My advice in the case of Morocco specifically would be to work towards the instrumental goal of getting those laws changed, rather than the final goal of promoting rationality. Morocco is a semi-democratic country but with extremely low levels of political participation by the citizens. That means one could have a disproportionate effect even by registering to vote (most Moroccans aren’t registered), let alone by joining a political party. I’d suggest joining Movement Populaire or Union Constitutionelle, after a few minutes’ googling. There’s just about enough give in the system that one could make a difference in overall freedom there.
In a country without even that tiny amount of pressure one can put on the levers of power, like an outright theocracy like Iran or hereditary dictatorship, it would depend on whether the budding rationalist considered hir death a reasonable price to pay for increasing overall rationality. If yes, then supporting whatever underground opposition groups exist would make sense. If not, then just doing whatever they could to get somewhere with a saner polity would be the sensible thing to do.
Oh. So it does work, the propaganda.. Morocco is only a consitutional monarchy on paper. The power resides in the Palace, and it is absolute. Parties have been proven, time and again, to be utterly impotent before the King. That is why people don’t even bother to vote. That is why you will often spot people sleeping during parliament sessions: those simply don’t matter.
People have picked up on this. Now, when they make protests, they address the King directly, ignoring the Ministers. Their tone is very deferential, but that’s one fuse that’s burned out.
And the most popular contenders, were the regime to change, are the Islamists...
And the most popular contenders, were the regime to change, are the Islamists...
Wow. Even more reason to want to get out now and enjoy your life among people who think in a way you consider valuable.
Consider it from the democratic point of view. Morocco DOESN’T WANT to be what you want to live in. It is not because of the evil king, it is not because of the evil Islamists. (Well at least not entirely). The people are not looking for the kind of rationality you are looking for.
It might be a nice democratic move to “live and let live.” To let Moroccans (or at least the bulk of them) do what they want to do and to go someplace where people do what you want to do.
To me “live and let live” may be a statement of the most basic rational precept ever. It lets you win and it lets them win.
And speaking in long-term terms, secularism tends to correlate with an increase in the perception by the individual that they have the ability to alter their circumstances. There are exceptions (the US is really weird in being something like a functioning democracy but still having a ridiculously rabid level of religiosity) but in general democracy and social mobility seem to lead to higher levels of secularism, though they’re not a panacea.
The cliche is that democracy is horrible and stupid, but it is better than all the alternatives.
Every time you have imposition by the few on the many, even if it starts with the few you agree with imposing the ideas you agree with, there is no mechanism to keep it that way. Indeed, the mechanism for gaining power within a system like that is probably quite different from the mechanism of having the kinds of ideas you agree with.
So what do we do when we have something that sounds good in theory, but sucks in practice? If we are rational we abandon it. Allowing the unwashed masses of fools and hypocrites to pick the policies of their nation by voting on them is a horrible idea. Its just better than forbidding it.
There is a fair number of Lesswrongers that challenge the notion that “Democracy is Good”.
That’s not very surprising. “Democracy” isn’t about democracy to begin with. The correct technical term for our political systems is “representative government”. Today, that means choosing your next leaders among a select few that pass a number of filters, such as media exposure. The intention of such a system is to select an elite that is genuinely better at ruling us all than laypeople. Whether it actually works is another matter, especially if you look at the conflict of interest that went on in most constitutional processes: rulers writing the laws of ruling.
Democracy, on the other hand, is when the people rule directly. The most famous example of this it antique Athens (if we count women, slaves, and strangers as non-people). To be actually democratic, a political system’s decisions must be sufficiently close to the (non-extrapolated) Coherent Volition of the set of people that live under it. Under this definition, representative government could very well be democratic. However, our western governments do quite differently. For instance, I’m sure there are a number of referendums that were subsequently not respected by the relevant governments. And I’m not even counting the times where there was no referendum in the first place.
By the way, I’m not even sure actual democracy would be very good. But it’s the best I can think of, short of a Friendly AI.
Well, it would certainly be better than current representative governments. Maybe there’s a way to make representative governments work even better, but I don’t know how to prevent them to turn into oligarchies¹. A start would be gathering up a popular² constitutional assembly, which would exclude itself from the institutions it will create. Maybe it would come up with representative government anyway, but it may at least think of better checks and balances than what we have now.
[1] Two examples of oligarchy-like features:
If I recall correctly, the winner at an election is overwhelmingly determined by the sheer amount of money that has been thrown in the election campaign. And the one who got elected knows where this money came from, and how to make it come again for the next elections.
