Physics and Me

Physics is, and always has been the discipline that interested me most. It seemed to ask the biggest questions about the world in which we live, and the route towards answering those questions seemed most challenging. Sadly it is somewhat of a light hobby to me, something to dabble in for a change of scenery. This is because physics is one of the less relevant disciplines for social engineering but also because I lack the fluency and cutting edge knowledge to really probe any of the questions deep enough to be satisfying. It is for the latter of these reasons that I have as yet not written any essays on physics as I struggle to substantiate or even phrase what I wish to say. As I cannot bear in mind all aspects of physics in my head simultaneously I often overlook simple and obvious things when theorising. Such failing on my part make me reluctant to put finger to key, but one should always try something before giving up on it so I shall proceed.

Science looks at what happens and then tries to frame those occurrences in models and equations so that they may be used to predict other similar occurrences. The progress of science is a process of observing discrepancies between the models and equations with reality so that they may be refined to provide a greater degree of accuracy. Presently we have two main models in physics, one to describe the very big (general relativity) and one to describe the very small (quantum mechanics). The problem faced by physicists today is that these two models do not work when combined, the equations produce senseless results. I am informed that relativity has been inelegantly shoe-horned together with quantum chromodynamics and quantum electrodynamics leaving gravity as the main problem. Relativity is a beautifully elegant theory and quantum mechanics, I am assured, is one of the most precise models. Both of these attributes suggest that much of these present models is correct and so the search is on to find the missing parts of the picture.

Logically the disagreement between our theories of the very big and the very small means one of a few things; one of the theories is wrong, both of the theories are wrong, an assumption we have made regarding either theory is wrong or we are missing an extension to the theories so that they apply correctly in various conditions. Few scientific theories that have gained any credibility or acceptance have turned out to be completely wrong, most, like Newtonian mechanics, turn out to be great approximations that work well for certain conditions. When applied to conditions that are significantly different to those on Earth we begin to find issue with Newtonian mechanics and are required to make new models and equations to explain the erroneous results. Newtonian mechanics is still widely used today despite the common knowledge regarding it's failings, this is because the factors it does not account for are not relevant for many day-to-day uses.

The precision and elegance of quantum mechanics and relativity respectively suggest that they are not wrong in much the same way Newtonian mechanics is not wrong. Certainly for my part I shall not attempt to critique either of our existing theories as it seems less productive and less likely to be the problem facing a unifying theory of the universe. This leaves us with either an incorrect assumption or an incomplete picture that would allow for our present theories to be extended upon. It is fair to assert that much of this problem arises from the inability to devise experiments and observe situations where very small things exert a huge gravitational force and this is a significant contributor to why we have no solution to this problem as yet.

When I use maths I have to be fully aware of what the numbers represent, I have to be able to visualise the process I am trying to describe mathematically. With a lot of quantum mechanics I am unable to see what the numbers are representing or how the manipulation of them reflects the changes in reality. Although I am much more at home with numbers and find things expressed numerically much easier to relate to, I also find any physical law that describes the universe impossible to understand unless it can be logically described with words and diagrams. If it cannot then I cannot appreciate what the numbers and their manipulations represent. Feynman and Dirac are the kinds of physicists that I can appreciate for their approach to understanding. It is ironic that for all things I try to find ways to express them numerically, except in physics where I prefer pictures and words.

The quest to find a unifying theory of everything is like a jigsaw puzzle, except we don't know what the picture we are trying to make is, nor how big the picture is, nor what pieces we are missing. The best strategy to completing a jigsaw is to locate the corners and edges and try to link them all together so that you have something to build the rest upon, and as you do so you are able to place them in the appropriate places. I have used a similar approach when I muse about the workings of the universe. I conceive of a model for the universe which describes the relationship between some of the most important physical factors and then I attempt to hang the pieces of the puzzle we do presently have onto this model to see if they fit suitably. Once the bits you do have are in place you are much more able to suggest the kinds of “pieces” that you require to fill in the gaps. This is quite a hit and miss approach and not a commonly used one in the scientific community as a result.

To brashly describe any physical factor as one of the most important is quite presumptuous so I shall define what I mean by physical factors and briefly justify why the ones listed seem of most importance. The factors I use to construct frameworks are; time (t), mass (m), energy (E), the speed of light (c), gravity (g), space-time (inclusive of relative position) and the electromagnetic force (and to a lesser extent the strong and weak forces giving a total of four fundamental forces inclusive of gravity. I will focus less on the strong and weak because their function and proof of their existence is less know to me, not because they are any less relevant. There is much to suggest they are all the same force but observed at different points on a spectrum in which case the number of forces observed seems almost as significant as their function). To return to my jigsaw analogy I would say that each of the above factors are akin to the clumps of pieces that form a small image that is a complete and recognisable object in the picture. There are many other bits of the puzzle we should not ignore such as the various subatomic particles (quarks, leptons) and their associated properties (spin, charge etc). Our justifications for these are largely based in pure maths and while the equations may provide very accurate predictions it is harder to explain the processes by use of words. It is for this inelegance and illogicality I shy away from constructing models to specifically make sense of this end of physics. I hope to be able to gain greater understanding of this area by inference from a model of the listed factors. Other things I should be wise to not overlook, as bits of the puzzle or clues, are a selection of constants like Pi (or as many would argue 2Pi or Tau), Hiesenberg's uncertainty principle and Plank's constant and it's derivatives. This list could go on and on as everything could be a clue or relevant. The selected aspects of physics are the most intriguing, confusing, unknown, fundamental and underlying and so seem to be the best places to start probing for hints as to the nature of the bigger picture.

Time is the trickiest customer of the lot and I put a great deal of this down to our perception of time. It is generally assumed that we all travel in time at a very similar speed in the same direction and have no control over this movement. We can only observe the “now” in our reference frame but we can recall the past in our memories, yet recollection is an activity we appear to do in the present. It seems the case that the future is something we can only statistically predict or wait for. We cannot escape time, all the things of our world occur within it and so all of our physics must account for time. Trying to describe the properties of a particle at a frozen interval of time yields the awkward result that we are clueless as to the particle's energy. There should be two words for time, that of it as a dimension for use in physics and one for out notion of the passage of time as our perception informs us it is. Time is such a big player in physics that I believe if we had a full understanding of it we would be able to infer explanations for everything else with great ease. The answers regarding time could easily be different for our physical understanding of it and our perception of it.

My aim with this essay is not to describe all my theories and thoughts nor discuss each aspect of our incomplete understanding of physics. I merely wish to introduce the subject and give an example of a model I have recently been using to frame other ideas upon. Later essays will probe the individual aspects to greater depths but I suspect that they will also be rather disjointed, hence my desire to begin with an essay describing my approach to physics and my weaknesses in the subject.

I have always observed that a group will make far greater progress on an intellectual task than an individual will. The ability to have multiple perspectives and reviews of ideas is huge. The individual can easily get distracted down a tangent that is of no use because they overlooked the small piece of information that ensured the tangent was not useful. A concern I have regarding the sciences is that the majority of the minds involved in making progress are of very similar dispositions and training. On top of that the science community has mechanisms, like any other social group, which require the individuals to adhere to else they are likely to suffer rejection from the community. Rejection from the scientific community means that any theories that person made will be far less well received and often disregarded on principle. The scientific method is both rigid and prescribed which suits well for most situations but not all. When faced with a roadblock such as a unifying theory an eccentric is required. The kinds of individuals who think outside the box, that are not blinkered by the community or their training. Rather than just astute academics the discipline requires a few individuals who are creative and that have a fresh way to look at problems. Einstein was one of these people, half artist and half scientist. He dared to ask questions about assumptions that others had not. Not being an active member of the scientific community myself I am able to begin with a pretty clean slate. My ignorance and lack of bias within the discipline are things I can turn into an advantage in some respects by allowing me the chance to be creative with my theories. Even if many are nonsense you only need hit the target once for it to be useful.

So on to my current model, which is easy enough to imagine and very simple in terms of how it combines a few factors. Originally I called it “balloon theory” but each extension of the model begs a more appropriate name. It was developed to make our experiences of time more comprehensible and palatable. The easiest way to imagine the model is as a three dimensional projection of a four dimensional shape. The space we appear to live in is three dimensional, we can go back or forward, up or down, left or right. In my model I use only two dimensions to represent the three space dimensions we perceive so as to make it easier to imagine because I use one of out space dimensions to represent the time dimension in the model. If mathematically describing I would return to a four dimensional model to appropriately calculate things. I postulate that our universe is like a four dimensional balloon in which we exist on the three dimensional surface. The surface of a balloon is only two dimensions, if you were to go up or down (radially in or out) you would no longer be on the surface but left, right, back and forward are all fine. The capacity to move in three dimensions upon the surface of the balloon must be imagined as it cannot be represented in our world of three dimensional perception. The up and down (radically in and out) dimension in the balloon model represents the time dimension. The inflating balloon represents the expansion of the universe, our movement in the time dimension is facilitated by this expansion, as the balloon expands all things at the surface will move upwards or radially out from the centre.

A balloon implies that the surface is smooth which it cannot be due to mass and gravity which will have the effect of distorting the surface. The balloon would like more like a conker where there are spikes on the surface, representing mass, that I believe point inward but am open to persuasion to other options. Another failing of the analogy is that I believe a projection of the four dimensional roughly spherical universe would look much more like the shape of the p-orbitals in chemistry, a shape you could make by joining six balloons together at right angles at the nozzle.

