Not What We Expected: Why Our Fixes Will Fail
We like fixes to pressing problems, and we like them to be simple: the simpler the better.
When presented with complexity, we freeze up or defer to experts: they’ll figure it out.
As often noted here, our Wetware 1.0 was selected over the past 300,000 years for a hunter-gatherer lifestyle with few incentives for long-term planning, as food could neither be transported nor stored except over the short-term. What offered selective advantages were group cohesion and a keen alertness to the dynamic world we traversed.
Genetic and epigenetic modifications over the past 12,000 of agriculture and permanent settlements have been relatively modest.
Our minds don’t favor uncertainty and indecision, and so we seek the relief of making up our mind: this is the problem, this is the solution, whew. We then add this position to our identity and worldview. Now we have an emotional stake in it, and feel powerful emotions when challenged. How dare you!
This has its pluses and minuses: the plus is we’re happier having latched onto certainties, but the minus is we’re often wrong about both the problem and the fix, but since we’ve chosen a position we’re extremely resistant to changing course or admitting we chose incorrectly.
Which brings us to energy and money. We understand these are essential to the way we live now, and they’re connected: we’re stranded in a desert, out of gas, and a stranger offers us gasoline or gold; which is more valuable to us? What is the “price” or “value” of each in that situation? If we set off on foot with the gold, what will we jettison when we’re exhausted and thirsty–our water or the gold?
Our predilection for simplicity and certainty leads us to either-or choices, and to ease uncertainty we pick one. So global warming is either real and poised to disrupt life as we know it or it’s a hoax designed to lead us astray. Our wetware doesn’t lend itself to “Hmm, I have an open mind about this, I have no emotional stake in either position, and I will change my mind based on my own observations and analysis.”
When it comes to energy, the either-or is: we have plenty of energy, as we have lots of natural gas in North America, modular nuclear reactors are coming online, and fusion is just around the corner. Alternatively, we’ve already consumed the cheap, easy to get energy, and so all future energy will cost more than most households will be able to afford.
The “abundance” response to this is that technology is always making extraction of energy cheaper, so stand aside, technology will reduce costs so energy will remain affordable. This is merely an engineering issue.
To secure our lock on whatever position we’ve chosen, we keep things abstract and simple: we have lots of natural gas, end of story.
But real life doesn’t actually distill down to simplistic abstractions. If we transition to mostly consuming natural gas, what does this entail? Since electricity is only a modest part of our total energy consumption, generating electricity isn’t going to power transportation, tractors, bulldozers, etc.
Enter the electrification of Everything, including short-range aircraft.
But all this electrification requires batteries, which consume more resources and energy than the previous liquid-fueled vehicles and equipment.
OK, then we can liquify natural gas into diesel. Yes we can, but that conversion consumes energy and is therefore has a cost.
Well then we’ll convert vehicles and machinery to natural gas by retrofitting them with pressurized tanks.
This too has a cost, and then there’s the enormous expansion of the electrical grid that will consume both energy and capital.
As for nuclear reactors, they consume a huge quantity of resources, energy and capital, and there are no tricks to process uranium, a mountain has to be ground up to get a handful, and there are no tricks for disposing of the waste, either. Reactors are inherently costly.
As for fusion, since we can’t duplicate the immense pressure inside a star, we have to heat elements not to “only” 10 million degrees but much higher, a state that is non-trivial to maintain, which is why “fusion” has never lasted longer than a millisecond. There are no work-arounds that evade the physics. Maybe it will eventually work, maybe not. If so, will it be financially viable? Maybe yes, maybe no.
Raising these realities greases the slide to accusations of nitpicking, indulging in doom-and-gloom, and our default response, “how dare you!”
I’m not picking on any one position, I’m simply pointing out how our wetware favors simplicity, abstractions and certainty and disfavors uncertainty, complexity and fluid, unemotional detachment when it comes to problems and fixes.