Current monetary shenanigans basically allow private banks to create money out of thin air, lend it, and perceive an interest. Since a few decades, states (US, EU, and others) basically stopped themselves from creating money for their own expenses, so that they have to borrow it (typically to the banks) at an interest. That suspiciously sounds like rich people are taxing everyone else. I think taxes, however low you want them to be, should be under the control of the state, which is at least supposed to be accountable in front of the people.
[2] By “popular”, I mean basically the same thing as in “popular jury”: you pick citizen at random, with a few precautions. You do not run an election.
[2] By “popular”, I mean basically the same thing as in “popular jury”: you pick citizen at random, with a few precautions. You do not run an election.
This is not how juries work in America. Really picking twelve people at random turns out to be unworkable—the population of people who can comfortable afford to spend a week or more on a jury is a very biased sample—it skews to the elderly and upper-middle-class in ways that would be politically intolerable. Also, since jury deliberations are secret and unmonitored, we go to elaborate lengths to avoid one juror having outside and un-compensated influence.
Courts routinely summon a hundred jurors to fill a panel of twelve. Only a small minority of potential jurors are actually suitable. Both sides of the case have extensive rights to reject jurors, both with and without cause.
It’s not so much “pick at random” as it is “audition a lot of people in order to find 12 jurors who are mutually acceptable to the parties.” I don’t see how that would generalize to decision-making contexts where there aren’t two clear predefined sides in a position to say yes or no to particular jurors.
Oops. I did not know the process was that selective. Quickly looking up the French Wikipedia, I see the French system is much less selective (it picks up “only” 3 times too many random candidates).
Now there are also other cases where random assemblies (a couple hundred people, I believe) were conjured to make important decision: election rules in one case (didn’t work out the first try), and GMO in the other (the unanimous conclusion was “looks somewhat risky, and we don’t see the benefits. No, thanks.”).
By the way, we could imagine something between a fully random assembly, and a fully elected one. (This is totally not my idea) Run free elections, where everyone is candidate (no choice). Let people chose, say, 3 people they believe would be good at making the relevant decision (like writing a constitution). We can suggest criteria, such as being good, well tempered, can change one’s mind… Now look how the votes are distributed. You can exclude the bottom fifth by assuming many people there are probably not so good. You can also exclude the top fifth to remove fame bias, and exclude authority figures (journalists, professional politicians…). Now you pick a couple hundred people at random among the rest, and propose them to participate in the assembly. Most will accept. Now let them write what they must, and if the decision is important enough (like a constitution), run a referendum, just to be sure. (People are overwhelmingly likely to accept it, but you never know.)
Current monetary shenanigans basically allow private banks to create money out of thin air, lend it, and perceive an interest.
Are you referring to fractional reserve banking? I agree that the concept is disconcerting at first glance, but banning it essentially requires banning interest on savings accounts because it bans lending money from savings accounts.
Yep. Credit default swap can also count when they go through tax havens.
Banning interests on saving accounts doesn’t bother me (Edit: err, maybe it should). No one should harvest money merely because they already have some. Now there’s inflation, but those who have little money are largely unaffected. That makes inflation a form of tax on accumulated wealth. I’m fine with that.
Now if you must protect the hard-working people who just want to save the little amount of money they have, just have the central bank open one special account per citizen that (1) will have an interest rate equal to the inflation, and (2) cannot hold more than some defined amount of money (in constant dollars). The interest rate would be paid by the state (with a mix of taxes and newly created money).
In such a world, it would be more difficult to have a rent. That’s precisely the point. I believe rent seeking behaviour, while often a rational self-interest move, is generally detrimental to the rest of society. I’d rather discourage it.
As a conceptual move, may I suggest removing the concept of savings accounts from your mind for the moment. Individuals have money that they aren’t using this moment. So they loan it to brokers. The brokers find business who need loans, ad charge a higher rate of interest on the business loans than they are paying on the individual loans.
I suggest the brokers are not receiving rent. They are providing a valuable service, without which business loans would be much more difficult (and expensive) to maintain. Yes, the brokers (i.e. banks) make money on the interest rate spread, but they are entitled to earn something, right? Do we agree that making business loans is economically valuable and those who facilitate it are entitled to some reward for their work?
Fractional reserve arises out of the usual feature of the individual loans to the bank—specifically, those loans are due on demand rather than having a specific repayment schedule. In normal circumstances, the broker knows that most people will NOT demand their money back—but some will, so the broker needs to hold on to enough money to satisfy those demands while still making loans to earn the interest to pay the individual loans.
will have an interest rate equal to the inflation
I don’t understand how you expect to pay for this (even in nomimal dollars) without printing money somehow. It doesn’t seem like an economically coherent position.
