What is the Economy For?

An ‘engine’ is some sort of apparatus which transforms energy in some useful way. The most common figure of merit is its efficiency. You put this much energy in and you get that much out. The figure is (that much energy out)/(this much energy in). Bigger is better but always less than one.

Economies are frequently metaphorically likened to engines. People work, like they have for millennia, supplying ‘energy’ to the engine, and the engine rewards us with a standard of living. The economy keeps getting better; today 1% of us work on farms where 300 years ago 98% worked on farms. Our standard of living has soared. Much of this increase is due to technology and science but much is due to division of labor.

During the cold war the West bragged about its economy noting the superior standard of living for comparable labor input. Invoking the metaphor we were getting more out of the capitalist engine than the communists were getting out of their communist engine. This was viewed as good, just efficient real engines are better when efficient.

The economy rewards ‘us’ for two meanings of “us”:

There are many jobs that need to be done that few find fun. There is a substantial incentive to do these jobs because they pay and afford the worker some of the benefits of the economy. It is conceivable that the economy gets so efficient that it is able to supply all of with a good standard of living without all working.

I find it perverse that today we denigrate an economy that threatens not to ‘supply’ enough jobs. That sounds to me like it is getting too efficient. Can it get ‘too efficient’? If not everyone works, who, then, are the slackers? Oops, did I let a pejorative slip? I don’t know. Perhaps you see a problem.

Capitalism thrived on private ownership of productive means. I see no viable alternative; we have tried some. Public ownership of productive means stagnates and becomes inefficient. Those who don’t work will not receive a salary or other compensation, unless, perhaps they have inherited much productive means.

A legislated basic income implies greater taxation on those who work, but greater than what? To answer that questions requires modeling two sorts of high tech economies. That is hard to do. My informal imagination leads me to suspect that the productive class has something to gain if the slackers have some money to spend. By the way, some of the slackers will be producing wealth that does not fit into the economy so as to reward the producer. How do economists classify the gentleman scientist who discovers something valuable for everyone? I admit, however, that the ‘uneconomic productive class’ will be small. Some worry about ‘alienation’—about feeling bad for being unable to contribute. Others worry about being merely bored. I wish we had it so good.

Notice the term ‘productive class’ above. I think Marx would shudder.

Any note such as this must warn that these worries may be premature. Such notes go back at least 150 years. We may still find useful things for workers to do, just as we found work for the 97% of the population who once worked on farms.

For the record: “A legislated basic income” terrifies me. There are many unsolved problems with it. However we already have several 2nd rate versions of it.

Sound Bites

Isn’t it strange that we speak well of an economy that demands much labor? It is like speaking well of a motor that requires a lot of electricity for a given amount of produced power.


The thoughts on this page are from a novel perspective, or perhaps several perspectives. One can bottom out several ways and I don’t propose to say which is ‘right’. This has all to do with humans living with humans. We probably have some genes that bear in this but we have a much larger cultural collection of memes saying what is right.

There is a familiar notion of simple justice. The 10 commandments are a good place to look into our past. In my opinion they are top heavy in the supernatural but there are elements of property rights there. There are notions of ‘everyone has some say’, idealized sometimes in the notion of democracy. There are notions of ‘divine rights’. Hobbes’ “The Leviathan” celebrates even corrupt raw power when it serves to protect against even worse chaos. Jane Jacobs’ “Systems of Survival” blows my mind in describing how humans really get along with each other. Douglas Allen’s “Institutional Evolution” provides a history of development of some of these patterns. Money is seen by many as a corruption of interpersonal relationships. Marx thought it might disappear in his Utopia. Ayn Rand celebrates the opposite, in a cartoonish way. I like the landscape between these two extremes. All of these perspectives share a degree of cooperation between individuals, even if it is limited to relationships between the king and his close circle. It is all very Darwinian even as most of the plans aspire to escape Darwin’s mechanisms.

I think about 90% of the population was directly attached to the farm in 1800. About 40% in 1900 and about 2% in 2000. Mechanization is the primary factor but also chemical technology greatly increased productivity of the individual and the acre. When I was young, (1940) growing up in Los Angeles it was commonplace to know a farmer. Today it is not.
I am down on Happiness, at least as a figure of merit. Somewhere I recall a study that indicates that given freedom people migrate in the direction of better standard of living instead of ‘happiness’. I would too. If standard of living were not correlated so much with freedom, I don’t know where I would go. I think they are both largely caused by the same cultural features.