Money Chasing Behavior: Rethinking Economics
By Zach Ochs
()
About this ebook
Our present understanding of economics is still in the Dark Ages. Held back by a fundamental misunderstanding between our economic relationships and wealth creation, for thousands of years the pursuit of money has unwittingly made us our own worst enemies. At every waking moment we have a near infinite number of possible choices and con
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Book preview
Money Chasing Behavior - Zach Ochs
Money Chasing Behavior
Rethinking Economics
Zach Ochs
new degree press
copyright © 2020 Zach Ochs
All rights reserved.
Money Chasing Behavior
Rethinking Economics
ISBN
978-1-63676-645-4 Paperback
978-1-63676-162-6 Kindle Ebook
978-1-63676-166-4 Digital Ebook
Acknowledgments
Publishing Support
Special thanks to the primary editor Linda Berardelli, the NDP staff, and content analyst Jordan Hall.
Cover Graphics Team
Milan Krstevski, Josip Perić, and Gjorgji Pejkovski
Art Team
Eli Martin, Victoria Semaski, and Simona Gjurovska
Academic Acknowledgments
West Chester University
Daniel Forbes
Ed Pollitt
Larry Udell
Matthew Pierlott
Rebecca Subar
Ruth Porritt
George Washington University
Bryan Stuart
deRaismes Combes
Eiko Strader
Michele Friend
Tadeusz Zawidzki
American University
Bradley Hardy
Seth Gershenson
Early Support and Funding
Aaron Davis
Adam Schwietert
Andrea George
Beth Lorah
Bill Gregory
Brian Ochs
Colin Ochs
Eric Koester
Jameson Beates
Janet Ochs
Jeffrey Grove
Jordan Hall
Juan Cortes
Judy Green
Kevin Ochs
Martin Goldstein
Naryan Wong
Pamela Musser
Qimou Su
Rhonda Ochs
Robert Hinkle
Sam Iguchi
Scott Lorah
Tom Green
Valerie Sassaman
learner work
To humanitarians…
Contents
Acknowledgments
Preface
Basic Reading Instructions
Advanced Reading Instructions
Second Read-through
Introduction
PART I
Part I Overview
CHapter 1
Fundamentals of Wealth Creation
CHapter 2
Cancer in the System
CHapter 3
Adding Currency to the System
CHapter 4
Money Chasing Behavior
CHapter 5
Contribution and Taxes
CHapter 6
Rich versus Poor
CHapter 7
Mapping the Economy
Part I Conclusion
PART II
Part II Overview
CHapter 8
Foundational Policies
CHapter 9
Public Production
CHapter 10
Private Production
CHapter 11
Automation and AI
CHapter 12
Investment
Part II Conclusion
PART III
Part III Overview
Part III Conclusion Question
Understanding Paradigm Shifts
Topics for Consideration
Conclusion
Appendix
Bibliography
Community Survey
Survey Questions
Interpreting Results
Currency System Overview
Preface
Chances are someone you know recommends this book, and here you are reading it. Likely described to you as an unusual book,
bravo for tackling it and making it this far. Strap in and hold onto your brain. For no other purpose, this book will send you on the wildest, most mind-melting, eye-opening, enjoyable learning experience you’ve ever had with a book. As likely alluded to by your source, we are going to be covering some topics that seem difficult, if not downright scary. Have no fear. Full stop.
My job as the author is to make sure you make it to the end of your journey in one piece and having truly learned something that will change how you see the world. Your coming into contact with this book, likely through a recommendation, speaks to the fact that someone you know has made it through and taken the effort to stress the importance of what we are about to cover. Not many of us take the time to read something as long as a book anymore, and there are upsides and downsides to how we consume information these days. Books offer a retreat from the hyper-connected world, and this topic is perhaps best suited to this form of passing information. With sharing being more than a click away from spamming everyone you know and receiving their info in return, we can sit down and work through a topic without feeling the rest of the world passing judgment.
What books and our ‘prestigious academic journals’ normally don’t offer are the visual tools that modern mediums offer. Illustrations for ‘serious’ topics are often seen as low-brow or not worth the time and resources for most literary publications, so allow me to be the first judged on your journey. It’s my job to make sure that you learn something, and if filling this book with illustrations that will help you in this endeavor makes this presentation of a theory unprofessional,
then color me unprofessional. I only care that you have a profound learning experience, and if that means every paragraph that needs a visual gets a visual, so be it.
When it comes to this topic, we need all the tools we can get. We are going through a portal…a 180-degree paradigm shift in our thinking about economics. It doesn’t matter if you have no familiarity with economics or if you hold a degree in the subject; we all need to start from square one. There is no point in beating around the bush. Economics is a young field and pretending that it is mature with a well-established understanding of reality will only do you a disservice. We should all take refuge in the judgment free experience of reading this book, economists especially.