There are several reasons this model appeals but the strongest of those for me is the least justifiable in that I find it to be an elegant idea which is as justifiable as taste in art or music. The simplicity of the model appeals as it is easy to comprehend and work with. It also allows more complex bits of the puzzle to be affixed onto it so that you can postulate theoretical explanations for them in the bigger picture within the theoretical universe model. The cyclic nature of the model also appeals as I have a real problem with the concept of infinite in reality. Maths makes assumptions regarding the concept but I am not ready to accept any of them as a reflection of reality with our current understanding of the universe. My model suggest that by travelling in one direction along the surface of the balloon/universe that they will return to the same point in space once they have made a complete orbit. There is no beginning or end of space in my model yet there is still the capacity to create more space.

The model suggests a kind of radial relativity where by movement along any space axis will change the nature of those axis. If I were to travel a quarter of the way around the surface of a sphere I would appear to be moving in the down direction or radially inward to an observer at my starting location however to me I would still seem to be travelling forward. As my model suggests that the down direction is “backwards in time” it offers a vague solution to dark matter and dark energy in that they are just relativistic effects. We observe far off galaxies and assess they should contain an amount of mass based on visual evidence yet the gravitational effects and expansions speeds we observe suggest otherwise. It is possible that these erroneous observations are not the result of any extra stuff but yet another trick of the universe based on where we see them from? Were we able to observe those galaxies from within we might well find they behave as we would expect and that our own galaxy was behaving peculiarly from the new position.

The malleable nature of the model is useful in that it may be tweaked to accommodate for problems that are encountered. Large parts may remain the same even when other aspects are flipped or reversed. This is useful as so many little things that all need accounting for throw a spanner in the works. The nature of time being so unknown also makes a rigid model unforgiving and I have several variations of the model for possible different properties of time. The model described assumes an inflating force or a pendulum like undulation of time. Another possibility is a cyclic time dimension, where rather than existing on a surface we exist on a wave, much like surfing ocean waves. This begs the question as to what is surfing the waves in front and behind us as well as many more technical ones.

To probe specific aspects of my model more deeply would require a lot of content and so I shall leave it at that for now as an introduction to the subject from my perspective, something I will return and relate to a lot in future essays and hopefully some things to ponder on in the time being.

Little elements of physics are like rubix cubes and other puzzle games, fun to pick up and try and solve, a bit of a challenge etc. To end I shall offer the reader a further choice of puzzle to muse over so allow me to suggest a very simple theory regarding anti-matter. We often wonder why we exist in a world of matter given that matter and anti-matter annihilate upon contact and the big bang created both. Presumably more matter was produced however that is unlike the universe, perhaps it is more mathematical in the way that negative numbers work. Matter combined with matter produce matter, anti-matter combined with matter annihilates to produce energy. Nothing is said about what happens when anti-matter combines with anti-matter, one might assume that anti-matter is the product but why not just matter? Because both 1 x 1 = 1 and -1 x -1 = 1 after all.

A Modern Witch Hunt

An injustice is being done to group of people that has had no media coverage. There are understandable reasons for this lack of support, mainly that the group in question is universally despised. This however is rather besides the point as injustices proliferate. Obvious injustices should not be ignored as they can only damage society in the long run. Social acceptance of an injustice targeted at villain figures will give the impression that one can excuse an injustice. This in turn will lead to people using ever more tenuous excuses for unjust behaviour. Logically there is no reason why anyone should speak out against the injustice that I intend to. People outside the group have no incentive to do anything and those within the group have a huge incentive to keep others from knowing they belong to the group.

The group I am speaking about is paedophiles and the injustice they are subject to is the assumption that they are all child molesters. The term paedophile and child molester are basically synonymous in modern society yet they have very different meanings. The former is a person who is attracted to minors and the latter is someone who sexually abuses them. We do not assume all straight men rape women so why make the same leap of logic when considering paedophiles? It is generally accepted that we do not choose our sexuality, it is unknown if it is a genetic effect or the result of upbringing but that is beside the point. Even if for some reason paedophiles were somehow different and able to make a choice regarding their sexuality I would guess that none would chose to be inclined that way for fairly obvious reasons. As such it would be fair to conclude that no paedophiles made the choice to be that way and should not be regarded as criminals or villains or social outcasts. I pity the person who is so unfortunate to be attracted to people who cannot reciprocate the desires. Their plight reminds me somewhat of king Midas and his isolation.

Certainly, as with rapists, any person who sexually abuses another should be treated as a dangerous criminal and punished accordingly. Crimes of this nature are the only ones I could consider corporal punishment being appropriate for. Where a violent rape occurs and can be proved beyond a doubt a castration of the perpetrator may be a reasonable course of action. Despite the public outcry at Ken Clarke's claim that different rapes are of differing severity I would have to agree and none more so than when a minor is concerned. The distinction is hard to draw in some cases as I see little problem with a 15 year old and a 14 year old doing what they want with each other if they are consenting. If one widens the age gap at all it very quickly becomes very unacceptable and when trying to draw a line between what is just youths experimenting and what is taking advantage of minors, one can see why as a society we tend to err on the side of cation in this regard. Consent is the main consideration in the borderline cases but we are going off point rather. I mainly wished to clearly assert my view on rape as one of the most severe crimes and what I believe to constitute it so as I may continue to distinguish between paedophiles, child molesters and just kids experimenting while growing up.

As ever we find we are looking for solutions to problems in society. Obviously paedophiles cannot be allowed to have relations with minors. Perhaps in some far away future when we can reverse the effects of ageing I would not have a problem if an adult wished to change their appearance to that of a child and have a relationship with an adult but that is pretty irrelevant to any current discussion on the matter. The problem faced by society is how to minimise the chance that any given paedophile becomes a child molester. My argument for writing this essay is that more just treatment of paedophiles would reduce the chance that they might become child molesters. It seems pretty clear that if someone feels rejected by the rest of society they are unlikely to respect it's rules or have much empathy towards others and so would be more inclined to criminal and immoral behaviour.

Another factor that may contribute to turning some paedophiles in to child molesters is the lack of an outlet for sexual release. As previously mentioned, this cannot be provided in the manner they may desire most but some potentially helpful provisions could be made. As a society should we not accept that paedophiles do exist and that it is not their fault and so we should help them, both so that they may lead happier lives but also so they do not cause any harm to others? Any honest man will concede that sexual release does not require more than one person, most make do with that when unable to find others that are willing. The imagination is a powerful tool but it requires a degree of things to work with, presently such things for paedophiles are rightly illegal as they contribute to child abuse. I have heard suggestions of legalised images that are provided in a capacity similar to medicine. These could simply be pictures adults donate of themselves as minors, donated rather like giving blood. This method gets around consent and abuse issues which are the social concerns. The idea may be unpleasant in many respects but it is the the lesser of the available evils in this particular issue.

While there may be many good ideas that help to solve some of the problems faced by paedophiles that relate directly to the sexual side of the problem I think the social aspect is a bigger concern. The previous example was given to illustrate the kinds of approach that could be used when dealing with the unfortunate sexual issues. The social side of the problem is regarding the integration of people in to society. We need to get to a stage as a society where someone being a paedophile is not stigmatised for it. I cannot even give a specific example for a comparison for fear of offending due to current levels of social stigma surrounding this topic. By creating an environment in which paedophiles can socialise and discuss their problems and feelings openly without fear of reprisal I am sure you would significantly reduce the number of child molesters found in the society. You may even be able to reduce the number of paedophiles in the society too due to results from social and psychological studies that cannot really be carried out in the current environment as no one would offer themselves up as a paedophile.

All child molesters are paedophiles but not all paedophiles are child molesters. Our hatred for the child molester and our associations for the two terms have made an already afflicted section of society one of the biggest witch hunts of recent years. I am sure they appreciate the rise of terrorism as it has taken the centre stage as public enemy number one! Regardless of this they are still hated and society does itself a disservice with this hate. In times when these issues were not so heavily demonised in the media we can find examples such as Lord Baden Powell who were reasonably obvious paedophiles (allegedly, as if getting sued by a dead man is my main concern after writing this!) that contributed heavily to society without reports of abuse. The achievements of Lord Baden Powell would not be possible in the current social climate. Changing the social climate is likely to be a slow process as the concept is so alien and repulsive. The more we struggle to appreciate the mentality the more we are able to hate, suicide bombers providing a good example comparison again here. The hatred is strong, and understandably so, but that makes it all the more important to push forward with social education and advancement. 

The Internet

It is hard to really appreciate the significance of an era in which one lives. The nuclear, space and computer ages are past and we are now in the internet age. Although closely linked to computers the internet is having a profoundly different effect on society than the advances brought on by computing. Computing gave humanity the power to store, manipulate and replicate vast quantities of data, upping the efficiency by which many jobs were done. The internet on the other hand, while facilitated by computers, has levied it's advances on humanity in the spheres of communication and knowledge. The most relevant era in human history that one can compare the internet age to is the development of the printing press, other similar comparable advances would include, in reverse chronological order; paper, written language and spoken language.

In times of change few people are happy, some fear the changes for various reasons while others anticipating the changes are impatient with the progress. This will help to confuse the society experiencing the changes as optimistic predictions fail to happen accompanied by a chorus of criticism. The internet started to really take-off in within my life, when I first heard the term used and inquired as to what it was I can remember being very unsatisfied with the answer, that I hadn't really understood, as I was expecting a thing that existed in a place. That was the early nineties, since then I have come to spend most of my waking hours within arms reach of the world wide web. In historic terms going from not knowing about a thing to spending a majority of time using it within the space of twenty years is incredibly fast, yet to me it was gradual and unnoticed.

Only very recently did it occur to me how significant the internet really is despite it having been right under my nose. As such I have come to write this article not to impart any relevant opinions or to provide any great insight but to simply express some of my shock at having been blind to such a powerful force of social change. The web is here to stay, as younger generations who have grown up with the net replace the older ones the internet is sure to become more engrained within society. It is wise therefore to consider some of the possible ramifications of this and, as ever, make some suggestions as to how the internet may be put to good use.

