
Wealth: The Toxic Byproduct (2013) - skilled
https://meltingasphalt.com/wealth-the-toxic-byproduct/
======
nostrademons
It's interesting to speculate on what would happen if some of these
foundational assumptions of economics didn't hold. What if _money_ actually
became more valued than _what you can buy with money_? What if supply didn't
create its own demand? What if people didn't try to make money to satisfy
their own wants, but to one-up their neighbors in the pissing match of life?

You'd see a lot of strange behavior. Instead of consumption or even
investment, excess money would be put towards _speculation_ , trying to raise
the dollar value of your holdings regardless of what you can buy (which you
don't want anyway). Instead of circulating through the economy, money would
pool at the people who already have their earthly wants satisfied and have no
need to spend it. Instead of focusing their money on optimizing production,
businesses would spend money on services or people that would _help them
convince others to buy their product_. And instead of buying businesses for
additional revenue, they would be more motivated to buy businesses that
_threaten to destroy the revenues they already have_.

You might even get really crazy behavior, like people creating their own
currencies that they then put lots of real money into, so that they can feel
rich in their own little domain.

In short, it wouldn't look all that different from the world of today.

~~~
ChuckMcM
I'm not sure I would use the word "interesting" it is more likely
"illuminating" :-) But word selection aside, one of the problems that money
brings is that it is a concrete number, and thus susceptible to being coerced
into being a "score." This is particularly true when you have people who are
insecure about their value, they might get it into their heads that the person
with the highest "score" has the highest value. As the author points out that
isn't a horrible place to be, it helps the economy, but it does become toxic
when a person uses consumption to _advertise_ their score relative to other
people. (It becomes tragic when someone borrows to spend consumptively in
order to present the illusion of having a higher score).

One of the examples of how broken this can be, is that of creating a company
(with some paperwork and about $1,500 you can do this easily in California),
then issuing yourself 5 billion shares in the company (also easy to do, just
register them with the SEC), and then "sell" 20 of your shares to a friend of
yours (who is a qualified investor :-)) for $20 to establish a "market value"
for your shares. And Poof! you are now "worth" $4,999,999,980 by virtue of the
"value" of the shares you still hold, you are a billionaire! And you only need
to pay the $850/year to maintain your corporation's status.

So who wants to be a billionaire right? And what does that mean? You have a
high "score" but you don't have any real wealth. You can't really sell a
billion shares for a billion dollars. That isn't going to happen right?

So now people play this game in the crypto coin market, creating a coin nobody
will actually use, giving them selves a bunch of it, and selling some to
speculators to establish a story about what that coin is "worth." What does it
mean really? Not a thing.

~~~
r00fus
I wonder if taxing stated wealth (even if at a miniscule percentage) would
help avoid insane/gamed valuations.

~~~
nostrademons
You get other sorts of gaming. Property taxes function like this, and there's
a whole industry around avoiding re-assessment, getting assessors to low-ball
property, etc. right up until it comes time to actually sell the property,
when you do a bunch of renovations, get it re-assessed, and try to get the
highest valuation you can.

------
mcfunk
The framing of this is all wrong. The problem isn't that developers are
overpaid, it's that other industries' laborers have had their work
systematically undervalued, all the way down to people performing essential
services who can't afford to feed their families on full-time work.

However you want to argue about payment/wealth being a problem, ultimately,
the idea that workers being compensated "too much" (when definitionally they
aren't making as much as their labor's value creates) is the productive thing
to focus on is very unhelpful.

~~~
ThrustVectoring
>all the way down to people performing essential services who can't afford to
feed their families on full-time work.

This is a feature of the system, not a bug. If these folks weren't barely
making it, there'd be more free energy for rentiers to extract through various
rent-seeking behavior, and since rentiers have significantly more political
power, the system would get subtly worse for the everyman in whatever ways
have the least-bad optics until they're barely making it again.

Like, this is why the SF Bay Area has the zoning-caused housing crisis:
because it can afford to.

~~~
rabidrat
Can we strike at the root and try to reduce rent-seeking behavior? Even if we
can't eliminate it, there was a time when 'usury' an ugly moral sin and
Jubilee was an actual event, so at least we understood who the jerks were,
instead of blaming ourselves for being indentured servants in a rigged system.

~~~
ThrustVectoring
IMO it's gotten too sophisticated to tackle head-on. Back then, if you were
getting screwed, at least you knew how and by whom. Now, the vast majority of
people who really understand how any particular rent-seeking scheme works are
the rentiers themselves, so any public policy debate quickly devolves into a
mix of noise and actual malice.

~~~
marvin
I initially mistook your first comment for defending a broken system (don't
know how I could have done that), but this is just beautifully cynical. I buy
your reasoning, and the state of things is actually quite tragic.

Most people who understand how this works will think "okay, so this is broken,
but how can I profit from this?" rather than focus their energies on how the
system can be fixed. The former is much easier to accomplish.

~~~
RestlessMind
> Most people who understand how this works will think "okay, so this is
> broken, but how can I profit from this?" rather than focus their energies on
> how the system can be fixed. The former is much easier to accomplish.

Taking that cynicism one step further: I don't think it is about ease or
difficulty of either approach. Rather, those who understand the system also
typically understand the human nature, particularly its lust for power, which
prohibits any system from being truly fixed. Because any system is going to be
gamed by someone to accumulate power for themselves (or their inner circles).
So why not apply your insights for your own benefits?

------
airstrike
> The yacht is made of wood, metal, and plastic. Building it requires many
> thousands of hours of effort. Workers have to find the trees, cut them down,
> haul the lumber across vast distances, cut it, sand it, polish it, paint it,
> etc., etc., etc. If you weren't commissioning the yacht, all of those
> materials and man-hours could be put to other, better uses. For all the good
> it does the Congolese people, you may as well pay them to build the yacht,
> then burn it before their eyes. Taking it through the window, into your own
> possession and for your own consumption, has the same effect.

