Fiat Is Effective

Source: Fiat money is very effective, a minitalk for the Silicon Valley Ethereum Meetup, by Steve Randy Waldman, 2017/10/08

For now, in my view, the fiat currencies of major economies beat every existing form of crypto hands down on effectiveness

  • We want a unit of account that helps us to solve the economic calculation problem, that helps us to reason about our future receipts and obligations
  • We want a unit of account and store of value that hedges our risk, inherent in the fact that our contractual obligations and the prices of goods and services we require may fluctuate over time and leave us unable to meet our obligations.
  • The unit of account that we choose will sometimes form the basis of our assets
    • we will hold or contract for claims on this unit
  • But it will frequently form the basis of our liabilities!
    • we will contract to make future payments in this unit
  • It will not be desirable for the value of this unit (in terms of actual goods and services) to unexpectedly collapse, as that inflation would devalue our assets
  • But it will also not be desirable for the value of that unit (in terms again of actual goods and services) to unexpectedly spike, as that deflation would cause the burden of our liabilities, our debts, to balloon!

Money is defined by the unit of account in which obligations payable into the future get denominated

Fiat prices are stable because they are actively managed to be stable.

  • Price stability is about managing valuation risk, and makes a money useful for economic calculation and hedging the risk humans face of finding themselves unable in the future to afford the real goods and services they require
  • Fiat money banking systems also enable effective means of managing counterparty risk. Most obviously, payments are often reversible.

The management of fiat provides state actors with incredibly powerful, ultimately discretionary, tools which significantly affect who wins and who loses and how equal or unequal a society is. Fiat money and associated banking systems are the technology that enables the finance of war on scales that would have been unimaginable a few centuries ago. Price stability, the primary advance fiat offers users over other forms of money, is often purchased at the expense of workers and the unemployed, on behalf of those who have the luxury of worrying about economic calculation for their businesses or hedging with their savings horde

To fix income inequality, we need more than UBI—we need Universal Basic Assets — Quartz

Source: To fix income inequality, we need more than UBI—we need Universal Basic Assets — Quartz

We call this solution Universal Basic Assets.

UBA identifies a fundamental set of resources every person needs access to—such as financial security, housing, health care, and education—in order to achieve economic security and prosperity. We focus on three broad classes of assets: private assets, like money, land, and housing; public assets, in the form of infrastructure and services such as education, health, and public utilities; and open assets, which are a growing category of mostly digital assets that are communally created and open to everyone, like Wikipedia and other open-source resources.

give people ownership of their data so it can be used as an asset which they—not platforms such as Google and Facebook—can leverage and capture economic value.

Capitalism in America has been on a suicide mission for forty years — Quartz

Source: Capitalism in America has been on a suicide mission for forty years — Quartz
RE: Peter Georgescu’s new book, Capitalists Arise! End Economic Inequality, Grow the Middle Class, Heal the Nation

Young & Rubicam Chairman Emeritus Peter Georgescu on ending the era of shareholder primacy.

Georgescu is convinced he knows how to beat this cancer, and he’s pitching it to corporate leaders across the country. “The cure can be found in the post–World War II economic expansion. From 1945 until the 1970s, the US economy was booming and America’s middle class was the largest market in the world,” he says.

“In those days, American capitalism said, ‘We’ll take care of five stakeholders,’” he continues. “Then and now, the most important stakeholder is the customer. The second most important is the employee. If you don’t have happy employees, you’re not going to have happy customers. The third critical stakeholder is the company itself — it needs to be fed. Fourth come the communities in which you do business. Corporations were envisioned as good citizens—that’s why they got an enormous number of legal protections and tax breaks in the first place.”

In Georgescu’s schema, shareholders are the last of the five stakeholders, not the first. “If you serve all the other stakeholders well, the shareholders do fine,” he says. “If you take good care of your customers, pay your people well, invest in your own business, and you’re a good citizen, the shareholder does better. We need to get back to that today. Every company has got to do that.”

Market power and competition explain every problem in the US economy, new research argues — Quartz

Source: Market power and competition explain every problem in the US economy, new research argues — Quartz

In a recent paper, De Loecker and Eeckhout analyzed the balance sheets of listed companies from 1950 to 2014. (In 2014, these firms accounted for around 40% of all sales.)

Higher markups suggest an increase in what economists refer to as “market power.” … higher markups don’t necessarily imply more market power. It is conceivable that there are larger upfront costs to starting a company today than in the past, and that higher markups are necessary to make up for this. Economist Noah Smith provides an excellent review of other criticisms of the paper.

Is America Encouraging the Wrong Kind of Entrepreneurship?

