Theoretically what an economic system could do is to take all the work that needs (and is desirable) to be done, and take all the benefits that result from work and from nature, and divide these up so that everyone contributes to the work in some fair, just, and reasonable way, and so that everyone receives from the results and from nature in some fair, just, and reasonable way. There are ethical issues involved in what counts as fair, just, and reasonable, because not everyone has the same ability, the same opportunity, the same wants and needs, etc.

But there is a practical problem as well because even if a mechanism were established that accomplished the ethical contribution/distribution aspects to everyone's satisfaction at any given time, changes in the labor available or in the benefits available would require changes in the contribution/distribution system. And that is not always easy or feasible, depending on the system, particularly ones which are slowly self-adjusting and ones where money is part of the economic system, and the tool by which trade, particularly distribution of work and benefits, is accomplished. The automobile question is one example. 

The reason money as the medium of trade, as productive as that can generally be, causes a problem in certain cases is that it sometimes masks the alignment between needs/wants and the amount of labor available to meet those needs/wants. Suppose there is an economic system such that people are meeting each others' needs and wants as well as possible, and that sufficient money is available in the hands of everyone to keep this system functioning smoothly. What is important in terms of what products and labor are available is what the people involved can contribute. Money can only serve to facilitate or impair trade; it does not serve to create or reduce potentially available Goods and Services except as it serves to channel or obstruct available labor. If someone in this smoothly functioning economy dies, the amount of money in the system remains the same, but the available labor and the system of trading itself will be altered. Similarly, but opposite, if someone is available to come into the system and contribute to it, but no money is added to it to reflect what could be purchased from them, it may be difficult to incorporate them into the trading system because it will (seem, at least at first, to) take money away from everyone else. The money that is left would be worth more if it ends up being re-distributed in a way that allows the trade circle to continue with the new person added. But that will be difficult for people to recognize at first, if at all, so people in the first case will have more money than they did and will feel wealthier even though their money buys less, and people in the second case will have less money, and feel poorer, even though they actually (could) get more for their money. Or temporary money imbalances can throw the system off unless people are willing to redistribute the money by lending, extending credit, or in some other way giving labor without payment at the time.

If, at some measure of the dollar value of labor, there is in an economy at some time $12billion in money but only $11billion worth of actual available labor and products, then $1billion will be unable to be utilized to buy labor or products of labor (without inflation's first occurring). People collectively will have $1billion they can't really buy anything with. On the other hand, if there is $10billion in money in this economy where there is $11billion worth of actual labor, the equivalent of $1billion in labor will be unutilized (without deflation's first occurring). 

Furthermore, if there is an even match of money and labor/products available, say $11billion, but the money is at some point distributed in such a way that it is not in the hands of some segment of the population, say senior citizens, then that labor which is established and trained to meet the typical needs of senior citizens, rather than the younger population, will be unable to be employed; and the money that is equivalent to its value will not be able to be used to purchase anything (without inflation's first occurring, or without the labor that would have been used to meet the needs/wants of seniors being re-trained or re-established to meet different needs/wants of others). For that money to line up the available labor with the needs of seniors, it would need to be given by the people who have it to the seniors or those who would supply their needs. If other money is instead introduced into the system or if service providers were to work for free or at a reduced rate, then the total amount of money in the system would be more than the amount of labor available for hire, and people who have some of that excess money would mistakenly believe they can buy something with it. But they will not be able to because the products or labor the money represents will not exist. So taxes, charity, gift-giving or some other form of re-distribution of money is necessary when skewing takes place, in order to get the money and needs/labor unskewed, otherwise there will be an imbalance in the system between the amount of total money available and the amount of labor available to do it for that money⁽¹⁾. 