A possible system for broking is to pay the broker with something else than interest rates. I don’t know, flat rates, maybe? There’s also the problem of risks, and what you want to achieve with the investment (do you want the money returned at all? If you construct, say, a school, you may not want to, because the increase in public wealth may match the money you created for it). We need a way to sort out “bad” brokers from “good” ones, whatever that means.
Okay, that’s difficult to do without interest rates. Maybe if I think about it for 5 minutes…
The problem I see with fractional reserve banking is that it lets yo wield far more money than you would otherwise control. Plus, earning all the interest you made of money that mostly isn’t yours strikes me as unfair. (But if we fix this, we’re back to saving accounts…)
As for paying for the public saving accounts, I expect the saving accounts to hold much less money than the whole economy. Refilling them will cause some inflation of course, but not so much that you cannot solve the equation.
The analysis is totally different if we aren’t trying to make a foreseeable monetary profit, so let’s put that aside to focus on for-profit business lending.
Let’s say Bob wants to open a restaurant. He’s short $100 to buy the oven. Alice has $100 (for whatever reason), but totally lacks the skills to run a restaurant. Assuming Alice does not operate as a charity, she expects repayment if she gives the money to Bob.
You seem to suggest there is a moral difference between Alice saying “I’ll give Bob $100, and 1) I want Bob to give in back, plus $20 in one year vs. 2) I want Bob to give my $10 a month for the next year.
What’s the moral difference between those positions? (Yes, I know the annual percentage rate of interest is slightly different—not important for this example, but I’m pretty sure (1) is a better deal for Bob)
And the only reason Alice has $100 is that she promised Charlie that she’d pay him $10 if he let her hold it, no questions asked, for one year. Fractional reserve is the inevitable consequence if Alice also promises that she’ll give all or part of the money back to Charlie whenever he asks. (To make this work, Alice will need to find other Charlies).
If you ban this arrangement between Alice and Charlie, then Alice will not have money to give to Bob, and Bob’s restaurant simply will never happen. I think that’s a worse world than the one we live in.
To put it slightly differently, the way Alice adds value is by being good at finding Bobs and telling the difference between Bob and Billy Bankrupt-er. Holding Charlie’s money is a cost to Alice, not a benefit. And none of this has anything to do with credit default swaps, which I agree are much less defensible.
Regarding the public savings accounts, your statement translates to “I’ll need less money-from-nowhere than you originally thought.” That’s not reassuring. What exactly do you think I should be doing with the part of my money that I’m not using to buy something right this instant?
Fractional reserve is the inevitable consequence if Alice also promises that she’ll give all or part of the money back to Charlie whenever he asks.
Under this scheme, fractional reserve banking is effectively unlimited. Yet many states do manage to put a limit (by making you guarantee part of your loans by money you actually own). They could, in principle, forbid it altogether without really affecting individual liberties.
To put it slightly differently, the way Alice adds value is by being good at finding Bobs and telling the difference between Bob and Billy Bankrupt-er.
Agree. That value must be tapped.
Holding Charlie’s money is a cost to Alice, not a benefit.
Nitpick: Initial cost. She can have a net benefit if we account for the leverage the extra money give her. Though she does have to have the skills to exploit it. And it is a way to tap her value (though possibly not the only one).
And none of this has anything to do with credit default swaps, which I agree are much less defensible.
Of course. I merely talked about CDS because they are a way to create money.
If you ban this arrangement between Alice and Charlie, then Alice will not have money to give to Bob, and Bob’s restaurant simply will never happen.
That is, assuming there aren’t other ways to have or create money. We need to create money, but private money creation isn’t the only way. States could print money, lend it to private banks, which would then lend it further (possibly with higher interests rates). (I’m not sure how this is different from fractional reserve banking. Maybe the state would have greater regulation power?) Or they could lend it directly (but then they need a way to find Alice). Or something.
Overall, I’m not sure usury is an unconditionally bad thing, or even a net bad thing. You made it quite clear it can do good. The key point I don’t like about the whole system is the fact that most western states basically gave up control over money. Letting private banks create money is one step, and the last straw is to (mostly) forbid itself to print money. When a state borrows money, the money is created anyway. Why pay interest when your central bank’s money is free? That’s not in the interest of the people. That’s in the interest of a few very rich people and corporations. Unless somehow their concentrating so much wealth is more beneficial to society. I don’t trust states as effective charities, but right now I trust banks even less.
Banning interests on saving accounts doesn’t bother me. No one should harvest money merely because they already have some. Now there’s inflation, but those who have little money are largely unaffected. That makes inflation a form of tax on accumulated wealth. I’m fine with that.