Source: Is America Encouraging the Wrong Kind of Entrepreneurship?

In a 1990 paper, “Entrepreneurship: Productive, Unproductive, and Destructive,” Baumol argued that the level of entrepreneurial ambition in a country is essentially fixed over time, and that what determines a nation’s entrepreneurial output is the incentive structure that governs and directs entrepreneurial efforts between “productive” and “unproductive” endeavors.

we and others have documented a pervasive decline in the rate of new firm formation during the last three decades and an acceleration in that decline since 2000. In fact, we found that by 2009 the rate of business closures exceeded the rate of business births for the first time in the three-decades-plus history of our data. This decline in startup formation has occurred in each state and nearly all metropolitan areas, and in each broad industrial sector, including high tech. There has also been a slowdown in activity of high-growth firms, the relatively small number of businesses that account for the lion’s share of net job gains. All of this points to a slowdown in the growth of productive entrepreneurship.

What about the other kind of entrepreneurship? Do we also see a rise in unproductive entrepreneurship, as Baumol theorized?

We don’t have a smoking gun to confirm this hypothesis, but there surely is smoke, and it comes in two forms: rising profits, especially those earned by the largest businesses in the economy, and suggestive evidence of an increase in efforts to shape the rules of the game. This pattern is consistent with the rise of economic rents and rent-seeking behavior.

How Amazon’s Accounting Makes Rich People’s Income Invisible – Evonomics

Increasingly, businesses don’t generate profits. They generate capital gains. It’s fiendishly clever.

Source: How Amazon’s Accounting Makes Rich People’s Income Invisible – Evonomics

Half a trillion dollars in revenues.

Essentially zero profits. Ever.

Dollars delivered onto investors’ balance sheets? Somewhere north of 300 billion.

none of that shareholder income ever appears as household income in the national accounts

StockX: A stock market for physical objects could change how capitalism works — Quartz

If the success of eBay or even the show “Pawn Stars” is any indication, people are excited to transact in physical things.

Source: StockX: A stock market for physical objects could change how capitalism works — Quartz

if I were to sell everything I owned on Craigslist or eBay, how much could I make to put towards the boat? The same question posed to my stock portfolio was easy to answer, but if I decided to liquidate all of my holdings, financial and physical, how would I value my vast collection of random stuff?

every marketplace must be built on trust and transparency. …
The way things are sold now on eBay or Craigslist is via a marketplace for individual items. Making stock markets means moving away from custom pricing for individual iterations of a thing (the pair of Air Jordan Retro Space Jams in my closet) and towards a universal price for all iterations of a thing (all pairs of Air Jordan Retro Space Jams in existence).

suppose for a moment it all works. If every household in America could have a living portfolio for their things, how would that change society?

Considerations On Cost Disease | Slate Star Codex

Tyler Cowen writes about cost disease. … Cowen assumes his readers already understand that cost disease exists. I don’t know if this is true. My impression is that most people still don’t know about cost disease, or don’t realize the extent of it. So I thought I would make the case for the cost disease in the sectors Tyler mentions – health care and education – plus a couple more.

Source: Considerations On Cost Disease | Slate Star Codex, by Scott Alexander

RE: This Economic Phenomenon Is Making Government Sick, by Tyler Cowen

So, to summarize: in the past fifty years, education costs have doubled, college costs have dectupled, health insurance costs have dectupled, subway costs have at least dectupled, and housing costs have increased by about fifty percent. US health care costs about four times as much as equivalent health care in other First World countries; US subways cost about eight times as much as equivalent subways in other First World countries.

I worry that people don’t appreciate how weird this is.

It’s actually even worse than this, because we take so many opportunities to save money that were unavailable in past generations. … And it’s actually even worse than this. A lot of these services have decreased in quality, presumably as an attempt to cut costs even further.

The modern conflict between opponents and proponents of free college education is over how to distribute our losses. In the old days, we could combine low taxes with widely available education. Now we can’t, and we have to argue about which value to sacrifice.

If some government program found a way to give poor people good health insurance for a few hundred dollars a year, college tuition for about a thousand, and housing for only two-thirds what it costs now, that would be the greatest anti-poverty advance in history. That program is called “having things be as efficient as they were a few decades ago”.

I’m more worried about the part where the cost of basic human needs goes up faster than wages do. Even if you’re making twice as much money, if your health care and education and so on cost ten times as much, you’re going to start falling behind. Right now the standard of living isn’t just stagnant, it’s at risk of declining, and a lot of that is student loans and health insurance costs and so on.

What’s happening? I don’t know and I find it really scary.