Category Archives: Philosophy

Philosophy of civilitic principles

Implications, Philosophy

Economics as a dismal science

Thomas Carlyle referred to economics as a dismal science in his work, Occasional Discourse on the Negro Question, published in 1849 because he believed the new science of economics, with its market forces of supply and demand, would undermine the social advances that had been achieved through slavery. Consequently, he argued, any cultural shift from slavery to exchange economics was doomed to a dismal future.

Slavery

Slavery

Of course, time has shown that exchange economics ultimately brought about great industry and advances in science and technology. So we might conclude that Carlyle was mistaken and economists can wear the dismal badge with pride in the sense that it successfully replaced the ethically-corrupt institution of slavery while being at least as productive. In her TEDx presentation, Jodi Beggs remarked, “If that’s what we are going to consider dismal… Hey, sign me up!”

If we look at the production of value as we progressed from slavery to exchange economics, it might look something like the first two diagrams at the right. The first diagram characterizes slavery in the sense that an entity (large orange figure) exercises relatively complete power over one or more individuals in an unequal relationship. In this arrangement, the master exerts power over the slaves and wields coercive power over them, which is used to transfer value from the slaves to the master (yellow arrow). The slaves, who are powerless in the relationship are also the ones who provide most of the productive value in the relationship.

Exchange economics

Exchange economics

In an exchange economy, the power appears to be more equally shared between participants. While the power sharing may not be totally equal, we could characterize an economic relationship as one in which both parties wield some degree of power over the production and transfer of value. In a market, for example, the seller has control over the price of goods and the buyer has control over whether or not to buy those goods. Of course, this is the system most prevalent in the modern world, and the one that Carlyle predicted would be a dismal failure.

Unfortunately, the situation under exchange economics is often much closer to slavery than we are led to believe. Employers sometimes wield unequal power over their employees because the employees are dependent upon their jobs for survival. This form of economic slavery can be seen in sweat-shops in the developing third-world as well as in certain jobs within industrialized western nations. Indeed, it is remains a fairly dismal outcome of the economic model.

Normally the economic discussion stops there and does not consider anything else. After all, what could be more progressed than exchange economics? Slightly dismal though it may be, it is certainly better than the alternative: slavery.

Civilitics

Civilitics

At this point, I direct your attention to the third graphic. In this case, the graphic is much the same as the first (slavery) except that the arrow now points in the other direction. From that point alone, we might want to conclude one of two things: Either (A) it is very similar to slavery and just as bad since the power is unequally held, or (B) it might actually lie at the other end of the spectrum, being as much better than economics as economics is to slavery.

My intention is to show how civilitics, represented by the third diagram, is ethically more sound than exchange economics. In fact, I would like to recast exchange economics as the dismal science it has turned out to be.

Whereas civilitics depends on a similar disparity of power as slavery, it does so by inverting the power structure, making the power holder the one who transfers value to those without power in the relationship. The immediate question one might ask is, “What would prompt someone with power to voluntarily give away value to those who have no power?”

The answer to that question is inherent in the nature of a civilitic system. In simplest form, it is the giving away of value that entitles one to receive additional value from others as part of a slightly altered social contract. This is not so different from exchange economics in which one must make money in order to have the money to spend. Said differently, one must initially provide goods or services in order to eventually buy goods and services.

The significant difference is that civilitics is not based upon reciprocity (exchange) between individuals, but rather upon one’s participation to the public benefit as a whole. Because value is strictly given (as a gift), and the benefit to the self is decoupled from the giving relationship, the tone of every transaction is shifted from “What’s in it for me?” to “How can I help?” This is a subtle but very important difference.

Ultimately, economics has given us many great wonders. But it has also nearly about broken our planet. Without economics, the infrastructure that will build civilitics could never be built. So it’s a mixed blessing. Maybe dismal or maybe not. Either way, it is time to move forward, just as we once moved forward away from slavery.

