Another robot story...

[stone]

Pointed stick, putting the returns from capital into the hands of people who use it to consume would be enough. That would provide demand that would cause more real capital to be made simply in order to meet that demand.
There is no point in building more productive capacity if there are no customers with the means to buy what is produced. And no I don't think the global economy is operating anywhere near full capacity. I do see involuntary unemployment whilst at the same time there are people who aren't getting everything they want.

[Pointedstick]

Pointed stick, putting the returns from capital into the hands of people who use it to consume would be enough. That would provide demand that would cause more real capital to be made simply in order to meet that demand.

True… but now not you're not arguing for an asset tax anymore, just for a citizen's dividend, or even just tax cuts or ordinary pork-barrel spending. Fiscal stimulus to boost demand doesn't require redistributing capital.

There is no point in building more productive capacity if there are no customers with the means to buy what is produced. And no I don't think the global economy is operating anywhere near full capacity. I do see involuntary unemployment whilst at the same time there are people who aren't getting everything they want.

Clearly; I agree. But this is a problem of low demand rather than capital mis-allocation, no? If demand were to increase, wouldn't you expect capital to become naturally re-allocated to those who are able to use it productively?

If all we're really talking about here is slack in the economy, this whole asset tax is unnecessary. Just inject some direct fiscal stimulus, maybe repair balance sheets by forgiving debt, and then demand will increase, boosting returns for those who can use capital to meet the new demands rather than just receive passive income. This will eventually reduce the proportion of "unproductive" capital, either by it getting crowded out by all the new, productive capital, or by encouraging those people who own and control the existing "unproductive" capital (i.e. us) to do something more productive with their capital to earn a greater return.

Right? It seems like this entire conversation is talking about the perceived undesirability of low-risk capital gains caused by a slackened economy that reduces the incentive to boost production due to insufficient demand. If you see that as the true problem, then attack that!

[doodle]

Pointed stick, putting the returns from capital into the hands of people who use it to consume would be enough. That would provide demand that would cause more real capital to be made simply in order to meet that demand.

True… but now not you're not arguing for an asset tax anymore, just for a citizen's dividend, or even just tax cuts or ordinary pork-barrel spending. Fiscal stimulus to boost demand doesn't require redistributing capital.

There is no point in building more productive capacity if there are no customers with the means to buy what is produced. And no I don't think the global economy is operating anywhere near full capacity. I do see involuntary unemployment whilst at the same time there are people who aren't getting everything they want.

Clearly; I agree. But this is a problem of low demand rather than capital mis-allocation, no? If demand were to increase, wouldn't you expect capital to become naturally re-allocated to those who are able to use it productively?

If all we're really talking about here is slack in the economy, this whole asset tax is unnecessary. Just inject some direct fiscal stimulus, maybe repair balance sheets by forgiving debt, and then demand will increase, boosting returns for those who can use capital to meet the new demands rather than just receive passive income. This will eventually reduce the proportion of "unproductive" capital, either by it getting crowded out by all the new, productive capital, or by encouraging those people who own and control the existing "unproductive" capital (i.e. us) to do something more productive with their capital to earn a greater return.

Right? It seems like this entire conversation is talking about the perceived undesirability of low-risk capital gains caused by a slackened economy that reduces the incentive to boost production due to insufficient demand. If you see that as the true problem, then attack that!

Sorry to inject my Malthusian worldview in here, but we always discuss the economy and production and consumption as if they function in a world of pure potentiality without natural restraints. While I agree that the economy is functioning below its productive potential, I think that our environment cannot sustain the modern productive capacity of 7 billion hard working humans and who knows how many more robots. Thank goodness for the lazy, poor people. They are what is standing between us and total environmental destruction.

Right now environmental externalities are not being factored into price of goods. We are consuming an enormous amount of life sustaining natural wealth in order to produce mountains of junk to sustain an out of control consumer driven society that has been brainwashed into believing that the "good life" can be acquired through the "goods of life". Our society is being driven by a fundamentally mistaken philosophy that will end up having us consume the true "wealth" that gives us life in exchange for the monetary representation of that wealth.

[Pointedstick]

It's an interesting line of argumentation, doodle, but let's keep it out of this thread and assume for the purposes of this discussion that resources are infinite. Otherwise, we'll never reach a conclusion here. Once we decide what (if anything) needs to theoretically be done about the demand shortfall vis-a-vis capital distribution, then we can later discuss the environmental impact of that and see if we need to modify our conclusion.

