generating economic inequality

[lemur]

Often we discuss economic inequality and the possibility of re-distribution to solve it. But how often do we consider the causes of inequality to begin with? Consider a simplified example of an economic society in the form of a single corporate, e.g. Walmart. In that corporation, you have numerous positions with different pay-levels. Since there is only one corporation in this economy, people can only spend their income at the store they work for. Thus, spending = GDP and GDP = corporate revenue. So, if anyone wants to make more money, either GDP/revenue has to increase or others have to take pay cuts, correct? Yet, for GDP/revenue to grow, people have to spend more money, which means that they either have to buy more or prices of their current shopping cart have to increase.

 

So now extend this logic to the broad economy as we know it: Most people are trying to increase their personal income and that of their businesses. Yet people are also trying to reduce their budgets and save more of their income. So if GDP is going down and people are still trying to increase their income, doesn't that put pressure to cut income for other people? If these cuts are controlled by taxation to be taken from the wealthiest people and corporations, don't those people and corporations have to make cuts to their expenditures, resulting in lost income for their employees and other beneficiaries? If so, how far should this be allowed to go? What happens when/if everyone is brought to the same income level? Will people then suddenly be satisfied with their incomes and stop trying to generate more revenue to be able to have raises and save money for the future/retirement? What will limit the will of the people to always increase the level of their material consumption and thus make, spend, and save more money?

[CaptainPanic]

Are all the employees also shareholders, or does the profit go to a selective few?

 

In your first paragraph, I really think you should explicitely include profit. Profit is a part of the revenue. Revenue is all the income, and it pays for the salaries. But profit goes to investors...

[lemur]

Are all the employees also shareholders, or does the profit go to a selective few?

 

In your first paragraph, I really think you should explicitely include profit. Profit is a part of the revenue. Revenue is all the income, and it pays for the salaries. But profit goes to investors...

Yes, and corporate expenditures to external contractors should also be included, but that would begin to undermine the simplicity of modeling the economy as a single corporation. You could conceive of shares as being sold to people according to their wages, as a form of savings. It just adds to the issue of people wanting to increase their income and that income requiring either increased revenue/GDP OR budget cuts in other incomes.

[CaptainPanic]

What I mean to say is:

You can lower costs (reduce wages) to lower the product price...

You can lower costs (reduce wages) to increase profit (increase income of someone else).

 

These are two fundamentally different things.

[lemur]

What I mean to say is:

You can lower costs (reduce wages) to lower the product price...

You can lower costs (reduce wages) to increase profit (increase income of someone else).

 

These are two fundamentally different things.

Right, and you can lower the price and reduce costs to eliminate profits, but the point is that if the shareholders are also employees, then profits/dividends are just another means of distributing revenues besides wages and price discounts. Price discounts work a like universal wage-increase for everyone who buys the discounted product. Profit/dividend increase works like a wage-increase according to the amount of stock people own. Wage-increases just increase the amount of money distributed to the people who get the raises. The issue I was trying to get at is that income-increases for some people reduce the amount of revenue/GDP available to divide up among everyone else. Likewise, raising GDP/revenue without raising the amount of goods produced requires inflation, which amounts to a wage-decrease across the board. And even if the amount of goods is increased without raising prices, people require more income to buy the new goods if they don't want to have to give up buying some other goods. So, what I'm trying to say is that people don't want to make more money, spend more money, and still they claim that doing so doesn't put pressure on the economy to reduce the means of consumption for others.

 

 

 

[Edtharan]

The problem you have is with treating money as the fundamental unit of an economy. Money is only a representing the unit (which is value) and not the fundamental unit itself.

 

In the example, you find it hard to understand how the economy could grow because all that is happening is good and money are being moved around. If someone can more trick others into paying more than what something is worth, then those people get the money and the other loose out.

 

Because money is a finite resource, it ends up being a zero sum system, and in a zero sum system, if someone is able to improve their position then someone (or some others) have to loose out by an equal amount.

 

But, for an economy to grow, it can not be a zero sum system (you can't get growth out of a zero sum system, except by external inputs). However, by looking at what goes on in even a simple trade, you can see that trades are not zero sum systems.

