.
Except, that's not what we're seeing. The amount of debt the US has isn't converging on $1.34 trillion, $16.8 trillion, or any other number.
It's not converging at all.
That's because sum(g) isn't converging either. We shouldn't expect either sum(g) or sum(r) to converge on a fixed number. We should expect, long-term, for sum(r)<=sum(g). This relationship can be true while both numbers continue growing.
You seem to think you've found a counterexample when you ask how "someone can owe someone else 12 TIMES the total amount of money in the system." There are at least two problems with that statement. First of all, sum(g) represents all the value in the whole world, not just the United States. So focusing on US currency levels is meaningless. Second, the total amount of currency is very different than the total amount of value produced over a given time period, which is what sum(g) represents. On a long-term timescale, sum(g) represents the value of everything. Cash, real estate, capitol (like cars, industrial equipment, ships, planes), infrastructure, commodities, extracted natural resources, intellectual property and trade secrets, investments in future growth (like public or private R&D), plus anything and everything else with economic value.
The amount of currency in circulation has no bearing on the magnitude of sum(g). We could have an entirely barter economy with no currency at all, yet still have a positive sum(g). And the US GDP last year was about $16.8 trillion, which is obviously much larger than the $1.34 trillion cash we have in circulation. GDP is an approximate measure of value generated over the course of a year, so you can see that the US's slice of sum(g) for a given year is much larger than its total currency in circulation.
But, World Wide Debt is approximately 10-20 Trillion dollars more than the Gross World Product.[1][2]
So, I'm not sure how this changes things.
The gross world product is approximately equal to sum(g) summed over one year. (This is not quite right because it estimates the integral with a straight line, but close enough).
So the GWP is just the value generated last year. There's lots of value in the economy that was generated before last year. Loans can come out of that value as well.
Summing over a long enough time period, sum(g) converges on the total measure of all value in the economy. Credit cannot, physically, exceed that number.
It's not arbitrarily large. It's bounded by the person's debt carrying capacity.
Which is what, exactly? Whatever the government says it is based on another arbitrary metric like "credit score?"
Other librarians I've met have talked about "fundamental rights" not given by the government. So, what's the fundamental "debt carrying capacity" of a person, and why is my assertion that it's arbitrarily large unreasonable?
That's because sum(g) isn't converging either. We shouldn't expect either sum(g) or sum(r) to converge on a fixed number. We should expect, long-term, for sum(r)<=sum(g). This relationship can be true while both numbers continue growing.
So, if neither is converging, then the roller-coaster ride isn't going to stop. Which means you can't make statements like "Sum(r) <= Sum(g) in the long run," because the 'long run' is indefinite.
The system is a non-converging function with no end, and 'r' can be greater than 'g' throughout.
The gross world product is approximately equal to sum(g) summed over one year. (This is not quite right because it estimates the integral with a straight line, but close enough).
So the GWP is just the value generated last year. There's lots of value in the economy that was generated before last year. Loans can come out of that value as well.
Summing over a long enough time period, sum(g) converges on the total measure of all value in the economy.
I will admit I didn't fully read my citations"[1][2]" from the last post, but I'm pretty sure -from skimming them- they show this to be demonstratively false.
If we were mainly driven by money, we wouldn't exist as a species.
Babies are one of the most expensive things you can get, and -statistically- they DECREASE your happiness.[1]
If that's not proof that monetary motivation is unsustainable, I don't know what is.
It's really only proof that humans aren't really capable of acting in their own rational self-interest (at least not all the time), which is counter to the underpinnings of a lot of economic arguments.
This paradox relies on the counter-intuitive nature of infinities. There are no infinities in economics. We're talking about a finite number of people, a finite amount of value, a finite number of transactions, etc. Numbers can get quite large in economics but never infinite.
It's not arbitrarily large. It's bounded by the person's debt carrying capacity.
Which is what, exactly? Whatever the government says it is based on another arbitrary metric like "credit score?"
Other librarians I've met have talked about "fundamental rights" not given by the government. So, what's the fundamental "debt carrying capacity" of a person, and why is my assertion that it's arbitrarily large unreasonable?
Debt carrying capacity is capped by (1) the willingness of others to lend you money and (2) the existence of money to lend. (Remember, money /= currency).
This isn't a statement about rights. It's a statement about possible actions in the real world. If no one wants to lend you money, you can't acquire any more debt. If you control all the money in the economy, you can't acquire any more debt.
That's because sum(g) isn't converging either. We shouldn't expect either sum(g) or sum(r) to converge on a fixed number. We should expect, long-term, for sum(r)<=sum(g). This relationship can be true while both numbers continue growing.
So, if neither is converging, then the roller-coaster ride isn't going to stop. Which means you can't make statements like "Sum(r) <= Sum(g) in the long run," because the 'long run' is indefinite.
The system is a non-converging function with no end, and 'r' can be greater than 'g' throughout.
This is where integral notation would come in handy in explaining the concepts. For any given year, the integral (sum) of r over that year can exceed the integral (sum) of g over that year. This is because some of the r is coming from previous years' g. For a very long period of time (say, 1000+ years) the integral of r over that time period cannot exceed the integral of g over the time period. That's because the integral of g over that long time period represents all value in the economy; it's the sum of all value generated by economic activity over 1000+ years which is essentially just "all value in the economy." The integral of r over that time period represents all returns on investment in the entire economy throughout history. The total returns on investments cannot exceed the total value of the economy. This is because, by definition, "return on investment" is a subset of "total value of the economy." In other words, the total value of the economy includes all returns on investment plus all other sources of economic growth as well.
There is some point in between 1 year and 1000+ years where the integral of g becomes a close enough approximation of "all value in the economy" such that we can say sum(r)<=sum(g) over that time period. I'm not sure exactly where that is, and it will depend on specific features of the economy like the total size of the economy, the rate of economic growth, the market interest rates, etc.
The gross world product is approximately equal to sum(g) summed over one year. (This is not quite right because it estimates the integral with a straight line, but close enough).
