What’s the real role of an Economic system, why does it fail and what’s the solution ?
The Incentive to work :
In a money based economic system, Money is the incentive to work. Wherever workers or producers find more profit i.e more money, they flock to work in those areas.
Effects:
a) To survive in the present economic system, people need money and they get it by working. At the end of the day, works get done. This mechanism has been working quite well.
b) More work gets done where there is more money.
High demand in certain area means that “More money” can be made by working in that field/area. Lot of people rush to work in these fields because more money means a better life.
Role of Money : So, we see that ‘Money’ ensures that people work. It also attracts more people to work in areas of high priority as people want more money.
So it seems the “Role of an economic model is Firstly to get work done and Secondly to get more work done in areas of high priority.”
Purpose of Economic system
The ideal purpose of an economic system is to point us to areas where there is requirement of work and to allocate priority to these areas using a number.
Now, what are these works that need to be done ?
First and foremost : Grow food for our survival.
Second : Protect ourselves.(From diseases, famines, harsh climate, etc)
Third : Keep innovating & increasing efficiency of 1 & 2.
Fourth : Cater to needs of Entertainment, leisure, etc
Fifth : Cater to Fashion needs, luxuries, etc
sixth, seventh, etc..
As we can observe in daily life, our economic model does a good job identifying areas where work needs to be done i.e There is money to be made in every industry : Food, fashion, pharmaceutical, entertainment, etc. indicating that these are works of value.
BUT the current economic model is messing up prioritization.
Prioritization : Arranging tasks in their order of importance according to a logic designed in the model.
The simplest way for any model to prioritize a list of works is by assigning numbers to different works. In our current money based economic model, it is the “Amount” of Money, that acts a signal for human species to prioritize where to invest time and energy.
We see that there is huge money i.e there is a lot of demand and prices are high, for example in the Fashion, automobiles & luxury industries indicating its a priority zone where humans must invest time & energy (and we do), WHILE ON THE OTHER HAND we have people starving to death, children forced to work, Global climatic change at its peak, basic necessities not being met for huge majority of people, debt ridden farmers suicide in India, etc.
Is this not a failure of ‘prioritization of work’ by the economic model ?
Why does the present economic system give signals of PRIORITY for the Human species to work in some field ( ex: fashion) when there are bigger issues to tackle collectively (ex: hunger deaths, climate change, plastic pollution, water crises, etc)?
Flaw in the present Model
The present economic model assumes that everyone has “equal number of votes” to have a say in deciding list of Works and their priority. Though the assumption of “EQUAL VOTES” is terribly flawed, the model still works in deciding the list of works to be done in an economic system:
a) Grow food b) protect ourselves (medicine, clothing, housing, etc..), etc.. BECAUSE these are the needs of all humans.
Even if we had Monarchy where KING has “ALL VOTES”, we would have all these works enumerated in the list of works to be done as we all have, more or less, the same needs !
Unfortunately, the terrible flaw of “EQUAL VOTES” is EXPOSED when prioritization task is given to the Model. The output of the model gives absurd results and we follow it.
Proof by contradiction:
Consider an IDEAL world where everyone has EQUAL VOTES in matters of work and Prioritization of works. Then, we would get some sort of indication from the model due to people dying of starving because they will use all their QUOTA of VOTES on food.
But we get no such indication, meaning the VOTES are not Equally distributed. Votes are nothing but money and We vote with our money in this model. Clearly, distribution of Money is highly skewed and therefore the Model output is highly skewed in the favor of those who have highest number of Votes / Money.
What are the needs of rich people ? -As you can easily guess, its Fashion & Luxury!
Therefore we see the weird output of our model which places Fashion & luxury as fields of work that require high priority compared to Starvation deaths in other developing parts of the world.
(Note: Fashion & luxury segments are chosen as examples here. You can come up with other examples to show that needs of Rich people do not usually reflect needs of the suffering people)
Worsens with Time
The present Money based Economic model isn’t going to get better with time , it only worsens. The historical data clearly shows that Inequality is increasing worldwide. Oxfam reports are published every year stating facts regarding the number of richest people in the world and this number is becoming smaller and smaller, indicating increasing inequality every year.