 

Just say I have a Spider-man comic and you have a Batman comic. Each comic has a value to its owner and the comic the other person has also has a value.

 

this means there are 4 values:

1) The value I place on my Spider Man comic

2) The value you place of your Batman comic

3) The value I place on your Batman comic

4) The value you place on my Spider-man comic

 

Now, if I place more value on your Batman comic than I do on my Spider-man comic (maybe because I haven't read your Batman Comic), then I could end up ahead by trading my comic for for your comic.

 

If you place more value on my Spider-man comic than you place on your Batman comic (again, maybe because you haven't read it), then you could end up ahead by trading your comic for mine.

 

If we both end up ahead by trading, then this is not a zero sum system, and it means that after the trade, the total value of the system goes up. The economy has grown.

 

Ok, now that was trivial, but it is a good way to explain it.But as a more realistic version more in line with the OP's model:

 

If I am operating the vegetable section of the store and you are operating the meat section of the store, then just eating only what we have, although would fill us up, is not as good as if we had both meat and vegetables in out diets. SO we could both get improvements if we trade meat for vegetables.

 

The value I place on your meat is greater than the value I place on my excess of vegetables, and the value you place on my excess vegetables is greater than the value you place on your excess meat.

 

Because of the differing values we have, we can end up with a non-zero sum system and improve the economy by trading.

 

This means that an economy is not about making money, but increasing value. Money is an abstract potential for value (abstract because it represents it, and potential because it can be traded for value).

 

When you understand these things about economies, a lot of the problems that have been presented actually clear up and no longer become problems.

[Marat]

Why assume at the outset that there has to be a wage differential? First you need a theory of what would be a fair wage. Perhaps people whose jobs give them a sense of power and prestige, allow them to work more creatively with their minds, get to make decisions for other people, require them to spend more of their life enjoying the pleasures of an education prior to starting work, actually receive so many intangible perks by all these factors that they should receive less rather than more income than those who have to scrub the toilets. If those with the former type of job also have to endure more stress from the responsibilities they have, perhaps this balances out their perks, so that the CEO of the company and the toilet cleaners should all get the same wage. My point in this exercise is just to suggest that assumptions about the reasons for paying some people more and others less have to be examined first before we initially construct our model with this inequality-generator built into it.

 

Since all people are legally and morally stipulated to be equal, since the basic human needs of all people are equal, and since doubts can be raised about the traditional reasons for assigning people greater or lesser wages, perhaps the solution should be that all people receive the same wage unless there are special negativities of the work that require compensation, such as the dangers and dirtiness of working in a coal mine.

[lemur]

But, for an economy to grow, it can not be a zero sum system (you can't get growth out of a zero sum system, except by external inputs). However, by looking at what goes on in even a simple trade, you can see that trades are not zero sum systems.

The irony of capitalism is that when an economy grows in terms of real productivity, efficiency, etc. goods and services become more abundant. The consequence of abundance and efficiency of production is that supply-side competition drives the price very low. This means there is enough for everyone to go around and everyone can afford the good(s) because the price has dropped low enough for them to afford it, yet businesses profit less which means lower wages, smaller dividends/profits, etc. Clearly people should be happy that they can get more for less money and welcome income losses in exchange for broader economic access but they don't because they desire social status more than abundance without status.

 

If I am operating the vegetable section of the store and you are operating the meat section of the store, then just eating only what we have, although would fill us up, is not as good as if we had both meat and vegetables in out diets. SO we could both get improvements if we trade meat for vegetables.

 

The value I place on your meat is greater than the value I place on my excess of vegetables, and the value you place on my excess vegetables is greater than the value you place on your excess meat.

And this would cause capitalism to be an amazing economic system if people didn't figure out that they can get by with producing less by investing in someone else's meat and vegetables so that they can consume them without having to put in the labor of producing them. However, most people do not perform direct productive labor but rather do something to make money that allows them to consume what others produce while keeping them from reaching a level of independence where they no longer have to perform such work if they choose not to. In such an economy, it becomes a zero-sum game because people are trying to extract maximum value out of minimum amount of productivity.