So the GWP is just the value generated last year. There's lots of value in the economy that was generated before last year. Loans can come out of that value as well.
Summing over a long enough time period, sum(g) converges on the total measure of all value in the economy.
I will admit I didn't fully read my citations"[1][2]" from the last post, but I'm pretty sure -from skimming them- they show this to be demonstratively false.
I don't see what you're talking about, please explain.
Maybe I'm being sloppy by saying "physical." I should say "objectively measurable." We measure it by summing over the dollar value of economic transactions, which is what the GDP or GWP are attempting to estimate. ("GDP is a measure of value added.")
It's really only proof that humans aren't really capable of acting in their own rational self-interest (at least not all the time), which is counter to the underpinnings of a lot of economic arguments.
It also shows any species that DID, would die out pretty quick. I've started to wounder about the evolutionary benefit of "intelligence;" at what point does it become more of an evolutionary millstone than a boon?
This paradox relies on the counter-intuitive nature of infinities. There are no infinities in economics. We're talking about a finite number of people, a finite amount of value, a finite number of transactions, etc. Numbers can get quite large in economics but never infinite.
I'm pretty sure indefinite systems have certain properties in common with countably infinite systems. However, I admit that's not my field.
Regardless, if the amount of debt someone can have is unbound (something still under contention, I realize) then this is a countably infinite system.
Debt carrying capacity is capped by (1) the willingness of others to lend you money
Which -I hope we can agree- is unbounded. Someone could be "willing" to go into debt for eleventy billion dollars, and someone could agree. I see no physiological principle that would make the amount someone was "willing" a bounded number.
and (2) the existence of money to lend. (Remember, money /= currency).
What? You just finished telling me the fact that there are only 1.3 trillion dollars in existence was immaterial.(Edit: ok, fair enough, I misread) Even if you start counting bales of grain -or what have you- I just finished telling you the world owes ~15 trillion dollars more than it produces.
...
I reject #2.
Edit: Unless you're saying that "money" is simply "value people are capable of perceiving in the system," then I agree, but also claim it's unbounded.
This isn't a statement about rights. It's a statement about possible actions in the real world. If no one wants to lend you money, you can't acquire any more debt. If you control all the money in the economy, you can't acquire any more debt.
Its not about "money" its about "value."
It's not even about "what exists now," it's also about "what people think might exist in the future." People buy and sell futures every day, I would assume you're aware. It's not only "stuff" that has value, its also "future stuff," what something might be able to make.
For any given year, the integral (sum) of r over that year can exceed the integral (sum) of g over that year. This is because some of the r is coming from previous years' g. For a very long period of time (say, 1000+ years) the integral of r over that time period cannot exceed the integral of g over the time period. That's because the integral of g over that long time period represents all value in the economy; it's the sum of all value generated by economic activity over 1000+ years which is essentially just "all value in the economy." The integral of r over that time period represents all returns on investment in the entire economy throughout history. The total returns on investments cannot exceed the total value of the economy. This is because, by definition, "return on investment" is a subset of "total value of the economy." In other words, the total value of the economy includes all returns on investment plus all other sources of economic growth as well.
1000 years then? That's it? After a 1000 years the economy is over and we all go home?
I guess it's good you picked 1000 years, because Piketty did it for 300 years and got r > g. But, I'm not sure why you feel 700 hundred more would fix it.
I thought we were mutually coming to the conclusion that the economy was unbounded. I guess not...
There is some point in between 1 year and 1000+ years where the integral of g becomes a close enough approximation of "all value in the economy" such that we can say sum(r)<=sum(g) over that time period. I'm not sure exactly where that is, and it will depend on specific features of the economy like the total size of the economy, the rate of economic growth, the market interest rates, etc.
It's also related to things like "expectations."
People are already buying and selling the right to name stars.
I don't see what you're talking about, please explain.
The whole world owes ~15 trillion more than it makes.
And, summing over (g) doesn't change the fact that r > g.
For 300 years people with money have made more money. You might claim that 700 years more would normalize it, but since -I hope- we both agree the economy -which contains the 'value' of everything people can think of- is unbounded, I don't see why that would be bounded. It's based on the perception of value.
Maybe I'm being sloppy by saying "physical." I should say "objectively measurable." We measure it by summing over the dollar value of economic transactions, which is what the GDP or GWP are attempting to estimate. ("GDP is a measure of value added.")
Well -since I claim to be a physicalist- I was actually worried I was being sloppy.
How much is an asteroid worth? What about the rights to mine one? (I know, the Outer Space Treaty) What about the rights to name one? How much is a human life worth? (my friend that works at an insurance company could tell you pretty quick) What's the total 'value' of everything that exists, could exist, or be imagined to exist?
We might be able to come to some intersubjective answer, and call it "the economy," but I wouldn't call it "objective" and I see no reason to agree it's -somehow- bounded.
Debt carrying capacity is capped by (1) the willingness of others to lend you money and (2) the existence of money to lend. (Remember, money /= currency).
I don't understand this part. Imagine you and I are stuck on a desert island. There are two coconuts, and no other resources or other forms of a value. You have both coconuts, and I really want a coconut. So I agree to pay you back three future coconuts in exchange for one coconut now. Doesn't my debt now exceed the amount of money in our little economy?
If we were mainly driven by money, we wouldn't exist as a species.
Babies are one of the most expensive things you can get, and -statistically- they DECREASE your happiness.[1]
If that's not proof that monetary motivation is unsustainable, I don't know what is.
It's really only proof that humans aren't really capable of acting in their own rational self-interest (at least not all the time), which is counter to the underpinnings of a lot of economic arguments.
Not really.
First, there's no implication in economics that money is what people seeks. Actually this idea is in direct conflict with neoclassical tradition - money is nothing but the things it can buy (which is Say's Law). This is why ortodox economic are labeled as 'real' systems (instead of 'nominal') because all aspects of monetary markets are internalized by consumers. In short, in traditional economics, money does not motivate people, the things money buy does it.
