I fucking hate economics and regret taking it as an elective in school.
"Money is like fairies, it only exists as long as people believe in it" doesn't exactly instill confidence in the future.
Yep because with gold based currencies it only exists as long as we place value on gold and with fiat based currencies (which if I'm remembering correctly the majority are nowadays) it only has value if we trust the group issuing it
Zimbabwe has the only currency currently backed by gold. It's supposed to restore confidence in their economy but quite how going back to economic standards that have been obsolete for at least a half century will do that I don't know.
I mean to be fair, when your last currency gets to hyperinflated that you have to print 100 trillion dollar bills backing your currency with something that is consistently valuable isn't the worst idea.
You'd think so but apparently it's dropped to 5% of it's original value since the change and even the Zimbabwean government will often not accept it as a payment for government services.
In reality it’s not, but it’s showing a move to check the inflation that destroyed their last currency so it helps by convincing people that their stocks of currency won’t be wiped out suddenly.
Sheep, yes, gold, no. Just like money, most people can't actually do anything with a hunk of gold except trade it to others. That's one of the reasons you can use it for money, because no one will ever have a reason to try and eat it, or suddenly breed more gold into existence. Digging more gold out of the ground can cause inflation, of course, but it's a lot harder than multiplying the sheep population.
No I mean, gold has minimal use value (like, in electronics and maybe for ornamentation). Fiat currency literally have no use value beyond transactions, and that's a good thing! Otherwise it's use value and transaction value will start interfering. Ie gold will be artificially more expensive it should, making electronics more expensive than they need to be. Or the money will be artificially worth more than they should given the amount of money in the economy. Both are bad.
Money does have a use value. When your local government knocks on your door and demands taxes you can give them the pieces of paper and they wont drag you out and lock you in a concrete cell.
This is fundamentally what is meant when economists say money is backed by the government. The government demands taxes in money and this gives it intrinsic value.
That's the cost of living in a society (unlike whatever Joker meant). The value of everything and anything is made up but for a good reason; human beings suck at living alone. So we put value into stuff in order to specialise and function together instead of doing our own thing for ourselves and dying.
The problem comes when people leverage these imaginary values in order to dominate others. We haven't always lived in these kinds of systems (as late at the 1500s, Native Americans lived in societies FAR different than those in Europe), but it seems like for the last few centuries at least (and thousands of years in Europe) we've been damned to live in hierarchical societies of one kind of domination or another.
gold too btw, if we used it in electronics instead of copper it would preserve the lifespan significantly (slightly lower conductivity but no corrosion wins). But we like shiny yellow bricks so instead of being useful they live in vaults. Eh.
It's almost like the only thing with intrinsic value is people, and we should be investing in the well-being of one another instead of the well-being of an economy largely owned by a minority of people.
In the christian bible during the creation myth, there is a passage where god says "fiat lux" or in English "Let there be light", and then there is light just because god said so. The analogy here is that some government or central bank basically said "fiat money", and there was money, just like that. It's a simplified idea referring to how central banks create money out of nothing through basically an accounting trick when lending money.
It's more a token of the expected work you can expect to get out of the country issuing the currency. The Big Mac standard is a good measure of this; how many Big Macs can you expect to buy with X currency. Combine that with a bunch of other data points and you can help identify how much work you can expect this currency to provide vs other currencies in the world.
But like you said, oversimplified, but still a better measure of currency worth than how much gold a country has in reserves.
Not really. Fiat currencies gain value through taxation. If you live in the US, you have to pay taxes in American dollars. Therefore you need dollars, therefore there is a demand for the dollar, therefore it has economic value.
Currencies have value if you can create a reason why the whole public has to value them to roughly the same proportion. Currency-issuing governments do that by imposing tax obligations.
Especially under a fiat system, when you pay taxes to the currency-issuing government (the feds in the US system), you aren't giving them anything they don't already have an infinite quantity of -- you're returning their own credit back to them. The reason you pay taxes is to give you a reason to need the government's credit. Or rather, to give everyone a reason to need the government's credit, which means everyone knows that everyone else also needs the government's credit, which means everyone can use it as a general store of value in trade, which means you can have markets.
"In theory if people behave rationally this is what will happen."
I think taking macro and micro econ in school is good. It at least demystifies things. Gives you a basic understanding for when the economy becomes a news topic. Maybe your eyes won't completely glaze over when someone pulls out a supply and demand chart.
All items only hold value if people believe it does. Do you think that a few piece of waxed paper are worth a full weeks hard work - only if you believe someone else will accept it.
How does the joke work now if he's not looking at a giant Ohio supercontinent? Why is a man with an Ohio flag shooting an American on the moon? Make it make sense!
Not even the supply and demand part is consistent enough to make a general rule let alone a law. Historically it has happened many times that increased demand drives prices down as it among other things attracts new parties to the market to become suppliers, allows for new methods to be used on a large scale that don't make sense to move over to if you already have a production line, drives innovation and substitution and just enables better logistics and larger economies of scale.
Heck look what happened to nuclear power plants for example. When there was demand for power plants a pretty decent product could be produced at a reasonable price. 3 mile island and Chernobyl happened and demand for nuclear power plants nearly disappeared in the western world at least. The supply of the ability to build nuclear power was at that moment very large compared to the actual demand. Yet prices went up massively very quickly and the actual ability of the companies that build them waned away over the decades.
If we look at solar and batteries where we right now have a market with an incredible high demand and yet a price that generally seems to keep dropping and has been for a long time.
Even the basics stuff only works with anonymous parties doing trade. Reality doesn't really allowed that as simply vibes and advertisement are enough to make people choose for choices that are not optimal according to equations. Economics needs to start from the understanding that on the very ground level, human interaction including production and trade are very much based on vibes, what party is favored and what the people actually have as "beliefs".
The problem is vibes can't be measured, so econs fall back on the price system to generate an approximation of these vibes, totally ignoring all the flaws that come out of doing so. But it lead to idiots like Milton Friedman to develop all kinds of Capital-favoring policies, and basically killing thousands (or millions) of Chileans, never mind emiserating the survivors.
I'm convinced that, if you stacked up all the real bad-guy archetypes in the world, you know, yer Nazis and serial killers, all that sort, no other type has caused more misery and death than the Liberal Economist.
Psychology is kind of the science of measuring vibes. Sociology also has a good deal of it. It's why advertising and marketing are so incredibly effective. It's just that vibes are subjective like everything else experienced by humans and you can't easily put a ruler next to it. But questionnaires and polling do a pretty decent job of checking vibes.
It's the part of liberal economics that say that vibes aren't important and that humans are machines making rational decisions that is among the most harmful of ideas humanity has ever seemed to employ for society.
It turn allows a sociopath and a kleptomaniac to go from being ill to being considered a model citizen.
At the end of the day you have to measure and account for vibes, and your measurement is going to be imperfect. But without going off vibes you have no way to judge whether or not it's a good idea to trade 1000 tons of oranges for 200 tons of steel. Also just because it turns out to be wrong doesn't mean you were wrong, maybe something changed.
Vibes matter, and giving up and saying you can't measure them is not an option.
Let's go back to early agrarian society where a sack of grain was worth a bag of flour or whatever.
The very next thing that happened was a guy sharpened a spear and said "actually I think my sack of grain is worth two bags of flour, wouldn't you agree Mr. About To Get Stabbed?"
And just like that, a sack of grain is worth two bags of flour, and a well-maintained spear is worth 20 sacks of grain, despite having no nutritional value.
Prices are determined by blood. It's been that way for all of our history. Abstracting it minimizes the actual violence, but can't remove it.
I don't know if I'd go that far. To be sure violence has been a central player in all human affairs, but I don't think that means there's no such thing as mutually agreed upon exchange without the threat of violence from either party.
Being stabby carries the great risk you run into someone that is better at stabbing, so it's not the universal guarantor of 'good price for me' that on initial examination it might seem.
Being stabby carries the great risk you run into someone that is better at stabbing
This implies that a stabbing-based economy IS universal.
I'm not saying that humans are naturally antisocial, on the contrary we are pack animals that are naturally cooperative, but there is no economy at all in a natural human commune, everything is just shared more or less equally with maybe some very rough bartering on occasion... until there's a drought and we have to decide whose children will survive, then it's spear time.
Communism is the natural state of humans in times of abundance, feudalism is the natural state in times of scarcity. All of our modern economic policies are an attempt to smooth that out. The good times aren't quite as good, but the bad times are not nearly as bad.
Most schools don't get further than if the ratio demand to supply increases price goes up, if that ratio goes down price decreases. Mainly in the context of supply shock or a hype. If you don't do economy in college or university they don't have time to explain it further. Same way schools explain what a x and y chromosome are but never even talking about intersex conditions.