I am doubtful that inflation preferentially hurts the well-off. If you’re wealthy, you are in a position to put some of your wealth in foreign-denominated assets or commodities or the like. If you are not wealthy, you are really dependent on your employer or pension—and those don’t reliably adjust for inflation. Pensioners, particularly, tend to get clobbered.
Bear in mind that the net-present-value of even modest retirement savings or pensions can be many hundreds of thousands of dollars—a denomination-limited savings account isn’t a good way to store retirement savings. You just can’t have “small savings account” as the main method of saving money.
Edit: It also occurs to me that banning interest on savings accounts will just move most individual savings into less-regulated forms. People will buy bonds and suchlike. You can ban banking, but the ability to “harvest money merely because they already have some” is almost the definition of investment. And I don’t think you can run a major economy without some way to let people collectively invest their capital in larger projects.
I suppose you could hope to reduce the implicit government guarantee on investments by banning interest on bank accounts, but there’s nothing magical about banks—you can get inflation without fractional reserve banking if the velocity of money increases or if people start using other financial instruments as money substitutes.
Rising prices without a corresponding rise in income isn’t true inflation, it’s just squeezing your people to get their juice. But it does somewhat emulate inflation.
Yes, it would probably be a bad idea to ban investment. Note however than investment requires effort. Yes, having money makes it much, much, easier to invest, and accumulate even more, but “be able to make money because you have money” is slightly different from “make money because you have money”. Though if you pay someone to invest your money…
It occurred to me that our fiscal an monetary systems are horribly complicated, and full of loopholes. For instance, many accounting schemes can reduce your taxes just because you cared to apply them. That’s crazy, because there’s an incentive to make effort for something that is basically useless for the society as a whole. I’d like to see simpler, more robust systems.
Rising prices without a corresponding rise in income isn’t true inflation, it’s just squeezing your people to get their juice. But it does somewhat emulate inflation.
I suspect you’ll find that you always have slightly different rates of increase for different prices and different incomes. There’s no such thing as perfect lockstep increase across an economy. As a result, there will always be somebody who gets hurt. In practice, those people tend to be pensioners, not the middle-aged wealthy.
It occurred to me that our fiscal an monetary systems are horribly complicated, and full of loopholes.
Yes. But that’s quite hard to avoid. The world has lots of complicated corner cases that have to be handled. This goes with the territory. When we apply a tax, we generally apply it to “the market value of” an asset or a gift or what-have-you. But “market value” is an abstraction that doesn’t perfectly capture the underlying reality. So there are going to be corner cases where somebody profits from the modeling error. I don’t see a way to avoid this. Mitigate when possible, yes. Solve, no.
I’m not arguing that “democracy is good” as such (though I would argue that it is a good in itself, but that’s a separate argument). But more important is the feeling of power over one’s own circumstances. When your life really is under the control of other intelligences, whose aims you don’t know and which aren’t the same as yours, then it makes an intuitive sense that everything is controlled by such an intelligence.
I don’t know for sure that that’s the mechanism—I’m not an historian, though I do have a layman’s interest in history, especially recent European history—but democracy and secularism at least seem to correlate very strongly, and I’ve seen the above proposed as a mechanism, and it makes sense to me...
Oh, the propaganda definitely doesn’t work. I said semi-democratic for a reason—the forms of democracy are there, but they’re not doing much of anything. They are a very, very, very weak form of pressure—but that’s not the same as no form of pressure at all. Tiny incremental changes (like the constitutional change last year which didn’t change anything on the ground level but did remove the king’s supposed divine status) can eventually add up. It’s just that those add up on ridiculously slow timescales.
I think we’re seeing something of the sort in China, where having idealist laws and constitution eventually give people a little leverage against corruption.
Yes! I think the essence of Ghandi’s non-violent opposition to the British was to take the British at their word. To repeat (a carefully selected) bunch of their own ideas back to them. To make them realize if they wanted to think of themselves as “good” they were going to have to address the inconsistencies between what they said and what they did.
This has also been an important part of the advance of civil rights for racial minorities in the U.S. in my personal experience. It is hard to totally ignore someone who is spouting words you believe in and not simultaneously threatening you with violence.
Ultimately in the U.S. and the West generally, these experiences of accepting differences, of inclusion, have lead to a new ideology of a positive value associated with diversity, not just a “tolerance” of it. I don’t know if you can live in the U.S. these days, with Thai restaurants and Indian and Chinese engineers, British rock stars and Polynesian beauties, and not recognize the great positive utility that diversity provides to the cooperative human enterprise.