[stone]

Pointed stick, putting the returns from capital into the hands of people who use it to consume would be enough. That would provide demand that would cause more real capital to be made simply in order to meet that demand.

True… but now not you're not arguing for an asset tax anymore, just for a citizen's dividend, or even just tax cuts or ordinary pork-barrel spending. Fiscal stimulus to boost demand doesn't require redistributing capital.

There is no point in building more productive capacity if there are no customers with the means to buy what is produced. And no I don't think the global economy is operating anywhere near full capacity. I do see involuntary unemployment whilst at the same time there are people who aren't getting everything they want.

Clearly; I agree. But this is a problem of low demand rather than capital mis-allocation, no? If demand were to increase, wouldn't you expect capital to become naturally re-allocated to those who are able to use it productively?

If all we're really talking about here is slack in the economy, this whole asset tax is unnecessary. Just inject some direct fiscal stimulus, maybe repair balance sheets by forgiving debt, and then demand will increase, boosting returns for those who can use capital to meet the new demands rather than just receive passive income. This will eventually reduce the proportion of "unproductive" capital, either by it getting crowded out by all the new, productive capital, or by encouraging those people who own and control the existing "unproductive" capital (i.e. us) to do something more productive with their capital to earn a greater return.

Right? It seems like this entire conversation is talking about the perceived undesirability of low-risk capital gains caused by a slackened economy that reduces the incentive to boost production due to insufficient demand. If you see that as the true problem, then attack that!

Pointed stick, check out: http://directeconomicdemocracy.wordpres ... al-assets/

.............Michal Kalecki wrote:

“If full employment is maintained by government spending financed by borrowing, the national debt will continuously increase.  This need not, however, involve any disturbances in output and employment, if interest on the debt is financed by an annual capital tax.  The current income, after payment of capital tax, of some capitalists will be lower and of some higher than if the national debt had not increased, but their aggregate income will remain unaltered and their aggregate consumption will not be likely to change significantly.  Further, the inducement to invest in fixed capital is not affected by a capital tax because it is paid on any type of wealth.  Whether an amount is held in cash or government securities or invested in building a factory, the same capital tax is paid on it and thus the comparative advantage is unchanged.  And if investment is financed by loans it is clearly not affected by a capital tax because if does not mean an increase in wealth of the investing entrepreneur.  Thus neither capitalist consumption nor investment is affected by the rise in the national debt if interest on it is financed by an annual capital tax.”?

Note that Michal Kalecki is not saying that government spending needs to be matched by taxation. He is saying that merely the interest due on the debt needs to be. Clearly he believed that although an asset tax sufficient to pay the interest would not impede the economy (for the reasons he gives), an asset tax sufficient to balance the budget would or else would be politically unacceptable. Presumably he envisioned that endless increases in the productivity of the economy would allow the interest payments for the ever larger debt to stay as a proportionately modest burden and so require an equally proportionately modest asset tax. The only change over time would be the stock of government debt securities held by investors.

My argument is that that stock of government debt securities causes behavioural changes that derail the system. They are risk free financial assets. They enable people to save for the future and be certain of being able to draw down the full nominal amount irrespective of how the economy has performed in the interim. If it were not for such risk free financial assets, the only way to provide for the future financially would be to provide for it in terms of maintaining enough productive capacity to meet that future claim. As such, risk free financial assets disconnect finance from reality. Owners of the risk free financial assets become a constituency who own wealth that as it increases does nothing to increase or even maintain real world capacity to honour that financial claim. So long as the government exists*, the debt will be paid even if the economy is mired in depression.

Currently government securities are issued both as conventional bonds and as inflation protected index linked bonds and of course as cash. Such assets are most valuable when assets that depend on a productive economy are doing worst. In the case of long dated bonds, such as the 50year gilts and 50year index linked gilts we have in the UK, even the prospect of the economy taking a nose dive causes a surge in their market value. In a deflationary depression 50year conventional gilts will make you a fortune whilst a stagflationary depression will do the same for holders of 50year index linked gilts. Both asset classes plummet in price whenever an economic recovery seems likely. I’m not claiming that some cabal of evil geniuses is conspiring to derail the economy on purpose in order to enrich themselves. I’m simply saying that people with power and influence have a safety net that detaches their financial interests from the real economy. If it were not for risk free financial assets then everyone would be painfully aware that in order to preserve any of their wealth the economy would need to be productive. As it stands many people are frankly complacent. They have the view that we ought to ensure an economic recovery so long as doing so doesn’t risk impairing their personal fortune. It is a distant abstract “wouldn’t it be nice”? hope rather than a desperate imperative.  The consequent fall in economic output causes shortages that are suffered by those without the risk free financial assets. In many cases the political force comes from people who do not follow bond prices directly and don’t give the matter much detailed thought; they simply are reassured by professional asset managers that their pensions and savings are well taken care of. They probably genuinely believe that the problem is the fault of those who are suffering its consequences.