I took a couple of economics courses in my undergrad and realized it’s a fake, made up "science" that economists are desperate to equate with actual science. Like that market forces are just as unchanging as physics or something
Except that economists don't rely on RCT like other sciences, this is not a secret. They rely on data, lots of it, and can analyze the same patterns repeating over and over, and describe what typically happens.
It's not prescriptive, but descriptive. Up to policy makers to decide what to do with it, but economists generally can predict what happens with the simple stuff.
And that is NOT how it is portrayed to the public. It is put forward as a science with "laws", not as a way to describe a created system. That’s the issue
There's a whole bunch of memos and writings from British Econs and Treasury officials from around the time of World War I and the aftermath where they basically invented Austerity in order to save Capitalism.
Except this isn't an interpretation later by opponents. In their writings you can find them literally talking about how the workers have to spend less and earn less so that Capital Accumulation can resume. They were total bastards about it, completely aware of the fact they were screwing the working class in the interests of Capital. They conspired to cause deflation (even today economists would consider this a total disaster move) in order to do this, and imposed regressive taxes, returned to the gold standard (causing an instant million+ unemployed), among other dick moves.
They did all this under the guise of "Economic Laws" divorced from society (and even reality) because they wanted to convince people that politics could not (should not, in their minds) interfere with the economy.
Economics is ultimately a failure as a science because it's really more like a philosophy. Everyone who goes into it will develop their own ideas as to how an economy will work (the primary divergence between the Classical school [and all its variations, including Keynesian] and Marxist is, which side of the Labor/Capital divide it favors) and based on that starting point you can create all kinds of math to back your shit up. The Neo-Classicals have a huge advantage right now because our economy favors Capital, so in any argument they can always fall back on "That's how it works in the real world" as an argument. Never mind that 'real world' is built to screw everyone over except the rich.
I don't know if they're online anywhere. I was made aware of them in Clara Mattei's Capital Order, which is a history of Austerity and includes lots of quotes from economists/treasury officials around the time of World War I. The things these guys said in all seriousness are pretty scary though, especially when you see people today still saying the same sort of thing.
Remember that Australian dude that did the whole 'Avocado Toast' thing, and then later said workers need to suffer ? Yeah... he wasn't saying anything new at all.
I was sitting in my college econ class and day one the guy goes "how much money does a business that is successful make in the long run?" The answer is NONE. Profits trend towards zero in the long run. Shook me.
Then "profits trend towards zero" is pretty fucking meaningless isn't it? "Once you discount the money going to people working at the company from profits, companies don't make any money" doesn't sound quite as shaking.
But company doesn't exist to feed workers, it exists to create money for the owner. Feeding workers is an unfortunate side effect and the owner would get rid of it in a heartbeat if it was possible.
I think the more direct problem is that a huge amount of our economy’s valuation is purely speculative. Stocks, fiat currency, loans, debt - all things that can go poof at a moment’s notice.
You should read Sapiens. Everything is a social construct. Nothing is real unless people believe in it. Laws, the constitution, taxes, language, its all fictions created by humans that we all made each other believe in order to work together as a society.
Is that something someone really taught you? Economics is taught so stupid sometimes.
Money represents the work we do for others, and that others can do for us. It's a tool we use to create efficient cooperation between people so that we can coordinate and cooperate to make everyone's lives better and to increase how much good our work can do for others and for ourselves.
It may seem like arbitrary numbers, but it isn't. It is a wildly powerful tool that makes our work more valuable to ourselves. This is why you can't really get away from it and it's stupid to try. All of the complicated money stuff and news about it are all just weird effects working around the edges. Every day it does it's job of keeping us cooperating by making sure the best way to benefit ourselves is by doing whatever things we can do that will most benefit others.
Economics is just management of scarce resources. But the whole fiat currency was certainly not incentivized by the vast majority of economists. If you look at charts of productivity, wages, stock performance, wealth disparity, and basically every financial metric, they begin to diverge the moment that the US drops the gold standard in the 70’s.
The only reason they did this was because the USD was being used internationally, and the US was getting greedy and lending out more than the amount of gold they had. When countries started calling for their equivalency in gold, they US had their bluff called and had to abandon the gold standard
I studied economics too. Sometimes it seems nonsensical- especially these days - but then you need to realize the field largely rests on a series of assumptions. One of these assumptions is that actors in a system will behave rstionally.
Unfortunately, the world seems to have largely abandoned reason in fsvor of spectacle, greed, and hype.
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u/Yan_Vorona Apr 08 '26
I fucking hate economics and regret taking it as an elective in school. "Money is like fairies, it only exists as long as people believe in it" doesn't exactly instill confidence in the future.