 

 

 

Why assume at the outset that there has to be a wage differential? First you need a theory of what would be a fair wage. Perhaps people whose jobs give them a sense of power and prestige, allow them to work more creatively with their minds, get to make decisions for other people, require them to spend more of their life enjoying the pleasures of an education prior to starting work, actually receive so many intangible perks by all these factors that they should receive less rather than more income than those who have to scrub the toilets.

Ok, so who is going to provide them with everything they consume while they are enjoying their lives and getting educated? If everyone gets to do that, does that mean educated people are going to perform the most basic forms of labor like toilet cleaning, farm labor, food service, etc.?

 

If those with the former type of job also have to endure more stress from the responsibilities they have, perhaps this balances out their perks, so that the CEO of the company and the toilet cleaners should all get the same wage.

Yet the CEO still would get to sit in an office and have meetings while the toilet cleaner would have to clean the toilets without any extra pay.

 

My point in this exercise is just to suggest that assumptions about the reasons for paying some people more and others less have to be examined first before we initially construct our model with this inequality-generator built into it.

The point is/was that when people complain about recession and wanting more money, they are actually pushing to raise their incomes at the expense of other people's incomes. Either that or GDP has to go up, which it can only do if people spend more money, which means they will want more income, etc. So the impetus for inequality is greed (dare I call it that when referring to the middle- and working-classes?). Presumably if everyone would be satisfied with making less money at current GDP-levels, there would be money to pay to those who aren't getting paid or are getting paid very little. By complaining about the rich, the middle-class and working-class are really just asking for more money for themselves when if they were really concerned about inequality, they would be looking for ways to improve the standard of living of the poorest people first, even if that meant lowering their own standard of living some. Instead they scapegoat the rich and keep telling themselves that everyone could have everything they want if the rich gave up all their wealth.

 

Since all people are legally and morally stipulated to be equal, since the basic human needs of all people are equal, and since doubts can be raised about the traditional reasons for assigning people greater or lesser wages, perhaps the solution should be that all people receive the same wage unless there are special negativities of the work that require compensation, such as the dangers and dirtiness of working in a coal mine.

That's possible, but if everyone received the same wage and spent it, GDP would have to be paid out equally to everyone, which would also mean that everyone would have access to more or less the same goods. In that case, it really wouldn't be a problem to have Walmart as the only business that supplies everything to everyone at the same status level. To choose some business with a higher status than Walmart would make no sense because status only works as status if there is vertical stratification.

 

 

[Marat]

Not everyone would want an education, even if it were free and they were paid a salary to do it, as many students in Europe now already receive. So there really wouldn't be a danger of everyone signing up for an education so that M.D.-Ph.D.s would be cleaning toilets while grumbling to themselves about the odds of getting e coli from their work. The population would be willing to support additional education for some people since those with extra education could add value to the society by bringing their enhanced skills to bear in serving the needs of other people. This is why the old Soviet Union refused to let Ph.D.s emigrate: since society had paid for their education, they were expected to pay it back to that society by working as a social resource. In the model I'm suggesting the cost of the public accessing professional services would be discounted by the public taxpayers' contribution to the education of those professionals. Education would then cost less, or nothing, or would even have a salary attached to it (Swedish students now receive $20,000 a year from the government for studying), but in return visits to the doctor, lawyer, accountant, architect, etc., would be less costly. The economy would operate more by social solidarity than monetary exchanges.

 

True, the CEO would still have the perk of working in an office rather than cleaning toilets, but wages would be equalized by paying more to people who had unpleasant jobs and less to those with pleasant jobs, since there would be less work stress requiring compensation.

 

The world has historically experienced long periods of no economic growth, such as in the Middle Ages, when the absence of technological innovations and the static forms of life under feudalism prevented people from demanding higher wages to compete with others for additional possessions to confirm their status. Similarly, in a command economy, any increases in growth achieved through technological advance could be equally distributed so that they would not inspire any competition in the population for higher material status. If wealth were essentially equally distributed, people would cease to define themselves, as they do now in a capitalist economy, by the trash and trinkets that they own, and would instead be able to think of themselves in more truly human terms as the emotional, intellectual, and spiritual beings that they really are.

