The Analytical Basis of a Humane Economy: A Speculation

Blog 2

It is necessary in proposing a new analytical model to show critical failure in the old model [Kuhn, 1967]. How hard is that with classic economics? 1872,1929, 2008. It's a piece of cake. It is not that those catastrophes occurred. It is that they were unexpected and in each case complex market interventions were required to keep the factories running,
The problem is not capitalism. If markets did not exist, we would invent them. Talent is a naive concept. It exists in the mind long before it is recognized in the person. That economic talent would be graced with unequal reward is intuitive. Likewise the essential arbitrage relationship, that greater risk requires greater reward, is very real and very human. Capitalism, in itself, is humane in the sense that it is all too human. We are too clever by half for our own good and we have win/lose outcomes wired into our cells. Capitalism is not the problem. It is the myopia of the economic analysis.
That analysis, in the process of utilizing available technology, has created our productivity driven mass industrialism with its aggregate demand and GDP. It is by these metrics definitely not human scale. It is by definition, in terms of any specific individual, not humane. Throw in the machines that make it go and the fact that its mechanisms manage to reduce humans to minions of the automated machine process and it is not incidentally inhumane. It is actually hostile. So, how do we characterize and analyze economic behavior so as to create a humane economy? Here is my speculative, somewhat naive, try:

Value Dilution Economics
There are two major aspects to economic behavior and, while each is perfectly comfortable with classic economics and accounting, the relationship of the two, production and distribution, is imperfectly expressed in the current model. To correct this, I propose two theoretical units, Point of Manufacture, POM, the point that the product leaves the factory, and Point of Sale, POS, the point that the product is in the possession of the end consumer. The number of socioeconomic sectors, education, basic income etc, between POM and POS I label x.
Arbitrarily I give each POM and POS a numeric value of 1. I then write the equation:
          (POM + POS) / x = y
y is the dilution factor of the 'goodness' of the money used in all the transactions. Obviously, the value of y will fall between 1 and 0. Why do this? Because money, a value calculus allowing the comparative valuation of disparate products and services in a market, has only economic value. The social utility of economic activity varies inversely with its economic utility. Using money for its social utility dilutes its value much as putting too much in circulation does.
A humane economy has a target value of .5 because any greater number will be excessive economic utility and any lesser number will be excessive social utility. It is a matter of plugging this equation in across all transactions to calculate the goodness of a currency.
Material existence, the stuff of economics, lasts around 75 years at best. Social existence is the stuff of eternity. It only makes sense to balance social utility and economic utility and it makes absolutely no sense to do otherwise.
Do Well and Be Well.

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