And no one ever assumed all things human beings seeks can be achieved through trade (money). Friendship, love, particular desires such as discovering something new, creative impulses, etc... Those are all things that are not economic goods and thus cannot be achieved through trade. Microeconomics normally doesn't deal with those things precisely because economics is the theory of consumption, production and trade - those things are simply not the objects of study.
The dissatisfaction may occurs when economists uses economic theory to justify policy and then someone brings the point that economics does not take in consideration non-trade things (who are important for human life). Those critics are often ignored because they are not framed in a consistent theory that undermines economic policy. Ex: Nationalist (left an right winged) always complain how bilateral free trade agreements economists advises as good trade policy are against national interests but they are ignored because they are enable to convince "national interest" is nothing but his own pride and idea of what his nation should be. It's not that nationalism does not constitutes a important part of the human social ecosystem, it's just that there's as much arguments for nationalism being against free trade as there's for being in favor of it.
And there are important cases were non-trade things play central role in traditional economics. In neoclassical growth theory technological change is precisely caused by non-profit seeking agency. People created some profit-seeking technological change models but while they cover part of the data better, there are some horrible contradictions between other parts of the data and this theory. The most accepted theory right now is more based on the older one, except it tries to give a better elaboration of how the non-profit seeking agency works.
Also, people having babies and feeling unhappy is 100% consistent with micro econ rationality. In micro econ theory, utility is just a index for your potential choices and rationality is the mathematical properties of those choices. No one ever said the more utility you have, happier you are - this is not a rationality axiom ! Meaning someone choosing something that makes then unhappy possible inside all kind of consumer models, from the old school 1950's ones to the bounded-rationality/behavioral modern ones. The reason is that happiness (as a state) relies on non-trade things as well as trade things you consume and also on expectations.
One simply reason why having children might cause distress is because the larger the number of serious emphatic bonds you have, larger the chances of really bad things happening in your perspective. It doesn't undermine economic theory because happiness is not utility because utility is the index-ranking of your choices and happiness is not the sole purpose behind those. We know the human machine is a lot more complicated then pleasure-happiness seekers.
Debt carrying capacity is capped by (1) the willingness of others to lend you money and (2) the existence of money to lend. (Remember, money /= currency).
I don't understand this part. Imagine you and I are stuck on a desert island. There are two coconuts, and no other resources or other forms of a value. You have both coconuts, and I really want a coconut. So I agree to pay you back three future coconuts in exchange for one coconut now. Doesn't my debt now exceed the amount of money in our little economy?
It depends on what you mean by "no other resources or other forms of a value." Let's explore both possibilities.
Possibility 1: You mean "no other resources or other forms of a value" in a very literal way. The island is made of pure sand or rock, with no coconut trees of any kind. And moreover, we know there is exactly 0% chance of us ever being rescued, meaning these two coconuts are the only two things of value either of us will ever posses for the rest of our lives.
In this situation, no sane person would ever agree to the loan you propose because there's no chance of ever getting repaid the promised three coconuts. I might just give you one of my coconuts out of the goodness of my heart, but a loan would never happen because we both know there's no chance of repayment. The amount of "money" or value in the economy remains equal to two coconuts.
Possibility 2: You don't mean there are literally no resources at all. Maybe there are coconut trees on the island that might bear coconuts in the near future, or maybe we think there's a realistic chance of being rescued soon. In that case, I might agree to your proposed loan. Whether I will agree to make the loan is determined by the value I place on your promise, as compared to the value I place on a coconut.
I determine the value (to me) of your promise by taking what you're promising to deliver (3 coconuts) and multiplying by discounting factors. One such factor is the "time value" factor, which represents that I value a future coconut less than I value having a coconut right now. Maybe you've promised to get me the coconuts within a week, and I determine that I value "a coconut in one week" at 75% the value of "a coconut now." So my time value factor is 75%. I also discount by a "risk cost" factor, which represents my estimate of the odds that your promise will come to fruition; this incorporates both the odds that you'll successfully locate and harvest more coconuts and the odds you'll actually make good on your promise to give them to me. Let's say I think you're trustworthy and I see lots of coconut trees in the distance on the island, so I think there's a 90% chance I will get the promised coconuts.
So this means I value the three promised future coconuts at (3 coconuts)*(75% time factor)*(90% risk factor) = ~2 coconuts. Since I value the promise at 2 coconuts, and I can secure this promise by giving you one coconut, I'll agree to make the loan.
In a mirror-image fashion, you would only agree to the trade if you valued the promised future coconuts less than you value one coconut now. For example you might be starving, so you apply a very significant time value discount. Maybe, for you, a coconut in a week is worth just 10% of a coconut now (or even 0% if you think you'll starve to death between now and then). Let's just say you value the promise at .5 coconuts, just to make it easy.
So we have a situation where I privately value the promise at 2 coconuts, and you privately value the promise at .5 coconuts. Meaning you're losing .5 coconuts worth of value by making the promise and I'm gaining 2 coconuts worth of value by accepting it. In this case the total value in our economy has increased by a net amount: 2 coconuts - .5 coconuts = 1.5 coconuts net increase.
Now the present total amount of value or "money" in the economy is equal to the value of our 2 coconuts plus the value gained by virtue of your promise. The total amount of "money" in the system is equivalent to 3.5 coconuts' worth of value. Some of this value is encapsulated in present possessory interests (the 2 coconuts) and some is encapsulated in contractual/promissory rights (the promise to deliver 3 coconuts in a week).
Now we can ask your original question, which was "[d]oesn't my debt now exceed the amount of money in our little economy?" You might be tempted to say "no, because my debt (3 coconuts) is less than the total amount of value in the economy (3.5 coconuts)." But that's actually the wrong way to think about this. Your debt right now is not "3 coconuts." That's what your debt will be worth in a week when it comes time to deliver the coconuts. Your debt is worth less than 3 coconuts right now. What is it actually worth right now? It's worth the "market price" of your debt, i.e. the amount of money you would need to pay to acquire the debt back. Since the market on our island is just you and me, the market price for your debt is the amount you would need to pay me to acquire the debt back today. Since we said I valued the debt at 2 coconuts, you'd have to pay me at least 2 coconuts before I'd agree to sell the debt back to you.