I don’t think Gandhi is a good model here. The only reason he succeeded is because the British already valued democratic ideals and thus his actions caused cognitive dissonance among the British public. The same applies to the U.S. civil rights movement. A government that didn’t value these ideals would simply have executed Gandhi and MLK.
My advice in the case of Morocco specifically would be to work towards the instrumental goal of getting those laws changed, rather than the final goal of promoting rationality. Morocco is a semi-democratic country but with extremely low levels of political participation by the citizens. That means one could have a disproportionate effect even by registering to vote (most Moroccans aren’t registered), let alone by joining a political party. I’d suggest joining Movement Populaire or Union Constitutionelle, after a few minutes’ googling. There’s just about enough give in the system that one could make a difference in overall freedom there.
In a country without even that tiny amount of pressure one can put on the levers of power, like an outright theocracy like Iran or hereditary dictatorship, it would depend on whether the budding rationalist considered hir death a reasonable price to pay for increasing overall rationality. If yes, then supporting whatever underground opposition groups exist would make sense. If not, then just doing whatever they could to get somewhere with a saner polity would be the sensible thing to do.
Oh. So it does work, the propaganda.. Morocco is only a consitutional monarchy on paper. The power resides in the Palace, and it is absolute. Parties have been proven, time and again, to be utterly impotent before the King. That is why people don’t even bother to vote. That is why you will often spot people sleeping during parliament sessions: those simply don’t matter.
People have picked up on this. Now, when they make protests, they address the King directly, ignoring the Ministers. Their tone is very deferential, but that’s one fuse that’s burned out.
And the most popular contenders, were the regime to change, are the Islamists...
Wow. Even more reason to want to get out now and enjoy your life among people who think in a way you consider valuable.
Consider it from the democratic point of view. Morocco DOESN’T WANT to be what you want to live in. It is not because of the evil king, it is not because of the evil Islamists. (Well at least not entirely). The people are not looking for the kind of rationality you are looking for.
It might be a nice democratic move to “live and let live.” To let Moroccans (or at least the bulk of them) do what they want to do and to go someplace where people do what you want to do.
To me “live and let live” may be a statement of the most basic rational precept ever. It lets you win and it lets them win.
Sure. The trick is not to confuse it with “live and let suffer and die.”
That is, indeed, the bit that I am worried about.
And speaking in long-term terms, secularism tends to correlate with an increase in the perception by the individual that they have the ability to alter their circumstances. There are exceptions (the US is really weird in being something like a functioning democracy but still having a ridiculously rabid level of religiosity) but in general democracy and social mobility seem to lead to higher levels of secularism, though they’re not a panacea.
Democracy and social mobility… and the ability to alter one’s circumstances.… What if those were red herrings?
There is a fair number of Lesswrongers that challenge the notion that “Democracy is Good”.
The cliche is that democracy is horrible and stupid, but it is better than all the alternatives.
Every time you have imposition by the few on the many, even if it starts with the few you agree with imposing the ideas you agree with, there is no mechanism to keep it that way. Indeed, the mechanism for gaining power within a system like that is probably quite different from the mechanism of having the kinds of ideas you agree with.
So what do we do when we have something that sounds good in theory, but sucks in practice? If we are rational we abandon it. Allowing the unwashed masses of fools and hypocrites to pick the policies of their nation by voting on them is a horrible idea. Its just better than forbidding it.
That’s not very surprising. “Democracy” isn’t about democracy to begin with. The correct technical term for our political systems is “representative government”. Today, that means choosing your next leaders among a select few that pass a number of filters, such as media exposure. The intention of such a system is to select an elite that is genuinely better at ruling us all than laypeople. Whether it actually works is another matter, especially if you look at the conflict of interest that went on in most constitutional processes: rulers writing the laws of ruling.
Democracy, on the other hand, is when the people rule directly. The most famous example of this it antique Athens (if we count women, slaves, and strangers as non-people). To be actually democratic, a political system’s decisions must be sufficiently close to the (non-extrapolated) Coherent Volition of the set of people that live under it. Under this definition, representative government could very well be democratic. However, our western governments do quite differently. For instance, I’m sure there are a number of referendums that were subsequently not respected by the relevant governments. And I’m not even counting the times where there was no referendum in the first place.
By the way, I’m not even sure actual democracy would be very good. But it’s the best I can think of, short of a Friendly AI.
You mean that “actual democracy” would be better than “representative government”?