 

Incidentally, G. W. F. Hegel in his 'Introduction to the Philosophy of Right' deals with some of the themes you discuss with respect to competition for status through differential ownership of goods creating relative poverty.

[lemur]

Not everyone would want an education, even if it were free and they were paid a salary to do it, as many students in Europe now already receive. So there really wouldn't be a danger of everyone signing up for an education so that M.D.-Ph.D.s would be cleaning toilets while grumbling to themselves about the odds of getting e coli from their work. The population would be willing to support additional education for some people since those with extra education could add value to the society by bringing their enhanced skills to bear in serving the needs of other people. This is why the old Soviet Union refused to let Ph.D.s emigrate: since society had paid for their education, they were expected to pay it back to that society by working as a social resource.

If working class culture valued intelligence and intellect, things would be much different. What currently occurs a lot in western culture is that working class culture is dismissive of intelligentsia as pretense and ignorance about what they believe life is truly about, submitting to economic authoritarianism and getting paid for obedience. Many think that university 'types' are just privileged rich kids who are exempted from what they see as "real life," i.e. unquestioning obedience within a management hierarchy. This is why people are skeptical of education and democracy generally. They see it as a diversion from the authoritarianism they see as controlling "the real world."

 

In the model I'm suggesting the cost of the public accessing professional services would be discounted by the public taxpayers' contribution to the education of those professionals. Education would then cost less, or nothing, or would even have a salary attached to it (Swedish students now receive $20,000 a year from the government for studying), but in return visits to the doctor, lawyer, accountant, architect, etc., would be less costly. The economy would operate more by social solidarity than monetary exchanges.

Solidarity with everyone who cannot be excluded from the system. No social professionals want to increase their workload without a corresponding pay raise, so I don't see how that culture is practically any different from a more capitalist one in which clients are excluded by how much they are willing to pay for services. In one system, the provider/government chooses who receives services and who doesn't whereas in the other, anyone can opt for services if they are willing to deal with the bill that comes afterward.

 

True, the CEO would still have the perk of working in an office rather than cleaning toilets, but wages would be equalized by paying more to people who had unpleasant jobs and less to those with pleasant jobs, since there would be less work stress requiring compensation.

In that case, what would probably happen is that no one would want to get stuck with a low-paying managerial job and those that did would be ridiculed for doing so out of laziness. Further, workers would likely vie to exclude each other from their specialty industries in hopes of sharing the higher-wage positions among fewer people, hence increasing the scarcity and therefore elite status of their positions. If, as under communism, labor was celebrated as heroic, there would also be much egoism and machismo among the laborers with the hardest jobs. How would that result in equality?

 

If wealth were essentially equally distributed, people would cease to define themselves, as they do now in a capitalist economy, by the trash and trinkets that they own, and would instead be able to think of themselves in more truly human terms as the emotional, intellectual, and spiritual beings that they really are.

Actually, distributing bountiful wealth causes materialism to become wider-spread. What you are referring to is more what happens among people of any class-status who, for whatever reason, experience some spiritual awakening due to trauma or other life-changing revelation. Such people may reject materialism since they come to see it as superficial nonsense compared to the deep spiritual satisfaction they have come to appreciate from the most basic aspects of human experience.

 

Incidentally, G. W. F. Hegel in his 'Introduction to the Philosophy of Right' deals with some of the themes you discuss with respect to competition for status through differential ownership of goods creating relative poverty.

I haven't read any Hegel first-hand, and very little Kant. Thanks for the tip.

 

 

[Athena]

Often we discuss economic inequality and the possibility of re-distribution to solve it. But how often do we consider the causes of inequality to begin with? Consider a simplified example of an economic society in the form of a single corporate, e.g. Walmart. In that corporation, you have numerous positions with different pay-levels. Since there is only one corporation in this economy, people can only spend their income at the store they work for. Thus, spending = GDP and GDP = corporate revenue. So, if anyone wants to make more money, either GDP/revenue has to increase or others have to take pay cuts, correct? Yet, for GDP/revenue to grow, people have to spend more money, which means that they either have to buy more or prices of their current shopping cart have to increase.

 

So now extend this logic to the broad economy as we know it: Most people are trying to increase their personal income and that of their businesses. Yet people are also trying to reduce their budgets and save more of their income. So if GDP is going down and people are still trying to increase their income, doesn't that put pressure to cut income for other people? If these cuts are controlled by taxation to be taken from the wealthiest people and corporations, don't those people and corporations have to make cuts to their expenditures, resulting in lost income for their employees and other beneficiaries? If so, how far should this be allowed to go? What happens when/if everyone is brought to the same income level? Will people then suddenly be satisfied with their incomes and stop trying to generate more revenue to be able to have raises and save money for the future/retirement? What will limit the will of the people to always increase the level of their material consumption and thus make, spend, and save more money?

 

Gross national product stopped products long ago. Interest rates and other non product things are added into our GNP, and we no longer have a industrial product based economy. We have an imaginary economy where millions of imagined dollars can disappear over night, unlike 12 box cars of manure that does not disappear.

 

We are importing more than we export, and that means our wealth is leaving, and buying more importers, included imported oil is going to improve our economy.

 

Oregon is up roar because of drastic cuts, especially in education cost. Other states have promised more in pension plans than they can cover. We been living in make believe economic world, and I am amazed we got away with it this long.

 

You might begin with a question about how an economy grows? We seriously need to get real about how an economy works. We need to understand this before we can consider anything else.

 

The irony of capitalism is that when an economy grows in terms of real productivity, efficiency, etc. goods and services become more abundant. The consequence of abundance and efficiency of production is that supply-side competition drives the price very low. This means there is enough for everyone to go around and everyone can afford the good(s) because the price has dropped low enough for them to afford it, yet businesses profit less which means lower wages, smaller dividends/profits, etc. Clearly people should be happy that they can get more for less money and welcome income losses in exchange for broader economic access but they don't because they desire social status more than abundance without status.

 

That doesn't work. Man, the bank wants those payments, car insurance is mandatory and medical insurance keeps rising, the price of milk goes up, etc.. A cut in pay means doing without and for some this means doing without to the degree of harming the well being of the family. Perhaps you should spend a year as a migrant farmer, and donate the cost of supporting two children to your favorite charity, then come back and tell us about economics. Or try one of this great jobs in an economic ghetto of a major city, where the laborer is exploited by both industry and property managers.

Edited May 21, 2011 by Athena

[lemur]

Gross national product stopped products long ago. Interest rates and other non product things are added into our GNP, and we no longer have a industrial product based economy. We have an imaginary economy where millions of imagined dollars can disappear over night, unlike 12 box cars of manure that does not disappear.

You should really start a new thread on this issue because it is a very complex subject that has to be broken down to the concrete level to be digested. A service can function as a substitute for a good or it can be a means to dissipate surplus human capital. If you can produce 3000 meals/day for 1000 people using 100 workers, that leaves 900 fed-workers available to do other things. It is in this context that you can begin to contemplate how a service-based economy utilizes surplus human labor as a means of leveraging control over the means of producing the basic necessities that facilitate all the surplus labor in the first place.

 

We are importing more than we export, and that means our wealth is leaving, and buying more importers, included imported oil is going to improve our economy.

You seem to be one of those nationalist economists who always talk as if everyone with the same nationality is part of the same economic corporation. That is simply not the case. Corporations utilize different currencies and markets to increase THEIR corporate exports and reduce the cost of their imports. Why do people expect these businesses to put national interests above private interests?

 

You might begin with a question about how an economy grows? We seriously need to get real about how an economy works. We need to understand this before we can consider anything else.

It depends if you mean GDP or material productivity and/or total happiness. Wealthy economies can have large GDP growth without raising the standard of living for people beyond the privileged classes. Providing a person with little to no income with affordable shelter, food, and health care doesn't raise GDP much unless you drastically subsidize providers, which makes the services unaffordable except via government gatekeeping. Simply getting some volunteers together and building housing with donated materials does nothing to raise GDP but it drastically increases the standard of living for the homeless person who no longer has to sleep in a tent outdoors.