Wow. A lot to unpack here. The author was doing just fine up until this
paragraph.

What "other, better uses" does the author propose? Better yet, who defines
what uses are better or worse? I'm sure those workers who chopped down the
wood or built the yacht would much prefer I pay them than a different worker,
even if I want to buy the yacht just to watch it burn.

The author fails to understand the fundamental principle of Utility[0]. It's
intrinsically up to an individual to determine that which has utility for
them.

> That's why wealth is toxic. As long as someone's money is tucked away in his
> bank account, we're safe. But the minute it starts to leak out, via
> consumption, we all become that much worse off.

What an outlandish claim. If consumption were to halt entirely, no money would
exchange hands and we'd go back to fending for ourselves by foraging and
hunting.

At some point, we have to stop listening to laymen. This is true of every
field, but Economics for some reason seems to be the layman's favorite.

I'm not an Economist either, but at least I don't go around pontificating
about things I _know_ not to know.

––––––––––

⁰
[https://en.wikipedia.org/wiki/Utility](https://en.wikipedia.org/wiki/Utility)

~~~
pesmhey
I think the author falls into the 'it's better to have cake than to eat it'
camp. Of course wealth in this case is toxic - you miss the point of it.

~~~
SilasX
So, you're saying that the worst possible thing someone can do is produce but
never consume?

~~~
pesmhey
To follow the food analogy, I'm saying that you've gotta eat to have energy to
be productive to make food to eat.

In other words, you have to produce in order to consume in order to produce in
order to consume, and so on. The worst possible thing would be consumption
sans production - that's cancer.

Can you think of examples where you would produce without consumption? I can't
think of any. Even intellectual discoveries consume information. My answer to
your question would be that it would be the most impossible thing someone
could do to produce but never consume.

~~~
SilasX
Needing to consume is a complication from the core insight. If necessary,
replace with someone who consumes at subsistence level.

\- Person A works X amount, and consumes typically.

\- Person B works X amount, and consumes at subsistence.

Judging solely from the perspective of other people, which person is better to
have?

Or, for another example, the sun produces without (economically-relevant,
purchased) consumption.

What if someone were like the sun, and charged for sunlight, but never spent
the money? They just left the money in the bank forever.

~~~
pesmhey
Between person A and B, the 'better' person to have would be the one who
produces more valuable stuff. Better is a tricky way to talk about this
though, because these two people might have different inherent capabilities.
The most ideal answer would be that person A and person B should each find
their ecological niche where their consumption and production of resources are
in optimal balance. The 'better' person to have in this case would be the
person most suited to your same niche.

If your statement had been 'produces X amount', and not 'works X amount', then
my answer definitely changes. Less consumption for the same amount of
production is always better, because in aggregate it means more resources for
consumption, and production goes up. Or maybe not? I'd be interested to think
about a good counterpoint.

Even the sun consumes - it consumes hydrogen, helium, lots of stuff. And that
stuff is localized to the sun. Perhaps we'll figure out a way to add fuel from
somewhere else to the sun one day, but as of right now, the sun consumes an
ultimately limited amount of stuff. We have a pretty decent understanding now
of the relationship between the sun's consumption and production of resources.

If someone were like the sun, and charged for sunlight, then they would HAVE
to spend the money on acquiring more hydrogen. If they left the money in the
bank, then they wouldn't be able to produce the sunlight that earns them
money.

~~~
SilasX
>If your statement had been 'produces X amount', and not 'works X amount',
then my answer definitely changes. Less consumption for the same amount of
production is always better, because in aggregate it means more resources for
consumption, and production goes up.

Yes, this is what I meant, and what you get from interpreting it charitably.

>Even the sun consumes - it consumes hydrogen, helium, lots of stuff.

Which is why I, anticipating that remark, added the bit about "economically-
relevant, purchased" \-- it does not consume _in the sense meant in economic
discussions_. It does not purchase goods on the market that then deprive
someone else of having them. The sun is not an actor in the economy that has
to buy hydrogen to fuse together, so economically it's just like someone who
throws off good things for free.

~~~
pesmhey
Burning hydrogen today deprives the market of 5 billion years from now. I'm
not trying to be pedantic. Nothing throws off good things for free.

I think what we're both touching on here, and what the article touches on as
well, is the question of what happens when the accumulation of wealth becomes
so great, that it's utility becomes almost incomprehensible. We know the sun
consumes matter, but to speak of the markets 5 billion years from now is so
incomprehensible, that the energy produced today might as well be 'free'. The
discussion stops being an economic one and turns into a religious one.

To bring it back to the article, what I understand you to be saying is, what
if the Congolese Trading Window had opened into the living room of someone who
could throw off good things for 'free'. They won't purchase goods that deprive
someone else of having them. So basically, a never-ending flow of rice comes
out of this window. This person, or even just the window if there's no person
attached, literally becomes a god. It's why the sun has been worshiped. It's
why feudal lords had the honorific 'lord'. The disparity in wealth between a
parent and child is so great that religions have used the terms 'mother' and
'father' to describe nature and deities. A King's Divine Right. The Emperor's
Mandate of Heaven. We could find others I think.

In all of these cases, there is still consumption of resources to produce
something, just that the scale at which this happens is beyond the realm of
understanding for the end-user. We have a decent idea that the sun will be
burning in however many billion years, but will markets exist? No clue, so
yeah, it's 'free'. Before we knew these facts, it was grounds for worship, but
now, we just know it as physics.

You asked if I thought if to produce without consuming was the worst possible
thing, and then mentioned that the need to consume was missing the core
insight. What is your answer to your question?

------
ganonm
"The point is, money spent on consumption is toxic — value-destroying"

This is something I've been thinking about a lot recently. Surely when
comparing inequality in societies, what we really care about is consumption.
Singling out billionaires as an example of how unequal our society, I feel, is
disingenuous. How much more does Bill Gates really consume than your 'average
Joe'? Sure, he presumably eats good food, wears better clothing and has a big
house, but his personal consumption levels are probably no more than an order
of magnitude greater than ours.

What separates him then from us, considering he has a paper net worth many
orders of magnitude greater than us? Well, mainly that wealth grants him an
outsize influence on the economy. By virtue of his wealth and participation in
the stock market he has access to some very big 'levers'. He can dictate what
a large portion of the workforce choose to pursue as 'productive economic
output'. He is, by means of increasing his net worth, incentivised to make
prudent decisions in this regard. High performing participants in the stock
market gain more influence in it. This is an optimising feedback loop for the
economy and is less fair (but more effective) than simply giving everyone an
equal say in the matter.

Is this a problem? Maybe. But does it really make our society more unequal? I
would argue 'not as much as you might think'.

