Making Money Real

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Making Money Real

“Not Another Engineer” These are the words, sometimes audible, encountered by every undergraduate engineer in Economics 101 (A class often required for engineers, but seldom required for other scientific disciplines). Engineers are the only people trained in the laws of thermodynamics that any Economics Professor is likely to encounter. We are the only ones to…

bjc
3 minutes
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“Not Another Engineer”

These are the words, sometimes audible, encountered by every undergraduate engineer in Economics 101 (A class often required for engineers, but seldom required for other scientific disciplines). Engineers are the only people trained in the laws of thermodynamics that any Economics Professor is likely to encounter. We are the only ones to point out the violations of those laws in Economics 101.

Because our economic systems are all based on something that cannot exist in the real universe.

Money is a commodity, of any description, that a society agrees to accept in exchange for every other commodity or service in the society. When you use money in exchange for something else, it represents the work you did to earn the money.

Work and commodities, like everything else in our universe, are subject to the laws of thermodynamics.

Our money is not.

Our money is created as debt with interest, defined by the way it is used, and used as though it can break the laws of thermodynamics.

Nothing in the real universe can do that; we can’t do that. We can only break something else, somewhere else, and probably belonging to someone else.

And in our world, as it currently stands, there is no shortage of breakage.

The laws of thermodynamics as they apply to money are not complex:

  • The First law, in terms of money, becomes: “Ownership cannot make money”.
    (see Henry George in the references page)
  • The Second law becomes: “Money cannot be a store-of-value”
    (See Silvio Gesell in the references page)

This means that all Rentier income is a violation of the First Law. Interest paid on debts or savings is a violation. It means that the major religions that unanimously declared interest on debts to be illegal, evil, and immoral in various ways, were correct.

Application of the Second law in terms of physics means the more stuff you have, the more maintenance you have to do. (That feeling that your stuff owns you is not your imagination.)

Application of the Second law in terms of Money means that the accumulation of “capital” on which our dominant socioeconomic paradigm is based, is not possible.

This is the largest single mistake in human history; a mistake our civilization has evolved over thousands of years. (See David Graeber in the references page)

Unwinding an error that large is not a job for the economists who made it. We are discussing the laws of thermodynamics. This book, by a former NASA engineer, is apt to prove a more useful guide.

There is now a review available on the Goodreads page for the book.
https://www.goodreads.com/book/show/202713892-making-money-real

A distributed ledger system that appears to be even better than those discussed in the book may be found here:

https://www.holochain.org

This may be complementary to the Byzantine Fault Tolerance I preferred, or completely supplant it. My concern is the access to sufficient peer devices to keep the distributed hash table in the multiple shards required, particularly as power and network access become disabled (that common weakness of digital currencies is quite difficult IMO). I believe it will work, but the system design wants more detail work.

4 responses to “Making Money Real”

  1. Charles Pinwill Avatar
    Charles Pinwill

    The most influential engineer in economic though is C H Douglas, (1979-1952) author of “Economic Democracy”, “The Monopoly of Credit” and more. Nobody is educated in economics who has not read his material.

  2. bjc Avatar
    bjc

    Thanks for posting

    The “Social Credit” movement is familiar to me, it was even a political party here in NZ at one point. Now not so much, though it continues to have some adherents.

    He understood a symptom and managed to create a possible solution that fell short of actually imposing the laws of thermodynamics on the economic system. I did not study his work intensively as a result. He opposed Gesellian money for the wrong reasons, and the various experiments with his system did not work as expected. I’m not a fan, but I respect the effort.

    It is the definition of money that we get wrong. Understanding what happens when it follows the laws is not a trivial exercise, and when it is understood that profit belongs to the society and never to the individual, we start to understand why a sharing society is more sustainable than a competitive one. The difference he observed, the one that started him off, is, I think, predictable from the laws.

    I apologize for the late response. I expected this system (which I have not used before) to actively notify me of comments. It doesn’t do it, at least not yet. More fiddling with it is in order.