 

That doesn't work. Man, the bank wants those payments, car insurance is mandatory and medical insurance keeps rising, the price of milk goes up, etc.. A cut in pay means doing without and for some this means doing without to the degree of harming the well being of the family. Perhaps you should spend a year as a migrant farmer, and donate the cost of supporting two children to your favorite charity, then come back and tell us about economics. Or try one of this great jobs in an economic ghetto of a major city, where the laborer is exploited by both industry and property managers.

People don't get that costs of living aren't fixed. You always talk as if the poor are haplessly at the mercy of landlords, retailers, etc. That mentality needs to change. It is unacceptable for businesses to refuse to budge on prices in order to squeeze money out of people who don't have it. Stop robbing the rich to feed the poor and start demanding that the people with food make it accessible to everyone without extorting the rich.

 

Sorry to sound a bit politically adamant in this post. It just seems like the simplest way to communicate these ideas at this moment.

 

 

[Edtharan]

The irony of capitalism is that when an economy grows in terms of real productivity, efficiency, etc. goods and services become more abundant. The consequence of abundance and efficiency of production is that supply-side competition drives the price very low. This means there is enough for everyone to go around and everyone can afford the good(s) because the price has dropped low enough for them to afford it, yet businesses profit less which means lower wages, smaller dividends/profits, etc.

I agree with this. Have you ever heard of a Post Scarcity Economy (I have talked bout it in other posts here).

 

When you look at capitalism (especially when combined with mass production) it drives the economy towards a Post Scarcity Economy.

 

And this would cause capitalism to be an amazing economic system if people didn't figure out that they can get by with producing less by investing in someone else's meat and vegetables so that they can consume them without having to put in the labor of producing them. However, most people do not perform direct productive labor but rather do something to make money that allows them to consume what others produce while keeping them from reaching a level of independence where they no longer have to perform such work if they choose not to. In such an economy, it becomes a zero-sum game because people are trying to extract maximum value out of minimum amount of productivity.

You are getting caught up in thinking that money is the fundamental unit of an economy here. Ignore money and think how is the person not actively involved in production adding value.

 

If a person was just leaching off the productivity of the produces without adding value themselves, they effectively reduce the value of any transaction they are involved with. However, if their involvement adds to the value, then all parties in the transaction can gain value.

 

For instance. Someone who just manages the logistics of distribution (eg: a shop keeper) adds to the value, but does not contribute to production because they free up other people to peruse other activities that can add even more value to the system.

 

It effectivly means that people are involved in the production of Value, not necessarily the production of goods. Services and managers are all still involved in the production of value, even though they are not producing any "thing".

 

We are importing more than we export, and that means our wealth is leaving, and buying more importers, included imported oil is going to improve our economy.

Again, this is thinking in terms of money as the fundamental unit of an economy. When importing, what you are importing can add value to your economy, even if it costs you more money than you get from export.

 

Imagine that you import farming equipment so that you can increase the amount of productivity of your farm. Now, this might, at first cost you more than you export, but because of your increased productivity, you can divert some of that into other activities that can further increase the value of your society, and thus increase the amount you export.

 

Remember, money represents value, so as the money is exchanged back and forth, it carries with it the value the economy has given it, and the stronger the economy it is coming from the more value it has.

[lemur]

I agree with this. Have you ever heard of a Post Scarcity Economy (I have talked bout it in other posts here).

 

When you look at capitalism (especially when combined with mass production) it drives the economy towards a Post Scarcity Economy.

Yes, this is basically what I'm talking about regarding production/consumption efficiency and abundance and therefore decreasing GDP. However, there have been people who have insisted that abundance causes unprecedented profits, which is true in a material sense but not in a financial sense.

 

You are getting caught up in thinking that money is the fundamental unit of an economy here. Ignore money and think how is the person not actively involved in production adding value.

depends what is meant by "value."

 

For instance. Someone who just manages the logistics of distribution (eg: a shop keeper) adds to the value, but does not contribute to production because they free up other people to peruse other activities that can add even more value to the system.

it's not clear what you're referring to here.

 

It effectivly means that people are involved in the production of Value, not necessarily the production of goods. Services and managers are all still involved in the production of value, even though they are not producing any "thing".