~~~
notahacker
> High performing participants in the stock market gain more influence in it.
> This is an optimising feedback loop for the economy and is less fair (but
> more effective) than simply giving everyone an equal say in the matter.

This assumes _decisions which drive up the share price of Microsoft and /or
the personal satisfaction of Bill Gates_ tends to yield better economic
performance than _decisions which represent what the public want_. There's
good reason to believe there are many situations where this isn't the case
(the Gates Foundation's projects to help humanity are a thing, but so are
battles for monopoly power). Wealth also tends to be much more heritable than
entrepreneurial vision...

~~~
ganonm
Your point about inheritance is a very good one and is a rather major flaw in
the capitalist model. Inheritance tax goes some way to dampening the transfer
of power from one generation to the next but isn't perfect. Hard to see how
this would conceptually be solved without required a 'robin hood' style system
that 'resets' everyone's economic status regardless of who their parents are.

------
hendzen

      For one, you could simply hand the pile of cash out to the first person who comes by your window. 
      Or you might hand small amounts of cash to a bunch of different people. 
      Both of these seem like nice things to do. But then you wonder: what if the cash in your living room is counterfeit? More to the point — does it even matter? 
      Wherever the money came from, if you dump it through the window, you'll be helping a few people, but at the same time causing inflation that will hurt everyone else.
    

The key issue with this entire blog post is that it ignores the _distribution_
of wealth within the hypothetical Congolese market. What if one person in the
marketplace has 99% of the money, and everybody else has the rest evenly
divided between them. Then under some moral/ethical frameworks it might be
beneficial to distribute the money evenly to the rest of the population at the
cost of inflating away some of the single rich person's wealth.

What you do with the money affects the distribution of wealth & goods within
the society. What is a good distribution? You need a moral/ethical framework
to decide. I won't make an assumption on which one we go with, but lets say we
go with one.

Not spending or donating the money is making the choice that the distribution
of wealth as it currently exists is the most optimal. Is this just? Depends on
your moral/ethical framework.

Saying that earning is good and spending is bad is overly simplistic. You need
an objective function on the distribution of wealth. Earning money in a way
that warps the distribution away from the ideal can then be considered _bad_
(and thus should be 'corrected' via taxation and other methods) and spending
money in a way that warps the distribution toward the ideal can be considered
_good_ and should be rewarded (via tax credits etcetera).

------
skybrian
The article is contrived, but the part he gets right is that spending money is
exercising power, and it matters how you spend it (or give it away). If you're
wealthy then you should think carefully about what you encourage by how you
spend your money, to avoid encouraging the wrong things.

Once you've spent the money, though, other people will have it, and _they_
have the power to spend it on their wishes. If you assume that people who did
the work for you are basically good, this is a good thing. There's nothing
wrong with a paycheck.

Maybe the problem isn't the money, it's the work? Are you creating bullshit
jobs by spending your money on bullshit? But how do you evaluate that? What's
honest work anyway? There are jobs are unpleasant and/or dangerous, but still
jobs people are happy to have. Office work is comfortable, considering, and
yet can be considered "soul-crushing" under some conditions. Maybe the yacht
builders enjoy the work and live well?

This is all second-guessing other people's decisions at a distance. It's
complicated enough that it's tempting to allow the market to hide all these
issues under layers of abstraction. You usually don't get to review labor
conditions anyway.

There are some attempts at breaking the abstractions by adding other
abstractions, so we see labels like "fair trade" and so on. This supposedly
lets you know what's going on at the other end of the supply chain. It's all
fuzzy and reputation-based, though, which provides opportunities for cheating.

Maybe cut through the layers of abstraction? Directly hiring people makes you
the boss and you get to decide what kind of boss you're going to be. But it's
by no means certain you'll be a better boss than average, particularly if
you're inexperienced.

~~~
airstrike
> Maybe cut through the layers of abstraction? Directly hiring people makes
> you the boss and you get to decide what kind of boss you're going to be.

In theory, yes, but then you can't diversify as much as you can by just
consuming goods and services provided by different companies and workers.

------
tristor
This article is an interesting thought experiment, but I can't help but feel
that the statements made are in such opposition to understood economic
principle and call into question basic moral precepts. That doesn't mean it's
wrong, it just feels alien to read.

As an example of what I mean, the idea of consumption being a net-negative
destructive action goes against the economic concept of velocity of money and
how that drives economic engines. On the other hand, I can understand because
the net value is perhaps negative of a grossly consumptive action like buying
a yacht, simply because of the natural resources consumed to produce it.
Economics rarely accounts for the externalities.

~~~
illumin8
I agree. I was in agreement with the article when it says that money we earn
is a statement of the value we provide to society, so earning money is good,
however, I don't agree with the statement that spending money and consumption
is bad.

The example of the yacht is rather contrived as well. They talk about how all
of the craftsmen and lumber workers had to chop down, dry, age, cut and polish
the wood to make the yacht, however, it's somehow evil for us to buy it?

This seems rather ridiculous when you consider that the money used to buy that
yacht paid the salaries and income of all the craftsmen and laborers that
built it for you, compensating them for the value they provide to society. If
there was nobody willing to consume or buy products, how would anyone make
income?

This article seems to understand capitalism superficially, then demonstrates
the authors know little about capitalism in the final paragraphs.

