I know there must be reasons and this is a dumb question, but I’m a bit of an abstract thinker and have trouble grasping it from a big picture presepctive. Can someone break this down for me? Can’t we all just kind of agree to just kind of… Reset some numbers or something?
Sincerely,
I’ve never taken an economics class in my life
In: Economics
It only works if everybody agrees.
The problem is that everyone wants as much as they can get, and they don’t see it as fair to stop competing.
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>Can’t we all just kind of agree to just kind of… Reset some numbers or something?
That would seriously damage confidence in the market. Would you invest money, time, and labor in a system when there’s a possibility it could all just get “reset” someday against your wishes?
It’s the same reason we can’t just excuse all debt; if we did, no one would ever lend anyone anything ever again.
I never studied economics either. I study biology, but there is a useful corollary called and ESS (evolutionarily stable system). An ESS is system that is stable because it is not easily disrupted by ‘defectors’, individuals whose behavior doesn’t align with the system. Infinite generosity is not an ESS because a single individual who chooses to be greedy will disrupt the whole system by preying on those who follow the rulse. Often, infinite greed is also not an ESS because a few moderately generous individuals may be able to work together in times of scarcity and perform better than greedy solo actors. The true ESS is usually somewhere in between, where most individuals are sometimes greedy and sometimes benevolent, and the mostly-greedy individuals are balanced out on average by the mostly-benevolent individuals.
What you describe is possible in theory over a short period of time, but it is not evolutionarily stable because if we all ‘agree’ that when a crisis is over we will just reset, there are enough people who will benefit from defecting from that agreement and later advocating against it that the policy will never be followed.
Value and the economy are, as you stated, man-made. The aspect I think you have overlooked is that they are based on agreements. For example, if I purchase a 10-year Treasury at 1%, that constitutes an agreement. If we hit a “reset” button and all countries agreed to zero out their debt, it would be a violation of that agreement. Fair enough, but what if you had invested your life savings (we’ll assume $500,000), with the expectation (based upon a legal agreement) that you would receive back all of that capital, plus a little more?
And then the whole world decided to hit the button. Your entire life savings would be gone. Now imagine that, writ large. There is a ton of U.S. debt that is owned by the fund that administers military retirements, teachers’ retirements, municipalities, etc. Imagine all of those people now bereft of any ability to provide for themselves. Perhaps you think, “That’s okay, Bernie will set things up so that the government will provide for everyone”.
The U.S. is already in debt to the tune of $23,000,000,000,000. Give or take a few ducats. To take care of everyone, cradle to grave, would be an expenditure that most people cannot comprehend. I know I can’t. The U.S. would default and enter a depression unlike any the world has seen. We’re talking Revelation 18 here.
That’s why we can’t hit pause. All economies would break.
On the other hand, black marketeers have always been my heroes. If it ever comes to the scenario about which you inquire, I’ll have what you need, but you’re going to need to pay me with gold, silver, or weapons.
Source: I have a B.B.A. in Economics and am a combat vet Marine
Ive thought about this very thing myself and the problem is, everything, most countries, private companies are all intertwined and getting everyone to agree on this would never happen. It’s just like when people wanted everyone to stop driving for a day to battle oil consumption or whatever it was. Like no one did it. So the short answer is, no, because people are are greedy and free to be greedy.
Money is an abstract concept, but it is tied to things that are absolutely real. When you monkey around with money in the way you are thinking its a bit like a carpet with a wrinkle in it. You can push the wrinkle about, but you cannot get rid of it. Someone is always going to be left short.
Think about it this way. If you and your friends all agreed to do chores for each other, and the chores you had to do were recorded on slips of paper, what’s to stop a slip from getting destroyed or new slips made? Nothing right? Except that destroying a slip means a chore doesn’t get done, and creating a slip means a chore gets done twice. There are real world consequences to those slips of paper with bits of writing on them.
money is the answer to the underlying issue of scarcity of goods and services.
Since goods and services have a limited supply, we estimate their price with money, which describes the intersection between supply/demand.
If all goods and services were infinite in supply, it is possible that money wouldn’t exist at all.
I hope this helped!
>I’m a bit of an abstract thinker and have trouble grasping it from a big picture presepctive
How do you reconcile these two statements?
What would be the effect of freezing all mortgages, rent, utility bills, car payments and all non-essential jobs. No income for anyone except essential functions to survive. Free food for everyone as well. Would this work to allow 95% of ppl to stay home?
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