Wednesday, July 15, 2009

Nature, Wealth, and Money

Since the beginning of the current series of Archdruid Report posts on economics, I’ve wondered in an idle sort of way if it might come to the attention of a professional economist or two. Last week’s post, though, seems to have settled that issue. I deliberately begged a question in that post, one that cuts to the core of conventional economic theory, and it would have taken a degree of self-control exceedingly rare in any profession for a mainstream economist to read the discussion and not rise to the bait.

I’m referring, of course, to the cavalier way in which the concept of money was treated in last week’s post. In terms of mainstream economics, it’s nonsense to talk about wealth or value without discussing how those things are reflected in some form of pricing mechanism – that is, how they’re measured in money. The widely held belief that the wealth produced by nature is valueless until it’s transformed into something else by human labor, in fact, bases itself largely on the fact that nobody has to pay the nonhuman world for that wealth, and so figuring out its price poses a major challenge – not insoluble, but significant enough that few economists have been willing to take it up.

Since Adam Smith launched modern economics in 1776 with The Wealth of Nations, unresolved disputes over the nature of money have formed a fault line running straight through the heartland of economic thought. Some economists – these days, the majority – treat wealth and money as interchangeable concepts. Others – the minority nowadays – draw a sharp distinction between them. Those who accept the identity of money and wealth seem most often to think of the rules governing money as something akin to laws of nature, untainted by human purposes and agendas; those who draw a distinction between them tend to see those rules as social constructs that benefit some people at the expense of others.

Longtime readers of The Archdruid Report will probably have little trouble guessing where along this spectrum of debate I can be found. It’s simple cultural chauvinism to insist that the particular, and peculiar, form of money used in contemporary Western societies is the only one that matters. Over the span of human history, money is a fairly late invention, and until very recently it played only a small part in the lives of most people even in the societies that used it; until the eighteenth century, even in the Western world, a majority of all goods and services were produced and exchanged within the household economy, or in local customary economies that made no use of money, and only the well off could expect to handle money on a daily basis.

Every human society has had some social mechanism for distributing goods and services. Paleoanthropologists have argued that it was precisely the evolution of food sharing within bands of ancestral humans that gave our species the evolutionary edge to expand across the globe in the face of wide variations in habitat and the rigors of ice age climates. Hunting and gathering societies around the world have intricate arrangements for sorting out who gets how much of the various natural sources of wealth available to them; so do the horticultural and pastoral human ecologies that evolved out of the hunter-gatherer pattern. Some of these latter use a particular trade good in certain contexts as a general marker for value – think of the shell-bead wampum strands used by the First Nations in eastern North America, for example – but these get used only in a restricted class of prestige exchanges, and play no role in everyday exchanges of goods and services. The same thing was true of gold and silver coinage in many ancient and medieval societies; most of the population of medieval England, for example, could expect to go from one winter to the next without seeing more than a handful of silver coins.

From a broader perspective, then, a money system of the sort we use today is simply one way of managing the distribution of goods and services within a particular kind of human society. Modern economics textbooks dodge this point by comparing money to only one other form of exchange – simple barter, in which (let’s say) a physician and a farmer have to negotiate how many bushels of wheat are worth a cure for an illness – and insisting on that basis that money is inevitable because the alternative is so clumsy. Surely, though, this puts the cart before the horse. It’s only when exchanges have already become subject to a market system that exchanges are conceptualized in such terms, and that presupposes that some standard measure of abstract value – that is, money – already exists. It’s worth mentioning that such great civilizations as Egypt of the pharaohs had farmers and physicians aplenty for tens of centuries before anybody thought of money.

What sets money apart from other systems is not its convenience – quite the contrary, as such alternatives as household production of goods and services, or traditional economies of gift and customary exchange, are quite a bit more convenient for most purposes, since the extra steps imposed by the need to bring money into the situation can be done without. Rather, money has three distinctive features relevant to the present discussion. First, to the extent that it can replace other forms of distribution and exchange, it draws all economic activity into its own ambit. That can (and very often is) used for political control, but this is a side effect. The principal effect of this property of money is to turn a society into an economic monoculture.

This elimination of economic diversity has been discussed in previous posts, but it deserves more attention than I’ve given it so far. Diversity is the basis of stability in any ecosystem, human or otherwise; when a significant proportion of goods and services are produced in the household economy, for example, the vagaries of the market economy have a limited influence on everyday life; that limitation goes away once goods once made at home have to be purchased in the market with money. Thus it’s no accident that over the last four centuries, as the market has supplanted the household economy and other patterns of production and distribution of wealth, economic crises have become progressively more frequent, more severe, and more widely felt. The effects of the Dutch tulip mania and the South Sea bubble were restricted to a relatively small proportion of their respective societies; this was hardly true of the Great Depression of the 1930s, and seems to be turning out even less true of the Great Recession now under way.

The second distinctive feature of a money economy is that it makes it harder, not easier, to value certain classes of goods. What E.F. Schumacher called primary goods – goods produced directly by nature without human intervention – are perhaps the best examples. Most traditional societies around the world, it bears noticing, have no trouble whatever recognizing the value of primary goods and finding ways to integrate that value into their own systems of exchange. The salmon ceremonies of First Nations along the northwest coast of North America are good cases in point.