~~~
yholio
> the money used to buy that yacht paid the salaries and income of all the
> craftsmen and laborers that built it for you, compensating them for the
> value they provide to society.

The point he is making is that they are compensated but no net value is
returned to society as a result of their labor and resource expenditure. The
yacht "disappears" in your private marina where it will rot away providing you
with a purely private satisfaction, whereby the same labor could create
houses, a public parc or some other widely shared goods, whilst still
compensating the workers the same and having the same overall economic
effects.

Symbolic, money wealth, thus becomes a force that diverts social physical
resources away from social needs and towards private needs of wealthy
individuals, making everybody else worse off compared to an alternate more
egalitarian social arrangement.

I would interpret it that as long as billionaires don't sink their fortunes
into megalomaniac wasteful personal consumption, like say building pyramids,
the results of capitalism and inequality are not very different from a more
egalitarian society, the vast majority of resources are still employed to make
most people better off. What's unequal is just the representation of wealth,
who owns what and who works for whom.

For example, if Warren Buffet would start to liquidate his symbolic wealth to
build a giant Warren Buffet statue, this would have a net negative effect on
the wealth of the average citizen. Yes, it would provide jobs, but it would
also extract available capital from the market that could be invested to
create other jobs, so over all it's a wash. No saleable products are generated
and a massive amount of resources is required, bidding the prices of these up
without putting anything back. The consumption of everybody else would
diminish to accommodate for the higher prices and lower overall quantity of
products now available. Society has "decided" to shift production from cars
and houses towards a giant statue that nobody really needs.

~~~
illumin8
I'm not sure I agree with this. The yacht could get very little use, but so
could a house that you build for someone. If the argument is that we should
only build public goods that will be widely used like parks, I disagree,
because the concept of private property is very entrenched in our society,
even in socialist countries.

I also disagree that the Warren Buffet statue would have a negative effect on
the wealth of the average citizen. Warren Buffet would be taking capital that
is locked up inside assets and spending it to build something, directly
contributing significant income to the middle class (laborers) in the economy.
This would have a positive beneficial effect on the economy in general.

Imagine a wealthy billionaire with all of his assets locked up in gold bars in
a swiss vault. Outside of a few hired guards that protect the gold, nobody
benefits. If he liquidated that gold and used the proceeds to build statues,
quite a lot of people would benefit from the income generated.

~~~
yholio
Buffet owns stocks in productive companies. If he starts selling this stock
and gets enough money for his statue, by definition he's absorbing market
capital that would otherwise be invested in productive companies. So he's
effectively shifting investment from jobs in companies to jobs in giant statue
production. The effect on the middle class jobs is largely nil.

If a billionaire is entombed in a safe with his symbols of wealth forever,
it's as if his symbolic wealth ceases to exist. Effectively, the symbols of
everybody else become more valuable to reflect the total quantity of products
and services available. It's just like burning money, no wealth is destroyed,
just redistributed to everybody else who holds the same currency.

------
40acres
This article really goes off the rails, so I'll just respond to the original
point described in the first paragraph.

To the question: are coders worth it? The answer in my opinion is yes.
Software engineering in general is a type of labor that is conducive to
generating large profits.

Building robust software systems has large fixed cost, but once the system is
out in the wild it has close to zero marginal cost. The cost of distributing
one more app through the app store is pretty low (give or take App store
fees). A share of the "profits" will go to the developers, and such developers
are highly paid relative to other professions.

If you want to do good with your money: spend it. A high level overview by Ray
Dialo really helped me understand the boom/bust cycle and how money flows
through the economy [0]. Look at China, for years the economy was growing at
almost 10% -- driven by the consumption of the new middle class. Now growth is
slowing to about 6% and everyone is freaking out, this is because due to
higher personal debts China is reducing it's spending. Your spending is
someone else income, and a certain % of income is paid out to workers which
results in higher wages.

I'd say smart (saving, investing) and "ethical" (to your personal beliefs)
consumption, along w/ charity, is the best way to morally utilize your wealth.
Support the arts by going to a show, support teachers by raising funds for
school supplies, renovate your home, support a farmers market. Wealth
intrinsically is neutral. It's all up to you.

0:
[https://www.youtube.com/watch?v=PHe0bXAIuk0](https://www.youtube.com/watch?v=PHe0bXAIuk0)

------
11thEarlOfMar
Ok, I read through sections I and II, and no further. Sticking my neck w-a-a-
a-y out there, I would loan the francs on my table to Congolese who could
convince me they can make a business, provide a product or service, grow the
business and employ other Congolese.

Essentially, become a bank that makes only business loans. Perhaps charge
interest, perhaps not. I'd recycle loan payments to make new loans to new
entrepreneurs. I'd meet periodically with the borrowers to learn what is
working for them and what is not so that I can select better candidates over
time, hopefully before I run out of francs...

~~~
iso1337
You can try out kiva.org

My problem with it was that most of the businesses were of the retail type
(selling clothes on the streets). I’m not an economist but that seems to me to
not have much potential for lifting many out of poverty.

~~~
hinkley
The context would matter.

It’s a very common refrain to describe how many hours are wasted each day
acquiring some necessity like food, water or shelter (I roughly include
clothes under shelter).

Opening a clothing shop in the central market of the largest town wouldn’t
move the needle.

Opening it in your village or the nearest crossroads could alter many lives.

~~~
iso1337
That’s a good point. Unfortunately kiva doesn’t give you many tools to make
those assessments. You get a picture of the person applying for the loan, and
then about a paragraph describing what they will use it for. Very light on
numbers and no follow up on how their business is doing post-loan. After a
while it felt like the site was selling me the feeling of being a good person,
above all else.

------
spencerwgreene
This reminds me of the section "Money Is Not Wealth" from Paul Graham's How to
Make Wealth [1]:

"The solution societies find, as they get more specialized, is to make the
trade into a two-step process. Instead of trading violins directly for
potatoes, you trade violins for, say, silver, which you can then trade again
for anything else you need. The intermediate stuff-- the medium of exchange--
can be anything that's rare and portable. Historically metals have been the
most common, but recently we've been using a medium of exchange, called the
dollar, that doesn't physically exist. It works as a medium of exchange,
however, because its rarity is guaranteed by the U.S. Government."

The "two-step process" part reminds me of pointers, strangely. The metaphor
doesn't make much sense though. A dollar points to wealth? Dereferencing a
dollar obtains the wealth it points to?

[1] [http://paulgraham.com/wealth.html](http://paulgraham.com/wealth.html)

~~~
lordnacho
It's the atomic compare-and-store operation you're looking for.

violing <> dollar dollar <> potato

------
gtCameron
This went off the rails for me at the end. If earning money is good for other,
but spending money is bad, then the "best" thing I could do would be to earn
money and hoard it under my mattress.

However, that would be the worst thing I could do for society, because I would
be removing that resource (whether it has intrinsic value or not, it is still
a resource) from society.

In order for me to earn money, someone else has to spend it. I don't see what
labeling one of the sides of that transaction as good and and one as bad
accomplishes.

~~~
aylmao
It goes on to explain it in the following paragraphs:

> Don't get me wrong — this is far from the full picture. There are a ton of
> second-order corrections we need to make. We'd want to inquire how the money
> was earned, for example. If it's earned in free, honest, competitive
> transactions, it's going to be a better measure of value-added than if it's
> earned coercively, dishonestly, or in stifled markets. If it's earned in
> positive-sum games (like farming), it's going to be a better measure of
> value than if it's earned in zero- or negative-sum games (like spamming).

> On the spending side, we need to account for whether the goods we're
> consuming are rivalrous or non-rivalrous, as well as all the externalities
> from consumption, both positive and negative. If no one consumed anything
> above basic subsistence, we'd have a lot less economic growth, fewer
> innovations, and inferior technology (including medical technology).

~~~
airstrike
> Don't get me wrong — this is far from the full picture. There are a ton of
> second-order corrections we need to make.

I'm sorry, but the author makes a terribly weak argument and than hand-waves
any criticism away preemptively. That's not how this should work. That "ton of
second-order corrections" would immediately destroy his argument.

------
awkward
Suppose you ruin the Congolese economy - bright young men and women who would
have become doctors and engineers become grain farmers to get in on the magic
window money train. A landlord who owns a building with a magic window on it
becomes rich, runs for office, and implements disastrous social policy.

The point isn't that trade is actually bad, the point is that you've become an
actor, moral or not, in the congolese economy. The attempt to find a single
number that makes you good, and not bad, is simply Calvinism minus the
theology. You can find out how good you for the world around your accounting
statement as effectively as Anubis could find out by putting your heart on a
scale.

------
asdfasgasdgasdg
You can trivialize almost any profession by stating it reductively. "All we do
is put boxes on a page, or change the color of the boxes." OK, well all a
farmer does is dig some dirt, and sometimes put some plant bits into it or
pull some out. All most doctors do is talk to patients and sometimes give them
some pills. All a soldier does is point guns and pull triggers. All a factory
worker does is pretend to be a robot eight hours a day. Etc.

I don't admire the guy for failing to adequately state the value he's bringing
to the table.

More to the point: most of society is by his estimation engaging in trivial
bullshit. Faux intellectual software developers like to self-flagellate. Sure.
We work on stupid stuff. But what do they think toy makers, the entire
entertainment and financial industries, fashion, much of the auto industry,
and even the majority of the housing industry are busy doing? They're all
selling products that people don't need and probably won't make them much
happier or better off. Don't like it? Go be a hermit. The story of the
twentieth century was the pursuit of largely pointless (from a well-being
perspective) excellence. That will probably remain the case for the rest of
human history, since we already have almost everything we need for well-being
built in, and the small remaining set is really cheap and no longer
economically significant.

