Tuesday, November 24, 2009

Individual Responsibility

Some topics are difficult to discuss. This is one of 'em.

"People don't take responsibility for their actions."  Those are not my words; they are common words. That is what makes the topic difficult to discuss. There is a magical power, a holiness to the words, and anyone who brings the subject up but doesn't use the right words is gonna be in trouble.

Do I lack the words?

I take responsibility for my actions. Most people do, I think, though I am no judge of character. But I don't care about that.

I care about the economy. About understanding the economy. About fixing what's wrong with it. It fascinates me. It's a big, complex system that needs to be tweaked. I have a tweak that no one else has thought of. And I want people to think about it. But some other time, maybe. That's not what this post is about.

Some people say we should use gold for money. To them I say: Go ahead. Use your gold for money. I'll accept gold as payment. I don't think I'll use it for payment myself, but you can. You think it's the right thing to do. So, go ahead. Do the right thing. Take the initiative.  Individual responsibility, and all that.

What's wrong with this picture?

The economy doesn't work that way. That's what's wrong. You can spend all the gold you want. But it you're the only one doing it, or one of only a few, you'll never see your gold again. Because other people will spend paper and hoard gold.

I suppose this says something about intrinsic value. It also says something about the way the economy works: Important as they are, individual decisions are always made in context. This "context" is the atmosphere arising from the ponderous mass of individual decisions people make every day. That atmosphere influences our behavior.

People who say we should use gold for money, don't use gold for money. It would be self-defeating to do so. It would be self-defeating because people in general don't use gold for money. Gold doesn't circulate. The atmospheric conditions are unfavorable.

People are like electrons going about their business. Their movement generates a field. That field exists apart from any of the electrons, and influences their behavior. Individual responsibility is important. But it is only one side of the coin. The other side is the economic environment. The field generated by economic activity. The context. The atmosphere.

In my previous post I wrote:

I am (apparently) the ONLY person who thinks our excessive reliance on credit is due not to individual behavior, but to ECONOMIC POLICY.

Economic policy is like magnets used to force changes in the field. Changes, like improving the average rate of economic growth by inducing us to spend more. Changes, like achieving price stability by restricting the increase in the quantity of money available to spend.

Growth and price stability. Those were the two main goals back in the 1970s. Since then, the average rate of economic growth has continued to decline. And we've given up altogether on price stability. Now we hope for inflation-rate stability. We have lowered our standards.

"You have to have lived in the 1950s and 1960s to have experienced a good economy."
-- Jude Wanniski in Reader's Digest, Feb 1995, p.49

"The economic climate during the postwar period from 1946 to the mid-1960's was favorable, often exuberant" -- Sidney Homer & Richard Sylla, A History of Interest Rates. p.367

The economic environment changes as time goes by. The post-WWII period was great. Why? During the Depression and the wartime rationing, people didn't buy much. So after the war people were ready to be customers again. But there is another, more important reason: Wartime spending put money in people's pockets. After the war there were customers with money. You want to make our economy vibrant? That's what you need -- customers with money.

This is the economic environment that we need to re-create today. Not customers with lots of debt. Not customers with lots of credit-cards. Customers with money.

When the whole world is a mess, what may be the cause? Can it be that all of us, individually, got messed up all at the same time, individually? Or is it more likely that the economic environment is messed up, that environment which affects us all? The economic environment is the cause, I say. Conditions created by failed policy, I say. And failed policy itself.


Anonymous said...

I think people should listen to you. You understand what is happening and how to fix it.

More math in high school would help others understand, perhaps.

Dredd said...

In the sense of the notion of "world economy", possibly we could extrapolate this out to include a concept of "individual" countries.

If so we might say that each nation has an individual responsibility to not harm other nations economically.

It takes corruption to corrupt an economy no matter what size it is.

The Arthurian said...

Ah, here it is:

"Neither an omnipotent superstate nor a loose association of 'free nations' but a community of nations of free men must be our goal." -- F.A. Hayek, The Road to Serfdom, Chapter 15.

I don't know how "this" nation can force "that" nation to understand that it has an individual responsibility not to harm this nation. I think this nation has to rely on economic policies that serve its own best interest: another application of the invisible hand.

Dredd, you say "It takes corruption to corrupt an economy...." To understand your meaning I re-word it thus: It takes dishonesty to destroy an economy....

I'll say sure, dishonesty can destroy an economy. But so can bad economic policy. And I don't doubt there is dishonesty. But I see bad policy everywhere, and I see it supported by everyone. This thing that you attribute to corruption, I attribute to bad policy and incompetent policymakers.

It didn't come up, but the point of my post is to show that an economic environment exists.