Well, it would certainly be better than current representative governments. Maybe there’s a way to make representative governments work even better, but I don’t know how to prevent them to turn into oligarchies¹. A start would be gathering up a popular² constitutional assembly, which would exclude itself from the institutions it will create. Maybe it would come up with representative government anyway, but it may at least think of better checks and balances than what we have now.
[1] Two examples of oligarchy-like features:
If I recall correctly, the winner at an election is overwhelmingly determined by the sheer amount of money that has been thrown in the election campaign. And the one who got elected knows where this money came from, and how to make it come again for the next elections.
Current monetary shenanigans basically allow private banks to create money out of thin air, lend it, and perceive an interest. Since a few decades, states (US, EU, and others) basically stopped themselves from creating money for their own expenses, so that they have to borrow it (typically to the banks) at an interest. That suspiciously sounds like rich people are taxing everyone else. I think taxes, however low you want them to be, should be under the control of the state, which is at least supposed to be accountable in front of the people.
[2] By “popular”, I mean basically the same thing as in “popular jury”: you pick citizen at random, with a few precautions. You do not run an election.
This is not how juries work in America. Really picking twelve people at random turns out to be unworkable—the population of people who can comfortable afford to spend a week or more on a jury is a very biased sample—it skews to the elderly and upper-middle-class in ways that would be politically intolerable. Also, since jury deliberations are secret and unmonitored, we go to elaborate lengths to avoid one juror having outside and un-compensated influence.
Courts routinely summon a hundred jurors to fill a panel of twelve. Only a small minority of potential jurors are actually suitable. Both sides of the case have extensive rights to reject jurors, both with and without cause.
It’s not so much “pick at random” as it is “audition a lot of people in order to find 12 jurors who are mutually acceptable to the parties.” I don’t see how that would generalize to decision-making contexts where there aren’t two clear predefined sides in a position to say yes or no to particular jurors.
Oops. I did not know the process was that selective. Quickly looking up the French Wikipedia, I see the French system is much less selective (it picks up “only” 3 times too many random candidates).
Now there are also other cases where random assemblies (a couple hundred people, I believe) were conjured to make important decision: election rules in one case (didn’t work out the first try), and GMO in the other (the unanimous conclusion was “looks somewhat risky, and we don’t see the benefits. No, thanks.”).
By the way, we could imagine something between a fully random assembly, and a fully elected one. (This is totally not my idea) Run free elections, where everyone is candidate (no choice). Let people chose, say, 3 people they believe would be good at making the relevant decision (like writing a constitution). We can suggest criteria, such as being good, well tempered, can change one’s mind… Now look how the votes are distributed. You can exclude the bottom fifth by assuming many people there are probably not so good. You can also exclude the top fifth to remove fame bias, and exclude authority figures (journalists, professional politicians…). Now you pick a couple hundred people at random among the rest, and propose them to participate in the assembly. Most will accept. Now let them write what they must, and if the decision is important enough (like a constitution), run a referendum, just to be sure. (People are overwhelmingly likely to accept it, but you never know.)
Are you referring to fractional reserve banking? I agree that the concept is disconcerting at first glance, but banning it essentially requires banning interest on savings accounts because it bans lending money from savings accounts.
Yep. Credit default swap can also count when they go through tax havens.
Banning interests on saving accounts doesn’t bother me (Edit: err, maybe it should). No one should harvest money merely because they already have some. Now there’s inflation, but those who have little money are largely unaffected. That makes inflation a form of tax on accumulated wealth. I’m fine with that.
Now if you must protect the hard-working people who just want to save the little amount of money they have, just have the central bank open one special account per citizen that (1) will have an interest rate equal to the inflation, and (2) cannot hold more than some defined amount of money (in constant dollars). The interest rate would be paid by the state (with a mix of taxes and newly created money).
In such a world, it would be more difficult to have a rent. That’s precisely the point. I believe rent seeking behaviour, while often a rational self-interest move, is generally detrimental to the rest of society. I’d rather discourage it.
As a conceptual move, may I suggest removing the concept of savings accounts from your mind for the moment. Individuals have money that they aren’t using this moment. So they loan it to brokers. The brokers find business who need loans, ad charge a higher rate of interest on the business loans than they are paying on the individual loans.
I suggest the brokers are not receiving rent. They are providing a valuable service, without which business loans would be much more difficult (and expensive) to maintain. Yes, the brokers (i.e. banks) make money on the interest rate spread, but they are entitled to earn something, right? Do we agree that making business loans is economically valuable and those who facilitate it are entitled to some reward for their work?
