Sunday, September 18, 2005

Thought for the Day

I think that one difficulty with a currency-based economy (i.e., any economy based on money rather than barter) is that because of the level of abstraction involved, it is easier to lose sight of common-sense principles. For example, I doubt that the broken-window fallacy would fool someone living in an agricultural society with minimal cash transaction.

I think that this problem is compounded the more wrinkles are put into the system (e.g. bank accounts, stocks, futures markets). Each of these represents at least one level of abstraction higher than mere cash, and as such people get lost in the whys and wherefores nad simply accept such ideas as interest or dividends without considering why they exist.

I think part of the solution here is for people to try and learn from an early age the basic principles behind economics; that is, the pre-currency principles. The concept of limited resources and of trade-offs needs to be made clear at a very young age; and in such a way as that money is not referenced (at first). Once these are understood, then a foundation has been laid that can be used to build an understanding of a cash economy.

I may expand on this later.

That is all.

No comments: