3. Plum Local

Plum Local
Bob Komives
  ::

I had my first course in economics in college. I forgot most of it, except for the fascinating way that banks create money as they lend out most of the money that we deposit with them, then receive most of it back again in new deposits, and then lend most of this magically expanding cash out again, and on, and on. We see that bad banks fail, and we know that even good banks make bad loans.

Why only blame
—if our banks create money—
why only blame our government for inflation?

||

I turned my studies to art and architecture. Along the way I discovered a maverick named R. Buckminster Fuller. He stood among other heroes such as Louis Sullivan and Frank Lloyd Wright in describing the unity of design and nature.

Can projects designed
following principles of our biosphere
ever be too ugly,
ever be too expensive?

||

I got married, and we went to the Peace Corps near the Pacific Coast in Guatemala. I saw discrepancy between strategies for national economic development and realities of community development.

I had to ask
" Does it make sense
—for our poverty, our sickness, our exploitation—
that our cure
cannot come
with our economic development,
but only after?"

||

We moved to Little Rock Arkansas where I tried my hand at city planning in the Model Cities program. This was 1969, a time of large investment in troubled cities. Our successes were real but modest.

Is it not strange?
Even during prosperous times
since our era of generosity,
they say,
we cannot afford to budget for success.

Since Our Era Of Generosity

I went back to school to get my professional planning degree. There I discovered economics, learning its many applications to local public policy. It was elegant; it was beautiful. The curves conveyed information to me in ways that no other medium ever had.

One weekend, I took a rest from my studies and read a book by R. Buckminster Fuller. I believe it was Operating Manual for Spaceship Earth. There, I encountered for the first time his elegant formulation of the fundamental law of economics:

Wealth is a function of energy and knowledge.

Absent was any mention of scarcity, supply, demand. This was the economics of abundance. Fuller's economics made every bit as much sense to me as the crisp logic of market economics.

Humankind developed
laws,
traditions,
and institutions
to deal with scarcity.
At any point
in time and space,
scarcity is specific.
It is real.

We live scarcity,
but we come to live
and to thrive
through abundance.

Please do not misunderstand me.
I believe in scarcity.
I have lived it and seen
both its pains
and its benefits.

Yet, abundance is as real as is scarcity
and is even more fundamental.

Without scarcity,
the economist cannot draw
supply curves
and demand curves.
But these curves cannot anticipate
mathematics,
art,
democracy,
communities,
back rubs,
interplanetary exploration,
civil rights,
the popsicle,
or the yo-yo.
Nor could they have anticipated
the brown trout,
the monarch butterfly,
or the horned toad.
Each is part of our biosphere.
Each is our wealth.
And wealth must be the stuff of economics.

Today,
if we choose to love our wealth and our biosphere
we seem unable to seek the best for one
without harming the other.
Today, also,
sages preach to us of the evils in our economy.
They tell us to be more moral,
to separate pretension from wealth.
Let us heed such sermons.

Yet, the moral sage does not free us
from the choice between two loves.
Neither sage nor economist can free us
unless we know
how wealth and biosphere are one—
how we live scarcity,
but come to live
and to thrive
through abundance.

We Come to Live and Thrive

I lay sandwiched between a straightforward explanation of supply-demand-utility and Fuller's statement that wealth is a function of knowledge and energy. I found myself in that muddled layer of confusion and witchcraft called macroeconomics —including gold flow, balance of payments, balance of trade, inflation, and the like. The economy uses the biosphere's model of abundance, while conventional economics uses a model of scarcity. Beneath scarcity lies a supportive abundance —a macro-abundance. Beneath microeconomics, which specializes in scarcity, should lie a supportive macroeconomics specializing in abundance.

Microeconomics covers those situations in which flow of wealth mimics a traditional marketplace. People buy; they sell; they trade. The demand for a product in relation to its supply sets the price. Economists do not. Buyers and sellers do so, acting upon their needs and desires. One day, two chickens are worth two yards of cloth. The next day, they may be worth three yards in the morning but only one after lunch. Marketplace economics explains well the dynamics in this true marketplace and in myriad public and private markets in which goods and services are bought and sold. It can explain how the price for cloth changes as well as how the weaver decides how much to produce. It cannot, however, go on to explain how cloth came into existence nor how chickens were domesticated.

From graduate school I launched my planning career. I went to the island of Martha's Vineyard where I worked for five years to protect its resources and foster sensitive development. I moved as a consultant to Colorado, worked for a while in the analysis of socioeconomic impact from energy development. I went on to typical land-use planning. The gulf between my professional work and my struggle with the theories of economics seemed unnecessary, but enormous.

The economics of abundance remained a closet hobby until 1980 when I pulled together some of my notes in a hand-printed, ten-page document called Plum Local. It began with my apology: "Pardon my boldness ." I wrote, "The valid world economics will show the tie between genetic and economic evolution," and "Taxes, Bah!! Let's phase them out Let's balance our budget by investing communally (politically) in the growth of knowledge for mankind." I sent one copy to R. Buckminster Fuller. When I received his encouraging one-sentence response I felt some comfort.

The four-page 2nd Plum Local of 1981 took my ideas further: "Taxation is role playing. Monetary return as we have in the national income tax system has no role to play. If there is a utopia it will be found in a humanistic management of instability."

Now, as then, I find it hard to put forth theories of economics that disagree with the teachings and preachings of intelligent people who are economists by profession. However, I would find it harder not to share ideas that help me find some sense and science among a potpourri of confusing theories and popular maxims.

:: Bob Komives, Fort Collins © 2006 :: Plum Local IV :: 3. Plum Local ::
With attribution these words may be freely shared, but permission
is required if quoted in an item for sale or rent

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7. Science and Pseudoscience

Science and Pseudoscience
Bob Komives
::

While we can compare theory and experiments in microeconomics with findings by historians, anthropologists, sociologists, game theorists, and psychologists; microeconomics provides few connections to the rest of science. It has a fair excuse; it makes no pretensions. Microeconomics limits itself to a narrow subject, the marketplace and interactions that resemble the marketplace.

It is macroeconomics that should connect all of economics to the rest of science. After all, it should take a macro-view, look at the whole. It should overlap in many places with the other sciences. Narrow-viewed microeconomics should nestle comfortably inside. I see the reverse to be more true. Microeconomics forms the underpinnings of today's Macroeconomics. An unfathomable web of rules and rationalizations has spun out of marketplace theories of supply and demand to bind together the larger world of macroeconomics.

For macroeconomics we have something more akin to pseudoscience. It seems to patch together theories that rationalize all of yesterday, fail to predict tomorrow, and that do not lend themselves to testing . The young science of complexity shows that we cannot always expect to predict tomorrow; so prediction cannot be the only test of science. Simple parts can synergize a future whole that has recognizable but unpredictable patterns. There is a better test of science: falsifiability.

Science and pseudoscience are incompatible: astronomy and astrology, evolution and creationism. The separation of macroeconomics from science comes from mutual repulsion between two inherently incompatible bodies of thought. I wish to paraphrase and thank a scholar who commented on the difference between creationism and evolution. I did not hear his name when a radio network interviewed him in 1987 during one resurgence of controversy over those competing explanations of the origin of our species. The difference? Evolution could conceivably be disproved by evidence whereas creationism could not. Thanks to Murray Gell-Mann and his book, The Quark and the Jaguar, I now know to give some credit to philosopher Karl Popper who promoted this falsifiability test for science.

Scientists modify the theories of evolution as they gather new evidence. Creationists are bound by their belief to support their story of creation no matter the changes in the evidence. Today's descriptions of evolution may not be perfectly correct, but they are science. Creationism is a complex pseudoscience that mounts evidence to defend a belief.

Good macroeconomists do practice science. They subscribe to the principle that their theories could be falsified by evidence. But macroeconomics has become so abstruse --and at times defensive-- that it resembles a belief system to be manipulated by politicians rather than nurtured by scientists. Depending on your political viewpoint and the latest fad, macroeconomics is a particular dogma. In 1998 "everybody knows" the federal budget must balance. For a politician in the United States of America to voice doubt in balanced federal budgets might be as harmful to her political career as expressing doubt in the bible. This seems to be the political reality, though even mainstream economics taught every day in our universities gives little importance to budget balancing.

Part of the problem here is that much of the economics that sets public policy has been wrested from the hands of economists. The media seem every day to find someone who calls himself "an economist for the Wall-Street firm of Stock, Broke, and Bond" to say that the market went up, or down, or failed to do either, "because president and congress failed to reach an agreement today to balance the budget (or distribute the surplus)." Of course, even if one statement happens that day to be true, fluctuations in today's market do not prove that balanced budgets are necessary any more than buying an umbrella proves that umbrellas cause rain. The public, however, is left to conclude that what it already knows to be true is true: a federal balanced budget is necessary.

Once upon a time, everybody knew
the earth is the center of the universe.
This was confirmed by religion
and ratified by politicians.
The best scientists of the day spoke doubts.

from: Everybody Knew

The public of 1633 in Europe must also have concluded that what it knew to be true was, in fact, true. Its media reported correctly that Galileo had just recanted his published conclusion that Copernicus was correct. Standing before judges of the Inquisition, Galileo said, no, he no longer believed what he and Copernicus had written. No, the sun is not the center of a solar system of planets. Yes, the planets do revolve around the earth, the center of the universe.

You think Galileo was a great one,
but he wrote heresy in 1632.
He wrote, " Copernicus is right,
our earth circles the sun,
not the other way around. "
You think Galileo was a great one,
but in 1633 he did recant so he would not burn.

Now you too believe
that to the sun belong the planets,
that we live on one example of them,
our sun-centered revolution,
a scientific revelation,
from a genius then among them
a religious revolution,
insult to god above them.

One way or another,
believers go early, but truth stays late.
Yes, die for your country to get a plaque.
Yes, die for your religion to get guaranteed heaven.
But why die for your science to get guaranteed hell?
Why should you burn for your solar system?

Is the martyr more hero than the genius?
We well know how to make you a martyr,
but we lack the weapon to make you a genius.

How can you resist?
How can you insist:
that Earth is a sphere,
if it is healthier to talk "flat"?
that we came from evolution,
if the inquisition favors special creation?
that all peoples are equal,
if we preach one-ethnic perfection?

Recant today so you will not burn.
Choose humbly to not-believe what you believe.
Humility is a sign of greatness.
For everybody knows and the bible humbly shows
our Earth to be center to the universe.

You think Galileo was a great one
for finding the motion of the pendulum,
the equal rates of falling objects,
and, of course, our telescope.
But then he wrote that Copernicus is right.
You think Galileo was a great one
--but then he did recant
--but then he did not burn.

You Think Galileo Was A Great One

What-everybody-knows is often not true. What everybody knows about the economy is often wrong, but serious economists, when they are asked, seem unable to help the public know better. For example, while they can tolerate unbalanced budgets, we hear serious, academic economists stand before a media inquisition and say about national debt:
"We know at some point too much is too much."
"We do not know how much is too much too much."
Such statements are as unclear as they are unfalsifiable. By comparison, those articulate, Wall-Street economists sound clear and confident. They give short answers that sound precise --even if, when spliced together, their daily pronouncements make neither sense nor science.

In search of sense,
in search of a science
I took my thoughts on a trip from economics
haphazardly
to the origins of life
and, still in search,
back again.

||

:: Bob Komives, Fort Collins © 2006 :: Plum Local IV :: 7. Science or Pseudoscience ::
With attribution these words may be freely shared, but permission
is required if quoted in an item for sale or rent

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9. Ignorance and Economic Development

Ignorance and Economic Development
Bob Komives
::

Despite our ignorance,
we are fair instruments of economic development,
while often not fair to the biosphere which gave us life.
Remove more of our ignorance
and we may become consistent economic developers.