Fractional reserve arises out of the usual feature of the individual loans to the bank—specifically, those loans are due on demand rather than having a specific repayment schedule. In normal circumstances, the broker knows that most people will NOT demand their money back—but some will, so the broker needs to hold on to enough money to satisfy those demands while still making loans to earn the interest to pay the individual loans.
I don’t understand how you expect to pay for this (even in nomimal dollars) without printing money somehow. It doesn’t seem like an economically coherent position.
A possible system for broking is to pay the broker with something else than interest rates. I don’t know, flat rates, maybe? There’s also the problem of risks, and what you want to achieve with the investment (do you want the money returned at all? If you construct, say, a school, you may not want to, because the increase in public wealth may match the money you created for it). We need a way to sort out “bad” brokers from “good” ones, whatever that means.
Okay, that’s difficult to do without interest rates. Maybe if I think about it for 5 minutes…
The problem I see with fractional reserve banking is that it lets yo wield far more money than you would otherwise control. Plus, earning all the interest you made of money that mostly isn’t yours strikes me as unfair. (But if we fix this, we’re back to saving accounts…)
As for paying for the public saving accounts, I expect the saving accounts to hold much less money than the whole economy. Refilling them will cause some inflation of course, but not so much that you cannot solve the equation.
The analysis is totally different if we aren’t trying to make a foreseeable monetary profit, so let’s put that aside to focus on for-profit business lending.
Let’s say Bob wants to open a restaurant. He’s short $100 to buy the oven. Alice has $100 (for whatever reason), but totally lacks the skills to run a restaurant. Assuming Alice does not operate as a charity, she expects repayment if she gives the money to Bob.
You seem to suggest there is a moral difference between Alice saying “I’ll give Bob $100, and
1) I want Bob to give in back, plus $20 in one year
vs.
2) I want Bob to give my $10 a month for the next year.
What’s the moral difference between those positions? (Yes, I know the annual percentage rate of interest is slightly different—not important for this example, but I’m pretty sure (1) is a better deal for Bob)
And the only reason Alice has $100 is that she promised Charlie that she’d pay him $10 if he let her hold it, no questions asked, for one year. Fractional reserve is the inevitable consequence if Alice also promises that she’ll give all or part of the money back to Charlie whenever he asks. (To make this work, Alice will need to find other Charlies).
If you ban this arrangement between Alice and Charlie, then Alice will not have money to give to Bob, and Bob’s restaurant simply will never happen. I think that’s a worse world than the one we live in.
To put it slightly differently, the way Alice adds value is by being good at finding Bobs and telling the difference between Bob and Billy Bankrupt-er. Holding Charlie’s money is a cost to Alice, not a benefit. And none of this has anything to do with credit default swaps, which I agree are much less defensible.
Regarding the public savings accounts, your statement translates to “I’ll need less money-from-nowhere than you originally thought.” That’s not reassuring. What exactly do you think I should be doing with the part of my money that I’m not using to buy something right this instant?
Under this scheme, fractional reserve banking is effectively unlimited. Yet many states do manage to put a limit (by making you guarantee part of your loans by money you actually own). They could, in principle, forbid it altogether without really affecting individual liberties.
Agree. That value must be tapped.
Nitpick: Initial cost. She can have a net benefit if we account for the leverage the extra money give her. Though she does have to have the skills to exploit it. And it is a way to tap her value (though possibly not the only one).
Of course. I merely talked about CDS because they are a way to create money.
That is, assuming there aren’t other ways to have or create money. We need to create money, but private money creation isn’t the only way. States could print money, lend it to private banks, which would then lend it further (possibly with higher interests rates). (I’m not sure how this is different from fractional reserve banking. Maybe the state would have greater regulation power?) Or they could lend it directly (but then they need a way to find Alice). Or something.
Overall, I’m not sure usury is an unconditionally bad thing, or even a net bad thing. You made it quite clear it can do good. The key point I don’t like about the whole system is the fact that most western states basically gave up control over money. Letting private banks create money is one step, and the last straw is to (mostly) forbid itself to print money. When a state borrows money, the money is created anyway. Why pay interest when your central bank’s money is free? That’s not in the interest of the people. That’s in the interest of a few very rich people and corporations. Unless somehow their concentrating so much wealth is more beneficial to society. I don’t trust states as effective charities, but right now I trust banks even less.
More importantly, it forces constant, exponential economic growth. Jormungard has to grow faster than he eats himself, or the world collapses.
I am doubtful that inflation preferentially hurts the well-off. If you’re wealthy, you are in a position to put some of your wealth in foreign-denominated assets or commodities or the like. If you are not wealthy, you are really dependent on your employer or pension—and those don’t reliably adjust for inflation. Pensioners, particularly, tend to get clobbered.