Another way that trading in money rather than products masks potential problems is exemplified by the case mentioned in Chapter 3 about the Wal-Mart that opened in a small town, bringing lower prices, which seemed to be good, until it drove so many people out of business that there was insufficient money left in the town to support the Wal-Mart and it closed, "killing the town twice", as it was said. This would have been less likely to happen had labor and products been traded than money, or had the money traded been thought of in terms of trade of labor and products. What was happening in the town when the Wal-Mart opened was that Wal-Mart was trading customers goods for money, not for their labor or the products of their labor (except for the people it employed, of course). So people could buy from Wal-Mart, but few, if any besides employees, could sell anything to Wal-Mart. Actual trade of labor and products therefore was only one-way, and one-way trade is not normally going to be an effective trading system. The Wal-Mart case at the local level is the same in principle as the case of a severe trade imbalance at the national level (see Chapter 17). Wal-Mart was selling to the people in this local economy in the same way that Japan was selling to the United States in the years of severe trade imbalance in that relationship. People bought their goods because they undersold local producers, but they were not buying what local producers had to sell. In a small, local economy that sort of pseudo-trade situation shows up as a social and economic problem sooner, and is more difficult or impossible to solve in a system that cannot become self-contained, self-supporting, and self-sustaining.⁽²⁾ If the townspeople had been bartering with Wal-Mart or trading actual goods and services instead of money, they would have realized immediately few of them had anything to trade for the goods Wal-Mart was selling. They would have realized before the Wal-Mart was even built that they would have had to sell what they had to offer outside of the town altogether if they were going to receive anything for their labor. Trade within the town would be severely diminished.

Now suppose you have an economy involving 100 people trading with each other, in a way, as above, where everyone is happy with the way benefits and burdens are shared, with the way work and its output are shared. If ten new people move into the community, theoretically one can total up the new amount of benefits and burdens they bring, and the re-distribution could take place in the same proportion and manner it was done before. However difficult that might be to actually incorporate into actual day-to-day trade, it may be more difficult to effect if money has to somehow be re-arranged or re-distributed first. It is, of course, theoretically possible that a system could be devised in which money re-arrangement (through loans, through investment, through interest rates, through manipulation of the money supply, through pricing, etc.) actually guided the labor/benefit redistribution, and made it easier to bring about, but that would have to be demonstrable, not just a matter of faith or appearance.⁽³⁾

It would have to work in all cases, not just (appear to) work in some. It could not, for example, work in a Darwinian way, in which only the survivors or beneficiaries were allowed to judge the effectiveness and value of the system. Natural selection (whether in biology or economics) is misnamed by calling it the survival of the fit, for something is fit or not, in the Darwinian sense, only in regard to a particular environment - and if the environment is changed for the worse in some sense, what is fit to survive may not be the best thing to have survive. E.g., if there is all-out nuclear war, it has been said that cockroaches will survive, because they survive almost everything. That will make cockroaches more fit than people, but only in this Darwinian sense, not in just any sense of relative value. Similarly an economic system that "works" for some people in certain ways cannot be judged solely by how well it works for them; it must also be judged by what the costs or losses are to (other) people along the way. One must take into account not only who or what is fit to survive in a system, but how "fit" in some sense the system itself is. You cannot say that person B, who flourishes in system B, is more fit in general than person A who flourished in system A, just because system B superceded system A. There has to be a weighing of the value of the systems themselves. Otherwise a well-organized group of extortionists and bullies can be said to be more fit than people who work hard, are honest, fair, and decent with each other, but who are intimidated by the thugs. Or in an economic system that favors materialism and mass production, personalized service and individual attention may be a "less fit" way of doing business than dispensing services by an assembly line. One current source of frustration with Darwinian economic "fitness" is the electronic menu phone-answering systems, which are, of course, cheaper to operate than paying trained employees to answer the phone, but it is exasperating to be the caller or the potential customer who cannot find or give the information s/he needs in an efficient way, if at all. The most economically fit or viable mechanisms are not necessarily the best or most generally fit mechanisms in senses more meaningful and significant to human beings.

Second, it is difficult to share work when work is so specialized that it requires extensive training to be able to do it. One cannot just ask a friend, or even in many cases a colleague at work, to simply fill in for him/her while s/he takes some time off. You could not evenly reduce the workload of the members of a finely coordinated surgical team by adding one extra person to it, because that person could not fill in for the surgeon, the nurses, the anaesthetist, and any others necessary for the surgery.