So the answer is, your debt (worth 2 coconuts) is less than the amount of money in the economy (worth 3.5 coconuts).
If you feel like getting really mathy:
We can generalize this to show your debt must always be less than the money in the system you describe. Let's say we have a deal where I give you X coconuts in exchange for some debt D. Let's call bitterroot's valuation of D "bD" and Tiax's valuation of D "tD." I will only agree to the trade if I think bD > X coconuts; I must be getting at least X coconuts worth of value out of the deal or I won't make the trade. Likewise you will only agree to the trade if you value tD < X; you must care about the X coconuts more than you care about not going into debt. Thus no matter what, bD - tD will always be some positive number, call it n; n is the net gain in value from the promise. Accordingly, the total value or "money" in the economy = X + n. We can algebraically expand X + n by noting that n = bD-tD; so we conclude the total value in the economy = X + bD - tD.
As we said, the market price of your debt is the amount you would need to pay me to get it back: bD. So now the million-dollar question. Can your debt exceed the total value in the economy? To put it another way, can we ever say debt > total value? No, because bD > X + bD - tD will always be a false statement. We know this because tD < X, as we said above, so X - tD is a positive number. Meaning our inequality from the previous sentence reduces to bD > bD + (some positive number). That's always going to be a false statement. So your debt can never exceed the total value or "money" in the economy.
I don't understand this part. Imagine you and I are stuck on a desert island. There are two coconuts, and no other resources or other forms of a value. You have both coconuts, and I really want a coconut. So I agree to pay you back three future coconuts in exchange for one coconut now. Doesn't my debt now exceed the amount of money in our little economy?
Two cases:
1) Your offer to pay me three future coconuts is genuine, in which case there must exist the necessary infrastructure for you to make good on the debt -- a coconut tree, your labor, et cetera -- in other words, value.
2) Your offer cannot be made good upon, in which case every rational actor (myself included) will refuse to loan you the coconut.
In case 1, you take on debt, but it does not exceed the available value. In case 2, you do not take on any debt and so do not exceed the available value.
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A limit of time is fixed for thee
Which if thou dost not use for clearing away the clouds from thy mind
It will go and thou wilt go, never to return.
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That's an issue of Want vs. Need. As long as they still had access to food, the Need for food was fulfilled. Eating itself is a matter of Want. One of the main points of Maslow is that the decisions you can make are determined by the resources you have available, and there's a rough priority in acquiring resources. You can only choose not to eat if you have access to food. If you don't have access to food, gaining that access in *any* form is higher priority than figuring out how to gain continuous access to food (i.e. Safety). This is one of the biggest problems the poor have in getting ahead - they're too busy making short-term survival decisions at the cost of long-term success.
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No, that's clearly not true. If people are on a hunger strike by refusing food, and the people providing them food say, "Fine, we're not going to provide food for you any more," the people participating in the hunger strike aren't going to immediately drop everything to forage for food so they can say, "Thank goodness we once again have food to refuse so the hunger strike can begin again." That's ridiculous.
Again, if you want to get into a debate about Maslow, then please create another thread about it. We shouldn't bog this thread down with a discussion over a theory that has no merit.
I mean, yes, but how else would you motivate people?
You could motivate them by threat of starvation. You can motivate them by putting a gun to their foreheads and telling them to work, threatening to end their lives. You can motivate them by threat of disenfranchisement.
However, none of these are going to prove as useful, and all of these are going to prove more problematic, than a system in which people are motivated to work to advance themselves. Hope for a better tomorrow proves a far more useful motivator than the threat of death.
I'm not going to comment on exactly how "return on capital" is defined by Picketty, whether it includes losses through non-investment of capital. I'm not sure of the answer, and it's irrelevant to the point I'm making.
At any snapshot in time, r > g is fine. But over time, that sum(r) > sum(g) is going to become unsustainable. In your example, eventually Jimmy will control all the wealth in your 2-person economy, and there will be nowhere for his "r" to come from.
This would be cleaner with integral notation, but I assume some members of my audience either never learned calculus or forgot it so I'm trying to keep it straightforward.
The further down the heirachry of needs you go, the more oppressive the motivation methods become, right? Better to motivate with money than starvation.
The higher you go, the more subjective and optional the motivations become. How do you consistently and reliably use "esteem" to reward people? And even if you find a way to do that, what if I decide I'd prefer going back to sleep in my warm bed over my daily esteem allotment?
The convenient thing about money is that it's liquid and can assist with pretty much everything in the heirarchy. Need food? Money buys it. Want self-actualization via pursuing your dream to become a philosopher? Money can help you get a degree in philosophy, and enough money will give you the financial independence to sit around philosophizing instead of working.
I was assuming you didn't want people in your civilized society to starve. Maybe that wasn't a value assumption.
But, if you look at "wealth vs happiness" graphs, they start tapering off after "needs and safety" requirements are met, or perceived to be met.
I'm a high school teacher. That's pretty much ALL I use.
It seems to work on the majority.
Right. It's not "money" people really want; it's what money can be used to get, or what it represents.
Or -at least- that's probably how it should work. I suspect many people in today's society have started wanting money for it's own sake.
kidding (or not) aside, following the TC question: If not, aren't you concerned about the fruits of your labor being taken from you?
the thing is, social walfare exist because:
1- not everyone came to the world with the same opportunities, its fair than you have a better life because you born in a wealthy home in america and not starving in africa?
2- what is "your labor"? a lot of wealth come from not only your labor, but natural resources, that resource are from everyone (or no one).
3- you want laws, protection (aka police and military) and other public goods? you have to pay for them.