||

I see economists shackled to a model of the world based on scarcity —making it difficult for them to approach the plentiful world of economic development. The last time I checked in detail, this was quite evident in text books. For example, Paul A. Samuelson and William D. Nordhaus, in the twelfth edition of Economics, devoted section seven (of seven) to economic growth and international trade, chapter 36 (of 40) to the theory and evidence of economic growth, and only 3.5 pages out of about 900 to "The Sources of Economic Growth." In these pages, they described growth accounting as an attempt to measure the ingredients that contributed to past growth trends —for example, capital, labor, land, education, and technological advancement. They stated frankly that no theory seems to fit reality very well. As for growth accounting, they wrote that it is far from perfect, but it is about as good a guide as any in this imperfect world. I felt that to be a discouraging conclusion to find on page 799 of an introduction to economics.

More encouraging were theories relegated to the appendix. There I found Joseph Schumpeter's model emphasizing innovation, Harrod & Domar's emphasizing productivity, and Von Neumann's emphasizing a logical tie between the growth rate and the interest rate. These models apparently got relegated to the appendix because there is no unifying theory. Samuelson and Nordhaus expressed hope for a future synthesis that will integrate the neoclassical analysis of economic growth with some 300 pages of macroeconomic problems found earlier in their book.

Can economics be a mature science if its theories of economic growth do not mesh with what economists call macroeconomics? Other authors of other texts may organize things differently; I doubt that they improve much on the clarity and honesty of Samuelson and Nordhaus. The problem lies in economics, not Economics.

:: Bob Komives, Fort Collins © 2006 :: Plum Local IV :: 9. Ignorance and Economic Development ::
With attribution these words may be freely shared, but permission
is required if quoted in an item for sale or rent

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20. Family is Our Minimum.

Family is Our Minimum.

Bob Komives
::

There are no true rugged individuals.
Either they died
for lack of nurturers after birth,
or they were never born
for lack of lovers before conception.

Ruggedless

The science of ecology tells us how we share biospheric wealth with other species, often to our mutual benefit. We must share. No element of life is self-sufficient. We must tax other individuals and species; they must tax us. Humankind has no self-sufficient individuals. From Lewis Thomas in Lives Of A Cell, I learned that the mitochondria in our cells are but one of several kinds of creatures with their own genetic structures that live symbiotically with us, within us. We tax them for their knowledge in order that we might survive; human genes alone do not know enough to keep us alive.

Even if I were to refuse to recognize mitochondria as anything other than "me," I could not ignore the two people who had to undergo bisexual reproduction for me to arrive in this world. Then I cannot ignore that once I got here, during infancy and well beyond, I continued to depend upon adult nurturers for my survival and well-being.

To support bisexual reproduction and to solve the challenge of infant dependency we organize ourselves into families. Family is the minimum biological unit of organization for species survival. Many of us do more than survive. We depend upon our families and their particular patterns of role playing to do more than reproduce and nurture hunks of genes and protoplasm. Adults carry brain knowledge and have artifacts that they wish to distribute to their children and others. Family is the convenient minimum to carry out this complex wealth distribution. Through family we receive and pass along culture and experience. Thus, our adopted children--who carry none of our genes but carry knowledge that we acquired during life--may inherit and pass along more of what we are than do our biological children.

Family is the minimum--the macroeconomic minimum-- the smallest organ that our species knows can capture, distribute, and recirculate knowledge we need to survive and prosper. Since reproduction requires two people and produces a dependent, over time there must be at least three individuals in a family. The minimum number of roles to play, however, is four: father, mother, dependent, and nurturer. There are no maxima.

Beyond the biological minimum necessary for survival, our species has unique flexibility in choosing the family form through which one generation can pass biological, brain and artifactual knowledge on to the next. Adjectives such as matrilineal, patrilineal, extended, monogamous, and polygamous each describe a family pattern that has proved useful. Nouns such as nucleus, band, clan, tribe, chiefdom, city, federation, and even nation, describe scales at which family-type roles can operate.