Before we move on to predictions it might be reasonable, if not obvious and redundant, to justify why I deem the internet to be of comparable significance to some of the previously mentioned human advances. The internet makes no new things possible, but then neither did language, animals with no developed languages are still able to communicate. Each new development provides the opportunity to communicate more accurately, quickly, durably, replicable, precisely, conveniently, widely and/or efficiently. The comparison of the significance of the internet against the others should therefore be between these aspects.

The internet allows for instantaneous communication, which admittedly the telephone provided before hand, the relevant differences between the telephone and the internet is the massive interlinking and passive nature of the latter. A phone call requires the participants to engage simultaneously in the event, where as the internet allows information to be presented for others to view at their leisure. The internet passively contains information which may be called upon as required/desired by individuals, the author is not required to present the information once it has been put on the internet. Prior to the internet and telephone communication was as fast as humans could physically travel themselves making it incredibly inconvenient.

The spoken word is as durable as memory, writing allowed humanity to increase the durability of the spoken word to that of whatever material was written upon. Largely this is plenty durable enough for purpose although there are some arguments to say that storing data on “the internet” will be more durable than a granite carving. This has more to do with the replicability of data compared to something like a book. Constructing a book requires time and resources, copy pasting something basically doesn't. The printing press enhanced mainly the replicability aspect of communications yet it had one of the most significant impacts of any invention upon humanity. The Renaissance was heavily fuelled by the printing press and the more widespread reading of books that the printing press allowed.

The internet, of all the methods of communication, provides the best or equal best accuracy, speed, durability, replicability, precision, convenience, efficiency and coverage. Humanity will need to transcend the use of language before we many be able to improve our ability to communicate much beyond the internet. Trying to provide a quantifiable measure as to the level of improvement of the internet compared to writing, speech, paper, the telephone and the printing press would be tenuous and imprecise. As I cannot quantify it, the assertion that the internet comes top in every category I can think to name, that would constitute an improvement to communication, is my justification of why the internet is so important.

Something is important in historic terms if it has a significant social impact, either it changes public opinions or causes the physical workings of society to shift. Examples of such events are the enlightenment and the industrial revolution respectively. Usually an event will cause changes to all aspects of society with most being very minor and just one or a few major alterations. The internet is set to cause a number of significant changes in all different spheres of society. To gloss over a few quickly we can look and see how many people attributed the largely successful and peaceful revolutions in Tunisia and Egypt to the internet. Impractical legal requirements like the recent super-injunctions were washed aside by the safety in numbers aspect of the internet. We can see how pressure from from popular internet forums (including the social networking sites) has caused enough advertising contracts to be pulled from the News of the World for it to be discontinued. It used to be the case that you had to infer public opinion from what the papers said and the views of a very small cross section of people, those being the ones encountered through the course of your life. The internet allows for the public to to provide enough individual opinions so that you are able to reasonable quickly gauge what the majority feeling is. Those industries where peoples opinions matter (which is all industries as far as I am concerned) would be wise to look into ways of using the internet to find ways of improving their operations.

The political power of the public has clearly been increased as the ability to reach a national or global consensus on an issue has been made easier in a number of ways. Essentially it is a combination of the vast number of people communicating with each other thus creating an exponentially greater number of communication links, the speed at which this communication occurs and the fact that geographic location has no impact on the communications. Because politicians know a public opinion formed with the use of the internet will be more representative and accurate of the population than the feedback they would get from the meetings they have in day to day life they are more liable to act upon them, hence the increased political power of the individual within democracies. The truth is quite easy to sniff out from the excuses, cover ups, distractions, linguistic tricks, slights of mind, boasts and blags. The advantage of free speech and a lot of traffic is that the truth will be spotted and spread like wildfire increasing the knowledge and freedoms of people. A secondary advantage to the free speech and lots of traffic is that in order to locate the truth for ones self you must approach new facts with cation and think about them. In school or on the television or in a book or paper we are somewhat more trusting of facts and, worryingly, opinions than we are from the internet. Questioning things and thinking about them has the effect of educating the populous and enhancing their intellectual prowess.

Although I hope for a second Renaissance that is ushered in by the internet age it is by no means assured, and even if it were there is nothing to say it will manifest in similar ways. It is conceivable that things will start to get lost in cyberspace. The sheer volume of data, opinions and so forth will obscure the most poignant and accurate from the larger audiences. This is not just the fault of the internet but also the result of a population boom since the first Renaissance. I do not know how to increase the chances of good things arising from the internet, all I am sure of is that the internet has a great deal of potential for social good along with a few minor areas of concern. Few people are unaware of the usefulness of the internet presently but we are most interested in what the internet may be able to do for us now and not what it may do for humanity over the next few hundred years. By being mindful of what changes may come about we are in the best position to maximise the advantages of the internet while avoiding any exacerbations of the problematic areas.

My first and only real prediction for now is regarding commercial areas of towns and cities – the CBDs, which in the opulent peak of the capitalist consumer boom have come to contain a very similar mix of shops, brands and products. The town I grew up in and the town I live in now are of similar size, over the last ten years they have had an uncanny resemblance to each other despite reasonably significant geographic and cultural differences. Over the last couple of years the resemblance they share is that of a thinning of certain shops. The feedback mechanism a free market capitalism has to equilibrate is that of the financial crash, it is not a mistake or something we can blame on groups or individuals, it is the natural cyclic progress of speculative money supply. The crash helps to cull the industries that are outmoded and unsustainable. My argument is therefore that exterior non-economic factors are the primary cause of the loss of many companies we are used to seeing in our high streets. The financial climate gave these businesses the final push over the edge but such pushes are inevitable under our economic systems, those companies may have survived if other non-economic changes were not also under way.

Clearly this non-economic factor, given the subject matter of the essay, is the internet in a lot of cases. For certain types of goods it is really not important to the consumer to be able to hold and inspect the product prior to purchase. Not having to pay high CBD rents or employ the number of staff required to operate many small shops means that the cost of such goods to the consumer can be significantly reduced if sold via the internet. The best examples of these goods are CDs DVDs and books where the consumer knows exactly what to expect from the product. As expected therefore, with the rise of internet companies who sell books, DVDs and CDs, the specialist shops who sold these products before the internet have had one of the hardest times in the current weak economy.

While CDs, books and DVDs may be some of the best example of products that are being purchased more and more online than from CBD retail outlets, and therefore also example of the kinds companies finding it hardest at the moment, the reach of the internet extends further and will likely alter our CBDs more as time elapses. Some of the various other markets that I deem to offer little as a retail outlet over an internet counterpart are; gambling, travel agencies, electrical equipment including computing accessories and so forth. Other sectors are able to transfer aspects of their service online such as estate agents, large super markets, banks etc. Essentially the only advantages physical shops have over purchases via the internet are the speed at which one can get the required item, the ability to inspect/try/feel/wear the product prior to purchase (which is important for many foodstuffs and clothes) or the human interaction, weather it be in the form of specialist advice or a specialist service such as a bike shop that also does repairs and servicing. Specialist advice and peer review is becoming more widespread and available online thus further reducing the need of a specialist provided by the retailer. People trust their own research more than possibly biased advice from a specialist provided by a retailer which is not an unreasonable position to hold.

I predict that as the use of the internet becomes more integrated throughout society that our CBDs will look rather different in a way that is probably for the best. As the need of certain kinds of shop diminish rents will decrease and space will increase thus allowing for more restaurants, bars, interesting shops and specialist service based shops to take their place. This is a natural progression as internet shopping is a more efficient means of distributing goods and thus a more advantageous thing to do for society. A CBD will come to be more and more a place of leisure. This in turn will also reduce the strain on such areas in terms of how many people they service and allow largely populated areas to operate more smoothly. The internet will decentralize commerce to an extent, indeed it may be one of the few modern social factors that slows the flow of population into urban areas.

I wish to end on a tangential utopian note regarding a new kind of theft that has arisen mostly alongside the internet. Copyright issues have existed for a while but are a far greater threat now that computing and the internet are so widespread. The issue is that it is very easy to replicate and use data that another's labours have gone into producing. Ethically such thefts feel different from thefts of physical objects, not because it is stolen labour and not stolen goods, but because after the theft the victim is in exactly the same position, they still have all of the things they previously did. I personally believe that people should be rewarded for their labours even if they may be used/consumed and enjoyed by others without removing that possibility from the “owner”, I also believe that the record companies have a negative monopolistic effect on the music industry. As producing and promoting music requires reasonable amounts of capital, and required more capital for production prior to the advent of digital formats, the record companies are able to offer contracts that are significantly in their advantage. That in turn allows record companies to ensure that success in the music industry without the backing of a record company is really hard. Copyright laws protect record companies interests and allow them to maintain control of the industry but without the laws there would be no financial incentive for people to create music. This applies to other industries that fall under the arts and culture umbrella but the negative aspects of capital based monopolistic control are most pronounced in the music industry.

Ideally therefore we would operate within a system that allowed the control of the music industry to be located in public opinion, while still providing the musicians a financial means to support themselves. My vision to solve this issue may be difficult to implement for many reasons, inclusive of objections from record companies. Essentially I think that a state based digital library would offer the best of all worlds. This library would offer citizens the ability to freely download films, series, music, books and potentially other goods that can be digitally replicated easily. The state would then offer the individuals or owners of the rights a flat royalty fee per instance downloaded. These royalties are funded by taxes but would need to be lower than they presently are to not cripple the state. The fact that it would be free means more people will obtain the media than they would if required to pay and those that would have otherwise acquired without making a payment would do so legitimately. This increased demand would allow a reduction in royalties needed to sustain artists and make such a system more financially practicable, sadly though the factors to facilitate the system are only created by the system thus creating a catch 22 scenario. The media downloaded would need to be free to remove the incentive to obtain pirate copies, the same is similarly true if all titles are not made available. Self production and promotion would be far easier as distribution via the digital library would also be offered to all artists for free and this would reduce the strangle hold the capital owners have on the industry. It has never really been the fear of the major record labels that people will pirate music online, it is their fear that artists will be empowered to bypass them altogether via the use of the internet.