Examples, Founder's Journal, Philosophy

TEDxPublicStreet: Jodi Beggs

I happen to be a big fan of TEDx. For one thing, it is a sort of quasi-civilitic network, allowing people to give freely of their experience while generating a social reputation in the process. But even moreso, many of the presentations have some really excellent content. Collectively, TEDx is a beautiful gift to the world.

Jodi Beggs at TEDxPublicStreet

One particular TEDx presentation was made by Jodi Beggs at TEDxPublicStreet on January 20, 2013. To her credit, I think Jodi might be about as close to connecting the  civilitics dots as any mainstream economist is likely to be, while still remaining an economist. In her biography, Jodi identifies herself as a hybrid between Steve Levitt, Demetri Martin and Jon Stewart. It is clear that her thinking is motivated as much by ethics as exchange economic dogma. This particular presentation was given at an event with the theme “how people in different fields are using what they know in order to make the world a better place” (her own words). Her presentation is so relevant to civilitics that I could devote several posts to discuss all the material:

  • First of all, Jodi points out that economics was once known as the dismal science. The term derives from concerns by nineteenth-century economists that ending slavery would hamper economic progress and plunge the world into a depression. This discussion provides an excellent entry point to discuss the relationship between slavery, economics, and civilitics. This is nothing new, but civilitics brings the discussion of exchange economics, started by Thomas Carlyle in the mid-nineteenth century, to its full circle conclusion, showing how civilitics is to exchange economics what exchange economics was to slavery. In some respects, exchange economics is really just the new slavery. See my detailed discussion at Economics as a dismal science.
  • Secondly, Jodi speaks extensively about the music industry, which is apparently her specialty. Here again, she goes so far as to almost touch on civilitic systems of production while not quite seeing the possibility. I have a very good friend who is a singer/songwriter, which has caused me to give considerable thought to how civilitics would work for musicians. While discussing the economics of crowd-sourcing, “pay what you want”, and music sharing, Jodi comes very close to bridging the gap to the civilitic paradigm. See my detailed discussion at Civilitics and the music industry.
  • Finally, in passing, Jodi singled out “one pretty famous” economist: Adam Smith. She summarized one of Smith’s basic tenets, saying his “idea of supply and demand of the self-interested producer making things – not because he wants to directly benefit society but because he wants to benefit himself – that actually can be very much in line with doing what’s best for society overall.” Unfortunately, Adam Smith was wrong and Jodi should have emphasize the words “can be” in that quotation.

Over recent years, we have seen many negative consequences of exchange economics. I am encouraged by economists like Jodi who are honestly looking for ways to vision a positive role for economics in the modern world. The effort is honorable and I can imagine how frustrating it must be to really believe in the economic mythology while seeing confronting how it undermines good in the world. I have every expectation that Jodi will be among the first to awaken from the dream (dare I say nightmare?) of the exchange economic machine and realize there is a real alternative within our reach.

Philosophy

Economics and civilitics – a philosophical difference

In an effort to understand exactly how civilitics is different from exchange economics, it is useful to compare and contrast the two in various ways. While they are similar in the sense that both provide a basis of provisioning our lives, they are very different in how that end is accomplished.

The basic philosophical difference: exchange economics and civilitics both depend upon human self-interest to create what is best for one’s own situation. However, where exchange economics encourages an exclusively selfish motivation, sometimes manifested as greed, civilitics creates an implicit motivation to frame self-interest in terms of a contribution to the public benefit.

  • Exchange economics is based upon an abstraction for the value of things so that they can be exchanged between people in a meaningful way. At its core, exchange economics establishes a financial balance-sheet for individuals who then exchange their wares in a market economy to obtain the things they need. Economics can be characterized by the question, “What’s in it for me?”
  • Civilitics is based on the abstraction of public benefit so that additional contributions can be apportioned between people equitably. It is not based on any kind of explicit exchange. Civilitics expects people will freely give to society by rewarding those who are seen as providing the most value. In turn, this is a way to demonstrate one’s own contribution to society. Civilitics can be characterized by the question, “How can I create the greatest public benefit?”

