A Taciturn Disposition

If you’ve been following along you’ll know that I’ve justified (for myself) the intervention by the government into the affairs of the economy. Any such intervention will have a cost. The question for today is: how will these costs be funded? The options seem to be a tax levied on actors or actions in the economy, borrowing from actors within the economy, or simply creating money (e.g. printing new notes, though that is an archaic way of thinking about money in the modern age).

I believe that all three of these may have their place, and the goal is to explain in what circumstances and in what manner each should be used.

I wrote in a previous post that any functioning democracy must run the economy with a blend of the two extremes of socialism and capitalism – that ownership of property must, in some way, be shared between the individual citizen and the whole society. The social part-ownership would manifest as some form of intervention by the government, with a combination of exercising partial control, and collection of partial profits. Even with the stated goal of maximizing productivity, minimizing hardship, and providing long-term stability, this provides little guidance on what a government in actually expected to do. In this post I hope to being to map out how government intervention could be structured, by presenting it as Facilitating Markets.

Once you assume a nation with a democratic form of government, the broadest brush used for describing the style of economic management seems to be a choice between Socialism and Capitalism. This is a false choice. Socialism and Capitalism are not alternates, they are extremes. Any functioning democracy will have an economic system which is both socialistic and capitalistic, in different circumstances or to different degrees. The question is which of these to choose, but how much of each to include into the mix.

The issue which these two “isms” address is the ownership of the means of production. Socialism suggests that society as a whole should own it, while Capitalism suggests that individuals, or individual corporations, may own it. In a working democracy, ownership is shared, and the degree of sharing has a substantial effect on economic outcomes. To being to think about the sharing, we need to be sure that we understand two things: What the “mean of production” are, and what it means to “own” something.

If I’m to explore ideas concerning macro economics, I need to have a clear understanding of the goal – what is the economic system trying to achieve? Any such goal must be subjective – it can only be “my” goal. I might hope that others will agree with it, but I cannot see any basis for arguing that a particular goal must be the goal. The best I can really hope for is a goal, or set of goals, that is simple, achievable – at least in principle – and that seems consistent with what most people seem to want. To that end I nominate, and will go on to embellish, three goals: maximum productivity, minimum hardship, and long term stability.