As for money, I hesitate to whack that hornet’s nest because our emotional attachment to our chosen fix is often extremely strong.
So please brace yourself, pray for divine detachment from worldly attachments, and forgive sinners, heretics and infidels.
It turns out money is squishy, malleable and complicated. It exists on multiple levels of reality, it’s a social contract above all else, it serves us in various ways, as a commoditized store of value, as grease for transactions (means of exchange), as a tool to account for taxes, debts, labor, goods, services, etc., and lastly, as a font of profoundly emotional incentives and attachments.
I’ve explored the complex nature of money in several of my books: Money and Work Unchained and A Radically Beneficial World.
Those interested in money and credit might find these books of interest:
Debt: The First 5,000 Years (David Graeber)
The Nature of Money (Geoffrey Ingham)
The Architecture of Markets: An Economic Sociology of the Twenty-First Century Capitalist Societies (Neil Fligstein)
So let’s pick our way through the minefield of money.
The problem is there isn’t enough money for everyone and everything we need–or want. So let’s fix that by adding a zero to everyone’s account: you have $1,000 in your checking account, now you have $10,000. Go ahead and buy what you need and want.
But inexplicably, the price of everything also suddenly has a zero added to it, so we’re no better off than we were before–and since this offers an opportunity gouge customers by jacking up prices a bit above the 10X increase, we may well be worse off.
Let’s give this power to expand money to eliminate want to government, which is wise and careful. Well yes, perhaps, but government is operated by humans, and they tend to view expanding money as an opportunity to pursue self-interest, reward associates, and invest in speculative ventures because why not, since all this new money is “free”?
OK, forget just printing as much money as we need to eliminate want. Let’s get rid of printed money and use only gold, silver and bitcoin, intrinsically limited forms of money.
This is a simple fix, and so it’s attractive. But alas, money isn’t simple.
So our money supply is $1 million, and it can only expand by adding gold, silver or mining bitcoin.
Since 80% of all money in the current arrangement is created by banks lending money into existence, then what happens when banks originate home mortgages worth $1 million?
If banks issued $1 million in home mortgages, then the “backed by gold, silver and bitcoin” value of our money declines, because there’s now $2 million in money and only $1 million in gold, silver and bitcoin. If each dollar was backed by X quantity of gold, silver and bitcoin, it is now backed by one-half of X.
To maintain the ratio of X (quantity of gold, silver and bitcoin to the money in circulation) all this credit-money can no longer be borrowed into existence: so no more home mortgages, no commercial credit, no credit cards, no credit at all. Banks can only lend out depositors’ savings deposits of gold, silver and bitcoin.
Since credit is the lifeblood of the economy, the elimination of credit other than loaning out savings deposits effectively collapses the economy.
But why can’t we just revert to a system that only lends out savings deposits?
History offers guidance here, because this is how economies used to function.
Banks have costs, and to fund these costs, they loan deposits out at interest, keep some for operations and profit and give some to the depositors whose money they’re lending out.
The problem is depositors have an annoying habit of periodically withdrawing their savings, so banks have to maintain a reserve. The problem is how to balance the need for reserves with the need to lend out depositors’ money to keep the bank afloat and profitable.
So the bank concludes 80/20 is prudent: 20% of deposits will be held as reserve and 80% lent out at interest.
The wealthy don’t need to borrow to live, but they often need to borrow to expand their enterprises or acquire an enterprise or property. The non-wealthy need to borrow to start a small enterprise to better their prospects, buy seeds for next season’s harvests, fix the hole in the roof, and so on.
So the need / want for credit is robust.
So 80% of the deposits have been lent out and spent / invested. Few borrowers keep what they borrowed in a strongbox at home, as they borrowed the capital for a real-world purpose.
Humans like to think of themselves as sovereign individuals, but we’re also herd animals, and so when rumors of financial troubles reach us, we realize it would be prudent to hurry to the bank and withdraw our savings, lest the bank run out of money before we withdraw ours.