Generalizations and inherent assumptions: Exchange economics and civilitics are both guilty of abstracting value in a uni-dimensional, scalar way. That is to say, they both assume that a single number can be used to assign relative value to very complex and varied things.

  • Exchange economics assumes that goods and services (materials and work) can be measured in the same units of value; that food and land can be measured in the same units of value; that work to build something up and work to tear something down can be measured in the same units of value. We pay money for all of these things and we are so accustomed to the concept that we do not even question whether it makes sense. Is it reasonable that food and demolition are measured in the same units?
  • Civilitics assumes that all human activity has relative merit. It supposes that the activity of one person can be compared with a different activity by another person and can be judged as having more or less value to the world or society. Not unlike exchange economics, civilitics assumes that the act of a person in providing care to another can be compared with the act of a person building a device or with a person performing art; with person pursuing some kind of educational goal; even a person destroying a building. Conceivably, various aspects of contribution could be broken into different dimensions of value (vectors), such as the value of serving others, the value of art, the value of self-improvement, and so on. But in its simplest form, like exchange economics, civilitics makes no effort to distinguish between these disparate things.

The basic challenge: Exchange economics has had many thousands of years to reinvent and optimize itself. Originally only a system for barter, it has become the trans-national electronic bank that drives world commerce. In doing so, it has needed to overcome many challenges. Civilitics has never before been abstracted beyond the family or tribe and it has not been optimized to the same extent as exchange economics. Consequently, it has some significant maturity challenges to overcome.

  • Exchange economics has overcome many hurdles. For one thing, exchange economics has needed to address the problem of assigning value to things for which a realistic value can not truly be assigned – like love, human life, freedom, and dignity. What are correct monetary values for these things? With the advent of fiat money, governments have needed to address issues of hyper-inflation, economic depression, trade deficits, and other instabilities in an effort to provide for the general welfare of their people. Of course, money has long had the intrinsic trouble of theft, embezzlement, extortion, and bribery.
  • Civilitics, at the outset, requires a wide participation from a diverse group of people who will take care to make reasonable and informed decisions. Unlike exchange economics, where value in the market can be set by experts, civilitics is based upon the ongoing assessment of billions of decisions by millions of people. The greatest early challenge for civilitics is simplifying the system sufficiently that it can be executed easily and effectively.

Overhead cost: Exchange economics and civilitics both require significant overhead when implemented across society to accomplish the objective of provisioning people.

  • Exchange economics is based in money, so when governments need to do some activity for the public good, a project can be funded by taxes, assessed upon income, property, luxury spending, sales revenue, licensing fees, or in other ways. In the United States, we have a term called tax freedom day, which is “the day when the nation as a whole has earned enough money to pay off its total tax bill for the year.” In 2012, that day was calculated to be April 17. That is to say Americans worked three and a half months of 2012 (almost 30% o f the year) just to pay for government overhead and programs.
  • Civilitics does not know money, so government programs in a civilitic system are run just as any other business in the interest of doing the greatest good. Government employees would not receive a paycheck. Instead, they are rewarded for contributing to society, just as everyone else. However, there is still an overhead cost in the civilitic system, which comes in the form of the time spent by people in assessing the contributions of others.

The following allegory shows how Heaven and Hell might be exactly the same – only different. In a similar way, exchange economics and civilitics are very much the same – only different.

Thoughtful cherubs

Credit: Bert Kaufmann

I once ascended to the firmaments. I first went to see Hell and the sight was horrifying. Row after row of tables were laden with platters of sumptuous food, yet the people seated around the tables were pale and emaciated, moaning in hunger.

As I came closer, I understood their predicament. Every person held a full spoon, but both arms were splinted with wooden slats so he could not bend either elbow to bring the food to his mouth. It broke my heart to hear the tortured groans of these poor people as they held their food so near but could not consume it.

Next I went to visit Heaven. I was surprised to see the same setting I had witnessed in Hell – row after row of long tables laden with food. But in contrast to Hell, the people here in Heaven were sitting contentedly talking with each other, obviously sated from their sumptuous meal.

