Rob’s comments are in italics.Derek’s comments are in normal font.
So last time out we were outlining our forthcoming book, Unravelling the Money Puzzle, and we thought we'd continue tugging on some of those threads today. What's on the agenda?
Well, as I said last week, we gave an outline of the structure of the book as a whole. I mentioned that there are going to be three sections. One is about the nature of money itself, the forms it's taken, what's the common feature, what functions it serves and how well the present form serves those functions. Broadly you could say this is the realm of the discipline of economics, so I think this section of the book we're going to call demystifying economics because I think you'll find that it mostly is a mystery to us.
We're familiar with economists as talking heads on TV stations. Usually those economists are either people who work for a bank or some other financial institution, or they're government bureaucrats, or they're academics. I don't know about you, but my experience very often is they have their few minutes of talk or being interviewed. At the end of it, I very often find that I'm not much better informed about what they were talking about.
Exactly. It's been described as the dismal science.
I go further than that and say it really is definitely a pseudo science. It doesn't count as a science at all because the key thing about science is that you form a hypothesis, you collect evidence for it. When the evidence seems to be sound, you make predictions. If the predictions come through, it gets adopted as a theory. Economics seems to come up with predictions all the time, which almost immediately in some cases turn out to be falsified by the way events actually unfold. So I think that rules it out.
It's interesting, we talk about the Nobel Prize for economics, but in fact, that is more of a PR stunt by the profession than anything else. In the Nobel Prizes that were set up in the will of Arthur Noble, there was no prize for economics. The strict name is the Nobel Memorial Prize for economics. It was funded by, I think, the Swiss National Bank to give a fig leaf of respectability to the profession. Some of the prize winners have been notorious for having overseen various financial catastrophes.
Like all of the social sciences, it arguably suffers somewhat from what might be called physics envy. Because physics is an exemplary science and is strongly mathematical, there's a feeling that a great deal of mathematical sophistication is required for contemporary economics. Whereas in fact, unless you've got a sound underlying theory and you're confident of the data that you're feeding into the equations, the results of those equations however they land will not be worth much.
So garbage in, garbage out indeed.
So we'll be looking at a few economists, what they've said, what we can take away from that and have some confidence in and what we should be a bit more skeptical about. We'll be taking a look at the fundamental question of what is money. We all take it for granted. We don't think too much about what the substance of it is, mostly what purposes it serves apart from the fact that obviously we need it to buy things we want.
We'll see how different forms of money have been in use over various times and places in history. We'll see how well or how badly it serves the purposes that it's intended to. Related to that is the question of what is wealth. Now, that's not the same as money. It's obviously calculated or measured in terms of money as a rule, but clearly it's something distinct because one way of describing what money is, is to say that it's a call on wealth.
When we look at that, we can maybe look at what's available in the world in the way of wealth and what's available in the way of money and how they match up. That would be quite an interesting thing to see.
We need a more holistic view of wealth. It's one thing having a tremendous bank balance, but if you don't have any good relationships with the people about you, or you have zero time to pursue any hobbies and interests, are you really wealthy? It seems a bit lopsided.
Yeah, indeed. In terms of the tangible forms of wealth, houses, cars, computers, and the form that investments may take, we'll be looking at where wealth comes from, how it's created, where it goes, how it's lost or how it's destroyed. In conjunction with that, we'll be looking at the particular form of wealth called capital. We'll be elucidating what that is.
It's also relevant, I think, to take a look at the role of energy in the creation of wealth and the maintenance of wealth and why that's necessary and why they're involved with one another. So that'll give a rundown of what will be in this section of the book. Anything for you there, Rob?
Yeah, I was thinking about the role of money. I mean, to my mind, money is a means of exchange, but it should also be a fair means of exchange. I think for the people who control the money supply, I think it's also a means of control.
Yeah, absolutely it is. Being aware of that in itself will release you to some degree from the grip it has if you're unaware of that. That's really the intention with this entire project. If you are aware of all of the topics that we're going to cover in this book, you'll be less susceptible to being exploited.
The Boy Scouts motto comes into play doesn't it? Be prepared.
Yep, that's it.
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