This idea is quirky and logistically awkward to implement yet it is a way the internet may be utilized as a positive social force, which has been the underlying theme of this somewhat patchwork essay. The main points of relevance regarding the internet as a positive social force are that is is one of, if not the most, significant improvements ever made to communication and that it is here to stay. It will have effects that are political, economical and social, from improving democracies to altering human geography. The internet is still in it's infancy and has much untapped potential for both good and bad. We need to be aware of it's significance so we may find ways to promote the good and avoid the bad. 

Economics Part II: The Trouble With Money

In the last essay in this series we looked at some examples to show how and why our economy came to exist and explain some fundamental principles from a different angle of approach. This essay will use those mechanisms to show how some natural evolutions of our economy are not to the advantage of society. Much as I dislike a negative essay it is important to highlight problems so we know what we are trying to fix.

So far from the previous essay the only method of altering the value of money in society we have explored is by improving the efficiency of labour or production. Many factors were kept constant or removed from consideration in the potato producer example which we shall now look at in turn to asses the resultant changes to the value of money.

It was stated that in the example society their was a fixed total amount of currency which we placed at 10,000,000 money. Currency is simply a reference tool and the actual numbers are only relevant when relative to something else. By using our understanding of equilibriums it should become clear that something in our society that cost 5 money would necessarily cost 10 money if the total amount of money in the society was doubled and all other factors remain constant. The real cost in labour terms to the society in producing the item is unchanged. That cost may be expressed as a percentage of the total labour.

Cost of item in labour = 5

Total cost of all labour in society = 10,000,000

(5/10,0000,000)x100 = 0.00005%

Now, if we double the total amount of money to 20,000,000 while leaving the percentage requirement of labour to produce the item we have

0.00005 x 20,000,000 /100 = 10

The ultimate equilibrium position makes no difference to the economy of a society (in isolation) however the transition from one equilibrium to another equilibrium position will cause some instability in the economy if it is too rapid. The transition period is where the most significant profits and losses are to be made.

Many factors can cause the physical amount of money to change or create a situation which simulates the creation or destruction of money. Minting new currency is the most direct way to increase the total amount of money in a society. It is rare that a government produces significant quantities of money relative to the total amount at any time due to the economic instabilities it can cause, particularly as no society is in isolation like in our potato example!

Population growth will simulate the removal of money from a system. Imagine an identical society to that our previous example but with exactly double of everything except the total amount of money. To produce the item which cost 5 money in the first society requires half the percentage total labour of the society. This is because the labour required to produce the item is the same while the total amount of labour available is doubled.

It therefore takes 0.000025% of the total labour to produce.

0.000025 x 10,000,000 /100 = 2.5 money

By increasing the population but not the total quantity of money the cost of things will fall. The quantity of labour increases with increased population and as money is used to procure labour the cost will be reduced in nominal terms to ensure the relative costs remain the same.

Another way to express this is with supply and demand. As more trades are made in a growing society due to increased total requirements and labour the demand for money to make those trades will increase. We have assumed the supply of money remains the same therefore when trading a good for money the recipient will receive less money. The increased demand for money increases its value as a commodity and so all other goods and services become cheaper or exchange for less money.

So far we have only a minor way to cause inflation which is via the minting of new currency and we have two major means of deflation through improvement and population growth. A very good question to ask at this stage is why, when our societies are clearly improving across the board in production methods and the population continues to grow do we experience inflation of money? It may also be prudent to consider why it is when deflation is the result of improvement that it is generally considered that inflation, or the devaluation of money, is a good thing.

I stated earlier that work or labour added value to something, however when attempting to define labour I did not point out that by adding value to a commodity it would also result in the increased value of money. When a potato is brought to market the value of money will be increased by that amount.

This would suggest that the total value in society was increasing continually however this is not at all the case for when the potato is consumed that value is lost again. Food is produced in similar quantities to the amount consumed and as a result the net effect is nil. No value is gained or lost by society. If something is consumed and not replaced it will become more scarce and command more money to purchase. This increased price is another way to say that the value of money is decreasing. Consumption therefore is a significant contributor to inflation or the devaluation of money. Value is always being added to society while at the same time removed, the net increase or decrease (assuming all other factors constant again) will determine whether deflation or inflation are observed respectively (again, assuming all other factors are constant). The most suitable economic definition of consumption is when something is no longer able to perform its function. Certain things like food are consumed immediately and others have a lifespan which may vary greatly. Services may be said to be consumed at a rate equal to how frequently the same service is required again. The product which lasts longer may be said to be consumed more slowly.

Along similar lines to consumption is an idea already touched on which we called parasitic trades. These are trades which may benefit one party but at a greater total cost to another party than was gained by the first. There are many examples of this but perhaps the easiest one to relate to is that of the slack worker who is present at work and receives pay but who achieves basically nothing. That person is supported by the productive labours of others yet returns little or nothing to them or the society at large. Each individual who produces less “value” than they consume is reducing the total value of society and consequently the value of money used in that society.

Labour is performed to produce or procure stock which is then sold to pay for the labour, the land and the upkeep of any required equipment. In most situations being able to guarantee a wage to labourers and being in possession of necessary equipment is required prior to generating any stock in which to sell. Profits from the stock may be reinvested to enable more efficient generation of stock and/or a greater quantity of stock. This is a slow process if one assumes that only the money generated by the stock may be used in this way. A much faster way to generate a good profit is to borrow money in order to fund the labour and stock. There is a strong positive correlation between the amount of money invested in the production of a given stock and how much return may be expected upon that investment, which is another example of economies of scale. As a result the ability to employ capital in producing stock, and ultimately profit, commands a cost of it's own. This cost is usually represented by the interest paid on a loan. Money not only acts as the profit made from selling stock but also as the stock itself and so money becomes a commodity in it's own right under capitalism.

As a commodity that may be sold for profit, those in command of a sizable sum of money are in a position to profit from the lending of that money alone. People earn returns on their savings or surplus money by giving it to banks and brokers who invest or lend it to others on their behalf. The more one has at their disposal the greater return they can expect from it. Under capitalism there is a general trend of money gravitating towards greater pools of money. The rich get richer is not a conspiracy theory where the rich plot ways to increase their wealth but simply the logical result of a system that allows a reference tool to extend beyond it's design parameters. Money flows like water with wealth acting as the gravity which gives it direction.

When a loan is taken to enable the production of stock the price of that stock when taken to market must incorporate the interest to be paid on the loan. This increased cost on the commodity is a cost that all who purchase the goods must pay in part. The more loans are utilized in industry the more the cost to society at large. Assume that all the potato producers in our example had taken out loans to buy their fields and support themselves prior to their first crop being harvested. We have already asserted that all other industries incorporate the cost of the potato as all persons in our example society consume them. The price of the loan is ultimately born by the society at large in order to benefit the owner of the initial capital against which the loan was issued. Certainly the potato producers had to incorporate the cost of the loan into their business plan however it is not really the producer but the consumer who must bear the cost of this loan. Consumers include the poorest within society where as those with surplus capital do not. The interest paid on loans is a tax upon the whole of society. This tax is not however used for improvement to society such as funding education but an additional income for those with the most already. The end result is a further devaluation of money as the cost of goods and services increases. Loans which demand an interest payment are another cause of inflation.

In certain situations loans can be given where the physical quantity of money does not cover the value of the issued loan. A bank may only have X money invested in it however it may have lent 2X money out. This is deemed acceptable as the invested money is not required by it's owners and the loaned money will be returning over time with interest. Although this may allow a society to fund new industry at a greater rate than it otherwise could it also has the exact same effect as minting new currency. The more money available in society- the more expensive goods become. The price of goods increasing or the value of money decreasing is therefore facilitated not just by the interest paid on loans but also by those loans which are made against a non-existent capital.

It may be unreasonable to describe those in the industry of providing loans and investing money as a parasitic trade on society, as mentioned previously they do provide a unique service which in turn allows for other things to become available to society. Should there become an alternate method by which new industry were funded and capital made available then the transactions made by investors would certainly be counted amongst those trades which are parasitic within society. The labour used on redistributing capital adds no value to any commodity, any value they obtain will be someone else's loss. The finance sector globally is huge, if one is to look down the hundred biggest companies they will have to look pretty far down before they find a company that does not deal in oil or finance. The argument in support of the finance sector is that they are the best able to put capital in the hands of those that will confer the most advantage to society. This is certainly a useful role but allowing it to operate in free market capitalism (or at least a capitalism with few restrictions) will ensure that the industry grows out of proportion to a size unrepresentative of societies need for informed wealth allocation. I would not like to postulate as to what fraction of those involved in finance are needed to function in the best interests of society in an ideal world, but I suspect it is a tiny fraction of what we currently have. The reason that a capitalist asset allocation system will grow out of proportion is due to the natural gravitation of wealth. The finance sector is best place to gain out of this trend as they dictate the terms by which they invest capital. The more capital they have at their disposal the more powerful they become, and thus the more they are able to dictate conditions, which they would sensibly do their own advantage thus furthering growth.

The current finance sector primarily makes money for themselves and secondly they make money for the already wealthy. It is an example of a necessary evil as we have no better mechanisms by which to allocate assets so they may advantage society. It is not that those in the finance sector are evil, they are all just people doing their jobs, it is a problem with the system and how it has evolved. This particular issue is possibly the most important for society to solve and as yet we have failed. We are otherwise faced with a choice between sustaining or increasing the wealth gap, or risking the loss of innovation and subduing industry. Communism saw fit to rely on the good intentions of individuals without any incentive to provide appropriate asset allocation and was a significant cause of it's initial failings. Potential solutions exist that operate using different economic systems, which is not particularly helpful without a method of getting from the current system to the new one.