(I guess this is ultimately the point of the article . . . sort of . . . but
I'm so over the trope in the first section that I just had to react to it.)

~~~
squish78
He lost me when he compared it to being a plumber.

If we didn't have plumbers, our infrastructure would collapse very quickly.
Without sanitary waste disposal, disease would run rampant

------
orcdork
Ahem - never thought I'd see a link on hackernews glorifying hoarding (the
economics type), but here here are.

"Imagine a particular bag of grain that you bought at T1 for 200 francs, and
then sold a month later, at T2, for 800 francs."

What about at 1600 francs? What about at 16000? The original argument was
about morals, not math or some kind of utopian economy where every transaction
is fair.

------
noahth
> Suppose a genie offers to tweak the world in one of two ways. Either he will
> (A) double everyone's bank account, or (B) double the amount of food in
> existence. Which is better for society? Clearly the answer is B, doubling
> the food. Option A (doubling the money) merely creates more placeholders,
> more tokens — while option B creates more objects of intrinsic value. In
> other words, A is a zero-sum change, while B is positive-sum.

This thought experiment is mistaken in almost every direction -- first of all
it's not zero-sum to double every bank account given the unequal distribution
of account balances. Second, and even worse for the point being made, it's
wildly untrue to imagine that food is in such short supply that we need to
double it. The problem with food is primarily one of distribution! This is
where I gave up attempting to see his argument through. There's nothing to be
gained by "reasoning" from such poor premises.

------
paultopia
There's a logical contradiction at the heart of this. If spending money
destroys social value and receiving it represents the creation of social
value, then every act has to be neutral. When you buy the yacht from the Congo
at the end and light it on fire, you can't have destroyed value overall,
because, well, the yacht builders got money so clearly they created as much
value as you destroyed. (Represented in some weird hedonic sense as the
pleasure you got from the burning yacht, perhaps.)

Slightly more technical translation of the above: this essay is a great
illustration of the vacuity of the revealed preference theory of value,
important in economics but widely shredded in every other discipline just
because it entails silly consequences like whenever someone pays you to do
something that indicates that you did something genuinely valuable for them,
an idea that reduces the notion of "valuable" to nothing but observed
behavior.

------
cryoshon
>We earn money by providing value to other people. And consequently, >The
money you've earned represents value you've contributed to society. >This
holds across almost every asset class and profit-making strategy in the modern
world.

if i extract 100 tons of carbon from the earth in the form of petroleum, then
sell it to make a profit of $100, that profit does not take any externality
into account. i could be making it such that $101 dollars of future economic
activity is prevented by virtue of the extraction process or subsequent
combustion and ruination of the environment. the petroleum "provided value"
\-- positive short-term value, but with a stiff cost of net negative value in
the future. the fact that i subsequently use those $100 that i made to consume
some product isn't relevant. society would have been better off if i hadn't
made the money in the first place.

this stuff isn't hard.

------
Crye
Doesn't this argument break down fairly quickly when you take into
consideration information asymmetry between actors.

Let's imagine you are providing future options to Congolese farmers, but you
know you can poison the water supply and cause specific crops to fail. In this
situation you, you sell the Congolese farmer a contract stating that he will
sell his crop for a specific price while you know the constrained supply will
increase the price to absurd levels.

Know you just got a bunch of money and yes you provided "value" to the farmer
but at the cost of everyone else.

------
joker3
You can't earn money if no one is spending it. That seems like an important
fact that the author is missing.

~~~
tlb
What situation do you have in mind? As long as people have money, they’re
going to spend some of it on food and clothing and entertainment.

------
theptip
> Wherever the money came from, if you dump it through the window, you'll be
> helping a few people, but at the same time causing inflation that will hurt
> everyone else.

On first read I thought that this was incorrect, but on pondering a bit more,
I think it's sound -- the observation is that in effect you're creating new
Congolese money, and you've not actually produced any value to add into the
economy, you've just increased the numerator in the <currency/value> equation.

(Taking the example further, if there's 100 CDF in circulation, and you add
100 CDF to the economy, then you'd have to reindex and make everything cost
2x. The only reason this isn't obvious is because it takes time/transactions
for this price signal to equilibrate through the economy, and so it's
impossible to measure on the scale that the example considers. Perhaps this is
more obvious if we reconsider the thought experiment with X=(Congolese GDP).)

On the other hand, if you were to hand over some USD from your pocket, those
have "inherent value" from a Congolese person's perspective, in that they are
fungible with goods on the international market and don't remove value from
someone else's currency.

Anyone with actual Economics theory know if my intuition here is correct or
what model describes it?

~~~
notahacker
You might not have produced anything, but you have given somebody else that
produced something a reward, so now they can start making new things and buy
new material right away. Also, they know there's a wealthy foreigner that
keeps handing out Congoese Francs, so there's more incentive to do so. Where
the additional money is spent it'll tend to drive up prices; where it's
invested in additional production it won't.

In practice, on a national level it's unlikely any individual is going to
drive up the general price level because the actual quantity of currency in
circulation is driven by the banking system (which ha policies specifically
designed to keep the supply and demand for money in balance). And an tourist
handing out currency willy nilly is going to have a big impact on prices in a
small village regardless of what currency they pay in, because there's not
much choice or competition there.

In terms of theory, the basic intuition is described by the Quantity Theory of
Money and the reasons why prices/wages tend to rise slower than wages is
covered by (New) Keynesian economics; covering when, how and why the extra
spend might lead to more growth or more inflation is pretty much the entire
first year of undergrad macroeconomics (particularly with the USD added in as
well; that introduces the dynamic of how a fall in the value of the Congoese
Franc affects imports and exports and resulting effects on local production)

------
pesmhey
>The point is, money doesn't have intrinsic value. You can't eat money or use
it to plow a field, nor can money babysit your children. It's just a token
we've all agreed to accept in exchange for giving up things that do have
intrinsic value.

We are social animals, and our standing within the tribe is most certainly a
resource to be extracted and utilized. How you utilize it is a different
discussion, but influence and respect are undeniably parts of our software as
human beings. Money is not a token we trade for things that have intrinsic
value. We would have traded for these things before money was a thing, under a
system of social credit. Everyone knows who's dependable and who sucks in the
tribe, since you see and work with them everyday. Now that we're bigger than
200 tribe members, we need an abstraction to determine this: money.

The author comes to this conclusion about 4/5 of the way down:

>The money you've earned represents value you've contributed to society.

I agree with the author throughout most of the article until this thought:

>The point is, money spent on consumption is toxic — value-destroying.

It's like, yeah, if I eat my cake then of course I can't have it too, but I
needed the calories, and the tribe is better off that I had the energy and
means to be productive. The whole of section V is just weird to me. It would
be like saying 'metabolism is toxic'. I mean, I guess it can be? There are
waste products, and there's also energy. It's just a nonsensical conclusion
that we get to in an otherwise well-written article.

>But as long as we're soul-searching, let's not forget to examine our spending
habits as well.

Yeah, 100% agree. Thought-provoking read overall.

------
jdietrich
Most transactions are broadly a win-win - I have something you want, you have
something I want, so we're both better off if we trade. That's the core
justification for a free-market economy, and it's a very important one.

Most, but by no means all. Some are outright fraudulent, because I'm lying
about what I'm selling. Some are coerced, because I've used my economic,
social or political power to rig the deal in my favour. Some have unpriced
externalities - you need oil, I have a shale oil field, we're both better off
but some other sucker ends up with flammable tap water.

If we aspire to be ethical capitalists, we need to think about transactions in
a more nuanced way than simply "free markets best markets" or "production
good, consumption bad". We need to seriously examine whether the transactions
we're entering into are genuine win-win scenarios.

------
sytelus
TLDR; don’t feel bad about making obscene money because if someone is paying
you that obscene money then you must be delievering that much economic value.

An important missing point with author: Money you get _tend_ to represent the
value you deliver, not always. In many cases value you delivere is way way off
than money you get. For example, lottery winner and a CEO who bankrupts the
company while getting golden parachute. This is the reason why the web dev in
authors referenced post is wondering if he is being overpaid for drawing boxes
on web page.

This is right now becoming universal questions for lot of people who live off
of passive income or are in exec roles with as much as 1000X compensation.
Economy and markets are not perfect. In aggregate and over a long term things
might balance out.

------
bitxbitxbitcoin
"Earning money (via production) is good for others. Spending it (via
consumption) is bad."

In the buying-an-iPhone-is-consumption-and-bad spending example, if the iPhone
is also used to increase the reach or efficiency of production, does that
cancel it out? I like the yacht example better.

------
spoonie
If you find your job really easy, what’s the best way to arbitrage it and get
more value out of your brainwork? Do the same work in less time and gain more
vacation/leisure time?

------
zestyping
The fundamental error in this article is the following inference:

Satisfying someone else's need is good, therefore having your need satisfied
by someone else must be bad.

But the real world is not this way at all. Transactions are not zero-sum. It
is entirely possible to satisfy someone else's need and have it not cost you
as much as it benefits them. Once you realize this, the entire chain of logic
falls down.

------
cwkoss
The author of this article seems to fail at differentiating price and value,
which seems to be a necessary premise for many of their conclusions.

------
castlecrasher2
I generally categorize philosophy and ethics works into separate categories:
profound, interesting but not particularly useful, and inane. This one falls
squarely into the third category, especially when the author tries to play off
spending money on yourself as wrong. To be fair, he seems to be entirely
Utilitarian so I guess I can't blame him for suggesting self-flagellation.