These societies have a gift economy in which rank and social influence are gained by giving away goods – a system that once provided a very efficient means of distributing wealth of many kinds through their societies – and they treat the arrival of the annual salmon runs in exactly the same spirit, as a mighty gift from the Salmon People that must receive an appropriate response. Anthropologists who treat these arrangements purely under the heading of religion (or, less politely, superstition) are missing one of their central points; they are, among other things, ways of integrating relationships between human communities and the natural world into the traditional economy, so that the value of the salmon harvest is always weighed in decisions that might affect it, and traditional practices that preserve salmon runs are given potent economic sanction.

Such arrangements are common – indeed, very nearly universal – in moneyless economies. They can also be found in money economies; one of these days I ought to devote a post to the elegant ways in which the classical Greeks, who had money and weren’t at all afraid to use it, set up lively economic exchanges with their own fragile ecosystem. (Like the salmon ceremonies, these are normally treated purely in terms of religion or superstition, and their economic and ecological dimensions have thus rarely been noticed.) Still, the more completely an economy becomes subject to money, the more difficult it becomes to include primary goods in economic calculations. The Salmon People are perfectly capable of participating in a gift economy, one might say, but there’s no way they can cash a check – or, for that matter, write one.

The third distinctive feature of money is subtler, and very often misunderstood. Unlike other systems of distributing goods and services, money functions as a good in its own right, and the right to use it functions as a service. To some extent this is a legacy of the time when money was made of some culturally valued substance – wampum strings in eastern Native North America, say, or gold and silver in medieval Europe – but it opens the door to unexpected developments.

If money is treated as a good in its own right, and the use of money is treated as a service in its own right, then instead of exchanging money for ordinary goods and services and ordinary goods and services for money, it becomes possible and profitable to exchange money for money. The entire world of finance, from savings accounts and installment loans up through the dizzying abstractions of today’s derivative markets, unfolds from this third property of money. When money plays a relatively minor role in a society, this dimension is correspondingly small; as the volume and pervasiveness of money expands, so does the scale and impact of the arrangements by which money makes money; when money dominates a society, so does the world of finance, and the amount of money being traded for money can exceed by several orders of magnitude the amount of money being traded for goods and services.

What makes this problematic is that the rules governing money are not the same as those governing other goods and services. Unlike goods and services that have their own value, money is only worth what it can buy; unlike goods and services that must be produced by labor from resources, money can be conjured from thin air by dozens of different kinds of financial alchemy, or by the momentary whim of a government. Nor does the amount of money in circulation have to have anything at all to do with the amount of other goods and services available. All these differences mean that the economy of money can very easily slip out of balance with the economy of nonfinancial goods and services.

It’s useful, in fact, to extend one of E.F. Schumacher’s insights further than he did, and speak of the economy of money as the tertiary economy of the modern world. If the primary economy consists of the natural processes that provide goods and services to human beings without human labor, and the secondary economy consists of the conjunction of human labor and natural goods that produces those goods and services nature itself doesn’t provide, the tertiary economy consists of the circulation of monetary goods and financial services that, at least in theory, fosters the distribution of the products of the secondary economy.

Last week’s post pointed out that the secondary economy depends on the primary economy. In the same sense, the tertiary economy depends on the secondary economy – all the money in the world, it’s fair to say, won’t allow you to buy a good or a service that the secondary economy doesn’t produce. Perhaps the greatest problem with contemporary economic thought is that it inverts this relationship, treating the tertiary economy of money as the prime mover, with the secondary and primary economies dependent on the world of money. This odd and disastrous inversion, and its implications in a world of rapidly depleting natural resources, will be the theme of next week’s post.


BrightSpark said...

Dear Michael

Greetings the bottom of the world (Dunedin, New Zealand).

This post provides some very useful insights into an issue that I believe is at the heart of our current problems. People have been using a form of money for so long that they simply do not stop to consider the psychological and cultural effects that it may have. The analogy of a fish not comprehending the nature of the water in which it swims is quite apt.

Now, no doubt you've heard of him already, but there's a theorist who devoted much time to understand money - Silvio Gesell. His book, "The Natural Economic Order" written in the 1890s summed up the functions of money into two categories - as a means of exchange, and a store of value. Not rocket science.

However, his key insight was that using money as a store of value corrupts its primary function as a means of exchange. He promoted measures to restore some balance, such as the concept of demurrage (negative interest, "rusting" money).

Gesell remains an inspiration to the community currency movement, and intrigingly, John Maynard Keynes acknowledged him in The General Theory - stating that "the future will owe more to the spirit of Gesell than it will to Marx". Interesting comments for an orthodox economist.

I for one hope that turns out to be the case.

Dorcas' Daddy said...

Thought provoking as usual JMG.

May I point you to an excellent article by a dubious character on the idea of money as an externalized soul, or horocrux for you Harry Potter fans?

Anyhow, thanks as always for a solid read.

hardhead said...

Right on, bro'. Give 'em hell, Harry!

This seems to be a good spot to point out that the general human propensity to promote one or another highly derived, abstracted notion to the primary reality, as in your example of money, is, first, so ubiquitous and pervasive as to go unnoticed by nearly everyone, and second, the reason why H. sapiens is doomed, unless we can learn to control that propensity.

"In the beginning was the Word, and the Word was God ..." Therein lies the root of our estrangement from the world of which we are a part. Though we are pathologically delusional, we are not "out of our minds"; indeed, we are too much "in" our minds and need desperately to go back out into the real world again. Only there will we find the answers we need, and not mere fantastical expedients which turn out to be just more of the same.

I'll get off my box now, and watch this thread continue to unfold. Good work, JMG - keep at it, and don't let up.

Nnonnth said...

Great post, but does money’s role in a society always increase continually, the way it has in ours? If so, why? If not, why has it happened in this particular case in your opinion? It seems in some way intertwined with the fossil fuel issue itself, to me.