We have previously shown how gaining market share is the main route to the profitability of business and thus one of their main aims. Several factors also work in the favour of larger companies such as the larger an organisation is the better able it is to employ good economies of scale. Larger companies generally have more assets and are able to employ more capital, more cheaply, at their discretion. They also have more leeway in tougher times and will be more able to borrow to cover their costs. Each of these factors will further enable a flow of money towards wealth and help the larger companies to take market share from the smaller ones. In regards the larger companies uses of economies of scale it may be seen as beneficial to society when companies grow, however there are more factors in play than just economies of scale.

Competition was the mechanism by which improvements made within industry are allowed to benefit society at large. The larger the company in terms of market share, the less competition they will have. This means that companies are enabled to control demand to an extent as they control the supply. A company with a monopoly on one kind of product may produce as many as they see fit to do so, the less they produce the higher price they will command. As the price rises less people will purchase the product so the monopoly will attempt to find the optimum balance for maximum profit where margins are high but turnover is still significant. If the margins were to get too high due to very low supply then the turnover will fall enough to reduce overall profitability. Not only can a monopoly control supply to maximise profitability they are also in a position to pocket any returns from improvements made to production as no competition exists to have a price war for market share. Industry without competition does not serve society, nor is it under any pressure to make advances and improvements.

Society is generally wise to avoid allowing any company to gain a monopoly on an industry. There are some cases however where it makes some practical sense to have only one set of infrastructure, such as a rail network as having two sets of lines is likely to be a very inefficient use of labour space and resources. These examples are few enough that they may each be dealt with independently and are outside the scope of this essay series anyway. There are some arguments against letting companies get too close to monopoly level. Minsky claims that the larger a company gets the more it will invest in things that offer no advantage to society such as advertising and executive weekends. This may well be the case but it needs close scrutiny as it is not so clear cut as that. Larger companies are best able to fund and implement new improvements to give one example. The task is therefore to find some approximation of the optimum size (measured in market share) for industries in terms of their efficiency and conferred advantage to society.

Real and Relative Changes of the Value of Money

1. Minting of new currency

2. Improvements to production

3. Population growth

4. Interest paid on loans

5. Loans made against non-existent capital

6. Consumption greater than value adding labour

7. Parasitic trades

We have now covered in a round about way, stopping for various tangents, the most basic principles that effect the change in value of money as listed above and many now return to our question of why inflation may be viewed as a positive effect. By maintaining a society of steady and constant inflation one may be assured that by doing nothing with a large pile of money it will fall in real value. As a result, anyone with capital would be sensible to employ it in some task or investment rather than let it diminish in value over time. By operating with an inflating currency a society is encouraged to save less and spend/use what they have. This in turn assures that all the money within the society is in continual circulation and use. More trades are made, more goods are consumed and produced and so jobs are available to provide for the increased consumption. In a society of deflation people are in a better position to save their money as it will accrue value over time. It would discourage people from frivolous spending creating an environment where people purchased only what they needed rather than until their budget was all used. Inflation creates a demand for consumption which is good for all producers of non-essential goods and services. Inflation also creates a demand for investments as those with a surplus capital that do nothing with it are loosing money continually. If inflation is at 2% a year, a person sitting on a million “money” is losing the equivalent of 20,000 money annually in devaluation. Even though they still have the same amount of money the purchasing power of that money is always getting less. People in this situation will either buy up assets with minimal depreciation or loan money to those wishing to turn a profit in order that they may gain interest on that loan.

Let us take two identical example societies and then impose 2% inflation of currency upon the first and 2% deflation of currency to the second. In both societies there is the same quantity of money and initial value however the flow or number of transactions in the first society will be far greater. A good way to illustrate this is by taking a single coin to represent an average coin of these societies. In the deflating society this coin may well only be involved in a few transactions and change hands these few times while in the inflating society the coin is more like a hot potato where it is rapidly passed from person to person, non wishing to hold it for too long. By having a situation where the same amount of money is used more frequently the result is a strong and booming economy. Investors are encouraged to see the populous spend everything they have at their disposal and the demand for goods and services at their maximum. These conditions will ensure the most immediate profitability to would-be investors and producers. It may initially appear to an external viewer that the society experiencing inflation is more opulent and has greater resources and greater wealth to begin with than the deflating society but this is only the appearance.

The society with 2% inflation may well be attaining greater value faster through increased production but it will also be removing that value again with increased consumption. The consumption in this case drives the production and not the other way round therefore the net increase in value by any measure in the society experiencing inflation cannot exceed the otherwise identical deflating society. It is also worth noting that the society experiencing inflation will consume it's natural resources at a greater rate than the other. This is in part due to the increased consumption but also due to the ‘hot potato’ effect. The inflating society is always under the pressure of having to act immediately otherwise have their money reduce in value where as the deflating society is happy to wait for a better opportunity as waiting only increases their money's value. Where inflation is prevalent the most important factor to consider is time, where deflation is prevailing then efficiency becomes more important than time. As such a deflating currency will help to increase the sustainability of an economy through frugal use of raw materials and longer lasting products however it will lower immediate profitability and stunt the growth of some newer industries. Inflation benefits those who are in a position to reinvest capital (providing they do so and sensibly) where as deflation is to the advantage of the poorest in society. The advantage gained by the poorest under deflation is not however as pronounced as the advantage gained by the capitalists under the same percentage inflation due to the numbers of people affected. A small and slow gain for many verses a more immediate and significant gain for the few are the options.

It is not inflation in itself which is good but rather we live in a society which runs on the energy and urgency injected by inflation. Although there is only a 4% change in effect in my example it is a very significant change in economic terms. If such a change were to occur overnight there would be chaos in the economy, it is indeed always the rapidity and magnitude of an economic change that causes the problems, not the resultant new equilibrium position. Inflation is therefore good as we, as a society are used to it, expect it and are set up to deal with it. Not only would the economy change if we suddenly experienced a period of ongoing deflation but the whole mechanism of society would need to readjust. I would argue that in undertaking any such readjustments to cope with deflation a more sustainable society would result but the slower these adjustments are allowed to take place, the better for all those involved.

So inflation may be regarded in some senses as good simply because that is the economic condition that our present societies are set up to expect. Inflation in and of itself is very difficult to classify as “good” or “bad”, it just is. A more useful way to look at inflation are the merits of its causes. If we take our list of seven factors which affect the value of money we can remove population decline and minting of currency and describe these as neutral effects (the morality and goodness of population growth/decline is entirely outside the scope of this particular argument). Of the remaining five factors it is clear that those which cause inflation are all negative contributors to society. It is not that inflation is bad but that the majority of it’s causes are bad. A society could weed out all negative economic factors and still experience inflation of it’s currency due to the neutral effects.

It is worth noting that both inflation and deflation are positive feedback mechanisms and by that I mean they are self perpetuating. Under an inflating currency the factors which further increase inflation, such as the interest rate on loans, are encouraged. The greater the inflation the greater the more significant the factors that effect it become. We have seen historic examples of countries which experience run away levels of inflation to quite disastrous consequences. Although there are fewer examples we can look to for cases of run away deflation the same self perpetuating conditions arise. The higher the percentage inflation or deflation the greater the rate at which it wishes to increase. As we have asserted, it is not inflation or deflation that are good or bad but rather a rapid change in economic conditions which causes most harm to a society. Inflation rates are kept low and steady in economies that are doing well in the present day. By letting them get to high you run the risk of having them spiral out of control, the same would be true of deflation. The closer your currencies change in value is to zero percent; the less it will encourage further change. This argument implies that inflation and deflation are both bad and that an unchanging value of currency is good or optimal. I would argue against attempting to maintain a steady zero percent level on inflation as it is an impossible task as economies are chaotic systems with too many factors to consider holistically. A margin of error or an acceptable fluctuation is a more sensible aim, for example say -/+ 0.5%. Flipping from inflation to deflation continually will cause problems in the economy due to the different effects they each have. It would be better to ensure you are as low as possible in either, so for example a target rate of 0.5% deflation with an acceptable variance of 0.5% would be acceptable as the possible range (0% - 1%) would never put the economy back into inflation while being as realistically low as possible to avoid positive feedback mechanisms taking over.

The fact that inflation is experienced throughout most of the world is testament to the might of the finance industry in that it must provide a great deal of unproductive labour in the relocation of money. To achieve the required levels of inflation experienced on a global level despite improvements to production and population growth a vast sum of money must be being created. traded and skimmed by the finance sector. All of this trading is not adding value to anything and must require the labours of others to support.

There is one further ramification of inflation I wish to discuss but it requires some understanding of the interactions between two (or more) currencies. We earlier defined money, in part, as a tool to relate variables, in other words it is a relative constant. As soon as you introduce multiple currencies you create a contradiction of sorts as those currencies vary with respect to each other yet only functioning as intended when relatively constant. The result of this contradiction is that trade outside of a single currency will not necessarily reflect real values of commodities as they should when under a free market and using only a single currency.

This is best described with an example so we shall take two identical isolated societies, called X and Y and give them different currencies. We shall then allow trade to occur between these two societies to show the effects of their currencies. To begin with these societies have a currency of equal value, X$ = Y$, the same nominal quantity of either currency will purchase the same amount of labour or goods. As with all examples designed at showing only one economic rule we shall keep all other factors which affect the value of money constant but allow the quantity of goods each country trades with the other to vary.

Country X sells X$10,000 worth of goods produced in country X to country Y annually. Country Y sells Y$20,000 worth of goods produced in country Y to country X annually. This implies that country X has a greater degree of consumption than country Y as they must make use of the extra $10,000 of goods which they purchase. If both countries produce $200,000 worth of goods and services annually then country X consumes $210,000 while country Y only consumes $190,000 each year.