Again, it depends what you mean by "value." Why does value need to be produced, btw? Why can't people decide for themselves how to value goods?

 

 

 

[Edtharan]

Again, it depends what you mean by "value." Why does value need to be produced, btw? Why can't people decide for themselves how to value goods?

Actually this is the point. Different people value things differently. Think back to my spiderman/superman comic example.

 

I valued the spiderman comic differently to how you would have, just as I valued your superman comic differently from what you would have.

 

The point is that people value things differently. If they didn't there would be no advantage to trade and no economy could ever work.

 

 

For instance. Someone who just manages the logistics of distribution (eg: a shop keeper) adds to the value, but does not contribute to production because they free up other people to peruse other activities that can add even more value to the system.

 

it's not clear what you're referring to here.

What I am referring to is that although someone who just manages logistic (getting people what they want), instead of producing anything means that the people receiving the goods that were produced has freed up the time of all the people who received them from having to go and get them themselves.

 

To put it into a sound bite sentence: Convenience has value.

 

Convenience saves time, and time has a value. It is what you can use to produce something. Thus, if someone provides the service that gives you convenience, then they have generated value without "producing" anything.

 

This was to show you that your post where you said "it becomes a zero-sum game because people are trying to extract maximum value out of minimum amount of productivity."

 

I showed that it is not only productivity that can increase value, but that there are other actions besides production that can increase value, thus negating your argument about zero-sum systems.

 

Yes, this is basically what I'm talking about regarding production/consumption efficiency and abundance and therefore decreasing GDP. However, there have been people who have insisted that abundance causes unprecedented profits, which is true in a material sense but not in a financial sense

GDP is not actually a good measure of the wealth of an economy. At best it is an indirect measure. It is more a measure of the "activity" of an economy, not it's overall volume.

 

Take for example this situation:

 

Imagine you are playing a game of Monopoly. Say you had "Pacific Avenue" and I had "North Carolina Avenue". Both are worth $300.

 

Now, if I sold you my North Carolina Avenue for $300 (exchange for the money), and then you sold me your Pacific Avenue for $300.

 

Then $600 of activity will be resisted in the GDP, but no value has actually been added to the system (because both being green, we don't end up in a position to increase what we have any more than we did).

 

This shows that GDP does not actually reflect the value moving around (increasing or decreasing) in an economy. GDP looks at money, not value, and that is why it doesn't truly reflect what is going on in an economy (but it is easier to measure than value and it does come close in the real world).

 

Now, about scarcity. There is value in scarcity, but that is not the only value in goods and services. Infact, as the example of the logistics manager shows, there is value in reducing scarcity (by getting people what they want when they want it). In fact, much of today's manufacturing is about reducing scarcity and getting the value in that.

 

At the moment, the market for reducing scarcity is new and relatively untapped, but this market is not infinite (large, and growing, but not infinite). Eventually this market will become saturated too. But there are still other sources for value out there that can be exploited to earn value and keep the economy operating.

 

However, there are those that can't see these, or are not in a position to exploit them. These people have an invested interest in keeping the economy in a scarcity economy.

 

This is not the first time this sort of thing has occurred either. The invention of the printing press, specifically the Gutenberg/movable type printing press was one such event (industrial revolution was another).

 

When this occurred, there were many people who entrenched in the old way of producing books, and the printing press threatened this. They said that this would destroy the literary industry, that such devices would rob authors of any way of making a living.

 

History shows that the reduction is scarcity did exactly the opposite. The literary industry is massive today, and the results of that and the new markets set up to exploit the new forms of value that such reduction created is probably the main driving force behind modern information technology (and interestingly the same thing is happening again with pirated movies and music, reduction in scarcity, etc - even the term "pirate" comes from the whole printing press situation as the operators of the printing presses were called pirates too - although back then piracy was a capital offence that carried the death penalty ).

 

Any move towards post scarcity is a disruptive move as there are people and organisations that are designed to profit from scarcity. However, these individuals and organisations will have to change as the structure they built their businesses from actually causes the drive to reduce scarcity.

 

Competition in a full market means selling more and selling them for less. This is the force that drives production towards post-scarcity.