Monday, July 20, 2015

Our sunny future III (economy)

Funny weekend, I went this last Sunday to pick my second son from summer camp, and was beyond happy to a) have him back home b) ascertain he had a wonderful time in what amounts to a XIXth century setting (no telephone, no TV, no internet –of course; just the countryside, hiking and playing sports and talking to friends), which speaks volumes of his resilience and promising fortitude and c) he read all of my (longish and probably a tad too philosophical) letters, and seemed to have understood them, mulled them and put them to good use, as he told me in what directions he wanted his character to develop in a way that almost made me burst with pride.  I couldn’t avoid thinking how that particular place in planet Earth (near Segovia, in Spain, where a village peopled by 500 souls is already considered big) would look like in 500 years. Probably not that different from now, may be with more trees (in Spain you still see traces of deforestation everywhere, making it difficult to believe Strabo’s assertion that in II BC a squirrel could cross the peninsula from the Bay of Biscay to the Straits of Gibraltar without putting his paws in the ground) if the country has not become a northern appendage of the Sahara due to climate change by then…

While I drove through the mostly deserted landscape I had ample time to reflect on how our descendants will need to organize their economy to be able to still enjoy a significant standard of living, harnessing the technological advances made by previous generations (which, given the demographic stagnation, they will most likely not be in a position to replicate, but more on that later), given the relatively low density of population that will be a significant part of their lot. As I’m pretty sure they will be much more intelligent than us (not a specially challenging mark), I’m confident they will find a better equilibrium between work time and leisure time (remember my prediction: they’ll work 20% of their waking time tops), and also a better balance between compulsion and freedom (the amount of working time that is socially mandated, vs what they themselves freely decide to undertake). Before I start to describe their economic model I’ll toss out a disclaimer: I’m pretty sure the dominant reason will not be desiderative any more (I realize I haven’t written that much about our dominant reason in this blog, but having devoted 430 pages to describe its genesis and likely demise in my dissertation I hope I’m pardoned for not belaboring that idea beyond what’s strictly necessary). What that means is that people won’t think that satisfying desires (more specifically, those desires that consist in having exclusive access to some material good that signals the rest of humanity how important one is) is the only valid purpose of life. Owning the most outrageously expensive goods will not be considered a sign of superiority, but just poor taste, so the vast majority of humans will not strive to have enormous amounts of money, but to have rich networks of relations with friends and family and to have rewarding experiences that are difficult (but not necessarily expensive) to acquire, like mastering some area of knowledge and being able to gracefully contribute to it, or acquiring an outstanding physical skill they can show to their peers to gain their admiration (requiring an unusual degree of strength, coordination or endurance… but not necessarily linked to a superior monetary reward), or travelling to some renowned place and knowing different people on the way. Simplifying things a bit, I hope that social position will again be linked to what people become (through exertion and dedication, and in ways that exclude pushing others down or cunningly winning in zero sum games), not to what they possess.

So although there will be money and private property, the accumulation of both will stop being a significant driver of behavior. But for that to be the case, the institutions that regulate what to produce and how to distribute it will need to be completely overhauled. I’ve already defended in a number of posts that the first step towards such a future is to ensure everybody enjoys some measure of economic safety, so each individual can devote the main thrust of his efforts towards what he deems important, rewarding and valuable, without fear of destitution and social rejection. Nowadays that can be achieved through a Universal Basic Income, and in the future I can imagine the State still will need to ensure that everybody has enough to eat, something to wear and somewhere to sleep regardless of occupational status, drive or interests. Today, these are the kind of rights that fail miserably because nobody has the equivalent duty of providing them. Compare them with the right to education, that is amply served because the state knows very well that it is its direct responsibility to ensure that every single citizen, rich or poor, hard working or lazy, virtuous or crooked, attains a minimally acceptable educational level ,and thus devotes enough resources to make it happen. In my previous post I already dealt with shelter: new citizens (born in the village or coming from outside with the declared intent of settling in it) are awarded a plot of land with a house in it, which they can reform or rebuild as they like. Regarding food, every village keeps a fraction of the land farmed directly under the elders’ supervision to ensure they keep communal stores well stocked (Not only to distribute free food daily, but to have enough in case of drought or crop failure to support the whole population for a whole season) with the basics: cereal, fruits and vegetables, poultry and meat, milk and cheese. Of course, the land and the cattle do not produce all those goods without human effort, so the question immediately arises where does that effort come from. The immediate response is: taxes. In the XXVth century taxes are not paid in money, but in time. Remember that I estimated the average guy to work 20% of his waking time (vs. 40% today). Well, I would expect the village to require him to spend a fifth of that time in communal duties (so it’s the 20% of a 20% , or a 4%, what we could call the “average tax rate” of the future, for comparison again if you add the highest bracket of marginal income tax, plus indirect taxes, your average Joe pays today between 40 and 60% of what he earns to the State). That adds to a total amount of 233 hours a year, or 29 working days of 8 hours each. I would like to think that around 2500 AD an 8 hour working day would be considered extravagant and somewhat revealing of a mental condition, so it will probably be common to discharge one’s duties towards the community with a bit under three months in all (58 working days, almost 12 weeks) working 4 hours a day. What would that work consist in? I am against excessive specialization, so I’d rather see the duties imposed by the community rotating between farming, cattle raising and manufacturing (with the help of 3D printers and highly automated factories, I think it will be the state who will build the tractors, harvesters, threshers, milkers, etc. that keep the required high productivity of the primary sector), as education should ensure that any citizen was capable of performing any of those jobs, and none of them would be deemed less respectable or glamorous than the rest.

Another way of seeing it, if we assume a “balanced” age pyramid (what is to be expected after the demographic transition is over, and with the simplification that everybody lives to 80 years old and then dies, there would be equal numbers of people of each age) and define a working age between 18 and 65 years of age, 61% of the population is available for working at any given time, and a 4% of that 61% is doing communal work, that means that a 10,000 strong village has a work force of 244 able men and women at its disposal to cultivate its fields (or the part of them required to ensure a minimum amount of food for everybody), raise and tend their cattle, do basic infrastructure repair and maintenance and direct their highly automated factories so they have enough fixed capital (motors, infrastructure and general purpose machinery) to maintain their required productivity. Doesn’t seem like a far stretch actually.

A problem we have to deal with is that of lack of incentives, that has bedeviled any collectivistic economy since they were first thought of. If people just has to work some time in those communal enterprises no matter what, and the rewards of that work are going to be the same (none) regardless of the level of exertion applied to the work, human nature being what it is we could expect them to do the barest minimum, to never reach any significant level of output and the whole thing to fail miserably (see the whole experience of communist countries in the XXth century), as the collectively produced food (and machinery) would not be enough to provide for the needs of everybody and the common infrastructure would be in the saddest state of disrepair. According to that view, it would be better to use a more traditional scheme and tax (i.e. have the State receive a percentage in money form) the rest of the economics activity of the population (what they choose to do with the rest of their time) and then give that money to the needy/ less fortunate so they can choose freely what to spend it into (food, clothes, whatever). This is something I have given a lot of thought to, and I don’t want to just accept the idea of maintaining a monetary economy as something essentially unavoidable because I’ve always seen the UBI as a first step towards the (theoretical possibility of) total elimination of money, and I have the hunch that if the right environment and system of incentives were put in place, at least some villages may forgo entirely the use of coin (at least within their domains, they may use it when traveling outside, of course), and just devote their time to other, non financially rewarded pursuits (studying, playing, practicing sports, meditating and whatnot). I also think that a really educated person should know when to sow and when to reap, how to use a lathe or a mill, how to rectify a piston or restore the flatness of a motor head, how to pave a road or build a ditch, how to milk a cow or cut it up in pieces, how to pick up the trash or repair a solar panel, and that the best way to keep those abilities honed is to be able to practice them occasionally. Also, the best way to avoid the potential stigma associated with some professions is to have everybody perform then (or have the possibility of ever having to perform them).

So for its salutary effects towards a more egalitarian society (and more conductive to the development of fully rounded human beings) I would keep the payment of taxes in time and not in money. Which presents us with the problem of how to ensure a reasonable level of productivity in the activities performed during that time. The best way I can think of is to define a target level for each kind of work (hectares harvested, streets cleaned, meters of road repaired, number of pistons manufactured…) and both penalize underachievement (the penalties would take the form of additional time to be worked above the base 4%) and incentivize overachievement (either by an equivalent reduction in the “taxed” time or by a monetary reward, if the activities require some coordination and the rest of the crew is not for speeding their work). Those targets should be periodically revised to reflect the technological level (although I’ve already stated that I do not expect a whole lot of technological breakthroughs in my steady state economy) and what is considered a “fair” level of effort. Note that I have assigned a number of tasks to communal enterprises, like the manufacturing of heavy machinery or the maintenance of roads (or the growing of food and the raising and slaughtering of cattle), that could be “outsourced” to private citizens willing to take them and able to perform them with greater efficiency (because, through specialization, they have people able to do them faster and with less effort, or because they have invested in more advanced machinery to do them in less time than what the state can afford). Wouldn’t everybody be better off if potentially ALL of the activities I assigned to the state were done by private companies, pursuing their private benefit, as long as it cost less total effort to the community? In that case, of course, we would be back at a fully functioning money economy exactly like today’s, where nobody does nothing for the common good except pay taxes (because the state needs some revenue to pay for all those services), and those private companies make ever increasing amounts of money by trying to milk the system providing as crappy a service as they can get away with, and flaunt it, and give everybody an incentive to make additional money too… you see where this is heading. So the answer to the previous question is a resounding NO. Nobody would be better off, because even though they may have more free time it would come at the expense of debasing that time, and putting a price on those services the whole community benefits from, and reintroducing a social arrangement where some players can make more money than they can spend, so they end up spending it in positional goods whose only benefit (to them or anybody else) is to make other people jealous (something we humans have proven to be very good at finding), and we are back at the rat race and the keeping up with the Joneses mentality.