Hardead is echoing a response of JMG's from a couple of weeks back, about Giambattista Vico. The idea that civilizations tend to disappear into their own ideas of themselves is very valuable. Perhaps especially on the more Carolyn Baker-ish side of the peak oil question, to do with what we make of it from the inner/psychological point of view.

RDatta said...

Thanks again for yet another clarifying post.

Among the reasons for the growth of the tertiary economy is the concept of getting something for nothing.

The primary economy seems to come gratis, but requires constant tending to, lest it cease to provide what is expected of it.

The secondary economy is the region where one finds a range of human activity, including exquisite attention to detail as in a cabinetmaker and backbreaking toil as in a lumberjack, or intellectual exercise, as in writing a book.

The malignant overgrowth of the tertiary economy is related to its disconnect from real goods and services, and the ease with which it can be inflated, with imagination being the only limiting factor until it comes time to pay the Piper his due.

Thanks again for these lessons in economics.


Sam Norton said...

JMG, are you familiar with the Peruvian economist Hernando de Soto's work on capital? I think there are ways in which it would fit in easily with the understanding of finance (or, law & property in his terms) as the tertiary level which you touch on at the end. A good website introducing him is here:

skintnick said...

This post is almost eerily opportune to me at this time - a lovely piece of prose to encapsulate beliefs which I hope are spreading fast in this interconnected world we live in.

I'm a latter-day student of economics and advocate of the Transition movement. If/when the incumbent economic system collapses (hyperinflation?) we need to have in place local means of exchange such that communities can continue to function. Despite months of research and s scattering of practical examples I've yet to find a convincing method of achieving this. For example, a local currency (notwithstanding the trust which underpins its viability) should be backed by some tangible resource no? I think there should be a forum for developing these ideas and systems but even the Transition movement does not provide much inspiration.

knutty knitter said...

As one Dunedinite to another - my bro and I were discussing this very point just the other day. His idea was that no money should be storable for more than a very short time. He included everything right down to inheritance, copyright, patents and any other form of liquid asset. The idea is to link money permanently with its use in the 'real' economy. That way money would cease to exist as a separate entity and could not be traded just for itself.

Interesting idea to throw round. Sounds like we may need to read Gesell :)

viv in nz

hapibeli said...

Hot diggety! Great explanation of the "tertiary" economies' ability to impact the "secondary" economy. I doubt that you'll find this discussion in many university textbooks anytime soon?

DIYer said...

There was an interesting commment the other day on The Automatic Earth, my favorite report on the current mythology of money. It was about a building in Japan:

"... to see the Gold Pavilion Temple in Kyoto and being mildly surprised at quite how well it had weathered the passage of time since it was first built in the fourteenth century. I was told it hadn't weathered well at all, and had in fact been burnt to the ground twice in this century. "So it isn't the original building?" I had asked my Japanese guide.
"But yes, of course it is," he insisted, ...

So it isn't a building, but the idea of a building. A nice analogy for money -- money isn't pesos or yen or krugerrands, it is an idea.

I think that, like ownership, it is a very poweful social construct that resonates with our neural wiring. As I was saying last week, one of my dogs would know that the comfy spot on the sofa belongs to her, and the other dogs will respect that notion.

Neven said...

Thanks for these recent articles, Mr Greer.

Coincidentally I'm currently debating someone on a forum who is studying Economics in university and I just can't seem to pin him down. First I tried to ascertain that there seem to be a few global problems that are progressively getting worse. He just wouldn't believe that, Climate Change being a religion etcetera. He would just not touch on other global problems such as ocean acidification, peak oil or top soil erosion. Meanwhile I kept stating my view on externalizing damage done to health and environment.

So then I finally had him pinned down on the question: 'What IF there would be a global problem that could cause huge economic damage in the (near) future, what would you then do, how would you set about it?' He just would not go into this question, but in the end casually says he doesn't like to hypothesize, doesn't see the use of it, etc (as if the whole concept of unending economic growth in a finite system isn't one huge hypothesis with obviously major side-effects).

Very tiresome all in all, but to be expected. It's one of those people whose definition of freedom is 'to be able to do whatever the hell I want to do without having to think about consequences'. If he decides to open up his mind a bit I might ask him to read these pieces. For they are excellent.

KimB said...

Thankyou for your brilliant insights, always like reading your thoughts. Have you ever written about "The Burning Times," and its relationship to the deliberate destruction of women's economic power in the home economy? Let's face it, the-powers-that-be aren't just getting a free ride from mother nature, they're also getting a free ride from mothers . . . I also think it would be interesting to explore this in the light of the Australian Aboriginal concept of "Women's Business" and "Men's Business." You might also be interested in taking a brief peek at some of my recent stuff around these ideas

Publius said...

Great post.
Good insight into the "tertiary" economy.
What role do you think that the financial sector (let's not call it an industry, as it doesn't produce anything tangible) will play in population overshoot?

It seems to me that the financial sector encourages a type of mass delusion: that natural resources are infinite, or that there are endless substitutes available for a resource that is being depleted. Thus, I believe it will make population overshoot and/or seemingly sudden resource scarcity much more severe.

All biological species are subject to the laws of ecology. Might the "laws" of finance interact with ecology in a mainly destructive manner, that will in the end cause much more damage to the human and natural worlds than would have happened in a world without a "financial industry"?

thetinfoilhatsociety said...

I believe this is where the ideas of the Greeks, handed down to the Western civilization, have run amok.