And so there’s a run on the bank: 80% of the depositors demand their savings be returned to them in full. Since there’s only 20% in reserve, the bank shuts its doors, to great consternation, and then calls all its loans: greetings, borrower, please return the money you borrowed from us in full, or we’ll lien your property and income.
Borrowers rush to sell their farm, furniture, cow, shop, etc., but since there’s a financial crisis there’s very little credit available, and so all these assets are sold for pennies on the dollar.
Since few borrowers have the cash to pay back their loan, and their assets are sold for a fraction of their pre-crisis value, they have no choice but to declare bankruptcy. The bank is insolvent, too, as it was unable to collect enough cash to pay back all its depositors. So most of the depositors are wiped out, those who borrowed and were driven bankrupt are mostly wiped out, and everyone who invested in the bank or worked there is also wiped out.
As a result, banks arose and collapsed with great regularity, wiping out many of those involved.
The government found this displeasing, as those wiped out no longer had the means to pay taxes.
This system is far from ideal, and so from ancient China to 18th century America, the solution was to print paper money, a.k.a. “small money” that could be used to grease commerce and commercial credit, what we now call purchase orders.
The government either approved or looked the other way as local / private script stabilized the system by expanding the money supply without all the bother of mining gold, silver or bitcoin.
But just as limiting money to gold, silver and bitcoin and credit is inherently problematic, so too is paper money, as the temptation to fix spots of bother by printing more of it is intrinsic to the creation of money and credit.
There’s another problem with money. In a corrupt system, reformers propose that replacing the current money with some new money will eliminate the corruption. So a wise commission orders everyone to relinquish their dollars for quatloos, which are inherently limited and therefore valuable.
This reform is simple and therefore attractive, but what happens is predictable: the corrupt continue their trade in influence and favors using quatloos. A moral foundation isn’t constructed of money, it’s constructed and maintained by social norms that impose limits on self-interest and corruption. Corruption will gladly use whatever form of money is in circulation. Changing the form of money changes nothing if social norms have eroded.
In summary: money is not simple, and so simple fixes cannot address its intrinsic complexities. There is no ideal fix for anything that functions on multiple levels and serves multiple purposes and is tightly bound to human avarice and emotions. Any solution or fix is inherently partial, contingent and complicated by unanticipated first-order effects and second-order effects (as effects generate their own effects).
Where does all this lead? It leads to a hard-to-swallow conclusion: we’ve misdiagnosed the problem, because we want to define problems in such a way that our simple fix will solve the problem.
So the problem is defined as a scarcity of energy and money, and so the fix is to generate an abundance of energy and money, and all our biggest problems will be resolved.
But the actual problem isn’t limited to scarcity or abundance of energy or money; it’s the erosion of social norms that have enabled an extraordinarily imbalanced distribution of energy, money and power to the few at the expense of the many, who are increasingly being forced to come to grips with the reality that they can no longer afford the lifestyle they want or feel is their birthright.
Making energy and money more abundant doesn’t fix anything because the abundance is distributed to the few rather than the many, who will eventually rise up in some fashion because our Wetware 1.0 has also been selected to be keenly attentive to fairness and unfairness in the group, as unfairness erodes the integrity and coherence of the group, and thus its survivability.
If we’re wasting much of our energy and money on things that are obsoleted by design, on systems that are going through the motions rather than actually being productive and on consuming distractions that are intentionally addictive and destructive because this maximizes profits, then claiming abundance is the problem is the wrong diagnosis, and so the patient will expire, no matter how energetically we argue that our fix is the solution.
If we misdiagnose the problem, our fixes won’t fix anything. Rather, they’ll accelerate the expiration because we squandered time and resources that could have been more productively invested elsewhere.
Sometimes certainty is the enemy we don’t even see and uncertainty is our most faithful ally.
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