Basic Reading Instructions
If you are an average reader or if this is the first book you’ve read in the past year, there is little instruction to give. Just continue, read at your own pace, and skip the footnotes as most people do. The additional information in the footnotes will likely only serve as a distraction that takes you off course. The main point to hammer home is that each reader is different. Some will find certain parts difficult and other parts as eye-opening. Just because you may personally struggle in many chapters does not mean that you should give up. This is a book that makes more sense with additional points of perspective and is intentionally designed for a second read-through to be an entirely different experience. Power through knowing you will learn something by the end, and your second time through will be far easier. You’ve got this.
Turn to the Introduction and move on with your journey.
Advanced Reading Instructions
If this is your first read-through, chances are you are not an advanced reader for this topic. The few who will qualify as advanced
on the first read-through are likely: ecological economists, heterodox labor and behavioral economists, fellow philosophers, and those who have some overlap with these fields. So, economists, traders, hedge fund managers, and all others of more traditional backgrounds, I mean no slight to your credentials. This topic may well be the most challenging you will ever grapple with, and paradigm shifts in thinking leave those in the know
at a disadvantage. Again, I want this book to be the most profound learning experience you’ve ever had, so if you fall into the latter category, please join the 99.9 percent, and enjoy a casual reading experience.
Proceed onward to the Introduction.
First Read-through
If you feel qualified and this is your first read-through, by the end of Chapter 1, you should know if you feel at home with this material. Here’s what you’ll want to know if that is the case.
Footnotes:
As a book designed for conveying an entire economic theory to readers of all backgrounds, there is little room to dawdle. Everything in the main text exists for a reason, and we will keep the conversation moving. The footnotes will include only small extrapolations as there will never be enough room to cover all we may desire. Outside of sourcing, these notes generally focus on philosophical concepts as they relate to the topic at hand, and extra examples for additional points of reference. Such footnotes will assist some by adding perspective, and others may find them distracting from the natural flow of the book. If shifting your attention to these notes
bogs-down the experience, skipping them on the first read-through is advisable.
Logic Work:
There is nothing like working through a topic or idea on our own. Our thought processes become tainted by the inputs of others when they hand information to us, and this book is no different. You will have one chance to work through this material on your own before you already know what is coming during a reread. This work is no more than rigorous logic. There is nothing explained here that you cannot come to on your own, given the effort. Such an opportunity will be lost as soon as we progress through a topic. If you hope to achieve the optimal learning experience, here’s what you should attempt:
1.Skip the "Part Overviews" as these will act as minor spoilers. Return to them as you finish each part of the book.
2.Each chapter will have an "Advanced Challenge" paragraph as the very first footnote. Skip immediately to these footnotes. Here you will read a description of the topic at hand.
3.Calling on your cumulative understanding of all previous chapters, pause, and attempt to formulate a view on the topic. Once you establish an initial perspective, read on, and compare your reasoning to the one provided in the chapter.
If you find yourself struggling to come close with your predictions but still seek the challenge, you can also skip to the end of the chapter to peek at the key takeaways. These can be minor spoilers, but they will steer you in the right direction without giving away the detailed reasoning.
You are ready to begin—best of luck in this challenge. Turn to the Introduction.
Second Read-through
Welcome back. Hopefully, your reading of this section is an indication that you were not entirely traumatized by the first go-around. Everyone grasps this material to different degrees. It will be a miracle if anyone has more than a thirty percent understanding of the full complexity and implications after one try. If you start the second read with a better understanding of economics, the hardest part is over. In the second attempt, we will aim to increase this understanding by improving your abstraction skills. It is one thing to comprehend each chapter and the Key Takeaways but piecing everything together for a coherent worldview is another matter.
Time
Time is the first of two abstractions we’ll want to add to your tool kit. If we can look at a single moment in time and point out what’s wrong, excellent. Now we need to focus on how multiple economic interactions stack on top of each other. What we do today affects tomorrow and what we are capable of doing tomorrow. Tomorrow’s actions impact the following day in the same manner. How we get the average person to live as multimillionaires do today requires understanding these improvements over time.
As you will have likely noticed, the chapter progressions start with the basics, followed by early markets, and then by adding features incrementally with each subsequent chapter. Start adding the effects of time by focusing on the Logger-Fisher example.
•Ch. 2—How do forced decisions impact the decisions of others, and how does the ripple effect spread in the community over time?
•Ch. 3—How does adding currency to interactions make these decisions worse?
•Ch. 4—How do Money Chasing Behavior and Labor-Locked Loops keep us in poor decision structures?
•Ch. 5—How do taxes in relation to wages prevent the problem from being fixed?
•Ch. 6—How do relative wealth comparisons and zero-sum interactions prevent the pie from growing?
•Ch. 7—What would knowing the real costs of wealth creation change?
When you add time and the increasing complexity of these relationships, focus on two decision trees. First, when reading Part I, note how these mistakes put us in a weak position tomorrow, the day after tomorrow, the consequences for a year, and a generation. Second, flip the relationship when reading Part II. If we did not make these mistakes, how would tomorrow be better? What would your community look like a year from now if the positive changes take place? How do these two decision trees differ? What types of actions cause the poor outcome tree, and what is different for the positive outcome?