4- even if other people were "lazy" and your tax pay for they life , there is still the "social peace" argument, i think everyone prefer to live in a more equal country (http://en.wikipedia.org/wiki/List_of_countries_by_income_equality)
there are more arguments, but the logic "my work, my money" is flaw in a lot of sense (even if in theory sounds good).
First of all, it is a valid assumption; there are only two economic actors in your example, so there's no one for Timmy to go into debt to. Jimmy won't buy Timmy's bonds (or whatever debt instrument he's using) because Jimmy sees that Timmy is hemorrhaging money and has no way to make it back.
But let's say we let Jimmy go into debt somehow. He can't go into debt forever. There is a finite limit, just like there's a finite amount of wealth in the economy. Eventually all the wealth + debt carrying capacity of the economy will be exhausted and r>g will be unsustainable.
Right, I'm saying it's preferable to motivate people with money as opposed to starvation.
No one's forced to just keep acquiring money forever. Look at the example I gave of someone who "retires" to live their dream of becoming a full-time philosopher. Money can be freedom to pursue what you want in life. The fact that many people don't treat it that way isn't a knock against money as an effective motivator.
Except you also motivate your students with huge sums of money, namely their entire lifetime earning potential. How many students would come to class if no future employer or college was going to care about their grades and whether they have a diploma?
Also parents are helping you motivate your students in a variety of ways.
If a student doesn't care about their future earnings and doesn't have a parent or two involved in their life, how likely are they to come to class? I'm guessing all the "esteem" in the world isn't going to matter much.
That's the beauty of money, it doesn't matter what the person values, they almost always want money because it can help them achieve it. That's why it's such a great motivator.
"I want a nice car and a nice house." Money.
"I want to spend more time with my family." More money in your pocket means you need to work less and can choose to have more free time.
"I want to help the city's homeless." Money; start a foundation or a program.
"I want to learn X." Money; go to college.
"I want to give my kids a good future." Money for their education, money also lets you spend more time with them.
etc.
As a former High School student I can assure you that for many students "esteem" is not what the students are shooting for. I personally was motivated by money. I recognized that doing well in High School would give me a better chance at going to a good college which would give me the most potential to make money. If I went to school knowing that as an adult all jobs were equal I wouldn't have given a ***** about school and probably would have played more Gameboy during class. Perfect example of this is despite being in AP Calculus, when I had to take the state required math test that has zero meaning to the student and only measures the school's ability to teach math I bubbled every answer as C and got out of there as quickly as possible to go to my real classes. Making that score available to the teachers would not have changed my behavior (heck it might have been available to them I cant remember) and knowing that my parents would see that score did not effect me in the least, but if that score would have been available to colleges I most certainly would have actually taken the test for real.
That's a baseless suspicious from you. Money for it's own sake makes little sense.
****sky equation pretty much answer this side debate http://en.wikipedia.org/wiki/****sky_equation.
Some people being motivated by money and while other's aren't is something that is rooted in the structure of consumer's behavior. Some people just have a higher distaste for laboring in undesired activities relative to consumption and because of that they start to reduce their labor supply earlier in the income axis or will be more inclined to supply labor of a type of his liking.
In simpler terms, people goal are normally to achieve a better position in life and that position is a set of many different things (money, free time, health, etc). Their decisions are then based on the available opportunities as well as their present position, so there's not a answer to what motivate people. It's many things that do that.
The special thing about money is that it buys so many different things that it almost surely will motivate you, either by giving you a trip to relax or by letting you invest on your career to earn more money later. But there are things that money can't buy (like free time) and people lacking it too much is when they start to not get motivated by it.
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Ever heard of "debt bondage?"
What if I said "Jimmy" was "The US" and "China" was "Timmy."
So -if I'm reading this right- we currently owe China ~13 trillion dollars, but only have $1.34 trillion in circulation.[4]
Total to everyone, the US owes ~16 trillion, but only has 12 times less than that in circulation. If the US recalled every dollar to pay back it's debt, it would still come up very very short.
While this might not show debt is "limitless," it certainly doesn't show it's finite.
Yes, sorry, I misread. You are correct.
I don't like making too many assumptions when debating on the internet; there are a lot of weirdos out there, as I'm sure you know. My mistake here.
No, but you can try, and many do.
With all of that pay off decades away; I assure you, your average teenager isn't that far sighted.
Very true.
Again, I don't think many(no all, many) parents are using strictly monetary incentives. Things like "being a good person" or "success" while not as concrete as a dollar sign, seem to be the carrot of choice.
Unless the person is a psychopath, things like embarrassment and other emotional cues are better.
I wasn't debating what YOU were motivated by.
I believe I said it was. Or, I at least admitted it was anecdotal.
Babies are one of the most expensive things you can get, and -statistically- they DECREASE your happiness.[1]
If that's not proof that monetary motivation is unsustainable, I don't know what is.
In our hypothetical, the endgame already has Jimmy taking all of Timmy's money. Jimmy has no incentive to put Timmy into debt bondage because he can't extract more money from Timmy than he's already extracting.
China and other debt-holders don't have infinite demand for US bonds. There is some point at which they would not keep buying bonds, either because they don't want them anymore or because they don't physically have the money to pay for them. Yes, debt (especially on a national scale) can get extremely large, but it's not boundless. You couldn't go infinity dollars into debt. That means it's finite; finite = not infinite.
Also, "dollars in circulation" is a pretty meaningless benchmark for debt. Something like GDP is at least representative of national productivity.
The deeper in debt you are, the harder it is to get out. Even if they're already getting everything, they want to make sure they can get everything for as long as they can.
But, again (and maybe I'm misunderstanding) I think this throws the whole "sum(r) = sum(g)" argument out of whack. If someone can owe someone else 12 TIMES the total amount of money in the system, how can you say "total growth" would necessarily equal "total returns?"
And, if the 'bottom' isn't at 12 times the total, than where is it? I see no reason NOT to assume the amount of debt is effectively 'infinite,' or -at least- "indefinite."