The Greeks were, I believe, the first to separate as a psychological construct, the body, and the soul that went with it, from the environment in which that body lived. They were the first to postulate that idea of linear time, in some respects, that got taken to such extremes in later centuries. This is where I think the idea of 'ever onward and upward' comes from, and the ideas of modern money economy being the 'primary' economy rather than the tertiary as you point out.

I think the agrarian and pastoral societies the world over have a much better handle on our place in the world -- we are part of a cycle of nature. The tree puts out leaves, the leaves die and fall to the spring the tree puts out new leaves. They're not the same leaves, but they're the same kind. Individuals within a cycle. As a whole our society no longer even begins to pretend to understand this concept.

Bill Pulliam said...

To debate a point of taxonomy and nomenclature (I'm a biologist at heart, after all):

I agree of course 100% with your core ideas here and your concept that money is not integral to economic activity. I'm not sure though that we should elevate the financial system all the way to the level of an "economy" even at the tertiary level. I always said I'd believe in the information economy when I could download a pizza (not just order one online that would be made, baked, and delivered the old-fashioned way); likewise I'll believe in the financial economy when I can shingle my roof with dollars -- not dollar bills or dollar coins, but the actual immaterial dollars themselves, those thoughts that float around from account to account for which the bills and coins are just representations. A dollar is neither a good nor a service. It isn't even information per se. To my mind the "tertiary economy" is really just bookkeepers gone wild. I can shingle or thatch my roof with palm fronds (product of the primary economy), straw (product of the pre-industrial secondary economy), or composite shingles (product of the industrial secondary economy). But Euros? Not gonna stop a single drop of rain. Hence I think the financial sector only merits a place as an optional sideshow of the secondary economy, not full status on the heirarchy as an entity in itself. I think that grants it undue status, and ironically feeds the delusion at the same time it is unmasking it.

Avery said...

"As one Dunedinite to another - my bro and I were discussing this very point just the other day. His idea was that no money should be storable for more than a very short time."

You're not the first to reach this conclusion! The Freiwirtschaft theory of the 1910s introduced the concept of Freigeld, which is money that must change hands quickly or lose its value. This was actually implemented in the Austrian town of Wörgl and lead to a surprising economic boom, but it was suppressed by the federal government.

ats said...

The idea of the tertiary economy gives me a way to articulate something that has bothered me for some time. As you say, there is little appreciation in these parts of the value of the primary economy. It seems to me that many of us in the developed world are similarly lacking in appreciation of the value of the secondary economy. Because of how global trade has developed, spurred in no small part by the activities of the IMF and World Bank, we flourish on a steady stream of wealth that comes from "them" to "us". It allows us to live our lives with a small fraction of the average effort required for a human to survive. As long as you have money in sufficient quantity, everything else is easy, so the game of turning money into more money -- the tertiary economy, if I understand you correctly -- is very appealing. Money insulates us from understanding of what it really takes to make one's way in the world, as we have no appreciation of the toil involved in producing the stream of real consumables that we exchange for conjured dollars.

ats said...

My previous comment on this topic was my first on the Archdruid Report. I had meant to begin with a heartfelt thank you for 3+ years of guidance and insight! Evidently I was too preoccupied checking my spelling. I trust it's not too late.

John Michael Greer said...

Spark, many thanks for the reference! I hadn't encountered Gesell before, and will certainly look him up.

DD, thanks for the link.

Hardhead, thank you. A good point, and sharpened even further by the fact that the English term "word" is a terrible translation of the Greek word "logos," which can mean "proportion," "speech." "reason," and "relationship," among other things. "In the beginning was the Relationship" does put a very different spin on things!

Nnonnth, most civilizations become steadily more dominated by money over time, to a certain point. Spengler argued that at that point, the rule of money became so self-defeating that it was overthrown by what he called "Caesarism." The overthrow of the Russian oligarchs by Putin is a good example of what he was talking about -- the replacement of plutocracy disguised as democracy by charismatic populist autocracy. We may see that here in the not too distant future.

Rdatta, exactly. The notion that your money can earn a living for you, and that it's therefore reasonable to expect investments to pay back more than you put in, is exactly what drives the tertiary economy into collapse.

Sam, no, I haven't encountered de Soto's work yet. Thanks for the reference!

Skintnick, the mistake you're making is expecting an abrupt collapse. One of the good points about the Transition movement is its name -- we're facing a transition, a relatively prolonged one, not a sudden lurch into a new world. Thus it's not very useful to try to build a new world from scratch; instead, muddling through with adaptations and piecemeal reforms will likely be the order of the day.

Knitter, the standard way that happens historically is inflation, the process by which money loses its value over time. We've got some deflation to work through first, but down the road a bit I expect quite a bit of inflation, or rather stagflation of the sort that made the Seventies interesting.

Hapibeli, I expect it about the time that pigs sprout wings.

DIYer, an excellent example!

Neven, that's been my experience as well. Mainstream economists live in a world as imaginary as Oz, with Adam Smith's invisible hand playing the role of the wizard. They have yet to realize that the invisible hand can give you the finger.

Kim, I've included articles on the European witchcraft persecutions in both my encyclopedias, but I have to say they don't really support your point; some 25% of the 50,000 or so who died in the persecutions were male, you know, and scholars have debunked the old claim that the motives behind the witch hunts were economic. More broadly, given that ondustrial society is the only civilization in recorded history to accord full civil rights to women, I'm not sure the language of moral dualism you're suggesting is really that useful.

John Michael Greer said...

