Monday, September 7, 2015

Notes on the Evolution of "Hunter Gatherer" Domain

While today's versions are decidedly more modern, societies still "hunt and gather" for economic sustenance. There's just one problem: the redistributed bounty of hunters and gatherers has become distorted beyond recognition. How does one know where wealth sources actually reside? Too much knowledge - for instance - is dedicated to obfuscating the details of redistribution, instead of serving any obvious purpose for societal benefit.

Even as recently as the 19th century, land use was central to economic activity. For Henry George, land value appeared to be the most reasonable means to coordinate production and service formation. Like others of his time, Henry George believed governments needed a more significant economic role, and he felt it made more sense for land to be government owned. However, he believed that land was the only thing that needed to be taxed, and taxation should be a simple process as well. From Progress and Poverty, (p. 408, 50th anniversary edition) (1879):
The best tax by which public revenues can be raised is evidently that which will closest conform to the following conditions:
  1.  That it bear as lightly as possible upon production - so as to check the increase of the general fund from which taxes may be paid and the community maintained.
  2.  That it be easily and cheaply collected, and fall as directly as may be upon the ultimate payers - so as to take it from the people as little as possible in addition to what it yields the government.
  3.  That it be certain - so as to give the least opportunity for tyranny or corruption on the part of officials, and the least temptation to law-breaking and evasion on the part of taxpayers.
  4.  That it bear equally - so as to give no citizen an advantage or put any at a disadvantage, as compared with others.
Henry George was concerned about forms of taxation which lessen the producer's reward. Alas, the simple version of taxation he imagined never came to pass, and the U.S. tax system in particular is convoluted beyond belief. However, even though land taxation might have been sufficient for the obligations of a simpler government structure, how would it have fared once governments took on more responsibility for service formation and entitlements?

By the time the National Monetary Commission convened (1908-1912) , doubtless the role of land was already seen as only a partial contributor to wealth - given an increasingly globalization which had not yet been disrupted by the first world war. There was plenty of wealth beyond land (and national borders) which the U.S. could "hunt and gather", and the pending Federal Reserve system likely took this into account. George Selgin (in the above linked post) notes that Federal Reserve notes were made "obligations of both the Federal Reserve banks themselves and of the United States government."

According to Selgin: unfortunately, the Federal Reserve was created in a way that even though money could continue to expand, it was not elastic. This greatly concerned New York senator Elihu Root, who argued that the monetary base would not be as responsive to the public's actual demand for money, as before.

For that matter, not everyone afterward remained convinced that the quantity theory of money was an important consideration for economic activity. Even today, some believe the only thing standing in the way of (government provided) needed services is the political will to make it happen...why shouldn't governments which print their own money be able to do what they want? Hence the quantity theory of money is also an "inconvenient" factor, for those who don't consider traditional production important as a "starter point" for services production, in the current monetary configuration.

Not only is traditional production primary in this setting, the income it generates also defines output capacity for asset formation as well. Monetary flows are ultimately subjected to the realities of two very different dimensions. One is based on finite time aggregates, the other consists of random sets of material resources. Civilizations eventually run into constraints, when they rely on what appears as an open checkbook of material wealth to support time based and services based options.

None of this is just a matter of budgets, which presently do not distinguish the difference between finite time aggregates and random material resources. While time based coordination takes place in finite and fixed sets of possibilities, material resource sets will expand so long as they prove capable of meeting the resource requirements attributed to time value. Time based coordination now needs to directly contribute to the process, since other resource capacity is struggling to meet service income demands in general equilibrium.

Knowledge use systems would utilize a production norm which separates time backed services endeavor from materially backed asset formation and infrastructure maintenance. The best part about this is that growth can occur not just from traditional production but also services production. A simple way to think about the process is time backs time, while material resources back material resources. Budgets would consist of time aggregate balances, alongside the normal monetary budgets of material resource use.

The hunting and gathering of new wealth potential is still possible. But doing so requires the ability to anchor time use potential, alongside what can otherwise turn into indeterminate material wealth capacity. Knowledge use systems would seek the tax simplicity Henry George once imagined, albeit in slightly different terms. Time coordination would provide the role of what would otherwise be taxation and/or subsidies for services. Land still provides a shared focal point for ownership capacity. The ideal is to not end up with indeterminate flows from material wealth to skills use wealth. Why not create alternatives to tax systems that are means to hide who gets the benefits? If "wealth" from legal obfuscation is lost, it is doubtful anyone would really miss it.

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