Source: http://www.gao.gov/fiscal_outlook/understanding_federal_debt/overview#t=1
Even loan sharks have to look at Cost v Benefit after a while. If China did have 13 trillion of the US's debt that would be 13 trillion that they couldn't effectively use towards any other meaningful program within China with no real benefit. Calling it all in would result in either a snub, war, or the US simply printing 13T worth of bills, causing hyperinflation and making the debt worthless anyway. There is always a meaningful limit.
Hewo wittle fishy!
Our example is a basic model. It's much simpler than the real world because there are only two actors.
In our simple hypothetical, Jimmy is already getting every dollar out of Timmy forever. He doesn't get any benefit from putting Timmy into debt.
If "indefinite" means "sometimes difficult to calculate and sometimes very large" then yes, the debt carry capacity of powerful nations is indefinite. This is not the same thing as "infinite." Nothing in economics is infinite, because economics deals with finite quantities of goods, money, and people. Infinite debt is impossible because there isn't infinite value to loan.
At the end of the day, debt requires two things like any transaction: a debt buyer and debt seller. In other words, someone has to be willing to loan you the money. Sum(g) reflects all the economic growth across the whole economy over a period of time. When the period of time becomes long enough, sum(g) = the total value of everything in the economy. All loans must come out of that "total value of everything in the economy" pool. There's no where else for them to come from.
You seem to think you've found a counterexample when you ask how "someone can owe someone else 12 TIMES the total amount of money in the system." There are at least two problems with that statement. First of all, sum(g) represents all the value in the whole world, not just the United States. So focusing on US currency levels is meaningless. Second, the total amount of currency is very different than the total amount of value produced over a given time period, which is what sum(g) represents. On a long-term timescale, sum(g) represents the value of everything. Cash, real estate, capitol (like cars, industrial equipment, ships, planes), infrastructure, commodities, extracted natural resources, intellectual property and trade secrets, investments in future growth (like public or private R&D), plus anything and everything else with economic value.
The amount of currency in circulation has no bearing on the magnitude of sum(g). We could have an entirely barter economy with no currency at all, yet still have a positive sum(g). And the US GDP last year was about $16.8 trillion, which is obviously much larger than the $1.34 trillion cash we have in circulation. GDP is an approximate measure of value generated over the course of a year, so you can see that the US's slice of sum(g) for a given year is much larger than its total currency in circulation.
Regardless of those numbers (which I see you disagree with later on), this is also played out with Payday Loans and Predatory Lending in general. On a smaller scale, the majority of collage students go deep into debt, many times what they're worth originally. I think it would be an over simplification to simply say "this doesn't happen" when it so clearly does, all the time. Debt bondage is -and has been- a real thing, and when my objection was "And, does your "Sum(r) <= Sum(g)" take into account debt, or negative wealth, of individuals or societies?" I think removing debt is a bit of a question beg on your part. I can't prove my point about "negative wealth" without looking at negative wealth in the real world, and to ask me to do otherwise is unfair.
Well, in my original example, Timmy would never owe "infinite" dollars to Jimmy, or -at least- the universe would end first. So, I feel "indefinite" is 'good enough' to show my point.
If the amount of "negative wealth" someone can have is "arbitrarily large" then the lending could go on indefinitely, which is all that is needed in this case.
Except, that's not what we're seeing. The amount of debt the US has isn't converging on $1.34 trillion, $16.8 trillion, or any other number.
It's not converging at all.
But, World Wide Debt is approximately 10-20 Trillion dollars more than the Gross World Product.[1] [2]
So, I'm not sure how this changes things.
Jimmy and Timmy was your example, which I was using to help simplify my explanation. Debt just adds an illusory layer of complexity to the real world case. In all cases, the fundamental principle is the same: you cannot obtain more value than exists. Therefore in the long run sum(r)<=sum(g).
It's not arbitrarily large. It's bounded by the person's debt carrying capacity. In the case of the US we are nowhere near the limit because we're one of the most economically stable governments in the world. It's like claiming your credit card limit is "arbitrarily large" because you've never maxed out your credit card.
That's because sum(g) isn't converging either. We shouldn't expect either sum(g) or sum(r) to converge on a fixed number. We should expect, long-term, for sum(r)<=sum(g). This relationship can be true while both numbers continue growing.
The gross world product is approximately equal to sum(g) summed over one year. (This is not quite right because it estimates the integral with a straight line, but close enough).
So the GWP is just the value generated last year. There's lots of value in the economy that was generated before last year. Loans can come out of that value as well.
Summing over a long enough time period, sum(g) converges on the total measure of all value in the economy. Credit cannot, physically, exceed that number.
http://en.wikipedia.org/wiki/Hilbert's_paradox_of_the_Grand_Hotel#The_Grand_Hotel_Cigar_Mystery
(I can't seem to get this link to c/p right....)
Which is what, exactly? Whatever the government says it is based on another arbitrary metric like "credit score?"
Other librarians I've met have talked about "fundamental rights" not given by the government. So, what's the fundamental "debt carrying capacity" of a person, and why is my assertion that it's arbitrarily large unreasonable?
So, if neither is converging, then the roller-coaster ride isn't going to stop. Which means you can't make statements like "Sum(r) <= Sum(g) in the long run," because the 'long run' is indefinite.
The system is a non-converging function with no end, and 'r' can be greater than 'g' throughout.
I will admit I didn't fully read my citations"[1] [2]" from the last post, but I'm pretty sure -from skimming them- they show this to be demonstratively false.
"Value" isn't a physical thing.
It's really only proof that humans aren't really capable of acting in their own rational self-interest (at least not all the time), which is counter to the underpinnings of a lot of economic arguments.
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This paradox relies on the counter-intuitive nature of infinities. There are no infinities in economics. We're talking about a finite number of people, a finite amount of value, a finite number of transactions, etc. Numbers can get quite large in economics but never infinite.
Debt carrying capacity is capped by (1) the willingness of others to lend you money and (2) the existence of money to lend. (Remember, money /= currency).
