Friday, May 23, 2008

Economics

Economics:
Most people see economics as about goods. They are wrong, economics is about the use of peoples TIME, specifically when they freely exchange it with others to both parties mutua advantage. Goods are merely the products of that time. Comparative Advantage shows that the more time that is exchanged voluntarily, the more productivity increases and thus living standards are raised. The more the exchange of time is hampered say through income taxes/national insurance/VAT (value is added through work) or through crime (theft & slavery) the more the economy will suffer.

Money:
Money is temporal barter it represents the economy it is used within. With barter, people exchange their time , however using money allows them to utilise other peoples time when they actually need it, rather than at the moment of exchange. This is much more productive, and that's why societies that abandon money get out-competed.

Debt and Credit:
Credit is the use of another persons time in the future. Debt is the use of your time in the future. When to borrow? When your utility is increased by borrowing! i.e. At the time in the future when the money is paid back with interest, you have a higher utility than if you didn't borrow. One of the best examples of useful borrowing is for education, however most people wrongly think that subsidising education is better.

Inflation:
There are two types of inflation, Price Inflation and Monetary inflation. Price inflation is caused by Price = Demand/Supply. This system is chaotically stable as changes in price cause lagged changes in supply which bring the equation back into balance. However speculative bubbles can form when the demand correlates with the price(i.e people "invest" because the price has gone up), this can form dangerous runaway cycles, both up and down in price! Monetary Inflation is caused by increasing the amount of monetary units in the economy If this expansion is "Adiabatic" then each monetary unit represents less of the economy, i.e. its value is lessened. However the economy tends to get more productive so a certain growth in monetary unit numbers, means that they tend to have the same utility. A small amount of monetary inflation is useful, because otherwise people could just sit on their monetary units and see it grow in value. This would eventally stop people exchanging their time and the economy would sieve up!

2 comments:

Adam In said...

The way I see it, economics is about the satisfaction of demand, be it in the production of goods and services or ... the availability of free time!

Saying it's all about time sounds a tad like Marxist labour theory of value. It fails to take account of the fact that an individual's time itself has a value to that individual, regardless of its value to anyone else.

Government employees spend a lot of time 'working hard', but they don't produce anything anybody actually wants for the most part, hence the distinction.

Perhaps I've misinterpreted what you meant.

AntiCitizenOne said...

I mean the unforced exchange of time.

Obviously the extortion funded sector ignores the most powerful feedback system ever invented, and that's why it fails!