Even though we all know how things are getting worse every year due to inequality, we muster courage , keep hope alive and try again by repeating the famous line: “Lets work towards having a society where wealth is more equally distributed so that our model gives better outputs which reflects and represents opinions of the majority in the society.”
Money
Money, by design is a metric to measure every commodity or service available on this planet. From food, to clothing, to luxurious goods, to even sex ! Everything is measured by a single metric called Money. The design clearly shows how “centralized” it is.
This centralized entity that holds key to every conceivable physical thing in life is undeniably powerful. Its power attracts every human being towards it. Every person tries to maximize the amount of money he can make in whatever ways s/he can (Ex: Panama Papers has showed how rich hide their wealth). Every business tries to maximize its profits irrespective of environmental or ethical concerns (Ex: Volkswagon faking their emission test results)
Now,
- Money was never distributed equally in the first place.
- No person is willing to lose his/her money and just wants to maximize it.
- Rich become richer is actually true.
a) If you have money, only then you can get well educated in most countries, to gain good employment. Money breeds money.
b) The rich usually use a part of their money to hire smart people to increase their wealth.
Conclusion: Its a vicious cycle of “Rich getting richer” combined with unequal distribution of money in first place that leads to very very little probability that you can rise up the ladder to become rich. Also, all data points to increasing inequality in the world.
Lastly, Why do we always want to fix the flawed model based on money? Maybe it is because we lack a concrete alternative economic model! Then, lets explore a viable alternative.
Alternative economic model
Replacing ‘Prices’ with another metric called “Serves”
Definition of a new measure called “serves” :
Serves is the suggested quantity of a specific good to be consumed OR a specific service to be availed by a customer.
Example — Serves for goods: 5 apples per consumer, 2 liters milk per person,..
Serves values for services : 1 hour of Car per user, 1 year of Housing contract per family, etc.
Please Note — “Serves is a SUGGESTED value of consumption, not an Enforced value”. It is very important to make this distinction else this model can be easily mistook for dictatorship.
So, try to imagine a moneyless economic system or a serves based economic system, in which everything can be got for free. Questions like who produces them, why do they do it, etc will hopefully be answered as we proceed in the discussion.
Prices are replaced by Serves now. Serves are suggested values of consumption such that if they are respected then no one in the community will suffer from non-availability of goods or services.
Example : Oranges have serves value of 5 per head. Meaning, everyone can get at most 5 each. But we know that different people have different preferences.
i) Lets say, some people take 2 each , some take 3 and the rest take 5 each. So in this case Oranges are left over at the end of the day. In this case the Serves value increases, to say 6, indicating that the community can eat more of them.
ii) If 50% of people take 10, and the rest take none, then its fine, balanced. Serves values does not change in balanced cases.
iii) If everyone starts taking > 5, then some people will not get any Oranges and will suffer and complain. In this case, the value of Serves decreases to less than 5, indicating that community could reduce its consumption so that everyone is happy and not complaining.
Another definition before we proceed:
Optimal Serves value : It is that value of Serves, say ‘x’, of a good or service, such that no individual in the community suffers or complains and wastage of that good, if any, is also negligible.
Example : If some people take more than x quantity of a good and some people take less than x, and if at the end of the day its seen that no one complains and goods wastage is also negligible, then ‘x’ is the optimal value of serves.
Natural Incentives of work
In a moneyless system, people might suffer due to lack of one resource or the other. So what solution does the system offer other than asking community to decrease consumption ? (We cannot only just try to limit our consumption)
The solution is , among those things that trouble you individually, pick those that are more important personally and work on them.
(Not convinced ? Lets try again :
Lets say somethings you want are not available, Ex : Electric car, Doughnuts, clean water, etc.
A group of people are working on it , so maybe you might want to work with them on building the electric car that you wanted? No ? Then maybe its just a desire you have and its not your passion and probably you are not hurt if you do not get it. Fine.
So you want to make doughnuts at home ? No ? Then probably that’s just a desire too, maybe you do not need it, you can survive. So its fine again.