We have settled, then, that each village keeps a minimum level of self sufficiency and keeps at any given time a 4% of the population working for the common good (which, between other things, should be enough to produce enough food to cover the basic needs of every inhabitant for free and keep common infrastructure in pristine condition). Now what do people do with the remaining 96% of their time? Pretty much what they want, including any additional activity to improve their material conditions. They can craft things for themselves, or for the market (I hope a discerning one). However, given the market would be stationary and the transportation costs high (very little aerial transport and no railroads, as there wouldn’t be the population densities to make it economically viable, so some limited shipping and trucking is all you can count on) there wouldn’t be much reason to invest in great manufacturing centers to mass produce anything for the thinly distributed potential consumers, specially given its fixed size (no population growth), their roughly similar income and their not being amenable to planned obsolescence (in flat countries I like to imagine bicycles passing from one generation to the next in equally mint condition as a most precious inheritance). Also I like to think in an egalitarian enough society, where everybody has similar skills and nobody is in need of sucking it up to anybody else, there wouldn’t be much scope for services as we know them (why would you want to ask an unknown fella to cut your hair in exchange for money? Much easier to cut it yourself, or ask somebody willing to do it for free in your immediate circle, maybe in exchange for some similarly informal favor, and the same logic applies to cleaning, doing the laundry, walking the dogs or gardening). Maybe to some this sounds like a communistic nightmare, the idea of renouncing to their personal servants too hard to stomach, but I think it would make for an infinitely more humane, more dignified society (I would rather not quote the arch famous passage by Hegel in The Phenomenology of Spirit about the dialectic between master and servant, what I took from it is that the relationship degrades and diminishes both). Also, a society in which everybody consumes what they need, not what they are made to want by an insane system of artificial desires creation (aka advertising) there wouldn’t be any of that most annoying of figures, the salesman, pretending to offer solutions to problems of their own devising (never of their clients’). A double win.

However, anybody willing to devote some effort doing something that he expected would bring some economic gain would be absolutely free to pursue his dream. The state would rent for life the land required (my calculations have always taken into account having more than necessary both for extra private cultivation or for the setting of industries) for a modest fee (it would need that extra income for ends we will disclose later), and just watch that no pollution is generated (a strict policy of “zero footprint” and no externalities will be enforce; any economic activity has to clean their own mess and be able to devolve the land they’ve used in the same pristine condition in which they had received it). People would be absolutely free to do what they want in the land they are assigned: convince others to collaborate with them, pay them as they see fit (remember, anybody could leave at any moment without fearing for their subsistence or their families’), produce what their ingenuity dictated and distribute it as they fancy, asking in exchange whatever they think fair. No taxes attached to such activity, and no burdensome regulation (beyond the “zero footprint”). If they want to work 23 hours a day 7 days a week, it is entirely up to them, although I hope they are cleverer than that, and even if they are not, their neighbors contempt would probably wake them up to what is really important and considered valuable in their social milieu soon enough. If everybody is playing 14 hours a day, and learning and talking and traveling with little baggage and thinking and discussing and expanding their minds, somebody that chose to slave in some manufactory to single mindedly churn out more gadgets hoping they would allow him to have more money (to what end? So some day he could relax and play and learn and talk and travel, as in the old story? Well, he could do that right away without all the previous slaving) would be considered utterly insane, and just left alone, not admired and praised as we do today.

So that’s it in a nutshell: same private property (except land, which can only be temporarily alienated, but not bought in perpetuity), same money (although less necessary, to the point of being possible to live entirely without it) as today, so people have maximal freedom to pursue what they individually consider valuable. But taxes collected in time, instead of that money (so people are forced to acquire a wider set of skills, and no stigma is associated to certain occupations) and redistributed in a way that practically frees human from the need to work (outside of the meager 4% of their time the state requires), and gives an actual content to the right to a living sustenance.

There are a few details I have left out (the role of high tech industry, and how to ensure a baseline level of R&D to avoid regression) that I will come back to in my next post in this issue, as this is already long enough.


  1. This is a very interesting picture of our economic future. And for sure, one in which I would be very happy. But when reading the piece I could not avoid wondering what is the difference between this system and the communist ones we've had in some countries. Last week I read for example how people in Uzbekistan still have to work for the community (or rather for the fat cat in the government) some days in the year, picking cotton...Of course here there is greater freedom to earn more if you wish, but the problem is about the incentives to work for the common good. I also have some trouble accepting that people will be happier doing what they are told to do (a bit of everything) instead of what they excel at...Anyway, very interesting post, a lot of food for thought over summer beers...:)

  2. A very valid point, you can't imagine how much I have agonized over the idea of somewhat limiting people's liberty in order to increase equality. I finally settled in this schema because a) I'd rather exchange somebody telling me what to do for 58 4 hour days (and then letting me keep whatever I choose to produce the other 162 days) than letting me do whatever I want for 220 days, like they do today, but then take away from me what I have produced in 127 of those days, and b) the activities to produce the goods required to satisfy true human needs (as opposed to artificially created ones) require very little skill, specially in a highly automated economy, and I think it develops positive character traits (and stronger community ties) to have everybody build a basic proficiency level on those skills and rotate using them. Think of it as an extended military service, which was common in Athens and Sparta (and at a lesser extent still is in Switzerland and Israel).