Country X is now running at a trade deficit as it is purchasing a greater value of goods than it is selling. Any currency finding itself, through foreign trade, in an area where it is not a useful currency must find its way back to the country of origin so that it may be useful and retain any value at all. In the course of one year of trading in our example we find that X$20,000 are in country Y and half that amount of Y$ are in country X (this assumes that both countries pay for goods in their own currency which changes nothing that would affect the economic trends but does make understanding easier). Country Y wishes to use the useless X$ to recall the Y$ it used in the foreign trade. The ratio of X$ to Y$ wanting to find their way back to their countries of origin is 2:1 which is a very basic way to understand exchange rates. Based on the trade deficit of these two countries which should have equal real value in currency the value of a Y$ is roughly twice that of the X$ even though in their own countries $10 will buy the same quantity or value of goods. Exchange rates are governed by money entering and leaving a system primarily and only slightly affected by the goings on within that system. Simply put this means that when purchasing from a system from the outside you are able to trade under conditions where values are not equal.

The ramifications of this unbalancing of values is that $Y commands a much greater purchasing power for commodities produced in country X. This is a negative feedback mechanism which ensures that prices tend to normalize towards their real value. As the Y$ is so strong compared to the X$ the imbalance of trade between the nations will swing in the other direction as those in country X get more for their money if buying in country X rather than country Y so they import less than previously and those in country Y begin to find it cheaper to buy from country X rather than the home markets. What began as a trade deficit for country X will become a trade deficit for country Y as country Y’s internal trade begins to purchase from cheaper sources in country Y, this is also true in reverse as country X will look to source things in the home market as country Y is twice the price. It is fortunate that unlike inflation and deflation, which are positive feedback mechanisms, the fluctuation in exchange rates are negative feedback mechanisms and essentially self regulate. If they were not self regulatory then sustained periods would exist where goods could be purchased at a price that is lower that their real value.

The equilibrium condition of our societies X and Y will be one where the exchange rate of their currencies will ensure that whichever currency you choose to buy any goods with you will receive the same level of value. Despite being a negative feedback mechanism tending towards the equilibrium condition it is the whole system that must respond to changes internally and therefore will necessarily have a lag phase. Any such lag phase will allow the most diligent of traders to make some very good profits for a short time. The scale of any such profits would be dependant on the degree to which the equilibrium position was deviated from; the greater the deviation the greater the potential profits. A deviation from the equilibrium position must have been caused by something, in our earlier example the deviation is caused by establishing a trade deficit in country X. In the time it takes their economy to regain an equilibrium holders of $Y will be able to gain advantage from purchasing goods made in country X. Fluctuations either side of an equilibrium position can be harmful to an economy as markets will be intermittent, companies who rely on imports and exports can lose custom or be unable to afford supply. When importing is cheap, exporting must be harder, and the same is true in reverse. Instability in markets caused in this way are as harmful to society as any other economic instability is.

By adding in multiple currencies, not to mention allowing all the factors we kept constant to vary naturally, we create a chaotic system of variations and ever changing equilibrium positions. Trends described in this essay will still be present but they may not be predominant and predictability is all but lost. By using our understanding of the aims and befits of money and trading, and also our knowledge of the causes of economic problems and trends, we are able to suggest potential solutions and improvements to an economic system with societies best interests being the prerogative.

Presently we observe in the global economy a number of the biggest individual economies able to maintain a seemingly continual trade deficit. When one considers the effects of combining an inflating currency with a trade deficit and our understanding of lag phases we are able to see how a deficit may be maintained. A lag phase of time must exist between a currency leaving a country and that currency returning. The rate of inflation over that time of the currency will not be accounted for directly by the exchange rates. The longer the lag phase on currency returning to it’s home country, the greater the inflation (providing it is stable) and finally the greater the total amount of that currency; the larger the trade deficit that country is able to support.

Let us paint a basic example. Country A has 1,000,000 money total and experiences a stable and constant annual rate of inflation of 4%. If we say the average lag phase for money returning to country A is 6 months then it may sustain a trade deficit of up to 20,000 money annually, this figure is 2% of the total money of country A. These figures assume much more than previous examples given in this essay and cannot in reality be calculated as such, most notably that all of country A's money would need to be used to import goods to be able to support the maximum deficit which is not achievable. If we were more reasonable and claimed country A imported goods to the value of 100,000 then it would support 2,000 of that at the expense of other nations. A country with a trade deficit is essentially borrowing value from other countries. If the countries lending value were using the same currency as the country borrowing it there would be no factors like inflation to upset any balances, as such the amount of value returned would be equal to the amount borrowed. As it is however, any value gained by a country with inflating currency will be returned at a reduced rate. Countries exporting goods to other countries with sustained inflation will exchange those goods for a lower value of goods (assuming their rate of inflation is lower) and as a result they will be working to improve things for those other nations. The loss on any transaction is minor, and on small trades is unnoticeable, however when massive economies operate under these conditions the summation of all the tiny gains becomes significant and enable that country to support itself upon the labours of others.

In this essay we have looked at the causes of changes in the value of money, deflations and inflation. This was used to determine how society acts in accordance with the conditions. The effect of capital acting as stock was also discussed which lead us to understand some of the problems in the finance sector and of monopolies. Lastly we looked at how multiple currencies cause can cause instability and periods of unjust (unequal labour values) trading, this idea was advanced by combining it with our understanding of inflation and delay times between equilibria readjustments. This is a critical essay which I shall attempt to justify writing by offering some possible solutions to the problems highlighted here in my final essay in the series - “Solutions”. Given the complexity of our global economy and the lack of any planning given to its evolution it is impressive how few flaws it has. They are more like minor compromises in order that we may gain the monumental benefits of trade, even so, it seems wise to attempt to improve where possible, particularly given the importance of economics in society. 

Economics Part I: A Primer

To understand anything which involves humanity such as politics or sociology one needs to understand economics. This is because money is such a convenient tool it has come to represent almost everything. They say money can't buy love, it doesn't need to, people already love money, and why shouldn't they as with it you can do anything. You can buy intimate relations or just friendship, they may not be quite the same as those forged without the transfer of money but they are not as far apart as people like to make out it is. I would say that the difference between renting friends or paying for sex compared to getting them without the use of money is rather like the difference between buying some tomatoes from the supermarket or taking the trouble to grow your own. They both do the same job but the latter in both cases is more satisfying, rewarding, time consuming, subject to failure, and will taste all the better when you get it right!

With the importance of money in mind the study of economics becomes of paramount significance for any study of a subject which relates to people. A lecturer of my partner's described economics as the science of choice. Really sociology and psychology should be the macro and micro sciences behind choice, but as choice is based on incentive and money provides a universal incentive regardless of your particular tastes, then understanding economics can be a more precise way of predicting the choices people will make. I have always been a utopian, even since quite a young child yet I had little understanding nor eduction about economics until a few years ago. I quickly realised the underpinning nature of economics behind any society when I tried to first describe my utopia and so set about gaining a complete understanding of the principles and interaction of economics.

When looking to understand any system, I break the system down in to it’s component parts to analyse them. Once you have established why each aspect of the system came into being and how it reacts with the other aspects, then you are able to extrapolate a complete understanding of the whole system. Economics has been made complex by the many regulations and interactions surrounding it. All markets are controlled by numerous chaotic occurrences which makes them seem random when actually there are few relevant factors one needs to consider to understand the principles. People are more concerned with what the markets are doing than understanding why they are doing it. This is entirely reasonable as that is how one is able to make money from the markets but it does not help to improve society. The aim of this series of essays is to explain these factors in simple terms so that the fundamental principles behind economics are clear. The first essay will act as a kind of primer, the kind I should have like to have read several years ago! It will look at how and why money came into use and how a change in conditions will impact upon money and the economy. It will do little more than describe how and why things occur in a manner that I hope will not be to dull or unapproachable to the reader. Once this is done subsequent essays will build on the mechanisms described in this essay and look at the problems that are caused by the current regulations and infrastructure of the economies around the globe. I shall attempt to end the series by offering solutions to these problems.

What are the component elements of economics? Trade is the underlying concept behind economics, whether it be of goods, services, currencies or any other commodity. The earliest examples of trade may be found in social animals who trade in security, parental duties and other forms of labour. By working together they are able to achieve greater efficiencies than they would otherwise be able to if operating alone. This improved efficiency will allow the same amount of work to support a greater number of offspring which confers a greater survival chance to the continuity of the pack. The improved efficiencies can be observed in two main ways, both of which also have economic terms; the division of labour and economies of scale.

For example: A pride of lions hunts together to bring down large prey to feed the whole pride. The prey is often large and requires the team work of the pride to capture. A single kill will provide a significant quantity of food, likely far more than a single lion could make use of on their own, even if they were able to procure it that way! By working as a team, or trading labour, they are able to perform a task that provides proportionally more return on the work employed than they are able to by labouring alone. This not only shows economies of scale but also possibilities of scale. A single man may not in a single lifetime construct the Sistine Chapel as it is too great a workload.

When the lions hunt together they may well employ the fastest lion to chase down and flank the prey and the strongest lion to bring down the prey and make the kill. By doing this they increase the success rate of hunting or its efficiency and are again able to support a greater number of offspring. As the lions specialize in the various roles performed within the pride they become practised and experienced at their main roles and are able to perform them yet more proficiently. Adam Smith brought this principle to the attention of people in clearly showing how it may be used in industry to enhance productivity, however he did not invent the division of labour as that has been exploited by evolution for a much longer time.