Publius, granted, it's not an industry, it's an entire separate economy of fungible abstractions. You're right, though, that it plays a major role in overshoot, by making it much harder to recognize the limits of growth. Like the person in the joke who insisted he couldn't be out of money because he still had checks left, a society excessively fixated on money can miss the signs of imminent ecological bankruptcy because the money economy still looks fine.

Tinfoil, I'm not at all sure you're right about the Greeks, but that's a theme for another post.

Bill, if dollars could shingle your house, they'd be part of the secondary economy -- that's where real goods and services are exchanged. It's precisely the fact that they can't that marks them out as belonging to the tertiary economy, where what's traded is abstract representations of value. Of course you can't substitute the products of the tertiary economy for those of the secondary, much less the primary -- that's what defines the boundaries among the three economies. More on this later.

Avery, thanks for the links! I'll check them out.

Ats, well put. Richard Wagner, in one of his essays, used metaphors from his Ring operas to make a very similar point: once wealth becomes abstract, it's very easy to ignore where it actually comes from. Starving faces in industrial slums and sixteen-hour days in sweatshops don't make it into the quarterly profit statement or the neat figures of a bank account balance. (Thank you, BTW!)

ric said...

Sorry John - I accidentally misposted this in last weekʻs comments:

Thanks so much for this fantastic and thought-provoking series of posts, JMG. Sometimes it takes an individual or many individuals operating outside of the traditional, approved institutions to improve the framework supporting a discipline like economics or physics. Einstein at the turn of the century comes to mind. This is what I think you are doing in regards to economics - improving the underlying framework so the discipline can more accurately describe observed behavior in how "goods and services" are distributed among individuals belonging to a society. Of course Einsteinʻs work merely had to help explain puzzling experimental lab results. Your work is helping to explain the ongoing collapse of humanityʻs most technologically advanced society.

I was wondering if you could share (or point me in the right direction) of any correspondence you may have had with any professional economists to which you alluded in the first paragraph of this p

John Michael Greer said...

Ric, I haven't had any conversations with professional economists -- that's exactly the point of the first paragraph of the post. I'm sure they think they have better things to do than read the economic ideas of an archdruid. Mind you, given the abject failure of most economists to foresee the housing crash -- or, for that matter, any of the significant economic crises of the last half century -- I'm not at all sure their judgment is as good as they seem to think it is, but there it is.

Mary said...


Natural Capital, Human Capital,
and Sustainable Economic Growth by
Robert Ayres, Beatriz Castaneda, Cutler J. Cleveland2, Robert
Costanza, Herman Daly, Carl Folke, Bruce Hannon, Jonathan
Harris, Robert Kaufmann, Xiannuan Lin, Richard Norgaard,
Matthias Ruth, Daniel Spreng, David I. Stern, Jeroen C.J.M van
den Bergh
----------------------- This paper is the result of discussions from a workshop on Assessing the Role of Human
and Natural Capital in Economic Production, sponsored by the MacArthur Foundation and
held at the Center for Energy and Environmental Studies at Boston University, August 2-3,
1996. The views expressed herein are solely those of the authors.

KimB said...

I don't doubt men were also persecuted in The Burning Times (in fact, I know they were), but the fact remains, the victims were overwhelmingly female. I don't think this was "Coincidental," there had to be a material/economic reason behind it, and scholars such Silvia Federicias, in her book "Caliban and The Witch - Women, The Body, and Primitive Accumulation" have taken a much closer look at this than me. Also, as Jared Diamond has brilliantly documented, massacres, wars and other upheavals don't just happen "Out of the blue" because one group happens to take a dislike to the other (though of course, there is always an "Ideological" overlay). Rather, there is always a contested material resource at the heart of the matter. And as for "Industrial society" giving "Full civil rights" to women, methinks there's a feminist (or two, or more . . .), who'd give you a good run for your money on that one (and I must say, I'm smiling with amusement as type). And in any case, what's "Recorded history" got to do with this? Human civilisation is a great deal older than that. Lastly, this has nothing to do with "Moral dualism," and if you check out Hannah Rachel Bell's book "Men's Business, Women's Business - The Spiritual Role of Gender in the World's Oldest Culture" (on Australian Aboriginal society), you may gain some useful insights. I've also had the privilege of speaking with a local Aboriginal elder/woman (on these matters), of my region (Yugambeh), which was very enlightening. Just a few useful points from a witch to a druid . . . ;-)

KimB said...

. . . a quick PS John (if that's OK), maybe I'll have "Full civil rights" in industrial society when I receive complete financial recompense for the time I spent raising three children. However, Sylvia says it a lot better than me:

I guess I'm just a bit surprised how someone who writes so brilliantly (and you do write brilliantly), about the crucial "Free services" of nature, can have (or so it seems), a blind spot for the crucial "Free services" of womankind . . .

Coyote said...

Nicely done, the concept of the tertiary economy is useful.

Not calculating the wealth inherent in natural resources is ironic since the US rose to world power largely as a result of our abundant natural resources. I guess that is another facet of buying into the myth of manifest destiny, and it illustrates the lack of a normative force in the “science” of economics. Economists have been making this fundamental mistake since the 1700’s. It is like trying to study physics with out getting the first law of thermodynamics wrong.

John Michael Greer said...

Mary, thanks for the reference! I've got their book on the shelf right now.

Kim, it might be helpful if you responded to what I'm saying, rather than putting together a straw man and then kicking him to bits. Of course the witchcraft persecutions had causes, but the last thirty years of historical research on the subject, which unfortunately has been ignored by too many feminist scholars, has shown that those causes cannot be reduced to gender economics. I've also discussed the importance of the household economy, and the challenges faced by people such as yourself who work in it, at quite a bit of length in previous posts here, so accusing me of ignoring that factor rather misses the boat.

