søndag 27. januar 2013

An optimistic theory





The future will be shaped by many things. Recently, I’ve thought about one of those things, that the world is getting smaller (WIGS).  In the past, WIGS seems to have been a force for a more "social democratic" world, and it may be so also in the future.
 

WHY?

1       WIGS means that bigger and bigger societies become more and more integrated.  They become big “families”.

2      “Families” tend to be pretty (social) democratic.

We look first at point 1:


HOW DOES WIGS MAKE SOCIETIES INTO BIG “FAMILIES”?

We can get goods (including services) from other people in three ways:
 
*  Theft:  Take it
Simple exchange:  Give something to get it
*  Gift (or not-so-simple exchange):  Be given it


Instead of “Gift”, the third method can be called family exchange:  Family members give each other goods all the time according to (usually informal) rules. In simple exchange, a seller sells a good to a buyer at one point in time. Family exchange is what can happen when several/many people (not just two – the buyer and the seller) exchange many goods (not just one good) at many points in time (not just once). Then the most efficient way to do all this exchange, can be that the persons give and get according to rules – instead of determining a price for every good that is exchanged.
 

Through history, technological progress (leading to more trade, travel and electronic communication) has steadily widened the geographical area, from which we get our goods.  All the three methods above have spread geographically:


*  Theft:  The main example of theft between regions/nations, are wars.  The main example of theft within regions/nations, are dictators/powerful kings using armies to “take” the power.  And the sizes of regions/nations have tended to increase over time, from tribes in e.g. the stone age to small kingdoms to modern nations.

*  Simple exchange:  From local trade to world trade

*  Family:  Institutions are in a way like families - members of an institution give and get according to (formal or informal) rules.  Examples of institutions are families, nations, organizations, firms and public institutions.  Through history, we have got more institutions, more different types of institutions, bigger institutions, and we give and get more according to our roles in institutions. 

This development can also be summed up like this:

Through history, technological development has increased what can be achieved with exchange.  Two consequences:

**   Exchange has become more and more attractive compared with theft.  It seems like dictators and wars more and more have been replaced with democracy (an exchange between the elected leaders and the population) and trade.  So exchange has increased, theft decreased.

**   And exchange has become more like family exchange, and less like simple exchange.  This is natural when the amount of exchange increases a lot. The main example is the growth of the public sector, and the increasingly regulated private sector.
 


In short:  WIGS means more family exchange.

We then look at point 2 mentioned above:


WHY ARE “FAMILIES” (SOCIAL) DEMOCRATIC?
 
The movement from theft to simple exchange and then to family exchange, means that power becomes more and more evenly distributed:  Theft serves the interests of just the thief.  Simple exchange serves the interests of just the buyers and sellers (at best, if not one of them is able to exploit the other) – the effects of the business deals on the rest of society, are (in principle) ignored.  But family exchange, that WIGS creates, tends to serve the interests of all the members of the family:

*  It's harder to use violence (i.e. theft) or economic power (i.e. exchange) to exploit "family" members than other people, partly because "family" members can easily communicate with each other, and organize e.g. unions or democratic elections.  So in a "family", the interests of the majority will tend to be decisive, not least in the long run.

*  This majority will probably want e.g. an adequate social safety net, partly because they know they or their relatives may need it. 
 
 
THE FUTURE?
 
In the future, increased family exchange will probably be a force for an even more social democratic world, perhaps especially by making the international community more into a big "family".  But other sides of WIGS, like e.g. capital movements and migration, may work the opposite way.   

But family exchange at least gives a reason to hope for an even more social democratic world, in e.g. the following two ways:
       
   A)  Perhaps it could become a right to have a job – if not an ordinary job, then a subsidized job in the private or public sector.  If so, high inflation could perhaps be avoided with regulated wage growth.  Regulated wage growth is the kind of thing that perhaps can be done when the society is integrated, organized - i.e. a "family".
 
   B)  Long ago, people with royal monopolies could charge high prices.  These monopolies disappeared (as a part of the movement from theft to simple exchange).  But companies still don’t have to face competition from public companies selling ordinary goods as cheap as possible (i.e. companies earning as little as possible instead of as much as possible).   Such a public company has been suggested in the health insurance market in the USA.   Such public companies could become part of a movement from simple exchange towards family exchange.  


EQUALITY VERSUS EFFICIENCY?

Usually, efficiency (the size of the "cake") and equality (how the "cake" is divided between people) are assumed to contradict each other.  But an important reason the world has moved in a "social democratic" direction, and may continue to do so, is that this direction often means increased efficiency.  The two possibilities in the future mentioned above, would increase both equality and efficiency.  Also in the historical process described above, both seem to have increased:
·      
    **  Dictators/powerful kings and wars have tended to create both inefficiency and inequality (e.g. because powerful kings wasted taxes on castles and armies).  So less theft (of these kinds) has meant more efficiency and more equality.

·   **  Simple exchange tends to create inefficiency and inequality simultaneously in mainly (?) two ways:

               o   Weak competition leads to too high prices and too low production.  E.g. the disappearance of royal monopolies have reduced this problem (and, as mentioned above, public companies may reduce it even more). 

               o   Ignoring effects of business deals on the rest of society is, at least in principle, inefficient for the whole society.  The ability to ignore such effects probably also usually contributes to inequality, because such effects are more often ignored when the "victims" have little power.  So increased regulations of business deals have probably often increased both efficiency and equality.

·   **  The higher tax level now than before is often assumed to have reduced efficiency, mainly (?) because it has reduced incentives.  But that’s just a part of the picture (that may be of little importance) – taxes have been spent in ways that have increased the efficiency, e.g. by stabilizing business cycles or financing the welfare state (which is a more efficient way of providing an income than begging and other local solutions).

Conservatism versus social democracy is often considered to be efficiency versus equality.  The examples above indicate that a more realistic summary may be inefficiency & inequality versus efficiency & equality.


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