~~~
AnimalMuppet
I don't see the Utilitarian value of self-flagellation...

------
Taniwha
Even worse if money spent on armaments, wars, soldiers and these are used to
destroy things it's even more toxic economically - you're not just burning
wealth, you're using it to destroy other wealth as well - foreign development
aid carefully given benefits everyone far more

------
jressey
You gotta take this with a huge dose of ceteris paribus. At best I will give
the author 'perceived value' but it is naive to think that money earned ==
real value to society.

------
rdiddly
Wealth accumulated by shrewd grain arbitrage represents the the noble
reallocation of value to where it's most needed, but wealth accumulated by
someone else by building and selling yachts to me represents selfish evil
waste?

The wood etc. that goes into a yacht could be put to better uses, but the
water, fertilizer and land that goes into a sack of grain could find no
possible better use?

There is no axiom that reconciles these contradictions better than the obvious
one: Transactions, and wealth, have no inherent morality. Make any claim
beyond that, and you are going to have to resort to the hand-wavy
fallaciousness of a disclaimer-ridden argument.

------
jellicle
People will go to great lengths to say "greed is good", but it still isn't.

~~~
test6554
People also go to great lengths to demonize the wealthy and also try to get
some of their money. I can totally understand why rich people would want to
build elysium.

------
omegaworks
>you'll be helping a few people, but at the same time causing inflation that
will hurt everyone else

This is immediately troubling and betrays a naive understanding of currency
and human behavior.

This article essentially writes off and lumps together all kinds of toxic
behavior we see in private markets.

------
hamilyon2
So, mercantilism all over again? Have we gone a full circle?

------
james_s_tayler
This is such a bone-headed conclusion.

The system is an abstraction of money in -> goods out. It doesn't specify
anything about amounts and it places restrictions on goods vary sparingly.

If you were to place restrictions on goods out some kind of ideology then
where do you stop the restrictions?

No yachts, they're wasteful!

No luxury cars, they're wasteful!

You don't need a bigger TV, the one you have already works. Don't be wasteful!

You don't need luxury food. Regular food will do.

I mean... you just end up with some god-awful Marxist hell hole of a system
that doesn't work very well.

No thanks. I'll let the occasional person who has earned just buy their
wasteful yacht because in aggregate, over time that seems to accrue the
highest benefit to me no matter who I am.

------
vertexFarm
I found this really frustrating. There isn't any evidence whatsoever presented
here--the whole treatise is based on a single outrageously over-simplified
hypothetical thought experiment, essentially a "Just-So" story. This is the
crux of pseudoscience. It's always a gigantic red flag when an argument about
complex real-world phenomena and systems is based entirely upon a work of
fiction with no real rigorous observation involved--only anecdotal observation
based on one's own personal life experiences. This doesn't work. It ends up
like dream logic--you imagine something should work this way in a dream, it
seems brilliant at the time, but when you wake up and try it in the real world
it suddenly doesn't quite make sense anymore or mesh together properly. Ayn
Rand is another big example of this pitfall. It's about as meaningful as
making an economic theory based on how it works in Harry Potter.

This guy's a psychology and computer linguistics major. That's great, and I'm
sure he's got plenty of great ideas, but we computer science people have a bit
of an issue with buying our own hype. Society greatly values our skills, many
people consider us to be exceptionally bright, so we end up believing
ourselves to be general-purpose geniuses much like aging physicists do:
[http://www.smbc-comics.com/comic/2012-03-21](http://www.smbc-
comics.com/comic/2012-03-21)

We are not general-purpose geniuses. A little knowledge is a dangerous thing.
Intellectual arrogance has caused many an engineer to meddle in things we
don't properly understand and it occasionally causes catastrophes, or more
often it merely spreads misinformation because most laymen put great value on
our thoughts and view tech people as some kind of oracle.

In the article he lampshades sophistry early on, but that doesn't magically
save it from being sophistry. It is absolutely sophistry, a transparent
attempt to assuage some kind of guilt and justify a moral quandary through
inventive story telling and evidence-free faux truthseeking.

He also calls out late in the article the fact that this thought experiment
he's made only covers a single currency and a single commodity, which is an
unreasonably simplistic model. The parable doesn't consider bad faith, market
manipulation, monopoly, corruption, unsustainable expectations of growth,
asymmetrical information, pricing inefficiency, and all sorts of other issues
that crop in real life and can't simply be ignored. With a little charisma and
eloquence it's pretty easy to make a self-consistent mental model by weaving a
fictional story and it _feels like truth,_ but in reality there are
unanticipated complications and external interactions that screw things up and
totally throw off your conclusions.

For instance, in real life there wouldn't be just one guy speculatively buying
Congolese grain through a magic portal. There would be lots of speculators in
wealthy nations, fueled by riches extracted from all over--including the
Congo. What about when their speculative hoarding is actually the force which
_creates the shortage?_ Are we being such benevolent, wealthy overlords if we