As I came closer, I was amazed to discover that here, too, each person had his arms splinted on wooden slats that prevented him from bending his elbows. How, then, did they manage to eat?

As I watched, a man picked up his spoon and dug it into the dish before him. Then he stretched across the table and fed the person across from him! The recipient of this kindness thanked him and returned the favor by leaning across the table to feed his benefactor.

I suddenly understood. Heaven and Hell offer the same circumstances and conditions. The critical difference is in the way the people treat each other. I ran back to Hell to share this solution with the poor souls trapped there. I whispered in the ear of one starving man, “You do not have to go hungry. Use your spoon to feed your neighbor, and he will surely return the favor and feed you.”

“You expect me to feed the detestable man sitting across the table?” said the man angrily. “I would rather starve than give him the pleasure of eating!”

– From Allegory of the long spoons

 

Philosophy

Exchange economics and civilitics

Economic paradigm: If I patronize your coffee shop, then you give me something (maybe coffee) and I give you something in return (probably money). In this case, we are both motivated to provide something the other person needs while getting the best possible bargain for ourselves. That’s the basic principle behind exchange economics.

When we extend this simple transaction to a global system, we should also consider long supply chains. So when I buy a cup of coffee at the local shop, I am not buying it from the grower. Instead I buy it from the shop, who bought from the distributor, who bought from the roaster, who bought from the importer, who bought from the shipper, who bought from the export collector, who bought from the grower. Of course something (generally money) was traded at every step along that supply chain.

In a minimal supply chain, limited to just me and a grower, I would know quite a bit more about the product’s history. For example, if I buy a heritage turkey directly from my neighbor at Wattermann Family Farm, I know that the animals are raised and processed humanely and with integrity, I know how the farmer cares for the land, and I know that I can ethically support his efforts. Because of my direct involvement in the one-to-one supply chain, I can vote with my dollar in an knowledgeable way.

But when the supply chain is much longer than that, and certainly before it reaches seven participants like in the coffee example, my vote is no longer educated and I am restricted to voting with minimal information, often based on little more than the price of the product.

To understand the price of a product, we need to realize that every step along the supply chain is necessarily motivated by profit. This is not an indictment of the profit motive; it is just a recognition of how the exchange economic system works: If my coffee purchase is governed largely by price and my vote goes to the lower priced product, then the higher-priced competition will become endangered or extinct in the marketplace. The end result is that the businesses that survive are the ones that are effective at driving prices down. This is not through malice, nor is it anyone’s fault; it is just a natural behavior of the system.

Planting coffee

Planting coffee Credit: Catherine Nomura

In a similar way, the coffee farmer at the other end of the supply chain will be pressured to lower prices and may be forced to cut corners, hire workers at poverty wages, or employ harmful land practices, as a way to minimize costs and remain in business.

There are a number of ways people try to combat these problems: trade laws, fair trade, ethical buying, labor laws, consumer education, environmental regulations, etc. All of which are good things, but we should realize that many people will never hear about those ethic-based campaigns or will not care, and there is a strong incentive for every part of that supply chain to push back against regulations. Ultimately such efforts have limited efficacy to truly improve the world.

Civilitic paradigm: In a civilitic “marketplace” (technically we should not call it a marketplace) if I were to patronize your coffee shop, the only coffee available for me would be free. You would receive nothing in exchange from me, but you would be rewarded by society-at-large for being someone who gives away free coffee. As such, your primary motivation is to please society and your secondary motivation is to please me, your customer.

With civilitics, we would probably retain all of the same supply chains for coffee so that everything looks very much like it does in exchange economics except the price/exchange system. What we have done is remove the one-to-one exchange that happens at every link of the chain and replaced it with a sort of social oversight. Just as the coffee shop owner is not rewarded (paid) by the customer, so also the coffee grower is not rewarded (paid) by the export collector. Instead, every member of the supply chain is rewarded independently by society for their contribution to the overall process. If society doesn’t like the process, then the supply chain will be encouraged to find something society does like.

