Let me talk about how money is failing.
With this, I don’t mean we have too little of it, nor that we have too much of it (although both things might be true).
The failure is not in the lack of one common currency, nor in the lack of a thousand alternative currencies.
No, the failure of money is a failure to establish a stable line of connection between the past, the present and the future.
Here and now, money works perfectly well. It works as a medium of capitalist coercion. Every single day, we all have to get and to spend money. That means work. That means capitalism.
We now celebrate 10 years since the last financial breakdown. So how did it all work out? Did capitalism recover or not? Is the economy growing or shrinking? And do workers today earn more or less, compared to workers one generation before?
The answers are not given. They all depend on how we measure the mysterious substance of money: the purchasing power. This measuring is done with a special device, called a price index.
The price index is that very timeline which makes it possible to read the economy through time. This statistic stands at the centre of all kinds of accounting, of policymaking, and of history writing.
The indexing of prices was never without complications. But only today, it is becoming apparent how profoundly metaphysical it is – that leap from nominal value to real value.
Why is it metaphysical? Because it is never enough to just measure the price of stuff, when the stuff itself is not the same from year to year.
So for every new model of a smartphone, for every new digital service disrupting this or that, the statistics office must try to measure also the change in quality.
They must quantify in monetary terms if the new product represents an improvement or a deterioration, compared to what was available before.
This is done from the standpoint of a fictitious consumer, who does not only have no class and no gender, but who is also able to travel in time with unchanged preferences.
I am not kidding. This is how national accounts are made. When those small “quality adjustments” add up, they determine in what colours we will see the economy at large.
So far, it seems like this fictitious consumer has been in love with new technology. No attempts are made to adjust for the downsides. No statistics office, as far as I know, has tried to calculate the effect of advertising, distraction or surveillance as negative qualities.
Yet, every new feature added to smartphones, for every acceleration of computing power, has been reflected in the price index as increases in the purchasing power of money.
Today, even mainstream economists are questioning the official price index. But they question it on the grounds that it should be even more optimistic. They think that the digital revolution brings so much more utility to us, that is not yet captured in numbers.
So may it be. But you could just as well adjust the numbers in the opposite direction.
Right now, we see how the critique of social media is becoming mainstream.
If this critique reaches all the way into the statistics office, they would have to adjust the whole price index, affecting all statistics that rely on it. That could actually throw the world economy in a much darker light.
My point is not that one picture is more right than the other.
Rather, that money itself is moving beyond measure.
It is failing as a medium to compare economic conditions over time.
Personalized pricing is certainly not making it easier.
Let’s face it – no kind of alternative money will solve that puzzle.
There is not one true way to account for economic change.
So let us draw the consequences.
Let’s expose economics as the most relativist of sciences.
Let’s forget the idea of a basic income given in money, as there can never be a guarantee for what a given sum of money can buy.
Let’s learn together how to talk about inequality in terms that are not monetary, just like we have learned how to talk about justice without reference to a god.
Money does exist. It is a medium of power. But it is not a suitable medium for redistribution, and not for envisioning a common future.
This is inaccurate. Even the conservatives are ragging on GDP these days (it helps that it was instituted under FDR, and no conservative worth his salt will pass up a chance to rag on FDR):
To an economist, a barrel of oil selling for $100 has the exact same effect on GDP as two barrels of oil selling at $50. Silly, but that’s the way the accounting works.
This dissatisfaction is long-standing:
We actually only started using GDP in 1991. Before that we used GNP, Gross National Product, which doesn't track foreign investments as well. Welcome to globalization.
to GDP: accounting properly for intangibles; removing unproductive financial
investment; and adjusting for income distribution. These alone will make GDP a
better measure of economic welfare. Official statisticians could implement this first
stage relatively easily.
The second stage is a more radical replacement of GDP with a small dashboard
recording access to six key assets: physical assets, natural capital, human capital,
intellectual property, social and institutional capital, and net financial capital. This
balance sheet approach to measuring the economy will embed sustainability, which
GDP never can because it records only flows of income, output, or expenditure. Our
proposed approach will also account for whether or not individuals have access to
the assets they need to lead the kind of life they want; this, rather than being able to
buy more goods now, is the key to economic welfare.
And really, other indexes are already tracked:
So while I agree with this statement:
It's uninformed to argue that these talks haven't already begun.