cause a famine, drive up costs, then sell the same product back to them at
exorbitant prices through these rent-seeking practices? And speaking about
rent, that's when multiple commodities come into play. What happens when our
speculative buying-up of resources causes scarcity and makes them spend all
their money on food and miss rent? Rent, by the way, which is also being
artificially driven up by speculation and is not in line with natural supply /
demand-based pricing. Because it's not just being sold as housing, an
intrinsically valuable use; it's also being hoarded in order to speculatively
extract wealth. People buying houses not because they need shelter, but
because they simply expect somebody else to buy it at a higher price later on.
Price does not magically match intrinsic value 1:1 at all times, which is an
assumption his parable is dependent on. And money being an abstraction does
not mean that extracting enormous dollar amounts from a local economy and
hoarding it does not hurt that local economy. The amount of money you charge
people for goods and services does not directly translate to how much value
you've blessed their lives with. Consider our healthcare system. We pay far,
far more than any other country, and that wealth is hoarded en masse by
insurance companies--essentially speculative, unnecessary middle-men who only
add to the cost of utterly essential services which must be bought at any cost
--yet the intrinsic value of our healthcare is far lower. We have a very low
life expectancy for a first-world country, let alone a superpower:
[https://ourworldindata.org/the-link-between-life-
expectancy-...](https://ourworldindata.org/the-link-between-life-expectancy-
and-health-spending-us-focus)

That money sitting in a bank is not proof of our intrinsic value going up. It
doesn't always work out that way in reality. So we aren't off the hook yet in
our own affairs.

Economics is hard. Ethics is hard. We can't handwave it using fairy tales with
magic doors. I'm no economist, so I don't want to claim any expertise either.
Take all I have just said with an enormous punch of salt, as if you're boiling
pasta. I only go into these diatribes to point out when others undeservedly
claim authority on a subject. People need to know to view this with
appropriate skepticism. People shouldn't make authoritative think-pieces about
subjects like this just because their job exposes them to a good amount of
math and logical problem-solving, thus causing us to assume we can apply that
to anything without significant subject-specific study and actual gathering of
observational evidence. Even expert economists do very poorly at predicting
and properly understanding the way this all works. This subject defies
translation into a simple analogy, and balks at being explained to somebody as
if they are five. People who try to do that are usually fooling you and
themselves as well.

------
vinceguidry
> Suppose a genie offers to tweak the world in one of two ways. Either he will
> (A) double everyone's bank account, or (B) double the amount of food in
> existence. Which is better for society? Clearly the answer is B, doubling
> the food. Option A (doubling the money) merely creates more placeholders,
> more tokens — while option B creates more objects of intrinsic value. In
> other words, A is a zero-sum change, while B is positive-sum.

This would be incorrect if it turned out that there just wasn't enough money
out there to provide sufficient liquidity. This is the reason bitcoin is
nearly infinitely subdivisible and the nominal reason why stocks are split.

The value of money in general is the convenience value of not having to
barter. If the currency has deflated to the point where nobody can use even
your smallest denominations, then people will devise an alternative means of
exchange that is more down to earth. So it can easily be a not zero-sum action
to double the account numbers. It can be worth more than food can in an
illiquid environment, because while the demand for food is fixed to the number
of people in the world at any given time and that it spoils, money does not
spoil and injecting more of it into an economy is a tried and tested stimulus
technique. Just doubling the food doesn't necessarily mean that the people
that need it are going to get it, something foreign aid organizations are
intensely familiar with.

> Imagine if, after years of speculating in the Congolese grain market and
> accumulating millions of francs, you decide to cash out with one final act
> of buying a yacht through your window (then nailing it shut). Nevermind the
> logistics of passing a yacht into your living room. The point is it's an
> incredibly selfish act, and almost perfectly cancels out all the good you
> did through speculation.

Not at all, you're doing the equivalent of Pharaoh building his pyramid tomb,
or more prosaically, retiring and spending the rest of your life making bad
art. If Pharaoh _didn 't_ build his tomb, then Egyptians will think he's weak.
The tomb is a symbol of Egypt's wealth and prominence, as is the yacht, and
the bourgeois retirement. If you don't exercise the perks of your station,
then you're basically saying that you're doing it all for nothing.

Capitalist society works precisely _because_ everyone has a selfish motive, it
wouldn't work at all if people didn't. The author thinking that money is
intrinsically worthless is the same mistake as thinking that yachts are
worthless. Symbols, of paper or of success, are important motivators. They
have intrinsic value as symbols. If you fail to understand this then you're
missing an important piece about how markets reflect human nature.

There are areas of the economy where the symbol value of goods far exceeds the
utility value of them. Numismatics, fashion, and art pop to mind immediately.
These markets can be understood, but not if you don't think symbols can have
value.

