Sunday, March 25, 2012

A Letter To A Friend

The division of labor is indeed a wonderful thing. For it to work however a sizable suite of liberal infrastructures must first be in place. One of the most important and least understood is the money system itself. It is an infrastructure, no mere thing, and it has important counterintuitive properties that cause its human inventors to consistently and systematically abuse themselves with its operation. I’ll address the nature and cause of this self abuse below, for now suffice to note that money is an artifact of man created to solve a particular set of problems, which it does. But aspects of the system are profoundly different from anything found in nature and can confuse us with an artificial logic that, while of our own creation, wreaks havoc on our evolved heuristics. Keynes would have been, and any real Keynesian will be the first to suggest the function money was invented to fill was efficient exchange for the purpose of strengthening the community, the state and its people. And his work centered on the all too human reasons why it periodically fails. 

I think we can agree the world, no less the subset of human institutions, is far too complex for anyone to fully understand. A result of this recognition was the invention of science, a vast set of institutions built around the need to codify what can be measured in a testable and document-able way so that functional generalizations to be universally depended upon can be drawn. The study of economics from Petty forward has been driven by a scientism seeking to document the underlying principles of economic activity in such a form. Like money, however, this scientism reduces understanding to mathematics which by nature excludes most of what is valuable in lived human experience. The scientism imposes a form that makes it easy to forget economics is the study of a subset of human behavior, it is a sociology of that human behavior engaged with the system of money. From its founding until Keynes economics assumed an identity between the math and the behavior it represented, he rejected this.