Thursday, January 9, 2014

Building An Economy For The Future


In an earlier article, You Are Being Exploited!, I promised to expand upon the thoughts written there as they relate to a new paradigm of economic and political thought.

In that article I put forward the premise that the transition from an industrial economy to an information economy was obviating the historical linkage between physical labor and economic rewards. Rather, to an ever increasing extent, every individual, to varying degrees, was contributing information to the system. That information was being translated into knowledge which was ultimately applied as technology accelerating economic growth.  For that contribution they should be compensated. 

One of my twitter followers made the observation that such an outlook would cause them to have to reassess their view of raw materials.

I would offer the alternative perspective that, rather than being a raw material, information is a separate and distinct factor of production. Traditionally economics has recognized three fundamental factors of production; land (i.e. raw materials), labor and capital. Information has always been an element of human progress (witness Schumpeter’s views on waves of technological change). However, it has never been dealt with as a separate and unique factor of production. One could make the argument that it was a form of labor, however I would counter that information transcends the lifespan of any individual and direct association to “labor” is tenuous at best.

Through its ultimate translation into technology it leverages the other three factors of production and mitigates the law of diminishing returns’ impact on those factors.

That is not to say that information is immune from the law of diminishing returns. Indeed, the explosion of social media and other mechanisms of communication have left us swamped with often repetitive superfluous information. That is compounded by the willful insertion of misinformation into the communications stream. However, this very phenomenon has given rise to nascent technologies designed to separate out redundancy and misinformation.

Moving on from that more theoretical debate, however, my focus is on what kind of political and social frameworks can be implemented to accommodate the ever-accelerating reality that the traditional link between physical labor and the acquisition of the elementary needs of survival is becoming obsolete.

At the core is the belief that all citizens should be guaranteed a minimum income that exceeds the cost of the fundamental necessities of life.

There are those of course who will immediately object that this is nothing more than rampant socialism or even worse (gasp!) communism.

To the contrary, I would maintain that this is a logical evolution of the merger between capitalism and socialism – the “mixed economy” model that the United States has championed for almost a century.

While current attention to this idea emanates from an article by Jesse Myerson in Rolling Stone, it is not confined to there. As renowned a bastion of fiscal sanity as Switzerland has decided to put such a proposal to a public referendum.

Indeed, even as conservative an economic icon as Milton Friedman advocated giving the economically disadvantaged direct cash grants rather than the existing plethora of government programs designed to assist them.

Of course the immediate question is, “How would you pay for such a scheme?”

The answer to that question is a direct result of the information economy that gives rise to the proposal.

It is called a transaction tax.

Such a tax would immediately “repeal and replace” (to use a popular phrase) the entire Federal income tax and the system supporting it. I won’t bother to recapitulate the details of such a tax because it is amply detailed on the website linked to above. Suffice it to say that the impact of such a tax policy should be lauded by Liberals and Conservatives, Keynesians and Supply-Siders, Free Marketeers and Socialists alike.

Combined with the guaranteed income floor above it provides the foundation for the new economic paradigm that I promised in You Are Being Exploited! 

Additional articles will be forthcoming exploring in greater detail these concepts for Building An Economy For The Future.

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