I recently came across some interesting articles by anthropologist David Graeber, whose new book Debt: The First 5,000 Years presents research suggesting that money originated as debt.
DG: If you pick up an economic textbook, it’ll tell you that once upon a time (it literally deserves such an introduction, it’s a fairy tale) there was no money, so people engaged in barter: “I’ll give you twenty chickens for that cow”, that sort of thing. If the guy doesn’t want chickens, you’re out of luck—so you have to go invent money. Gradually, this gives birth to more sophisticated financial forms like paper money, complex credit operations, securitized derivatives… Problem is that, as anthropologists have known for years, it just isn’t true. No one has ever found an economy based on barter (and believe me, they’ve been looking.) Actually it’s not just wrong, it’s backwards: credit systems come first, coinage is invented at least two thousand years later, and barter… well, when it does occur, it’s usually because people are used to using money, but somehow the money supply disappears, as it did, say, in Russia with the collapse of the Soviet Union. But if credit systems are the original form of money, that gives great support to those economists—and among economists, they are decidedly the minority—who argue that money really is debt; or, better perhaps, a system of accounting that allows us to keep track of credits and debts. That realization has profound implications.
that gives great support to those economists—and among economists, they are decidedly the minority—who argue that money really is debt*; or, better perhaps, a system of accounting that allows us to keep track of credits and debts.*
Riddle: What logical fallacy is he committing? Hint: try and lay out his argument as a syllogism.
I did not read kregmans article but based on the title.
If private sector does not make a surplus then it will go bankrupt, well some of the private sector, unless they are close friends with the government. But the government, surplus is not in their vocabulary. Why would you need to run a surplus when they can just lend more money with the only risk being that lenders might stop lending.
There is no direct relationship between private sector surplus and a public sector deficit. The only relationship is that the government misappropriates from the private sector. Some might argue that the more surplus the private sector experiences, the more the government spends. But this is not a direct relationship. It just the more money people make the more the government wants to take and spend.
Riddle: What logical fallacy is he committing? Hint: try and lay out his argument as a syllogism.
Begging the question? Genetic fallacy? I’m not sure that he is really trying to make a logical argument in the section you quote, but rather transferring his previous conclusion into different terms.
There is no direct relationship between private sector surplus and a public sector deficit. The only relationship is that the government misappropriates from the private sector. Some might argue that the more surplus the private sector experiences, the more the government spends. But this is not a direct relationship. It just the more money people make the more the government wants to take and spend.
Are you talking about a surplus and a deficit in money? When people say the government has a deficit, they’re not saying it doesn’t have money, they are saying that it owes money. A surplus then would be when money is owed to you. The private sector willingly loans the money (i.e. they buy bonds). The real misappropriation (it seems to me) is when the government taxes people to pay back the debt. The bondholders essentially steal money from the non-bondholders.
I am talking about a government budget deficit or surplus. The private sector profits are rarely called a private sector surplus. Only a socialist would look at all the private sector profit as one and called it a surplus and try to equate it to government budget deficit. No matter how much profit the private sector experiences, the government can spend less or more, it makes no difference, because they can just loan money. The government could also, if they chose, spend less and run a surplus for once, regardless of the private sector performance.
Are you talking about a surplus and a deficit in money? When people say the government has a deficit, they’re not saying it doesn’t have money, they are saying that it owes money. A surplus then would be when money is owed to you. The private sector willingly loans the money (i.e. they buy bonds). The real misappropriation (it seems to me) is when the government taxes people to pay back the debt. The bondholders essentially steal money from the non-bondholders.
You’ve got this half right. The moral issue is, yes, that bonds are repaid with coerced tax dollars, or new printed money. However, part of the misappropriation is that the government, in sucking up private investment via bonds, inhibits the creation of new, productive investments. Instead of risking thier money in entrepreneurial activity, creating new value via productivity and an increase in wealth, they hand the money over to the government in exchange for a modest, “safe” return on their money. The implication is that they are essentially purchasing a portion of future tax revenue, assuming the money isn’t printed into existance.
This has the effect of directing lots of resources from potential new buisness ventures, and instead distributes them to the various government projects, which may or may not be increasing wealth in the society. For example, instead of money being invested in a new shoe factory, it’s invested in new tanks and fighter jets. This has the effect of building new fighter jet and tank factories, but the question is “do we really need more of these”? For the weapon producers, the answer is probably yes. But for society at large? Probably not. This goes down the line through most government expenditures. Do we really need that new bridge? Well, the bridge might actually be needed and useful. It may benefit the people who will use it greatly, but how do you know if it’s a net wealth producer for society? How do you know that those resources wouldn’t be better invested elsewhere? This is the classic seen-and-unseen problem, combined with the inability of a state enterprise to calculate proper prices without the profit-loss model.