This simple example is used in order to illustrate that trading evolved (or life evolved to trade) because it could confer an advantage. The act of trading is akin to a symbiotic relationship. Mankind evolved from a social animal and had made use of the principles of trading well before inventing the wheel or even learning to walk! We use trading in a slightly removed context from how it came in to being. A trade is usually defined as the exchange of goods or services for other goods or services. This does not make clear the case that this exchange may not be of mutual benefit. In nature parasitic relationships exist in which only one of the parties involved gains any benefit. Parasitic trades occur in human societies when errors of judgement are made or people are the victims of deceit. Worse still, trades may occur in which no parties benefit which may be due to bad judgements or just ill luck. Understandably such relationships have not evolved in nature!

Categorising trades as parasitic or symbiotic does not completely describe the state of affairs as it is an analogue scale. A trade may benefit both parties tremendously or confer minor advantage to both parties or confer a great advantage to one and a small advantage to the other. The latter example resembles a parasitic trade greater than the other examples but is still not defined as such for a single key reason. When a small advantage is to be gained it is still an improvement or an advantage. If the only alternative to the trade is to not trade is would be folly to not make the exchange. Symbiotic trading therefore increases the overall advantage of all involved in the trading. An easy way to represent this would be to say 2+2 in a symbiotic trade = >4! or in a parasitic trade may only = <4 (this same logic could also be used to define symbiotic trading as X+X = >2X). Parasitic trades may benefit a small group of people at the cost of others yet the prevalence of trade in society is due to symbiotic trades, which benefit everyone.

Before we are able to go further and show how these economic principles are manifest today in human society we must understand the concept of money and how and why it came into being. Money came into being as a tool to facilitate trade. Exchanging goods for other goods becomes difficult and laborious when multiple types of goods from various suppliers are required. This is especially the case when one only has a single commodity they produce themselves to trade for other commodities (which is incidentally the optimum condition for gaining maximum advantage from the division of labour) as it requires the people you wish to trade with to desire the commodity you produce. Convoluted trades begin to occur where intermediaries are needed to exchange your commodity for commodities desired by the people you originally wanted to trade with. By having simple and quick means of trading each exchange is more efficient leaving more time available to exploit economies of scale and the division of labour. Money does exactly that, it removes the need of any intermediary by performing the same role.

The difficulty of trade is also increased when goods are heavy, bulky, perishable or fragile, by using money in part of a trade it reduces the physical difficulties of certain goods which acts as another time saving property of money. Money also gives the ability to relate the value of a commodity to another which can otherwise be a hard task. Different commodities not only require varying amounts of labour to produce but also have a different value to different people. Barter may enable all parties to fight for the best deal for themselves but it is another activity which consumes time. Having a society-wide price for a product will normalize the price of that product and facilitate competition, a mechanism which allows trade, the division of labour and economies of scale to confer the maximum advantage to society.

The money we use today is, as an object, worthless. It cannot be consumed or worn or fulfil any other practical use. It is better understood as a representation of some labour done to the benefit of society combined with a promise from the society to repay that equivalent value to the owner. When there is no trust in the society the “value” of money falls as it ceases to command repayment and becomes akin to the useless commodity it is. At such a time the advantages of having money in a society are lost. Money came into being to allow a society to efficiently trade and easily relate value of labour and commodities. This is not the only role presently performed by money in economics due to how its use has evolved, this will be returned to later but for now all we need to appreciate are the advantages that money gives a trading society (excuse the tautology) and therefore why it came into being.

Now that we have a clearer understanding of money we can use that to show how economies of scale and the division of labour can be fully exploited in human society. Both of these principles rely on sufficient communication and cooperation to become useful. Unless you can be assured of perfect teamwork and understanding in production and trading every increase in size that is made to the trading group will reduce certain efficiencies and so the economic advantages would need to offset that to remain effective. The pack sizes of social mammals varies from species to species but nothing in the animal kingdom comes close to humanity in its ability to exploit economies of scale and the division of labour (although some insect species are very impressive). Humanity can be observed as many packs consisting of towns and cities or of nations or religions but in economic terms it is one entity and this position gives the greatest potential for creating an advantage from “nothing”. To put in more real terms, most wild animals are forced to spend a majority of their time fulfilling the basic requirements to survive and propagate while many humans enjoy a significant quantity of “free time” that they may spend at their leisure. This principle also shows how humanity has been able to increase in population as rapidly as it has done. The extra efficiencies of our production and trade allow those labours to support more and more people.

As money is, on the whole, freely interchangeable, any person who uses money is part of a giant economic whole. Currencies may be exchanged, which has ramifications of its own, but it does allow the whole globe to participate in trade. The more persons involved in trading with one another the greater the potential to exploit economies of scale and specialization. Trying to relate lions hunting to human economics is big jump and so we will use another example of a trading society. In this society we shall make a number of assumptions in order to distil the basic principles I wish to illustrate. Our society shall be of constant population size and in complete isolation, as far as this example is concerned it is the only society in existence. They use a single currency and there is a fixed quantity of that currency.

Mr A is a citizen of our example society and he supports himself by producing potatoes. The prices of the potatoes in our society are constant and depend only on the yield of the crops. A good yield may be the result of good weather conditions but it may also result from improvements made in the production methods. We shall now assume for this example that weather conditions remain constant and affect all producers equally and can therefore also be ignored. It is the nature of improvements to production and how they impact on the whole of society that I wish to focus on.

Mr A develops a new production technique which enables him to double his productivity. With no additional labour or cost used, he achieves twice the yield and may sell this at present market price for over double the profit he would have made prior to the improvements. Due to the increased production of potatoes however, there is a greater supply than the demand for them. As a result Mr A is sensible in reducing his prices to ensure that he will sell his potatoes before his competitors. This reduction in price will mean that the competitors are the ones left with the surplus supply. Mr A has greater profit margins due to his increased productivity and is better placed to win a price war as he will still be making profit at a price at which his competitors are making a loss.

Let us put some numbers into this example so that the changes may be observed.

We shall say the price of a potato in our society is 1 money.

We shall say that there are 4 producers of potatoes, Mr A, Mr B, Mr C and Mr D.

Each of these producers initially produced 10,000 potatoes annually at a cost of 1,000 money making a 9,000 money profit.

In the society there is demand for 40,000 potatoes annually at a price of 1 money each.

In the first year that Mr A produces 20,000 potatoes for only 1,000 money he stands to make 19,000 instead of 9,000 however 10,000 of the total 50,000 potatoes produced this year by Mr A, B, C and D are surplus to requirement.

Mr A reduces the price of his potatoes to 0.8 money each to ensure he sell all of his stock. This means he still makes 15,000 profit, a 66% increase on previous years despite a 20% reduction in price.

Mr B, C and D are now in a predicament as they have 30,000 potatoes to sell in a market that only requires 20,000. If they leave their prices the same and suffer the loss of sales evenly between them each only sells 6,666 of their potatoes which would make their profits on the year 5,666 money, about 63% of the previous year.

Even if they were able to retain all their customers by matching Mr A's price and sell the whole crop at 0.8 money each their profit would be reduced to 7,000 which is still only about 78% of the previous year. This is also a best case scenario for society as Mr A is able to continually reduce his prices all the way down to 0.5 money per potato without making less profit than previous years. Simply put, the society is required to pay less for potatoes as a result of the improvements to production methods as the producers reduce prices in order to retain market share.

The two previous options available to the competition show that market share is of greater importance than profit margins in terms of total profit. The best methods of retaining your share of the market is by producing quality products and charging competitive prices. It is in the best interests of the whole potato industry to reduce margins and retain market share.

Note at this stage that the only ramification to any person in this society other than Mr A, B, C and D is that potatoes are becoming cheaper to buy. Mr B, C and D are all forced into taking action as a result of Mr A's improvements. They can seek to improve their methods of production to compete with Mr A's efficiency. They could also change trades and produce a different commodity but they cannot simply do nothing unless they are able to afford a significant loss of earnings.

Let us say that Mr D decides to get out of the potato business immediately and expends his labours on producing other commodities. Mr C is frugal yet lazy and elects to do nothing as he is able to live more frugally to compensate for the reduction in profits while Mr B is industrious and sets about making improvements to his production methods. We shall say that Mr A is content with the situation also and does not wish to increase the size of his operation by purchasing the fields of Mr D. If Mr A was to use his profits to expand it would have no negative effects on the rest of society unless he obtained a monopoly on the potato market. It would be to the advantage of the society of the most efficient and cheapest potato producer was able to supply the greater portion of the market.

I have thus far described points in time and the changes that happen between them as it is the most suitable way to describe the basic principals. It is still worth pointing out that economics is, in reality, more evolutionary as it is reacting to every change to rebalance itself. In the example where the potato producers are reducing prices to retain market share it is clear that this will be a smooth and ongoing procedure and not done in steps or stages as shown.

Economics is best understood as a vast array of equilibriums. If you have a system in equilibrium governed by a set of conditions and one of those conditions is altered, when the equilibrium is re-established another condition will necessarily also have changed to balance the equilibrium. Allow me to show this in the case of the potato farmers.

Mr B is able to obtain the same efficiency in production as Mr A over a period of time however at the start of that period Mr B is still only producing 10,000 potatoes. Mr C is at that time still producing potatoes that are in demand as a total of 40,000 are produced annually (as Mr D has left the industry). As Mr B gains in efficiency over time he will begin to produce more potatoes thus creating more supply than demand.

Mr A is best suited to gaining the market share of Mr B, C and D as his production is most efficient enabling him to reduce his prices most easily. Mr B is becoming ever better at taking market share from Mr C and competing with Mr A on price. Mr C is poorly positioned to take any market share from Mr A or Mr B but initially this is not too much of a problem as Mr D has left the market leaving his previous share of the market in need of new supply.