This isn't a statement about rights. It's a statement about possible actions in the real world. If no one wants to lend you money, you can't acquire any more debt. If you control all the money in the economy, you can't acquire any more debt.
This is where integral notation would come in handy in explaining the concepts. For any given year, the integral (sum) of r over that year can exceed the integral (sum) of g over that year. This is because some of the r is coming from previous years' g. For a very long period of time (say, 1000+ years) the integral of r over that time period cannot exceed the integral of g over the time period. That's because the integral of g over that long time period represents all value in the economy; it's the sum of all value generated by economic activity over 1000+ years which is essentially just "all value in the economy." The integral of r over that time period represents all returns on investment in the entire economy throughout history. The total returns on investments cannot exceed the total value of the economy. This is because, by definition, "return on investment" is a subset of "total value of the economy." In other words, the total value of the economy includes all returns on investment plus all other sources of economic growth as well.
There is some point in between 1 year and 1000+ years where the integral of g becomes a close enough approximation of "all value in the economy" such that we can say sum(r)<=sum(g) over that time period. I'm not sure exactly where that is, and it will depend on specific features of the economy like the total size of the economy, the rate of economic growth, the market interest rates, etc.
I don't see what you're talking about, please explain.
Maybe I'm being sloppy by saying "physical." I should say "objectively measurable." We measure it by summing over the dollar value of economic transactions, which is what the GDP or GWP are attempting to estimate. ("GDP is a measure of value added.")
I'm pretty sure indefinite systems have certain properties in common with countably infinite systems. However, I admit that's not my field.
Regardless, if the amount of debt someone can have is unbound (something still under contention, I realize) then this is a countably infinite system.
Which -I hope we can agree- is unbounded. Someone could be "willing" to go into debt for eleventy billion dollars, and someone could agree. I see no physiological principle that would make the amount someone was "willing" a bounded number.
What? You just finished telling me the fact that there are only 1.3 trillion dollars in existence was immaterial.(Edit: ok, fair enough, I misread) Even if you start counting bales of grain -or what have you- I just finished telling you the world owes ~15 trillion dollars more than it produces....
I reject #2.
Edit: Unless you're saying that "money" is simply "value people are capable of perceiving in the system," then I agree, but also claim it's unbounded.
Its not about "money" its about "value."
It's not even about "what exists now," it's also about "what people think might exist in the future." People buy and sell futures every day, I would assume you're aware. It's not only "stuff" that has value, its also "future stuff," what something might be able to make.
So -in that context- what's a person worth?
So, whats the interval we're integrating over? Where does the economy start and where does it stop?
1000 years then? That's it? After a 1000 years the economy is over and we all go home?
I guess it's good you picked 1000 years, because Piketty did it for 300 years and got r > g. But, I'm not sure why you feel 700 hundred more would fix it.
I thought we were mutually coming to the conclusion that the economy was unbounded. I guess not...
It's also related to things like "expectations."
People are already buying and selling the right to name stars.
The whole world owes ~15 trillion more than it makes.
And, summing over (g) doesn't change the fact that r > g.
For 300 years people with money have made more money. You might claim that 700 years more would normalize it, but since -I hope- we both agree the economy -which contains the 'value' of everything people can think of- is unbounded, I don't see why that would be bounded. It's based on the perception of value.
Well -since I claim to be a physicalist- I was actually worried I was being sloppy.
How much is an asteroid worth? What about the rights to mine one? (I know, the Outer Space Treaty) What about the rights to name one? How much is a human life worth? (my friend that works at an insurance company could tell you pretty quick) What's the total 'value' of everything that exists, could exist, or be imagined to exist?
We might be able to come to some intersubjective answer, and call it "the economy," but I wouldn't call it "objective" and I see no reason to agree it's -somehow- bounded.
I don't understand this part. Imagine you and I are stuck on a desert island. There are two coconuts, and no other resources or other forms of a value. You have both coconuts, and I really want a coconut. So I agree to pay you back three future coconuts in exchange for one coconut now. Doesn't my debt now exceed the amount of money in our little economy?
Not really.
First, there's no implication in economics that money is what people seeks. Actually this idea is in direct conflict with neoclassical tradition - money is nothing but the things it can buy (which is Say's Law). This is why ortodox economic are labeled as 'real' systems (instead of 'nominal') because all aspects of monetary markets are internalized by consumers. In short, in traditional economics, money does not motivate people, the things money buy does it.
And no one ever assumed all things human beings seeks can be achieved through trade (money). Friendship, love, particular desires such as discovering something new, creative impulses, etc... Those are all things that are not economic goods and thus cannot be achieved through trade. Microeconomics normally doesn't deal with those things precisely because economics is the theory of consumption, production and trade - those things are simply not the objects of study.
The dissatisfaction may occurs when economists uses economic theory to justify policy and then someone brings the point that economics does not take in consideration non-trade things (who are important for human life). Those critics are often ignored because they are not framed in a consistent theory that undermines economic policy. Ex: Nationalist (left an right winged) always complain how bilateral free trade agreements economists advises as good trade policy are against national interests but they are ignored because they are enable to convince "national interest" is nothing but his own pride and idea of what his nation should be. It's not that nationalism does not constitutes a important part of the human social ecosystem, it's just that there's as much arguments for nationalism being against free trade as there's for being in favor of it.
And there are important cases were non-trade things play central role in traditional economics. In neoclassical growth theory technological change is precisely caused by non-profit seeking agency. People created some profit-seeking technological change models but while they cover part of the data better, there are some horrible contradictions between other parts of the data and this theory. The most accepted theory right now is more based on the older one, except it tries to give a better elaboration of how the non-profit seeking agency works.
Also, people having babies and feeling unhappy is 100% consistent with micro econ rationality. In micro econ theory, utility is just a index for your potential choices and rationality is the mathematical properties of those choices. No one ever said the more utility you have, happier you are - this is not a rationality axiom ! Meaning someone choosing something that makes then unhappy possible inside all kind of consumer models, from the old school 1950's ones to the bounded-rationality/behavioral modern ones. The reason is that happiness (as a state) relies on non-trade things as well as trade things you consume and also on expectations.