With regard to civil rights, you have, I believe, the right to vote, to run for office, to represent yourself in legal and business matters, and to own and control your own property? Those are civil rights, and the fact that there are still social barriers to equality for women in a variety of contexts does not change the fact that you have them. Nor does it change the fact that until the rise of industrialism, the vast majority of historically documented human societies did not accord them to women. (It's always fashionable to project Utopian fantasies onto the inkblot patterns of the prehistoric past, but those don't count as evidence.)

More generally, for the last forty years or so, it's been a standard gambit in identity politics to try to privilege one or another way of dividing up humanity, so that those who claim to speak for people on one side of the dividing line can claim a comparable privilege for their own grievances. To speak of "womankind" in the abstract as uniquely burdened by the current predicament of industrial society is to engage in exactly such a claim of privilege.

It's far more helpful to recognize that injustice is a complex terrain that can't be meaningfully reduced to such simplistic dualisms. However hard a time you had raising your children, for example, I suspect your life has been quite a bit less burdened by oppression than that of an Aboriginal male whose ancestors were forced at gunpoint off the land where you now live -- and we won't even talk about the Third World laborers of both genders whose sixteen hour days at sweatshop wages fuel the economy that supports all of us in relative luxury in the industrial world. In those contexts, are you oppressed -- or oppressor?

Coyote, excellent. Yes, but it was exactly the abundant natural resources of the US in years past that made it easy for people to ignore their role. There's a psychological equivalent of Liebig's law of the minimum; when human labor and technology are what's in shortest supply, those seem to be the factors that matter. It's only as resources run short that we begin to see the broader picture.

SleepyTreehugger said...

Hi Michael,

I'm happy to note that you've raised a topic in your latest series of articles that is of especial interest to me.

Its little suprise that so few people question the institution of money, its nature, and the implications of its use, because like many cultural and social constructs that have become embedded into both our individual and cultural psyche, people have become so accustomed its pervasiveness that most do not seek to question it, though as in the case of virtually all social upheavels in history more people are.

Money is merely one facet in modern political economy that needs to be challenged.

Neoclassical economics is merely an attempt to intellectually rationalize pre-existing social arrangements and has been so since the French Second Empire of 1850s They do so by, instead of analysing the world as it is, when confronted with uncomfortable reality, they attempt to confrom the world to fit their preconceived model.

"From Metaphysics I went to Ethics,
and found that the justification of the existing conditions of society was not easy. A friend, who had read a great deal of what are called the Moral Sciences, constantly said: 'Ah! if you understood Political Economy you would not say that'" [quoted by Joan Robinson, Collected
Economic Papers, vol. 4, p. 129] "

"Yet the main lessons of these increasingly abstract and unreal theoretical constructions are also increasingly taken on trust . . . It is generally taken for granted by the great majority of academic economists that the economy always approaches, or is near to, a state of 'equilibrium' . . . all propositions which the pure mathematical economist has shown to be valid only on assumptions that are manifestly unreal -- that is to say, directly contrary to experience and not just 'abstract.' In fact, equilibrium theory has reached the stage where the pure theorist has successfully (though perhaps inadvertently) demonstrated that the main implications of this theory cannot possibly hold in reality, but has not yet managed to pass his message down the line to the textbook writer and to the classroom." [Kaldor, Op. Cit., pp. 376-7]

They are only able to do so, because they have been successful in marginalizing any dissidents, particularly within their profession, who disagree with their orthodox doctrines.

In 1972 John Kenneth Galbraith said, "Economic instruction in the
United States is about a hundred years old. In its first half century economists were subject to censorship by outsiders. Businessmen and their political and ideological acolytes kept watch on departments of economics and reacted promptly to heresy, the latter being anything that seemed to threaten the sanctity of property, profits, a proper tariff policy and a balanced budget, or that suggested sympathy for unions, public ownership, public regulation or, in any organised way,for the poor." [The Essential Galbraith, p. 135]"

SleepyTreehugger said...

Neo-classical economics isn't even meant to reflect the reality, if it conflicts the results of their flawed assumptions. This was openly admitted by Ludwing Von Mises, the head of the Austrian school of neoclassical economics.

"If a contradiction appears between a theory and experience, we must always assume that a condition pre-supposed by the theory was not present, or else there is some error in our observation. The disagreement between the theory and the facts of experience frequently forces us to think through the problems of the theory again. But so long as a rethinking of the theory uncovers no errors in our thinking, we are not entitled to doubt its truth."
Epistemological Problems of Economics

If this isn't sufficient grounds to condemn him, then perhaps his open support for the fascists in Central Europe during the 1920s would be.

"It cannot be denied that fascism and similar movements aiming at the establishment of dictatorships are full of the best intentions and that their intervention has, for the moment, saved European civilization. The merit that fascism has thereby won for itself will live eternally in history."
Ludwing Von Mises, Liberalism

KimB said...

Thanks for a lively and interesting debate John. Much appreciated. I've responded to you here . . .

Nnonnth said...

JMG, what's a good resource for those classical Greek ceremonies you were speaking of?

Pezhi said...

Since this is a place where there might be other biology types who find themselves annoyed by economics, and it's related to the topic at hand, I guess I'll share the similar epiphany I had about this topic.

The "resource" (aka "store of value") aspect of money is quite literally a polite fiction that isn't strictly necessary and doesn't really explain anything that you can't explain just as easily without it. Money can always be treated as information rather than stuff.