Tying this back into the original question, does “private sector surplus = government deficit”? Partially. The government’s deficit is limited by the amount of bonds they can sell, and this is limited by the “surplus” profits available in the private sector. However the private sector surplus is not limited by government deficit, as they can produce more wealth independent of government action.
The fallacy is non sequitor, i.e the conclusion does not follow from the assumptions.
Could you tell me specifically what you think the assumptions are and what you think the conclusion is? From what I can tell, you only quoted the conclusion. Are you saying that the assumption is that money was originally debt and that the conclusion is that it is currently debt?
This has the effect of directing lots of resources from potential new buisness ventures, and instead distributes them to the various government projects, which may or may not be increasing wealth in the society. For example, instead of money being invested in a new shoe factory, it’s invested in new tanks and fighter jets. This has the effect of building new fighter jet and tank factories, but the question is “do we really need more of these”? For the weapon producers, the answer is probably yes. But for society at large? Probably not. This goes down the line through most government expenditures. Do we really need that new bridge? Well, the bridge might actually be needed and useful. It may benefit the people who will use it greatly, but how do you know if it’s a net wealth producer for society? How do you know that those resources wouldn’t be better invested elsewhere? This is the classic seen-and-unseen problem, combined with the inability of a state enterprise to calculate proper prices without the profit-loss model.
But when the government takes the money through bonds and spends it on tanks, then the money is back in private hands. The government always gives money to private individuals. So wouldn’t the tank manufacturers be able to spend the money on the same things that the bondholders would’ve spent it on? Or are you saying that the bondholders are “better” at spending the money than the tank manufacturers?
However the private sector surplus is not limited by government deficit, as they can produce more wealth independent of government action.
How do you equate tank manufacturers with the public? Tank manufacturers are a product of the gunvernment whose market wouldn’t exist without them. .
You can measure the private sector wealth creation in increases in standard of living across all facets of society instead of just the chosen few supported by the government.
How do you equate tank manufacturers with the public? Tank manufacturers are a product of the gunvernment whose market wouldn’t exist without them.
So when an employee of a tank manufacturer spends money on a house, that counts as public spending and not private spending? When the house manufacturer then goes to spend the money he received from the tank manufacturer, does that count as public spending as well? After all, he wouldn’t have that money without the government. Thus, by your standards, everything is government spending.
(I assume you meant: “How do you equate tank manufacturers with the private sector?”)
You can measure the private sector wealth creation in increases in standard of living across all facets of society instead of just the chosen few supported by the government.
When the gov. spends $1,000 on a tank, only $1 is earned by the tank factory worker who might go spend it on a house. Here is an example of public ($1,000) and private ($1) spending.
The economy is hurt not by the worker spending his dollar on whatever they so choose, but rather by the government stealing the $1,000 from the public and forcing them to buy a tank. In a free market, this $1,000 would have been used more efficently enrichening many actors instead of a chosen few.
I measure the standard of living by looking at the past.
My great grandma had a wash board, my grandma had an automated open wash tub with wringer attachment, my mom had a fully automatic wahing machine. My wife enjoys the convience of a fully automatic washer and dryer.
When I was 7, I’d buy boxes of pistol cartridges at the local hardware store and enjoy a day of plinking bottles and cans at our private range. If my seven year old attempted to buy cartridges today, he’d be in state custody and I’d be in jail.
Its a shame the government didn’t subsidize and force the market of years long gone to grant my great grandma the right to have a washer and dryer. She would have been better off for it ergo I would have been better off for it.
When the gov. spends $1,000 on a tank, only $1 is earned by the tank factory worker who might go spend it on a house. Here is an example of public ($1,000) and private ($1) spending.
I still don’t understand. Where does the other $999 go if not to the private sector?
Nowhere profitable. If the money goes to pay a public servant, it funds a job that doesnt need to exist. That public servant could get a real job in the private sector, and he would contribute to the supply of goods and services that people actually want and are willing to pay for.
But that just takes the current distribution of property for granted. They might be willing to pay for those goods and services if they had more money. Because people in Africa can’t afford food doesn’t mean that they don’t need food.
But that just takes the current distribution of property for granted. They might be willing to pay for those goods and services if they had more money. Because people in Africa can’t afford food doesn’t mean that they don’t need food.>>>>
current distribution of property is one of the few givens in philosophical problems. Or is your beef with reality? Do you have a system of values you wish me to adopt? Lets hear it.
current distribution of property is one of the few givens in philosophical problems. Or is your beef with reality? Do you have a system of values you wish me to adopt? Lets hear it.
Well, taxation going to pay public servants is a given as well. Is your beef with reality?
if the need food so bad, why dont you go give it to them?
Just because a need exists doesn’t mean I have to satisfy it.