Microeconomics is important because it helps us understand the dynamics of individuals (or even families acting as individual entities) who buy and sell goods and services in a marketplace. Some of these individuals may be close to rugged, but, here at least, we do not give a damn. What does it profit a man to control a market but suffer a dearth of things to trade? We cannot look to microeconomics to understand the dynamics that produced the market goods and services in the first place -nor the greater wealth that never goes to market. To gain that understanding we should be able to turn to macroeconomics and its minimum economic unit, the family, in all its forms. There we can hope to find out how our species reproduces, expands and nurtures its wealth.

:: Bob Komives, Fort Collins © 2006 :: Plum Local IV ::20. Family is Our Minimum ::
With attribution these words may be freely shared, but permission
is required if quoted in an item for sale or rent

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35. To Suggest a Framework

To Suggest a Framework
Bob Komives
::

What I have worked
is just forgotten.
What I have wrought
is but forgot.

Ought To The Participle

I end Part I suggesting that we might re-subdivide the science of economics. In the first Plum Local, I saw a need for a new name to cover an expanded economics -perhaps, "biosphere economics" or "world economics." Change in name, however, is less important than change in substance. The substantial changes I describe rely on distinctions between abundance and scarcity, between centers and edges. Here, I propose a framework to accommodate these distinctions. I propose to unite similar areas of study within economics and to help economics connect itself with the rest of science through a redefined macroeconomics.

Macroeconomics covers the broad scope of economics, its important connections with the rest of science, and the interrelationships among the centers and edges of microeconomics. It describes the work by nature and humankind that creates wealth. It describes the general rules of abundance and economic development. Some traditional macro and microeconomics belongs here, as does economic history. For the most part it is a new economic umbrella synthesized from other parts of science.

Microeconomics describes the work of wealth distribution and maintenance. It describes the special rules of scarcity. Microeconomics can be divided into two parts:

• Central Economics covers socialism, law, tradition, treaty, peaceful cooperation, money, stock issues, internal borrowing, corruption, and like subjects. Most of traditional macroeconomics belongs here, together with studies that have not traditionally fallen under economics.

• Edge Economics covers marketplace, trade, war, peaceful isolation, external borrowing, thievery, and like subjects. Most of traditional microeconomics belongs here, together with work from other social sciences.

War and marketplace are moral near-opposites. However, both belong under edge economics because they try to bring wealth across the friction of the edge between groups. A treaty does the same, however a treaty usually belongs under central economics because it can form the core of a new group. It is the center of a higher level communal system.

Corruption and thievery are moral kin. But corruption is central while thievery is edge. In corruption, a small group at the center of a larger group finds its communal way to subvert the larger communal wealth ethic. In thievery, an individual or group imports wealth snatched from others.

Socialism and marketplace fall in different divisions of microeconomics, not because they are rivals, but because they solve different problems in the way hub and rim of a bicycle wheel solve different problems.

I prefer this framework, but I believe that names and frameworks can be both problem and solution. I seek a framework that works better, but we should avoid excess concentration on the classification of fields of study. After all, subdivisions are artificial; there is only one science. We need only make sure that economics be an integral part.

I trim my beard;
you notice my hair.
You cut your hair;
I ask, "since when the beard?"
On sight of a dirty bath,
together we throw out the baby.
My,
what able eyes for change
and lame brains for attribution
have you and I, sir,
and Little Red Ridinghood.

You and I, Sir

:: Bob Komives, Fort Collins © 2006 :: Plum Local IV :: 35. To Suggest a Framework ::
With attribution these words may be freely shared, but permission
is required if quoted in an item for sale or rent

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73. Goods, Services, and Promises

Goods, Services, and Promises
Bob Komives
::

I argue that it is wrong for a government which mints money to recall this money to cover its expenses. It follows from that argument that borrowing to make up for insufficient recall is wrong because it is unnecessary. I have a hunch, however, that you will hesitate before accepting the futility of monetary recall. Also, I think borrowing is an interesting topic. So, I choose to come at the balanced budget question from the borrowing side.

My friends, too,
go where I want to go
to share what I am eager to share.
My enemies, too,
go where I want to go
to get what I am unwilling to give.