Not that economists deny that in so many words. They're perfectly happy to agree that money is information, and likely to mention it in an introductory paragraph now and then. Economic theories however, tend to ignore the practical implications. Practically every economic model treats a unit of currency as a persistent resource for some calculations and as an abstract "bit" of information for other purposes. But thermodynamically speaking you cannot have it both ways, no matter how many people pretend. This is, I think, the main reason that economics has a reputation among natural scientists for being incoherent. A bit of information does not decay, but it also cannot -- by definition -- have any value independent of its position as part of a pattern or sequence. Resources meanwhile, may retain value (even if they are only a substrate for informtion!), but they are guaranteed to decay. Anyway that confused the hell out of me for several years.

Eventually though, I realized that money doesn't obey any of the rules that govern "resources" as studied by ecologists, except coincidentally. What money does obey, quite consistently, are the rules that govern "signals" as studied by ethologists, which are a form of information. The reason it's confusing to compare human economies to "natural" ecosystems is that the real parallels lie elsewhere.

Once you start thinking of "an offer to exchange money for goods or resources" as "a signal suggesting an indirect reciprocal relationship between buyer and seller, via other parties" things start to fall into place. Indirect reciprocity is a familiar tool from Mother Nature's belt, and we're far from the only ones to use it. True, there are some peculiar things about the particular way that we use it, but the only thing that's really unique (as far as I know!) is that we do it with our own species, but irrespective of genetic connection or individual recognition. Meaning we recognize and "accept" money signals even if we don't recognize the particular individual offering the signal and have no reason to believe we're related to them.

That's the normal case for symbiotic relationships between species, but not for intraspecific cooperation. Even among true eusocials, it's not normal to have a reciprocity signal that's independent of any sort of kinship signal.

The analogy doesn't have a lot of predictive power, but in that sense it's no worse than any other economic theory :-) And unlike some economic theories, it isn't self-contradictory or incompatible with actual observations.

KimB said...

Just dropping in again John. Thanks (again), for expending so much time and interest in our recent "Debate." It was very helpful to me (in sharpening my own ideas). I've also posted some comments on Mike Ruppert's blog (pertaining to our recent discussion), three in all:

. . . which might be of interest to you. I drop in there from time to time (have done for a while). In summary, I find your posts extremely lucid and helpful. You've got a very sharp mind, but maybe we've "Grown" from different backgrounds. I spent quite a bit of time at Greenham Common Women's Peace Camp in the early 80's, and "Felt" first hand what it was like to be in a cohesive/non-hierarchial group of women (it left an indelible and visceral impression, like "Remembering" something I wasn't even aware I'd "Forgotten") - and I also spent nearly 4 years at NE London Polytechnic, UK (Sociology), immersed in a plethora of feminist writers. In conclusion, I find the stuff you do quite brilliant, and I'm genuinely surprised you're not more open to the angles I've hi-lited. And if you note my comments on Mike Ruppert's blog, you'll see Richard Heinberg has already considered (favourably), the issues I'm articulating/exploring. Maybe it would be useful for you to check out the concept of "Women's business" and "Men's business" in tribal/indigenous societies.
From one I can gather, men and women had different (but completely equal), spheres of influence.

SleepyTreehugger said...

Hi John,

You may be interested in this discussion of the nature of money by a member of a group of dissident economists who are trying to formulate an actually consistent model of how economics actually works. Its particularly relevant to your questions regarding the development of the use of money.

das monde said...

Recently I read Niall Ferguson’s book
“The Ascent of Money”. It became clear to me that exchange mediation or wealth storage are not defining roles of money in this world. This is well demonstrated by the story of Spanish conquest in South America. After the band of Francisco Pizarro routed the Inca army of Atahuallpa, the Spanish were grabbing tons of gold and silver beyond their original fancy. They even found a silver mountain, Cerro Rico, and crippled generations of local Indians for extraction of that silver. But the abundance of precious metals did not make Spain supremely rich or powerful. Contrarily, Spain suffered the first big inflation, and the Spanish crown even went into deep debt. In contrast, the Dutch and British colonial empires expanded thanks to basic financial innovations.

The defining property of money is credit assertion. Right from the Babylon times, transferable notes of credit claims were issued - and that is what money is to this day (most of the time). Collecting money means collecting credit claims. The fundamental unit of value appears to be a credit claim or expectation. The significance of precious metals (and real estate) in financial transactions is that usually these are accepted as most reliable collateral, merely.

Even if modern dollar bills are promised to be nothing more but “legal tender”, all paper and electronic money originates (more or less exclusively) as credit in this world. Just recently, a lot of new money originated from the infamous subprime loans and the boom of leveraged credit. It is clear that waves of credit expansion do not have to be objectively related to the state of material productive relations and needs of economic exchange. We are facing an exceptionally big mismatch between financial fancy and the real world.

Even when we talk of governments “printing money”, the actual mechanism is that a government borrows money from its Central Bank in exchange for treasury bills and bonds. It takes two to tango: the government prints its promissory paper that bankers and investors would value; the Central Bank delivers the banknotes. The money is covered by new ongoing credit bonds.

das monde said...

