If I had a dollar...
I have a lot of conversations that incorporate the economy into the discussion, because I feel it is both something that everyone can relate to, as well as something that most people don't have a very clear understanding of, yet all participate and are affected. It is also interesting to note that when a discussion arises about changing some part of the economy, most people really struggle to visualize what is affected, or the implications. For instance, something like having a flat tax rate, or having zero income tax and only having taxes on purchases, makes people's brains melt.
Which I get.
Because while the economy is simple in terms of it just being about supply and demand, and tracking trade, it is complex because it impacts on everything we do, no matter what we do. It affects everything, and is affected by everything, from social healthcare services, to the quality of the air, or the supply of illicit drugs.
Everything is connected.
And because everyone works on incentive, whether financial or other, and because each if us have a different incentive model, the dynamics are incredibly complicated. And, it is also because of this that a one size fits all economic rule is always going to fail, as it can never be smart enough to fit the needs of everyone.
And, it is because of this complexity and the impossibility to meet it, that any attempt to manipulate the model should be in the simplification of rules, taking away as many rules as possible so that people can act as freely as possibly, and find the equilibrium.
For instance, removing all income tax, or even having a flat rate for all, would allow people to work as much as they want without worrying about being punished by a bracket. However, there is a cap on how much people can work effectively, so there is a cap on earnings, unless there is a skill growth. But, there are also limitations on what skills people can develop, and the skill value in the market, so there is a cap there too.
Simplification is the first key to economic improvement.
I was taking to the company lawyer today, who is also a friend of mine, about performing in front of people. They were saying that the worst people for her to present to are other lawyers, as they are often the ones who are the most knowledgeable of the field, and also are quite competitive.
My take is that it is also their job to find loopholes in a contract, in the system, that they can leverage. It is their job to either create a watertight contract, or their job to find the hole in a watertight contract and make it leak. It is their job to criticize and apply pressure, and they are incentivized to do precisely that.
Complexity keeps them employed.
Financial complexity keeps a lot of people employed too, and it allows for corporations to play all sorts of games on order to reduce their tax obligations. Plus, it sets up economic barriers so that ordinary people aren't able to find ad leverage the same loopholes.
To hide money in a tax haven, costs money.
For the majority of us, it is impossible to hold even a fraction of the complexity in mind. And even if we could, the amount of gain we get from it is so low. Even if the percentage saved is the same, there is a big difference between leveraging loopholes for an income of 50 thousand, or an income of 50 billion a year. The impact on a local economy is different too, where while one might be able to wrangle a few thousand out if the government's hands, the other will remove billions.
But, there is also a difference in how that "saving" is used, because even if the individual does pay less tax by a few thousand, they will likely use it locally and it will flow back into the economy. However, the corporation savings will reward shareholders, and that will flow into those tax havens. This means that increasing amounts are not only removed from the money supply at the local level through tax, but also through the hiding of money that would also be subjected to tax.
Double-dipping.
Yet, for most of us, what we do is expect that the government is going to make special laws that will make the system fair for all, even though they are not incentivized to do so at all. The government's goal isn't to improve well being, it is to increase wealth via proxies, with the majority of that wealth being generated and going to a fraction of the population, by means that will actually punish the majority, as they extract wealth, putting far less back into the stream, than they take out.
As I have mentioned before, there is a difference between complicated problems and complex problems. Complicated problems are difficult to work out, but once they are, the solution is repeatable and constantly works. Complex problems are dynamic, so that even if a solution can help today, it will
get increasingly unaligned as the problem changes. The economy is complex, because it is driven by us, who are also complex creatures, with far too much dynamic change in our preferences to keep any rule valid for long. What we need to realize is that governments make complicated rules for a complex problem, not only creating loopholes to benefit some, but also not being good enough to meet the needs of the majority well.
The algorithmic laws they try to apply to the economy, are never going to work.
There are no rules that are ever going to work well for long, but increasing the number of rules is a sure fire way to ensure that the rule is going to become even more useless, faster. Rather than fighting for rules that serve us, we should be demanding constant simplification of the rules so that there is increasing transparency on activity at all levels of the economy - government and corporation first and foremost.
What happens then?
If I had a dollar...
Taraz
[ Gen1: Hive ]