Footnote, Draft Three

I argue that in economic terms the standard deficit calculation is fantasy. In financial terms, however, it exists. National government has borrowed a lot of money. Necessary or not, the paper obligations occupy big spaces in our marketplaces.

In our marketplaces people every day distribute and redistribute the world's wealth. They buy goods and services at prices derived from dynamics between traders. Depending on our view of a transaction, we call one trader, buyer, and the other, seller. Each wants to get as much as possible while giving up as little as possible.  They both have an incentive to bargain and reach agreement on price because each is threatened by the consequences of not getting the desired commodity. Microeconomic theory bases itself on this simple but dynamic relationship.

We might expect that in the perfect marketplace trading will continue until everyone is happy with what she has and then stop. This does not happen due to some obvious dynamics. Goods and services get used and must be replaced. Tastes and desires change; what we wanted yesterday we may wish to trade away today. Old traders die; new ones arrive. Also, even as we have world markets for many goods and services, one marketplace cannot contain all the world's goods and services. Even if it could, new goods and services keep arriving while some old ones deteriorate, decompose, or disappear. These dynamics do not bother microeconomics much because researchers can usually design their analyses so that they can safely assume that the marketplace does not change enough to confuse their conclusions. 

When venturing away from microeconomics, however, economists must concern themselves with a less obvious dynamic. Many of the newly arriving products and services have not arrived by camel or airplane from some distant market, but have merely appeared out of thin air. Goods and services are not just shuttling between markets. The goods and services available in the total of all marketplaces really grow. New goods and services regularly intrude in old marketplaces. These intruders from thin air are economic growth as manifested in the marketplace. 

Even less obvious than these intruders is the trading in thin air itself. Traders deal not only in old commodities and new commodities but also in the mere prospect of new commodities. One gullible trader will give away real goods in exchange for the promise from a trustworthy trader that she will return next month with real goods in exchange. Using the resources she bought with a mere promise, the trustworthy one will go out and try to produce and maybe invent enough during the month to go back and pay her promise. The gullible trader who gives away the real goods for a mere promise knows that not only must he stand and wait, but he stands at risk. She may not come back and make the payment. It is reasonable for him to set a price that is above the going price for immediate trade in the marketplace. He adds some penalty for his wait and his risk.

While I describe this transaction as a sale, which it is, it is also a loan. In receiving immediate payment (in goods) and delaying her own payment, the trustworthy promiser has borrowed. The gullible one has lent her the value of his goods. By tacking a penalty to the price of the goods he delivered, the gullible trader has issued a loan which is to be repaid in principal (immediate market value) plus interest (penalty). Whether the exchange is in chickens or coins, it is a loan. Both parties do seem pleased with the promissory note; they entered into it freely.

Wherever buying and selling based on promises became popular, everyone could buy and sell more. They did not have to restrict themselves to the goods and services actually in the marketplace. They could speculate on the ones that would be there a month, a year, a day later. Merely by allowing this speculative activity, the marketplace grew. All the real goods and services were there together with the promised ones. Since both the real and the promised were being traded, the total value of the market was now greater than when only real goods and services were traded. The value grew even more when people not only entered into promissory notes but began to actually buy and sell the notes themselves. The man who sold real goods for a promise suddenly needs a real service. He cannot wait for the loan to be repaid so he buys the service using the promissory note given him earlier in trade for goods. When the trustworthy promiser returns she must pay the new holder of her promissory note. As this practice becomes understood and accepted, traders can deal in promises alone, "I'll give you these three one-month promissory notes for that one-year note you have."

Thus, one simple marketplace
expands into the once simple marketplace
where next to traditional good and old service
come the novel good and new service,
newly invented,
newly imported,
newly produced.
Then come
the promises of more to come,
and finally,
midst them all,
we find the market
for promises of promises,
for the some-day goods
and yet-to-be services,
to be sold
for the price of expectation
--for risk and promise
of what this marketplace may yet become.

||

:: Bob Komives, Fort Collins © 2006 :: Plum Local IV :: 73. Goods, Services, and Promises ::
With attribution these words may be freely shared, but permission
is required if quoted in an item for sale or rent

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