Maybe you want to work on purifying water ? Yes ? Oh so you care about this issue so much that you are willing to work on it ? Great ! There are other people who care about it as well, and some of them are working on finding best filtration techniques, some on killing harmful bacteria, some on decreasing wastage of water, etc.. so you might like to join them to help improve the quality of water.
So, now you can see how you have voluntarily offered your services to a water purification organisation and in doing so, everyone benefits from your work by getting to drink purer water.
The above process of : ‘Something troubled you’ , ‘ you deciding to take action’, ‘finding a community to start work’ — is a natural process of how work usually gets done. The same logic and story that describes your journey of work in a moneyless system can be applied to answer the questions of ‘why people work in a moneyless system ?’ , ‘who are these people?’ etc.
To sum up, it is an economic system where each one works on what they think is important to them personally at that moment of time. And that is how everyone in the system gets everything else, like:
potatoes — (Because some group of people work in farms as they think its important to have quality potatoes)
cars — (Because some group of people work to build transporting machines as they think its important to enable transportation of people or goods)
Water- (Because you and your colleagues work to purify water as you all personally think its important to have quality water)
And hopefully you get the idea of how everyone works in areas of either their “NEED” or “INTEREST” in order for society to function in a moneyless economic system.)
— — -
Pick any problem in the world, there are always a group of people working on it. People who think like you do, people who have preferences like yours, etc. So the solution is to ‘Join the group of people who are working on problems that you care about’.
In this Alternative economic model, people work due to at least one of the following natural reasons :
i) People want to solve their problems (NEED)
ii) People are interested in a certain kind of work (INTEREST)
iii) People want to serve others in the society voluntarily (SERVICE)
The above mentioned forms of work happen in our current economic system too, because they are part of human nature.
Unlike money based economic model, the Serves model has no powerful influencing object like ‘money’ to force us to work in areas of no interest or need.
Prioritization of Works in Serves Mechanism
Lets see how this model identifies all works to be done and how it prioritizes them in the right order. Also , what is the definition of right priority order ? Lets see this.
Consider a time t, when the economic model based on serves mechanism is already functioning.
Lets say ‘x1’ is the optimum value of serves of a good/service A. ‘x2’ for B, ‘x3’ for C and so on.
At time t, say A has serves value of y1 instead of the optimum value of x1.
So the troubled individuals now join the group of people who are already working on “A”. The “Serves” value of A increases due to the addition new work force till it reaches an optimum value of “x1”.
After reaching value of ‘x1’ no one is troubled , so no new workforce will join A. Then it can be said that problem of scarcity of ‘A’ was solved at time t.
(The role of existing workers of A would be to increase efficiency or automate processes so that the people can move out to tackle other problems of their need/interest.)
At time t-1, a similar argument can be applied to show that serves value of, say B, was restored to optimal value.
Since B reaches optimal value before A, we can say that B is above A in the priority list of works. Similarly, we can say the same about C at time = t-2.
Therefore, Priority order of works in a serves based economic model:
X > Y > … > C > B > A
What could be X ?
X is the work that was solved first because it troubled many people in the community.
So X must have been something very important like Water or Food.
As it can be seen clearly, The priority order is decided based on personal choices of individuals. If more individuals decide to work on “water purification” rather than “Building cars” then the task of purifying water will progress at faster rate and achieve success.
Order of priority given by the model is the cumulative priorities of individuals in the community.
Hence this model is fair and reflects needs of every individual. Every individual VOTES with their work in this model and this is a VOTE which anyone can cast. It is not discriminatory and hence the model is fair.
Concluding remarks
- In this proposed new economic model, there is no dictatorship by a person or an object like ‘money’ to make survival difficult if someone doesn’t work. When work is forced this way , we take out the joy in work. Work begins to seem like a burden, which is not at all true.
- The alternative model recognizes that work can be a source of joy when a person works on their needs or in the area of interest.
- The mindset that no one wants to work and that all will become lazy if there is no penalty for not working” is the mindset of a Master towards the slave.
It is just not true that people are lazy, its a myth. - “Working on things that “interest us” or working on solving problems” give us joy — it is nature’s design to enable us to solve our problems. Also, It’s fun to work in a community of like minded people who are interested in solving the problem.”
