10 Fundamental Fixes for Economics

Notes to myself for a discussion of the book Economy, Society, Nature at the Sustainable Prosperity Conference, Adelaide, 10-12 Jan 2020.


• Identify the system as a far-from-equilibrium self-organising system – wild horses versus the neoclassical rocking horse. Markets must be managed, through their incentives.

There are two main signalling mechanisms: social interactions and money. Both are excluded from mainstream theory, but they are central to the system’s behaviour.

People are highly social. Cooperation is as pervasive as competition, in society and in nature. The good life balances the two, balances me with us.

Money’s role is to facilitate exchange. Token money carries an implicit social contract; we need to be attend to the terms of that contract (e.g. no perpetual private tax, via interest).

• Understand central banking, via MMT: governments create base money, and can govern for full employment. Don’t balance the budget.

• Understand commercial banking. They profit by loading us with debt. This is the biggest driver of booms and busts. Separate the provision of money from investment. Require ‘investment’ to be productive, not asset speculation.

• Rein in financial markets. They trade about 50 times faster than the productive economy requires. This means 98% of their activity is parasitic, and destabilising. A transaction tax could tame them.

• Land has no cost of production to anchor its price. This makes it a vehicle for speculation. Lease it, don’t sell it.

• Land also has an emergent community value arising from the community around it. That wealth belongs to the community and should not be captured by individuals.

• GDP is not accounting, it is a crude tally of good, bad and ugly transactions. Use proper balance-sheet accounting like GPI or Triple Bottom Line.

• Use shared (local, involved) ownership to ensure reasonable sharing of wealth created (always) through joint effort and common inheritance.

• Replace crude ‘growth’ (of GDP) with the goals of reducing quantity (of stuff) while increasing quality (of life).

• An economy’s purpose is to serve the society it is part of. A society must abide by the imperatives of the biosphere if it is to survive.

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