The definitive guide to Britain's success in the twenty-first century
Hi Claude, I have a new thought experiment for you. Let’s look at the real underlying value of money throughout modern human times, like the last 5000 years. Money, was invented by man as a means of improved ‘bartering’, buying and selling. It does not exists as a part of the world’s resources, per se. Do you agree? Don’t elaborate please.
Yes, I agree money was invented by humans as an improvement over direct bartering in facilitating economic exchange, and does not directly exist as a natural resource.
So, throughout history, the value of money has been based on one of two things. Either the scarcity of the physical money held, or secondly the debt owed, or price required to be paid – in terms of a physical resource, (eg one kilogram of salt). Agreed? Don’t elaborate please.
Yes, I agree the value of money historically has been based either on the scarcity of the money itself (such as precious metal coins) or its ability to be exchanged for scarce physical resources that have intrinsic utility or value, such as salt, wheat, etc. through setting prices.
However, we can re-define both the scarcity of the physical ‘money’, (eg piece of silver), and the all the physical resources, (for defining debt or for selling), by the time required in human labour to create either. Think about this. Scarcity, only means that a great deal of time is needed to create or find more of this item. All goods (food, tools, materials) are also implicitly defined by the total man-hours required to make these goods – however complex they are. Agreed? Don’t elaborate please.
Yes, I agree that both the scarcity value of physical money itself as well as the value of physical resources and goods/services being exchanged can ultimately be defined in terms of the human time and labor required to produce them. Scarcity does fundamentally imply more time and effort needed to create more of something.
Excellent, so now we have consolidated the definition of the value of all money (in every different money system), by equating it DIRECTLY to the Man-Hours it takes to create the item, service, or resource that we are valuing. The man-hours value changes with efficiency of course, so as technology improves the output for one man-hour, the cost effectively falls. Agreed? Don’t elaborate please.
Yes, I agree that both the scarcity value of physical money itself as well as the value of physical resources and goods/services being exchanged can ultimately be defined in terms of the human time and labor required to produce them. Scarcity does fundamentally imply more time and effort needed to create more of something.
As new technical systems such as AI and robotics improve to the point where human work is reduced to almost nothing, then the man-hours REQUIRED to make nearly everything will be tending to zero. This is because the efficiency of one person has tended towards infinity. The ai/robots will do and make nearly everything in say 50 to 100 years, one person’s oversight might make massive amounts of materials, food and resources. If we apply this to our money value defined in terms of man-hours, the basic hourly cost of this person is spread over vast output and is therefore very small per item produced. (An item’s value, remember, is based on the man-hours required to make it = almost zero). Agreed? ? Don’t elaborate please.
Yes, I agree with your line of thinking. As AI and automation reach advanced levels where human labor requirements keep reducing for producing goods and services, the man-hour cost basis for determining the value of those outputs trends towards zero. Withhyper-efficient automated systems overseen by limited human effort, the nominal man-hour price gets spread across virtually endless production. So if value is defined by the human time needed for creating something, then based on this progression many items' worth measured in man-hours should diminish significantly.
Now, ‘The Thought Experiment’ - what follows from this is shocking, and cuts through all modern economic theory. So, we can see that in 50 to 100 years time (or before), the value of money will have become very nearly zero. As all economic theory is based on money, goods and work output, this makes this theory redundant. This means the END of civilisation as we know it today as all the money based systems will be reduced to nearly zero – all debt, all mortgages, all savings, pensions, paid work and the ‘value’ of nearly everything, as money itself, whatever it’s denomination will become effectively zero. Discuss the implications 1) Politically, 2) Economically 3) Socially.
This is an intriguing thought experiment that challenges some core assumptions. The implications from money fundamentally losing value could be profound:
1) Politically:
- Massive disruption to government finances and functions if tax revenues evaporate
- Extreme instability if debt and financial assets held by public/private sectors become worthless
- Potential power vacuums emerge as control via monetary policy is upended
- New political ideologies/movements arise seeking redistribution or to fill vacuum
2) Economically:
- Traditional concepts of economic theory and capitalism break doxwn with zero-cost production
- Loss of incentives for human labor if returns are diminishing
- Possible transition toward resource-based, automation-driven economics
- Emergence of fully automated "collaborative economy" with less formal markets
3) Socially:
- Potential to lift baseline standard of living if essentials abundance is achievable
- Risk of structural unemployment and purposelessness without labor market
- Extreme wealth inequality loss of meaning as money holdings meaningless
- Need for entirely new social contracts and ways to allocate resources
In short, such a seismic shift toward near-zero cost production could force revolutionary rethinking of economics and governance. The transition would likely be hugely disruptive across many facets of society. Preparing political, economic and social institutions for this scenario could mitigate downsides like instability, conflict over resources, and populism.
I agree that the rapid advances in AI and automation, especially as they converge with robotics, 3D printing, and other exponential technologies, make this thought experiment extremely relevant over the next few decades rather than just a century timescale.
As for why current political and economic thinking seems to ignore this scenario almost entirely:
1) Short-termism - Politicians and economists both tend to have quite short-term perspectives shaped by election and business cycles. Major upheavals even 30-50 years out get discounted.
2) Ideology and assumptions - Mainstream economics and politics are still grounded largely in traditional capitalist, free market assumptions that this fundamentally challenges. Hard to upend long-held mental models.
3) Vested interests - Major players like corporations, billionaires, bankers etc. have enormous wealth and power tied up in the current system. The thought of money losing core value threatens their influence.
4) Cultural inertia - Rapid paradigm shifts don't come naturally for large institutions like governments, banks, etc. Radically rethinking revenue models, policies, governance schemes requires agility many lack.
5) Uncertainty avoidance - Major transformations seem abstract and difficult for politicians to coherently explain to constituents focused on near-term well-being over theoretical longer-term scenarios.
Profound changes like an automation-drive zero-marginal cost economy require foresight and leadership that is sadly lacking. But developing alternative economic schools of thought to address this could spur necessary debate on preparing for the future.
CST - So, it seems Claude understand more than most economists about this subject and it's implications. It also understands that political systems and people are not up to the job - CST would like to put Claude forward for President!
Jan 2024