One simply reason why having children might cause distress is because the larger the number of serious emphatic bonds you have, larger the chances of really bad things happening in your perspective. It doesn't undermine economic theory because happiness is not utility because utility is the index-ranking of your choices and happiness is not the sole purpose behind those. We know the human machine is a lot more complicated then pleasure-happiness seekers.
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It depends on what you mean by "no other resources or other forms of a value." Let's explore both possibilities.
Possibility 1: You mean "no other resources or other forms of a value" in a very literal way. The island is made of pure sand or rock, with no coconut trees of any kind. And moreover, we know there is exactly 0% chance of us ever being rescued, meaning these two coconuts are the only two things of value either of us will ever posses for the rest of our lives.
In this situation, no sane person would ever agree to the loan you propose because there's no chance of ever getting repaid the promised three coconuts. I might just give you one of my coconuts out of the goodness of my heart, but a loan would never happen because we both know there's no chance of repayment. The amount of "money" or value in the economy remains equal to two coconuts.
Possibility 2: You don't mean there are literally no resources at all. Maybe there are coconut trees on the island that might bear coconuts in the near future, or maybe we think there's a realistic chance of being rescued soon. In that case, I might agree to your proposed loan. Whether I will agree to make the loan is determined by the value I place on your promise, as compared to the value I place on a coconut.
I determine the value (to me) of your promise by taking what you're promising to deliver (3 coconuts) and multiplying by discounting factors. One such factor is the "time value" factor, which represents that I value a future coconut less than I value having a coconut right now. Maybe you've promised to get me the coconuts within a week, and I determine that I value "a coconut in one week" at 75% the value of "a coconut now." So my time value factor is 75%. I also discount by a "risk cost" factor, which represents my estimate of the odds that your promise will come to fruition; this incorporates both the odds that you'll successfully locate and harvest more coconuts and the odds you'll actually make good on your promise to give them to me. Let's say I think you're trustworthy and I see lots of coconut trees in the distance on the island, so I think there's a 90% chance I will get the promised coconuts.
So this means I value the three promised future coconuts at (3 coconuts)*(75% time factor)*(90% risk factor) = ~2 coconuts. Since I value the promise at 2 coconuts, and I can secure this promise by giving you one coconut, I'll agree to make the loan.
In a mirror-image fashion, you would only agree to the trade if you valued the promised future coconuts less than you value one coconut now. For example you might be starving, so you apply a very significant time value discount. Maybe, for you, a coconut in a week is worth just 10% of a coconut now (or even 0% if you think you'll starve to death between now and then). Let's just say you value the promise at .5 coconuts, just to make it easy.
So we have a situation where I privately value the promise at 2 coconuts, and you privately value the promise at .5 coconuts. Meaning you're losing .5 coconuts worth of value by making the promise and I'm gaining 2 coconuts worth of value by accepting it. In this case the total value in our economy has increased by a net amount: 2 coconuts - .5 coconuts = 1.5 coconuts net increase.
Now the present total amount of value or "money" in the economy is equal to the value of our 2 coconuts plus the value gained by virtue of your promise. The total amount of "money" in the system is equivalent to 3.5 coconuts' worth of value. Some of this value is encapsulated in present possessory interests (the 2 coconuts) and some is encapsulated in contractual/promissory rights (the promise to deliver 3 coconuts in a week).
Now we can ask your original question, which was "[d]oesn't my debt now exceed the amount of money in our little economy?" You might be tempted to say "no, because my debt (3 coconuts) is less than the total amount of value in the economy (3.5 coconuts)." But that's actually the wrong way to think about this. Your debt right now is not "3 coconuts." That's what your debt will be worth in a week when it comes time to deliver the coconuts. Your debt is worth less than 3 coconuts right now. What is it actually worth right now? It's worth the "market price" of your debt, i.e. the amount of money you would need to pay to acquire the debt back. Since the market on our island is just you and me, the market price for your debt is the amount you would need to pay me to acquire the debt back today. Since we said I valued the debt at 2 coconuts, you'd have to pay me at least 2 coconuts before I'd agree to sell the debt back to you.
So the answer is, your debt (worth 2 coconuts) is less than the amount of money in the economy (worth 3.5 coconuts).
If you feel like getting really mathy:
We can generalize this to show your debt must always be less than the money in the system you describe. Let's say we have a deal where I give you X coconuts in exchange for some debt D. Let's call bitterroot's valuation of D "bD" and Tiax's valuation of D "tD." I will only agree to the trade if I think bD > X coconuts; I must be getting at least X coconuts worth of value out of the deal or I won't make the trade. Likewise you will only agree to the trade if you value tD < X; you must care about the X coconuts more than you care about not going into debt. Thus no matter what, bD - tD will always be some positive number, call it n; n is the net gain in value from the promise. Accordingly, the total value or "money" in the economy = X + n. We can algebraically expand X + n by noting that n = bD-tD; so we conclude the total value in the economy = X + bD - tD.
As we said, the market price of your debt is the amount you would need to pay me to get it back: bD. So now the million-dollar question. Can your debt exceed the total value in the economy? To put it another way, can we ever say debt > total value? No, because bD > X + bD - tD will always be a false statement. We know this because tD < X, as we said above, so X - tD is a positive number. Meaning our inequality from the previous sentence reduces to bD > bD + (some positive number). That's always going to be a false statement. So your debt can never exceed the total value or "money" in the economy.
Two cases:
1) Your offer to pay me three future coconuts is genuine, in which case there must exist the necessary infrastructure for you to make good on the debt -- a coconut tree, your labor, et cetera -- in other words, value.
2) Your offer cannot be made good upon, in which case every rational actor (myself included) will refuse to loan you the coconut.
In case 1, you take on debt, but it does not exceed the available value. In case 2, you do not take on any debt and so do not exceed the available value.
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