Ironically it is those who own the most extensive personal safety net of risk free financial assets who are now behind the political force to ensure that further deficits are brought to a halt even though such expansion is our current way of holding off economic depression. That is an inbuilt characteristic of the system. In my view that is the design flaw that has led us to where we are now. The hope that government debt would not increase relative to economic output has been undone by the behavioural changes induced by holding that debt. The only solution that I can see is to adopt an economic policy that eliminates involuntary unemployment and yet does not increase the stock of risk free financial assets and so does not build up a constituency that is opposed to full employment.

As Michal Kalecki described, replacing all other taxes with a generalised asset tax frees economic activity from taxation. He clearly expounded that such a tax could meet interest repayment obligations however large without impeding the economy. Perhaps we need to face up to the thorny possibility of using such a tax to balance the budget over the business cycle.

[stone]

Sorry to inject my Malthusian worldview in here, but we always discuss the economy and production and consumption as if they function in a world of pure potentiality without natural restraints. While I agree that the economy is functioning below its productive potential, I think that our environment cannot sustain the modern productive capacity of 7 billion hard working humans and who knows how many more robots. Thank goodness for the lazy, poor people. They are what is standing between us and total environmental destruction.

Right now environmental externalities are not being factored into price of goods. We are consuming an enormous amount of life sustaining natural wealth in order to produce mountains of junk to sustain an out of control consumer driven society that has been brainwashed into believing that the "good life" can be acquired through the "goods of life". Our society is being driven by a fundamentally mistaken philosophy that will end up having us consume the true "wealth" that gives us life in exchange for the monetary representation of that wealth.

doodle, check out http://directeconomicdemocracy.wordpres ... ial-sense/

We could choose to do things differently. There are currently massive opportunities for productive investment that would provide a real world backing for people’s savings. Providing everyone on Earth who wants it with clean water, sanitation, a refrigerator, transport, some sort of health care and education – that would provide an immense outlet for private sector investment and use for private savings. Incidentally it would also entail overwhelming the supply of fossil fuels such that renewables became a financial necessity. The big issue is that in order to make financial sense it would necessitate everyone being able to afford to pay for such things. We need to face squarely up to our choice as to whether the role of government is to ensure that or whether the role of government is to uphold fictitious financial assets and ensure that they can never be spent.

Also http://directeconomicdemocracy.files.wo ... cracy8.pdf

As important as financial freedom is for allowing everyone to meet their basic requirements, it also
allows people to pursue other goals. Much time is currently spent doing pointless work “for the
money”?. Economic democracy would enable people to choose how to spend their time. Without
sales and income taxes and with a citizens’ dividend, people would be more able to spend time on
child and elder care or sport or art or science with complete academic freedom.

[stone]

*ninja hug for Pointedstick*

Stone running off to your security blanket that espouses the same argument you cribbed from instead of answering Pointedstick doesn't make you look very smart.  I think you're an intelligent soul, so take this with all the due respect it deserves: stop being a bloody sheep and think for yourself for once.

Hey who knows, maybe we're wrong and you were right.  But you will never reach that conclusion if you abdicate critical thinking to a blog post on the internet.  Pointedstick has been taking their time to walk through each step of the argument while you're just jumping the shark and heading directly for what you think is the answer.

Slotline, I wrote those blog posts on the internet-sorry that wasn't clear. I thought it was clear that "stone100" (the author of those blog posts) and "stone" (also me as on here) was the same person but I now realize I didn't make that clear. The website icon (little picture of planet earth) on the left here is also to that blog.
I really appreciate the efforts of you and pointed stick and doddle putting this idea through intense scrutiny. Trust me I'm not trying to waste your time or mess you around. I only linked to it rather than re-telling it because it is a point I've been trying to make since 2010 on comments sections of MMT sites and have failed to get it across clearly. My hope was that if I wrote it out carefully it would be a more coherent argument rather than simply yet another communication failure. Cheers, Stone (aka stone100 ).