Third, it is difficult to spread work out so that it is shared equally, particularly as changes occur that would theoretically allow work to be reduced. For example, in the above case of adding 10 new workers to an existing economy of 100 people. Those 10 people cannot just step in and do 8 or 10 percent of everyone else's work because division of labor does not generally work that way - even without specialization. There are situations, of course, where if a group of people were all doing the same thing in the same place, such as filling and stacking sandbags to build a levy before a flood, adding a number of people would readily allow the work to be done faster. But if you were to try to add one extra person to a company of 25 workers, just to redistribute the same amount of work among everyone, someone would have to schedule the work so that each person did approximately 4 percent less work. To absorb the Fed Ex commercial guy's free time throughout his company would be a difficult task, even if everyone could do everyone else's jobs as well as the other persons could. It would certainly be difficult to do on a daily basis so that everyone got to go home a few minutes early. It might be able to be done on a weekly or monthly basis where each person received a few hours off every once in a while, or a day off every third month or some such. It would probably be impossible to do it if the company had one plant in New Mexico and another in Rhode Island. Even working around each others' vacation time in a company is often difficult; and many workers feel they have to work so much harder before and after a vacation that taking a vacation is almost not even worth it sometimes. There is a humorous get-well card that says on the front, "Don't worry. While you are in the hospital, we are dividing up your work evenly among us and doing it with our own." The inside of the card reads: "That way everyone gets to go home a half hour early." Even if it were true that everyone were dividing up someone else's leisure on a job, it is unlikely they would be able to divide it evenly very easily. Going in the opposite direction, increasing the amount of labor everyone has to do because of some special project or deadline, it is difficult to spread the work out evenly among everyone involved. Normally a manager would not even try, except perhaps to make sure that excessive burdens do not fall on one or a few people while the additional burdens to others are only slight.

1. Whether labor is voluntary or paid (and, if paid what the amount is) matters in trying to calculate the amount of money needed in a society to match the amount of potential labor available, even if it is the same labor. Work that is done voluntarily or unpaid (the amount of which is substantial in many societies) is not, and should not be, taken into account in determining what the money supply ought to be. Similarly, different prices for the same (kind of service or product) will need to be accounted for somehow in determining how much money needs to be available for that sort of service. E.g., if two photographers charge very different prices for their work even though their work may be of the same quality, it is not clear how much potentially available photography service there is in money, though it may be quite clear how much there is in terms of how much photography can be done -- particularly if one is talking about something such as wedding photography, since weddings tend to occur on the same days so that if a photographer is booked for one or perhaps two that day, s/he cannot generally photograph another one. A photographer who charges $2500 for a wedding makes perhaps $5000 worth of potential wedding photography available on a given Saturday. One who charges $500 makes only $1000 worth of potential wedding photography available on the same day, if we judged by price alone. Yet they are both making available the same thing in terms of physical product. If housewives or househusbands had to be paid for the work they do as such, presumably a great deal of money would have to be added to the economy to permit that. Yet the amount of work done might be the same either way. When businesses begin to charge for services they formerly provided for free, or when business raise or lower prices, they are changing the amount of money-supply needs in the economy, not the available service supply. Such changes can be a source of monetary difficulties if they become sufficiently substantial.  (Return to text.)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

2. In Chapter 17, I point out that it is the customer or buying nation in a continuous international trade imbalance situation that benefits the most, but, as I point out in that chapter, that is only if the customer nation has a way to take into account the depletion of money it is sending, which the selling nation is essentially hoarding. A self-sustainable nation has a potential way of doing that which a local economy does not have, or at least does not have as readily available. (Return to text.)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

3. As I am writing this, the U.S. Federal Reserve Board yesterday raised short term interest rates because they believe inflation will otherwise occur. Unemployment is low. However, low unemployment in today's economy is the result of many workers being employed part time or in low level jobs, many with low pay and without benefits, such as health insurance. While they may be spending money on other things that would be in short supply or whose prices would go up because of increased demand (whether necessities such as bread and milk or luxuries such as larger tv's or entertainment sound systems), it is not clear to me that there is a shortage, or could be a shortage of something such as health insurance or retirement benefits. Changing interest rates alone is not going to change the skewing of money away from things such as medical insurance, which many people do not make sufficient money to afford.  (Return to text.)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

4. Forced idleness when one is healthy is not the same as leisure because it is demeaning and boring in many cases and because it can mean there is no money being earned if one is not the beneficiary of welfare or charity. When someone expresses appreciation for having work, that generally means they appreciate having the opportunity to earn money from the work or the opportunity to show what they can do, or that they appreciate having something to do rather than being bored. Normally, however, what people call work is not something anyone appreciates having to do, even if they appreciate the results of it. If one works very hard at something one really loves doing for its own sake, one does not usually consider that work, even if that same activity would be considered (unpleasant or laborious) work to most other people.  (Return to text.)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

5. By doing "trinket" or trivial work - that is, by selling products and labor that people will buy, not because they need it or even really want it, but because it is there and is bought on impulse or because it is "cute" or saves a little bit of labor, as in paying someone to carry something for you that you could easily carry yourself.  (Return to text.)