Population
Population Scale is the second abstraction to add. It is one thing to see how consequences impact our lives over time, but excess available labor is an entirely different factor. If you and your community run the Community Survey,
you will find that the discordance measure is completely off. If your expenses are in a 4 to 1 proportion to the occupations we would hope to find, there is 1 productive member for every 3 free riding members. These proportions are not all bad news. This imbalance means that we need only 1 in 4 laborers to maintain your current standard of living.
Level 1 for this abstraction tool focuses on these 3 remaining members. If their labor (costs/inputs) should match the expenses, where would you reallocate their labor to bring the proportions back into alignment? Think about the things you currently cannot afford but would like to purchase. Moving 75 percent of your population into these jobs would fix the concordance, and monetary expenses would match the labor expenses. This correction means you, and everyone else, can now afford all the new production, in addition to what you already purchase. If this labor can go toward solar panel production, now everyone can have solar panels. If you use the labor for mass-transit, parks, libraries, medical care, or anything else, now everyone can have these improvements and the standard of living only increases.
Level 2 for population scaling brings in specialization and efficiency gains. Population size in relation to the labor required for accomplishing tasks, is incredibly important. If you have a population of 100, most of the labor will need to go toward basic production. When we produce goods at scale, we become more efficient. Increasing the population to 10,000 will not require 100 times as many farmers or construction workers to maintain the same standard of living. To account for this increase in efficiency in our mental model, let’s assume that of the 3 remaining members in your community (75 percent), only 2 of them (50 percent) are needed for the Level 1 improvements. The remaining individual (25 percent) can work on projects only available to large populations. A community of 100 cannot afford cancer research, but 1 million can. Think about how many excess members your community would have, and multiply by the number of communities in your country. If 25 percent of your entire nation could collaborate on projects that individual communities cannot handle, we can access far more wealth. Consider what would happen if large-scale projects could receive more labor inputs.
Level 3 is the final step in putting everything together. Here we are combining the efficiency gains of large populations with the dimension of time. We only require labor if it’s a necessary input. If we develop a vaccine against cancer, we won’t lose labor to this illness or spend labor on diagnostics, treatment, or research. Not only does our standard of living increase, but all this freed labor becomes available for further improvements. We’ll want to think about the Level 2 specialization but understand that we require less labor for each expense over time. What other projects become available if we expend less labor maintaining our standard of living? When we incorporate the Inherent Bounty incentive structure, how much faster will we make efficiency gains?
Adding these abstraction tools isn’t easy, and we’ve covered quite a bit to remember for your entire reread. You can always return to these instructions at any point. The main takeaways should be to apply time and population size as you read. If you wish to brave the footnotes for extra context and try the Advanced Challenges
before starting each chapter, feel free to do so; however, our primary focus on the second read should be putting the big picture pieces together. Remember, the first attempt is always the most difficult. Now we know what’s coming, and you have a complete picture to put each chapter into context. Should you find adding these abstractions too challenging for the second attempt, there is no harm in merely rereading with a better understanding. If nothing else, your second time through should be more enjoyable, so move on and enjoy it.
Introduction
My friends…We need to have a very serious conversation. We have a profound misunderstanding regarding how we make decisions and organize our lives. Think you’re not in Kansas anymore
-level crazy. How we interact with money and each other are what make up the economy, and our entire understanding of these economic relationships has been flawed for thousands of years. These faulty decisions and interactions come down to a small error in logic in how we exchange with one another. The consequences are like everyone punting a brick through your neighbor’s window every morning to start the day. We end up with lots of broken feet and windows. We have unintentionally designed our systems to keep us all laughably poor compared to what we could have under a rational system. We must put a stop to this insanity, and if I have done my job in communicating with you, by the end of this book, you will agree that we have completely lost touch with reality.
As this problem deals with our understanding of reality, we need to take a deep breath…and a big step back to see the larger context of the economy. We are physical beings, part of a physical universe, functioning under physical laws. We exist on the surface of the Earth. Picture the Earth as if humans never existed. All that we’ve created does not exist, and everything is wild. Now, put back only the people. In what landscape would you be sitting if everything we’ve created disappeared?
We are creators. Man
in mankind
and manipulation
means hand.¹ We have an exceptional ability to manipulate our environment to improve our condition or well-being. We manipulate the Earth’s materials to create all we see around us that is not wild; what we can call wealth. For this conversation, we will focus on well-being. Our ability to alter our conditions and the environment changes the well-being we experience, and we can think of wealth as the things we create that change our well-being. These products that increase well-being would not exist if we did not bring them into existence.
At the risk of losing you early on, let’s focus on physical wealth. All wealth follows the same laws, but most people get lost on how services and information types of wealth fit into this picture. If we can make it through physical wealth, the other two categories become much easier to understand. Physical wealth is the most apparent form as these items of wealth are what we can see and touch, whether it’s buildings, phones, roads, or lightbulbs. To bring these items