  3. Louis Woodhill Avatar
    Louis Woodhill

    This is completely wrong. “Money” is a form of information. “The dollar” is our unit of measurement for market value. “Dollars” are instantiations of “the dollar” (just as clocks are instantiations of “the second”). Dollars are packages of pure abstract market value. You could call dollars “a store of value,” but so is anything possessing market value. What dollars are uniquely is “a store of financial liquidity.” Dollars provide certainty that you will be able to pay your rent in a way that no other asset can.

    Thermodynamics applies to the physical world, but not to the world of information. It therefore it does not provide a useful set of abstractions for dealing with “money.” This having been said, the economy itself is a physical system, and an economy with 275 million independent decision makers will conform to Ludwig Boltzmann’s statistical mechanics. Accordingly, events like recessions cannot “just happen.” They are caused by excursions in the real value of the USD.

  4. bjc Avatar
    bjc

    I am always happy to see an argument. I have tried quite often to get people to argue.

    I don’t just assert that money represents work, I provide a proof in the first 30-odd pages of the book.

    Value is _always_ subjective. “Market value” is, as a result, also subjective. It is subject to collective delusions, bubbles and errors that we would prefer to NOT have affecting our money.

    Saying that dollars measure “market value” in units of dollars is, I think, an odd form of circular reasoning that fails as a definition of money. We use dollars to measure “market value” but that only describes a way to use them, not *what* they represent. Without completely defining “the market,” we cannot understand the value of such dollars, and there is no measurement for the totality of all trades of all values of everything in a society, which is (I think) the closest approximation to the generic “market” that you are then splitting up into dollar sized chunks of value. Effectively, it becomes whatever you think it is, and while that is what Galbraith pointed out, it is philosophically speaking, a descriptive but not a real definition. This is pointed out in the book.

    The notion that a clock is an instantiation of a “second” is interesting, it is an abstraction that fails in interesting ways. A clock counts seconds, it counts units of time that are defined as a number of vibrations of a cesium atom, it is measuring something that we can’t actually define, that is relativistically variable (depending on our frame of reference), and that could be thought to correspond with the continuous increase of entropy in the universe. One could imagine that the clock provides instances of seconds, but the clock cannot be an instantiation of a second. Perhaps you misspoke.

    It seems to me that you are trying to force the logic to bend enough to allow money to remain an abstract idea. You have not provided evidence that challenges the definition provided. Taking that evidence from the ways we currently misuse money doesn’t help. What is required is a chain of logic that takes this unit of exchange and makes sense of WHAT is being exchanged. The thinking around this has to be crystal clear. What is it that people exchange when one person exchanges money for something that someone else provides?

    Money is a commodity (it can be anything), that a society agrees to accept in exchange for every other commodity or service in the society.
    When you use money in exchange for something in a society, it represents the work you exchanged to get that money from that society.

    As a commodity, and as work, money is subject to the laws of thermodynamics, and while its use provides information about the market value of the things it can buy (or the rent it can pay), that information does not define it. (edit)The more closely one focuses on “value” the more the information becomes fuzzy, inaccurate, and probably wrong.(/edit)

    For it to be properly useful to the society, the money has to be available in any amount that the society requires for it to represent all the work the society, as a whole, does and controls. That means that a simple physical commodity that is in naturally limited supply (Gold), is not a good form of money. A fiat, account based, commodity that the society can control and create without limit is much better. MMT makes sense.

    Claiming that it is abstract information and pure market value is fine, but now you must show us all how that can be true, and offering up “excursions in the real value of the USD” in the ultimate sentence, after making it out to be pure abstract market value in the first paragraph, ought to have caused your logic circuits to trip. Those two concepts are not compatible with one another. I do not believe you can do it.

    (( I had not realized when I entered into this, that the editing of these text blocks was bereft of italics, bold, underlines, etc. – I have to look into fixing that somehow.))

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