If we assume that the initial starting condition were in a state of equilibrium (within a free market economy) in that the price of potatoes was 1 money and each farmer made 9,000 a year profit then we can make some predictions about the resultant equilibrium when production capacity has been doubled. As Mr B tends towards producing 20,000 potatoes annually for 1,000 money the price of potatoes will tend towards 0.5 money. The guaranteed competition between the three remaining producers will force prices down across the board. If both Mr A and Mr B produce 20,000 potatoes each annually and charge less than 1 money per potato and Mr C tried to keep his prices at 1 money each then all or most of the 10,000 excess supply of potatoes will be the ones produced by Mr C. Mr C will sell 0 potatoes and make a loss of 1,000 money which is not sustainable even to the frugal! This is the mechanism that ensures prices are lowered as production efficiency is increased. Increasing production at the same rate of efficiency serves no purpose unless demand for that product in society is also increasing.

The improvements made by Mr A initially caused Mr D to leave the industry. As Mr B made his improvements and Mr C remained static, he was gradually forced out of the market but his presence ensured that competition would drive prices towards the equilibrium value. This is because without Mr C their would be no surplus production and therefore no need to reduce prices to sell all the produced goods. The new equilibrium in this example is one where Mr A and Mr B both produce 20,000 potatoes annually for a cost of 1,000 money and then sell them at 0.5 money each. The cost to produce, profits, and total market quantities (supply and demand) have all remained unchanged so to redress the balance of producing twice as many the price must fall by half.

[I have assumed that reducing the price of potatoes does not increase the demand for them which based on the nature of the goods almost certainly would, even in a society with no population growth. This is because they will begin to compete for market share with things like bread and rice as they perform a similar role but the relative cost of only the potato is falling. This particular trend is not relevant in understanding the principals behind improvements and would just increase the complexity of the example.]

That example looked at a single equilibrium in isolation but I defined economics as a vast array of linked equilibrium. As a condition changes and an equilibrium linked to that condition readjusts it will have knock-on effects on other conditions that relate to other equilibriums which will in turn do the same. Some of these affected equilibrium will perpetuate the initial changes and others will retard them but in general it will ensure results that are hard to predict. What may be an equilibrium for one set of conditions may well not be for a another linked equilibrium, in such a situation there will be no smooth and gradual progression from one position to another but instead an undulation between the two systems different equilibria.

In this period of time since the first improvement the changes we have observed are that Mr C and Mr D are no longer able to support themselves in the potato industry and have been required to find work elsewhere. The profits from the potato market were also unevenly distributed between the suppliers while the improvements were at vary levels of efficiency and the supply outweighed the demand. This plight of Mr A, B, C, and D are not really the emphasis of this lengthy example but rather the effects on society as a whole.

Society has gained from the improvements made in the potato industry in that potatoes now cost 0.5 money and not 1. Each year the society when viewed as a whole saves 40,000 (total potato consumption) times 0.5 money which = 20,000 money. Let us say that within the society exists 10,000,000 money total then by saving the society 20,000 the value of money has increased by 0.2% which simply means that for the same face value of money you would be able to purchase 0.2% more of anything. This is an idealistic way to illustrate the outcome as it requires certain conditions to result in an exact, across the board 0.2% change but it does accurately show the mechanisms by which improvements benefit society.

The main assumption made in asserting that a 50% price reduction in a 40,000 money market would provide a 0.2% increase to the value of money in a society with a total of 10,000,000 money is that of perfect benefit transfer. What I mean by the term benefit transfer is the knock-on effect throughout the whole market of reducing the price of one commodity. If all people eat potatoes then it is fair to say that the cost of potatoes is involved in the cost of any task. If people need to eat to live and perform labour then by reducing the cost of eating you are reducing the cost of labour. In reality people will just have a bit more spare money which they will spend as they feel fit creating new demands. By increasing the value of money you are effectively increasing the supply of money (which is ironic as in present day economic lingo to increase the money supply is inflatory and reduces the value of money). The new demands may well find employment for Mr C and Mr D, perhaps Mr D grows sugar and Mr C makes sweets thus offering the society greater luxury consumption. In the case of Mr C and D producing sweets the market has the same nominal value of money but more goods being produced. This is another way of saying the cost of everything else must go down in order to “fit in” the extra new cost of the sweets available in the market.

An alternative solution to the equilibrium is that Mr A found it possible with his improvements to produce 10,000 potatoes for 1,000 money but in half the time. The price would remain the same as there was no influx of supply so society would not benefit in the same manner but Mr A would be working less. If you look at the society as a whole this would mean that less total labour supported exactly the same degree of “value”. This illustrates the two ways to balance the economic equilibrium when improving production methods, either less labour is required or more money becomes available to support new and different labours.

A society continually improving all its production methods is able to expend greater portion of labour on luxury and other superfluous demands or reduce its working week. Most societies have found that some combination of these two factors is how they wish to make use of increased efficiency with an emphasis of luxury consumption over reduced work, particularly in the last thirty years. As society improves its production methods gradually and across all industries the general trend in that society is lower labour time per person, greater value of money and greater quantities of available goods.

Potatoes are used in this example as they offer better benefit transfer throughout society than many kinds of production. In economics there will always be a lag phase between an improvement being made and the benefits coming to the society as a whole through the forces of competition. If an improvement was made to a very specific area of the economy, say for example a tool used in mining to extract metal ores is made significantly better. Firstly the company producing the tool will benefit, then the various mining companies will also start to gain an advantage but to a lesser degree than the tool producer. After that the companies buying the ore and using them to produce other things will notice very minor benefit and lastly this benefit will begin to minutely manifest itself throughout all of society. Some forms of improvement such as those upon crops of basic foodstuff will have a quicker, broader and more evenly distributed effect on society than specialist or luxury producers will achieve. The important point to understand is that any improvement made upon the labours of society will improve the whole of that society by virtue of the trading relationship within the society. This improvement may be measured in an otherwise constant society by the increasing value of money (or its deflation) or by the reduction of the average working week.

It must be noted here that those who instigate an improvement are only in a position to personally gain an advantage during the lag phase, or at a non-equilibrium position. Mr A in the potato example is only able to be more profitable than Mr B while Mr B is less efficient in production. When both producers are equally efficient Mr A will only be as profitable as he was before he made the initial improvements.

The way in which improvements effect society may be explained in other terms without using the altering value of money as a measure. This second explanation will describe exactly the same principle as before however in a society where many factors affect the value of money it can be useful to understand in different terms. In reality we are unable to keep influential factors constant and so our method of measure loses its usefulness. This essay is not intended to provide means of measuring the economy but to impart understanding of the important basic principals and this is why the first monetary example has been given.

To describe how society benefits from improvements to production and trade we must introduce a new concept concerning types of labour. When a cost is paid for goods or services a portion of that cost will go towards paying the labour that produced the good or performed the service. The remainder of the cost will go towards the land used to render the goods or services, the cost of maintenance and profit. These areas of cost will be returned to but for now we need only be assured that the cost paid for anything will in part pay for the labour. Even a portion of the cost of the constituent raw materials contained within any goods will be for the labour required to procure that material. Labour or work is the act of adding value to something.

The kinds of labour that exist within a society may be broken down in to two categories; those labours which support the subsistence of the society such as all the food producers, all the people who make tools which are used by the food producers, all the people involved in moving the food from where it is produced to where it may be consumed and so forth being the first category. As to what you may put in this group depends on what you define as a requirement for the subsistence of society and more importantly to what extent should those things be made available. Take the motor vehicle: humanity was able to survive for a great period of time without it. Shortly after its invention it was still only a luxury, now however many would consider motor vehicles to be essential to sustain life as we presently live it.

The second category of labour consists primarily of labours that contribute to the luxury and culture within a society such as entertainers. It is clear with this second definition that the overlap between the two categories is up to interpretation. Many other examples can be given alongside that of the motor vehicle such as healthcare, education or the computer which are not essential to sustain humanity but do facilitate it very well and would now be considered an essential. It is also worth noting that many industries overlap and perform some tasks for the “sustenance” or first category while also expending labour for the “luxury” or second category such as a logistics company who help move all manner of goods.

The important distinction between these two categories is that all of the labour found within the second category is supported by that of the first. This may be easiest to show with some numbers. If the average producer of food makes enough to support themselves and nine other people then that allows nine people for every one producing food to expend their labours on other tasks. It would be folly to produce more food than is required as it goes to waste. We can complicate our example by saying that it also requires the labours of one further person per food producer in the production of equipment for the food producer. We shall say that in this example that only food, clothing and housing are required for sustenance and that the labours of one builder or one tailor provides enough to support twenty others. In such a situation 30% of the population would be able to support the rest thus enabling their labours to go in to improving the quality of life.

For 20 people therefore 2 are needed to produce food, 2 more are needed to support the 2 food producers. 1 is needed to make clothes and 1 is needed to make houses. This means that 14 of the 20 people are able to perform other tasks.

Perhaps only 50% of the population are capable of working as the rest are children or elderly which would then mean most of the labour output by the society would be for basic sustenance.

The example with Mr A and his potatoes was used mainly to highlight how improvements to the efficiency of labour increase the value of money. It also shows that improvements that occur within the sustenance labour category will proportionally increase the number of people that it supports. The same is true for land usage in terms of how many persons a given area may support. Improvements to production methods used on that land will enable it to support more people and that will in turn free up more land for other uses or enable population growth to occur.

In this essay we have explained the beneficial mechanisms by which trade came to exist and how humanity has advanced the use of trade; with money, massive scale and extreme specialization. It was shown how improvements to efficiencies of labour come to benefit a society when competition exists, and that competition will provide an incentive to improve. Nothing I have said here is unbeknown, nor does it contain suggestion or opinion. It is hoped however, that I have managed to provide a useful basis upon which to use economics to discuss how we can make things better, and not simply more profitable. My description thus far is intended to show the important fundamental aspects of economics that relate to society rather than the individual or the business. In my next essay - “The Trouble with Money”, I will build on the ideas of this essay and show how some of our monetary systems have evolved to the disadvantage of society.