Coffee plantation. Photo by Gillian

Coffee plantation. Credit: Gillian

Because society is the agency responsible for assigning value to the activities of participants in the example coffee supply chain, there is cost pressure to be applied between the links in the supply chain. In fact, there is a great deal of incentive for cooperation and collaboration. The coffee-grower will want to be rewarded (by society) in the highest possible way and will be inclined to do what society values: treating the crops with care, tending to the land, maintaining good social relationships with workers, and generally being a good and productive steward. There will be little incentive for cutting corners and it will be much as if the customer were dealing directly with the farmer, only better.

Similar reasoning applies to the export collector, shipper, importer, roaster, distributor, and retailer, where there would be incentives to be productive, responsible, and act in the best interest of society and the world. Every place along the supply chain, the incentive changes from profitability (exchange economics) to playing a constructive role in the process (civilitics).

The incentive is to contribute real value (versus money value) because the rewards of society are based upon actual contribution rather than upon some idea about the money saved, labor exploited, or products bought below market price. In short: exchange economics forces a “race to the bottom” (the bottom line) while civilitics encourages a “race to the top” (the moral high ground).

We can’t keep up this race to the bottom while trying desperately to keep ourselves from actually hitting the bottom. It is good that there are regulations and social campaigns to block the downward progress, and those things do help, but the problems we are facing are intrinsic to the system and they will not simply go away. The system of exchange economics created this world and no variation, including green economics, is likely to solve the problems.

We can’t solve problems by using the same kind of thinking we used when we created them. — Albert Einstein

Think differently

Philosophy

Negative interest

In physics, we build models to represent the real world. We find equations to describe falling objects, cooling bodies, and collapsing stars. The equations are really just mathematical models, and when the equations accurately predict the behavior of something, we feel like it has been correctly modelled; at least until we find out differently.

A number of years ago, I spent a great deal of time investigating the true nature of value, aside from modern economic conceptions of the word. Of particular note is that people commonly equate value with money. Yet, if these two really are equivalent, then it follows that the way we model money – the equations we use – should also correctly apply to our observation of value. So what is the evidence for this?

Does money really grow?

Does money really grow?

First, let’s consider the summation of money and value. If you begin with twenty dollars and someone gives you another twenty dollars, I think we would all agree that you now have twice the money. But let’s contrast that with something that is not money. If you have a reserved seat on a flight from London to New York, that will have a certain value for you. If someone gives you another seat on that same flight, in most cases your value would not considered to have doubled.

Second, let’s look at the behavior of money and value over time. The financial equations that deal with interest rates, dividends, and account balances do a very good job of modelling money – by definition – but do they correctly model the nature of value? Looking at the equations governing compound interest on money in a bank account, we will use the following formula for continuously compounded interest :

P = C e rt

In this equation, P is the resulting value, C is the initial deposit, e is the natural logarithm (a mathematical constant), r is the interest rate, and t is the time over which the interest accrues. For a positive interest rate over a positive time period, the resultant amount of money will always be larger than the initial deposit and it will grow exponentially over time.

Value decreases over time

Value decreases over time

But does this equation really represent how value in the world of “things” behaves? Let’s consider some simple examples: If you have an apple and you “bank” it in your refrigerator for a month or two, does the resulting apple have a value greater or less than the initial apple? If you have an automobile and bank it in your garage for a few years, does it have more value when you come back to withdraw it? How about books, or furniture, or clothing, or tools? Does the value of such things go up or down with time? Although there are a few exceptions, such as a vintage bottle of wine or a classic automobile, just about everything loses some or most of its value over time.

The point here is not to say that banks have it wrong. Banks handle money exactly the way we expect it to be handled. The point is simply that money should not be confused with value. They are two very different things and they do not behave in the same ways, nor should they be expected to do so. Any system that correctly models value will show a depreciation over time, dwindling to an ever smaller value. As a result, the above equation only begins to model value when the interest rate is negative.