Bear in mind that the net-present-value of even modest retirement savings or pensions can be many hundreds of thousands of dollars—a denomination-limited savings account isn’t a good way to store retirement savings. You just can’t have “small savings account” as the main method of saving money.
Edit: It also occurs to me that banning interest on savings accounts will just move most individual savings into less-regulated forms. People will buy bonds and suchlike. You can ban banking, but the ability to “harvest money merely because they already have some” is almost the definition of investment. And I don’t think you can run a major economy without some way to let people collectively invest their capital in larger projects.
I suppose you could hope to reduce the implicit government guarantee on investments by banning interest on bank accounts, but there’s nothing magical about banks—you can get inflation without fractional reserve banking if the velocity of money increases or if people start using other financial instruments as money substitutes.
Rising prices without a corresponding rise in income isn’t true inflation, it’s just squeezing your people to get their juice. But it does somewhat emulate inflation.
Yes, it would probably be a bad idea to ban investment. Note however than investment requires effort. Yes, having money makes it much, much, easier to invest, and accumulate even more, but “be able to make money because you have money” is slightly different from “make money because you have money”. Though if you pay someone to invest your money…
It occurred to me that our fiscal an monetary systems are horribly complicated, and full of loopholes. For instance, many accounting schemes can reduce your taxes just because you cared to apply them. That’s crazy, because there’s an incentive to make effort for something that is basically useless for the society as a whole. I’d like to see simpler, more robust systems.
I suspect you’ll find that you always have slightly different rates of increase for different prices and different incomes. There’s no such thing as perfect lockstep increase across an economy. As a result, there will always be somebody who gets hurt. In practice, those people tend to be pensioners, not the middle-aged wealthy.
Yes. But that’s quite hard to avoid. The world has lots of complicated corner cases that have to be handled. This goes with the territory. When we apply a tax, we generally apply it to “the market value of” an asset or a gift or what-have-you. But “market value” is an abstraction that doesn’t perfectly capture the underlying reality. So there are going to be corner cases where somebody profits from the modeling error. I don’t see a way to avoid this. Mitigate when possible, yes. Solve, no.
I think I agree with what you say here.
If only we genuinely tried that, it’d be really cool.
I’m not arguing that “democracy is good” as such (though I would argue that it is a good in itself, but that’s a separate argument). But more important is the feeling of power over one’s own circumstances. When your life really is under the control of other intelligences, whose aims you don’t know and which aren’t the same as yours, then it makes an intuitive sense that everything is controlled by such an intelligence.
I don’t know for sure that that’s the mechanism—I’m not an historian, though I do have a layman’s interest in history, especially recent European history—but democracy and secularism at least seem to correlate very strongly, and I’ve seen the above proposed as a mechanism, and it makes sense to me...
Oh, the propaganda definitely doesn’t work. I said semi-democratic for a reason—the forms of democracy are there, but they’re not doing much of anything. They are a very, very, very weak form of pressure—but that’s not the same as no form of pressure at all. Tiny incremental changes (like the constitutional change last year which didn’t change anything on the ground level but did remove the king’s supposed divine status) can eventually add up. It’s just that those add up on ridiculously slow timescales.
I guess every drop of water counts in eroding the rock...
I think we’re seeing something of the sort in China, where having idealist laws and constitution eventually give people a little leverage against corruption.
Yes! I think the essence of Ghandi’s non-violent opposition to the British was to take the British at their word. To repeat (a carefully selected) bunch of their own ideas back to them. To make them realize if they wanted to think of themselves as “good” they were going to have to address the inconsistencies between what they said and what they did.
This has also been an important part of the advance of civil rights for racial minorities in the U.S. in my personal experience. It is hard to totally ignore someone who is spouting words you believe in and not simultaneously threatening you with violence.
Ultimately in the U.S. and the West generally, these experiences of accepting differences, of inclusion, have lead to a new ideology of a positive value associated with diversity, not just a “tolerance” of it. I don’t know if you can live in the U.S. these days, with Thai restaurants and Indian and Chinese engineers, British rock stars and Polynesian beauties, and not recognize the great positive utility that diversity provides to the cooperative human enterprise.
I don’t think Gandhi is a good model here. The only reason he succeeded is because the British already valued democratic ideals and thus his actions caused cognitive dissonance among the British public. The same applies to the U.S. civil rights movement. A government that didn’t value these ideals would simply have executed Gandhi and MLK.
You wouldn’t tell that by watching a Hollywood movie
That depends on the movie.
Exactly. You can’t change social structures on your own, but you can make an appreciable difference.