There is definite logic in the “money as credit” definition. It appeals to a certain will of cooperation, trust and common expectation of future between a creditor and a borrower. Such a relation is absent in nature. But there are caveats. For one thing, the powers and potential reputation of creditors and borrowers differ markedly. A debt default is a big shame, while the business of vulture funds ripping developing countries for excesses of their earlier dictators is not questioned. A lot can be sacrificed in the ongoing crisis, but not interests of big creditors. Secondly, the level of trustworthiness of a borrower or a project is determined by the will of creditors, and this is not a democratic process. Even if a majority of us were proud creditors or investors, the size of fellow fish differs markedly. Seldom are the questions asked, how powerful are the biggest bankers, what they do with “hard earned” wealth, or who owns those mountains of public debt.

Ferguson gives examples how the first financial bubbles, policy failures or creditor fancies influenced the French Revolution, the American Civil War and probably other important events. You can notice that the banking or lending business is a double-edged sword. At different times, you should be prepared both for high society looks and duties, and for rough power and shrewd politics to collect your credit. Failure risks are big, but a few winners could gain enormous power. The first banking practices in the medieval Europe were quick failures (mainly because only ethnic minorities were doing it), until the Medici raised their fortunes and got significant control of Italian city states. In the post-Napolean Europe, the Rothschilds were dominating bond markets of many European governments, from England to Prussia, from Russia to Belgium. They were in power to determine which ministers to appoint, or which wars were to be fought.

The public appears to be largely ignorant of actual financial mechanisms, but there is not much supply of open educative information either. Ferguson’s book gives a bulk of accessible explanations and a relatively transparent history of money, though there is no lack of jumps in financial terminology and arguable “common sense” still. Financial services are clearly valued nominally much better than human labour and primary nature’s goods. That circularly explains the distressing monoculture of financial economy, as whims of creditor’s legitimation are taken more seriously than anything else.

swchenkinphd said...

Thank you for bring so much clarity to this issue. No wonder the fascists don't want us to barter goods and services. We would have no need to borrow money, and we wouldn't be worried about being sued (because we wouldn't have anything). We couldn't be bamboozled into buying health insurance because we could trade a chicken for a doctor's visit. We would be growing our food and trading it to each other, so Monsanto would be in a quandry. We would even be able to engage in whatever religions we wished because we wouldn't need to look respectable in order to get a job. Well, probably only half of us will have jobs in the next two years, so the sooner we get to bartering the better!

Pangolin said...

I'm missing the bit where it's explained that monetary economies destroy the marginal value of labor. Where labor is exchanged for money marginal laborers; the handicapped, elderly, sick, women with small children, are frequently denied entry into the monetary economy.

A tribal or clan economy uses every resource it can get. A person who can knit a few socks or weave a few baskets a week is given a corner inside some shelter to sleep and a share of the porridge. Woolgathering, hedging, berry picking, fuel gathering, goose herding and so forth are all tasks that contribute to the general welfare may not require the skills, energy and mobility of primary energy-harvesting activities.

Currently, the globe suffers from vast surpluses of labor at the same time that tertiary economic activities are destroying primary productivity. Much could be done to mitigate these harms but mitigation measures such as composting, garbage sorting, watershed maintenance, fisheries monitoring and so forth do not generate "monetary returns" to individuals. The returns are distributed to large groups over time.

The inability of monetary systems to value available inputs of labor while they destroy resource incomes might be an Achilles heel.

tata_23 said...

Ah, yes. Money. Two things pointed out in your post< John, that are very key to the problems that industrialized corporate society faces - how does money and value get placed onto resources that are very difficult to quantify using money, and, money is only as valuable as what it can buy.

How does human life get priced? Human health? When a corporation is going to make money doing something that will cause death, injury or ill health to humans, how does that monetary value get decided? Who decides? How does a company decide to do a recall of a hazardous product? When how many people die? Five percent? Ten? This is a major moral, ethical and cultural laps in our current society, and has been for the many centuries money has been used by the ruling classes.

If money is only worth what it can buy, then moving toward a barter economy is going to devalue money further. If food can be bartered for easier than money can be used to buy food, then money will lose value as a whole. Call me crazy, but I see this as a good thing.

If I want to get a bushel of beans and my neighbor has them, but has less use for money than for my big jug of home-made whiskey, I'll happily trade her my jug for her bushel. But why not just buy the whiskey with money? Because I have the whiskey and am more willing to accept beans for it than money and vice versa. Plus, we're neighbors and part of a community. The intangible value of money goes poof.

Rick Larson said...

Money is the credit to borrow from future resources. This was the ability in the buildup the infrastructure necessary to harvest massive amounts of fossil fuel energy leading to the accompanying side effects.

I believe 1995 was the pinnacle of ease - in total - for human life, as the combination of the availability and cost of credit and availability and cost of energy to these many humans was at a highpoint (yes, low point to some of you - who are by far in the minority on this style of thinking).

The addiction is now, again, total.

Well, it might be fancified thinking to want an easy long-term transition from the "thermodynamic economy" to one of being "financed" by the Earth's ecosystem, but I think not.

Easy to hope for though. :-)

puny human said...

Hello JMG,
I was delighted to discover your blog. You'll keep me up way past my bedtime!

I recently read The Acquisitive Society by R.H. Tawney, who was a Christian socialist and economic theorist of the 1920s. His contention was that those who do not produce do not deserve to profit from the production of others. In this, he was referring to the tertiary economy. He said of bankers and owners, "The man who lives by owning without working is necessarily supported by the industry of someone else, and is, therefore, too expensive a luxury to be encouraged."
Best wishes,

jesus said...

I recently came accross your blog and have been reading along. I thought I would leave my first comment. I dont know what to say except that I have enjoyed reading. Nice blog. I will keep visiting this blog very often.


libramoon said...

I hope you don't mind that I forwarded this post to the Seers and Seekers Yahoo group: