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Opinion Piece by Josh L. Ascough

With the UK only now beginning to realise the problem with putting an entire economy on lockdown; forcing millions out of work for being classified as “non-essential”, is it time we rethink how we cover the struggles of unemployment?

Having unemployment coverage run by government has its issues. Due to the fact that no one can consume more than what they produce, if people are unemployed then the government through taxation redistributes money; yet if not enough people are producing, then the resulting answer (in the eyes of the government), is to print more money, resulting in the purchasing power of the money becoming less valuable. This ultimately does further harm to the very people that were in need of help to begin with, as through inflating the money supply, the money operating within the economy becomes less valuable because money is subject to the same laws of supply and demand as any other market good; so the poor, unemployed person with £20 in his pocket from unemployment payments, will find he is less capable of purchasing goods and services than he was before.

It is, quite literally, stealing value and economic growth from our “what was to be” future.

There is also the problem of people who are capable of working, the work exists, yet refuse to work, because there is no incentive to work. If an individual is handed “free” money at the expense of another man’s productive efforts, and he faces no risk or opportunity cost to himself; where is the incentive to work?

In addition there is the problem of individuals who hold a repetition of becoming unemployed through a lack of responsibility resulting in being fired; whether it be through stealing from the workplace, abusing staff and/or customers, lying about being sick or a whole host of other actions which justify the termination of employment, the fact is this:

If you create poor or no incentives for people, you will come up with poor or negative results.

This is not to say there are not people who are unemployed through no direct fault of their own. There are many people who become unemployed due to a whole host of reasons; the company going out of business, costs for employees rising, economic disasters, natural disasters, or simply not meeting the expectations of an employer.

So if the problem is unemployment, why not just create more jobs?

If the goal is purely to have full employment then there is a simple answer; bring back conscription. If every worker is staffed in the army then we will have full employment, but we will also have nothing to eat. Jobs are not the ends, they are a means for people to live better; to put food on the table by the production of what people demand. That is how you achieve economic growth; creating jobs for the production of things which have no demand and simply exist as a policy to “get people to work” creates and holds no value.

“I am very much on the same side as the great Professor Walter Block; if it moves privatise it, if it doesn’t move privatise it. Since everything either moves or doesn’t move we should privatise everything.”

So if employment for the sake of employment and government unemployment coverage aren’t the answer, then what is?

As the title suggests, I believe the answer to be the privatisation of unemployment coverage. I am very much on the same side as the great Professor Walter Block; if it moves privatise it, if it doesn’t move privatise it. Since everything either moves or doesn’t move we should privatise everything.

“Now private doesn’t mean you pay for it or that it is for profit, private simply means it is not owned, run, or managed by the government; to be a private aspect of the economy is to be separate from government involvement or management, and to be commanded and operated by private citizens”

Now private doesn’t mean you pay for it or that it is for profit, private simply means it is not owned, run, or managed by the government; to be a private aspect of the economy is to be separate from government involvement or management, and to be commanded and operated by private citizens. There are a few ways unemployment could be covered in a free market economy which I will go over. However, it should be noted that these are not policies of a top-down approach. Not every means mentioned will be of value to all individuals just like any aspect of the market; this is an approach from a bottom-up position based within human action and incentives.

Community Coverage – We have many locations around the UK which hold on to community values: look out for your neighbours and help to keep your community safe. One form of private unemployment coverage could come in the form of community coverage based within a HA (Homeowners Association). Now in the UK we don’t really have Homeowners Associations apart from a few “gated” communities. A Homeowners Association is a private association, usually formed by estate developers in order to manage homes in residential areas. However in a free market there is relatively no reason these associations could not be run and managed by the community members themselves via the formation of what could be called “Community Contracts”; these contracts would operate on a membership benefit basis.

For example, let’s say John Smith wishes to buy a home in a community which has a Community Contract. He is not required to sign the Contract in order to live in the community; if he chooses to sign, he will be legally obliged to have a certain percentage of his income deposited into the communities fund, which is to be used to cover damages to any of the properties, donations to churches if it is a religious community, maintaining roads, and, on the subject we are focused on, assisting in coverage for unemployment. Now as stated, Mr Smith is free to not sign the contract and live in this community, however if he chooses not to, any damages to his property, any religious building he wishes to attend, any roads within the community he wishes to drive on and covering his unemployment will have to come out of his own pocket, rather than the fund set up by the contractual obligations of the community.

Now the reader may think this is a disadvantage for Mr Smith; however the community is incentivised to have Mr Smith sign the contract, not simply because it means more funds by the community for the community, but because if they can insure Mr Smith is a contracted community member, then they can further insure there will not be a ripple effect on to the value of their own property through damages which have been done to his property, through not being able to afford a toll on the road which goes towards maintenance, or through him becoming unemployed and being unable to pay his bills. His incentive if he chooses to sign the contract is the same as the communities incentive to encourage his signing; shared community values, maintenance of the community resources, ensuring protection against damages and unemployment, and securing the property value at high rates.

“Some may say this is just a local version of government with choice added in to the mix; to which I would say localism and choice by our current standards are the complete opposite of government”

Some may say this is just a local version of government with choice added in to the mix; to which I would say localism and choice by our current standards are the complete opposite of government.

But what if like myself, you don’t really get along with your neighbours and you don’t hold any shared values (I’m a Libertarian ever moving towards Anarcho-Capitalism living in a Labour stronghold; I’m as out of place as Karl Marx in an Economics class) and you don’t value such a setting; or if the location you reside in doesn’t hold community values, what is the option for a purely individual basis?

Unemployment Insurance – An Unemployment Insurance Program (We’ll address it as simply UIP from this point), would operate on a similar basis to most insurance program do now; the higher financial risk you pose the higher rates you’ll have to pay. However just as insurance for health or cars in a free market would be more open to innovations and competition, insurance for unemployment would operate in a much broader sense.

These rates would be based on a number of factors; taking into account a person’s income but in addition taking into consideration living costs, if the person has ever been fired and what for, and the level of experience and/or qualifications which increase or decrease a person’s ability to obtain and retain a job.

This would mean that, for example:

Let’s say we have two individuals; persons A and B.

Person A has a job which pays £20,000 annually, has never been fired, holds 5 years’ experience, holds a degree where there is high demand for that line of work and their consumption and living cost are low.

Person B has a job which pays £23,000 annually, has been fired multiple times for abusing customers, holds 12 years of short-lived experience based on being fired from multiple establishments, holds a diploma where there is high demand for that line of work and has high consumption and living costs.

A’s living costs are low because he doesn’t smoke or drink, has paid off his mortgage and economises on what he consumes.

B’s living costs are high due to holding a high drug and drinking habit, and due to holding debt from excessive credit card use.

If an unemployment insurance company based its rates off of the factors which were mentioned above, then we can assume that B would have higher rates to pay.

B would have higher rates to pay because he has been fired a variety of times due to abusing individuals and because of a high drug/drinking habit. He has a higher risk of becoming unemployed due to his own actions, and so would have to pay more as he is a bigger financial risk to the insurance company.

A would have to pay lower rates due to the fact he has never been fired, holds low living costs due to economising on his resource consumption and holds a degree in an area with high sought after work. He has a low unemployment risk and in the low risk event of losing his job either due to his own actions or an exterior causation, it is speculated he would not be unemployed for a long period of time, due to his experience, and his sought after qualifications.

“We can see from this scenario that the unemployment coverage would favour those who are responsible individuals and financially punish those who were not responsible”

We can see from this scenario that the unemployment coverage would favour those who are responsible individuals and financially punish those who were not responsible and were the cause of their own terminations.

This would incentivise what otherwise would be harmful, reckless individuals who become unemployed due to their own negative actions to take on responsibility, while ensuring those who are responsible and who may lose their jobs due to exterior reasons receive higher coverage for lower costs, because due to their responsible actions are less of a financial risk to themselves or the insurers.

This is all good for those who already have employment, but what about individuals in communities where there is no employment; how do we address this problem?

Unemployment Charities and Work Foundations – Now addressing an entire community which is unemployed and in poverty is a difficult subject in the hypothetical because (A – poverty is the natural state of man and (B – lack of economic activity is not a black and white scenario and can occur for a variety of reasons; for the purposes of this example however, we will assume that poverty within an entire community has occurred due to governments regulating economic activity out of business, and has become a generational problem.

Within a market economy, charities could be set up much easier than current (we can also make the assumption that in this hypothetical scenario, the monetary sphere and government are separate, and sound money is active; which would remove the risk of private charities being decimated by inflation), to provide financial aid to those who need it. In addition to this work foundations could be set up, which would receive their funding via donations from private citizens and businesses, in order to provide training to individuals to give them the skills for work; as well as provide funding to individuals looking to set up a business to boost the GDP of their community, but lack the funds due to no economic activity and/or not being able to acquire a loan due to low or no credit score.

The ultimate theme here is one of choice; choice for how we cover ourselves and help our neighbours and whether we choose to do either or not.

“Nobody likes to see others suffer, but forcing resources from others in order to give to another does not make the giving moral. What makes it moral is the recognition of choice and the analysis of values each person holds”

Nobody likes to see others suffer, but forcing resources from others in order to give to another does not make the giving moral. What makes it moral is the recognition of choice and the analysis of values each person holds; can any act actually be deemed “moral” if it is forced without any understanding as to why this act is right or wrong? If I put a gun to my neighbours head in order to redistribute his wealth to someone else who I deem to need it more, am I moral or would I have been moral if I took the time to persuade him of the moral value of charity, and he gave based on his own understanding and agreement of value?

It is very easy to force things from and upon others; it is difficult to persuade, but it is a lot more rewarding and long term, as if you can achieve such a feat, you will have created a moral framework, rather than a violently forced act of charity; which is no charity at all.

Main image: https://www.123rf.com/photo_96096037_stack-of-cv-and-application-for-employment-on-blue-desk.html

Economic Piece by Josh L. Ascough

When writing about the subject of money, I think it’s worth having a bit of fun by quoting the Monty Python Money song:

“There is nothing quite as wonderful as money. There is nothing quite as beautiful as cash. Some people say it’s folly, but I’d rather have the lolly. With money you can make a splash.

You can keep your Marxist ways, for it’s only just a phase… Money makes the world go round!” ~ Monty Python The Money Song

“Money is quite literally the life blood of any economy, and a people’s ability to communicate value to one another”

Money has played one of the most important roles in our ability to communicate throughout the world of commerce. Thanks to money, we are better equipped to calculate the marginal utility of goods and services, which ensures we can evaluate the cost of production and the value of capital. Money is quite literally the life blood of any economy, and a people’s ability to communicate value to one another.

But thanks (or rather, no thanks) to government involvement and its monopolistic grip over the monetary sphere, money has not advanced in 100 years; in fact, it has gotten worse.

“money never used to be a symbol of ‘national sovereignty’, in fact during the period of the classical gold standard, money was not nationalised; it was an international means of calculating value via the means of value to weight ratio and arithmetic”

Not many people realise, but money never used to be a symbol of “national sovereignty”, in fact during the period of the classical gold standard, money was not nationalised; it was an international means of calculating value via the means of value to weight ratio and arithmetic. Gold was gold. It did not matter what brand was on the coin as it was all in the form of precious metals.

Sadly, we went down a very damning path by nationalising money, and giving full control over the monetary sphere to governments and the central banks. We took what was a once a bottom-up process based on market democracy, and turned it into a top-down process based on institutional, cartel-like tyranny.

However, though governments will fight hard to not resurrect the gold standard, we have an alternative to the monopolistic, monolithic hold over our money. Allow me to introduce you to the wonderful world of Cryptocurrency.

Before we delve into the subject of Cryptocurrency I think it is important to debunk an idea that has circulated for a while:

Where does money come from?

There has been this strange consensus for a while that could be the root of the idea for assumed consent of taxes; which is that money is created by government.

This is in fact not true in any sense. In fact it is actually the complete opposite.

Money has always been a creation of the private, organic markets. When I say the private market, I don’t mean a CEO of a company creates a money and says “this is money, and this is how much it is worth.” Rather, I’m referring to the organic process of human interaction. I’ll try not to turn this into an article on the creation of money, but I will attempt to explain this through a chronological ordering:

Let’s say there is a community with no money and it is operating in a system of barter. Barter is a system with no commodity for the means of exchange and so those wishing to acquire goods and services will trade economic goods for economic goods, via the means of Direct Exchange; for example let’s say I grow wheat and you raise cows. I have 50 crates of wheat, enough to serve my immediate needs via 2 crates and enough to keep aside for future use via 10, yet I can further satisfy my needs by acquiring a cow.

You are raising 20 cows, you hold 1 for an immediate food source, 5 for future food sources, 2 for milk which you use to drink and create butter, and 4 for breeding, yet you can also further satisfy your needs by acquiring wheat.

Your uses for the wheat equate to you requiring 20, and you hold the use value you hold over the 8 cows as being below that of 20 crates. My use for the cow equates to requiring 4, and I hold the use value I hold over the 38 crates as being lower than the 4 cows.

In all economic activity we are seeking to increase our value by trading goods we deem to have lower value for ourselves, and so if I value 4 cows to be equal in value to my 38 crates of wheat and was to trade the exact amount, I would not be gaining value. The same is true for the other side; If you value your 8 cows to be equal to 20 crates and you were to trade the exact amount, you would not be gaining value – therefore the ratio for me to gain would mean I’m willing to trade no more than 37 crates, and in order for you to gain you are willing to trade no more than 7 cows.

We agree to a trade by you acquiring 30 crates of wheat in exchange for me gaining 6 cows.

30 crates = 6 cows.

This system of barter is all well and good until a few issues arise.

Within a system of barter, we rely on a coincidence of wants; we are focused on the necessity of our neighbours coincidently having a need that can be satisfied through the use of what his fellows have, and vice versa.

Additionally, the perishability of goods is another problem. If you are growing wheat, and your neighbour says he doesn’t want wheat now, but he probably will in the future. The problem here is that wheat doesn’t last forever, after a period of time it will shrivel up and be incompatible for the uses it could’ve served. Continuing down this, perishable goods cannot be traded over great distances as again, they will shrivel, grow mould and become unable to satisfy the needs they once held use value for, so under this system direct trade based on the coincidence of wants can only be maintained within a local community; not city to city or nation to nation.

Finally the other problem with a system of barter, is the indivisibility of goods. If you are raising horses for example, you are looking to acquire wood and straw to build yourself a basic hut, and people have a need which can be satisfied through the use of said horse and hold command over the goods you are seeking, you cannot divide the horse into a multitude of pieces to satisfy both “buyers” and yourself, as the horse will then lose its use value, and if both the wood and the straw hold no value to you on their own, then even trading the horse to one person regardless of who will not form a gain in value to yourself, as you would be no worse off with or without.

Now the way in which a money is brought to the market occurs when an economic good, which holds use value, acquires the quality of being a means of exchange, by confirming a few important qualities:

Scarcity – scarcity is the primary requirement for a good to be deemed an economic good, and it is no different for money. If a money is not scarce, then it loses its value and ceases to be an economic good. A historical example of what happens when a money is made non-scarce, is the period of hyperinflation in Germany.

Divisibility – this could also be referred to dramatically as the indestructability of a sound or “good” money. An indestructible or divisible economic good, is one in which it can be divided into fractions without losing it value. A perfect example of this is the gold standard; if you had a 1kg bar of gold and broke the bar up into a thousand pieces each equalling 1g, the value of gold has not diminished it has simply been divided into more flexible quantities.

Durability – a sound money will be able to be transported across cities, towns and nations without fear of the money shrivelling up, and losing its value; this is very similar to the divisibility of money.

These are the qualities of an economic good that are required for a money to occur over the course of time within the market. So if, let’s say, steel was seen to satisfy a need which people had and therefore held use value, then an innovative, entrepreneurial individual would come to the conclusion that, steel is scarce so it quantifies as an economic good and the more people demand it the more valuable it will become, it is divisible/indestructible because it can be broken up and melted down into different quantities of different sizes and weights, and it is durable because it retains itself over long periods of time making it possible to transfer as far as other nations; this individual would decide to begin accepting steel in exchange for his goods and services. The steel now has gained a new quality, it has acquired an exchange value by obtaining the ability to be a means of exchange; it is now of intrinsic value.

If you would like to see further details about how money comes into the world, I highly recommend Carl Mengers book – The Origins of Money.

So, what is Cryptocurrency?

Crypto is a digital commodity which is created through the means of what is called Crypto mining; using specialized hardware to code at a variety of hash rates and adding blocks to the chain (Blockchain). This process takes a lot of processing power just like mining for gold. The Hash rate is the speed at which a software is able to complete the operation of accessing crypto code; the greater your hash rate the more crypto you’ll be able to mine.

There are a wide variety of Cryptocurrencies; Bitcoin being the most famous and most valuable; at the time of writing this (24/07/20), 1 BTC is valued at £7,498. Other forms of Crypto are Ethereum, Ripple, Bitcoin Cash, and Litecoin.

At the time of writing this, they are valued at:

1 ETH = £221.

1 XRP = £0.16.

1 BCH = £184.

1 LTC = £34.97.

Cryptocurrency has all the qualities that require a money to come on to the market.

“These mechanisms ensure that only a fixed quantity of each Cryptocurrency can be created through coding regardless of the hash rate. So once a maximum quantity has been created, no more for that particular Cryptocurrency can be brought into existence”

It is a scarce resource. Many may say, how can something with no physical qualities be scarce? Well that is thanks to the mechanisms operating within the Blockchain itself. These mechanisms ensure that only a fixed quantity of each Cryptocurrency can be created through coding regardless of the hash rate. So once a maximum quantity has been created, no more for that particular Cryptocurrency can be brought into existence. This also ensures that it cannot be manipulated through artificial creation or inflation, and so as the production operating in an economy is lower than the money supply we will see what is known as Growth Deflation, resulting in prices falling; not necessarily due to overall supply of goods being higher than consumer demand, but because the money has become more valuable than the capital and consumer goods themselves.

It is divisible. Cryptocurrency can be divided between different coders, hashers, consumers, suppliers and investors without it causing the currency to lose its overall value.

It is durable/indestructible. Cryptocurrency probably has the most unique form of this than any other form of money, because all money, even the gold standard over very long periods of time will wither. Under the gold standard even though there were huge benefits to this monetary system, over prolonged periods of time the coins would lose weight and so a coin which originally weighed 1 pound, could be reduced by continuous use to say 3/4 of 1 pound or lower, and so that particular coin would be less valuable. Crypto though, thanks to its non-physical quality and being completely based in code, can go on, and on, and on; forever. Cryptocurrency is the purest form of indestructible money.

There has been criticism and questions over Cryptocurrency in general and I’d like to address some of them.

“So Crypto is just a money. What about a payment system?”

Cryptocurrency has a unique quality about it where it is both a money and a payment system. The payment system is built into the money itself, for example imagine if PayPal was its own form of money as well as a payment system; rather like how most modern gaming controllers have battery packs built into them rather than the battery being a separate aspect; except the batteries in the Crypto payment system down run out of power.

“The Blockchain not only acts as a massive database for all the Crypto in existence, but has built into it a ledger that keeps track of transactions occurring as well as keeping a log of what belongs to who”

“If it is all digital how do you know what belongs to who?”

The Blockchain not only acts as a massive database for all the Crypto in existence, but has built into it a ledger that keeps track of transactions occurring as well as keeping a log of what belongs to who. Note that when I say track I don’t mean the ledger is keeping track of what you buy or who where the money is going; to keep with the privacy of Cryptocurrency, the ledger tracks when transactions occur, and how much; that’s it.

“How secure is Crypto; could I get hacked?”

Just as any piece of technology, there is always a possibility that your wallet could get hacked, but at the current period of time, unless someone has access to your private key; which is built into each individual wallet that only the owner has access to, it would be impossible to hack into someone’s account and steal your money without requesting money first, which is done by sharing your public key to customers or businesses, which is used to enact transactions.

I would like to rewind my statement earlier about it being a money and a payment system, as with the information on the private key it can be noted as being three; a money, a payment system and a personal private bank.

“What about the crash that happened to Bitcoin in 2017?”

This has often been thrown around in an attempt to discredit Crypto in general, however the reason the crash happened is very straight forward and, while it is something skilled techno-minded people are looking to solve, from an economic position its reasoning comes down to artificial barriers in the way.

Crypto has all the qualities of a money. It is scarce, divisible, durable, it holds exchange value and is a means of exchange. However, at the time, it did not hold use value because it could not be used in large numbers of transactions; so as large numbers of people were increasing the demand and overall value of Bitcoin, when it was realised it couldn’t be used speculation went against its favour and caused the value to drop. Now as stated, there are very skilled technically minded people working on ensuring it has usability, however I would argue it comes more down to governments holding a monopoly on what money is “meant” to be, and so blocking any and all competition for better, more efficient means of exchange. There is also the aspect that not all businesses wish to commit to transactions in Crypto, but no money ever created through the spontaneous, unplanned order of the market comes about instantly; these things take time and the user interface has hugely improved since Crypto’s inception in 2009.

If Cryptocurrency continues to advance, and achieve better, faster and more user friendly means, we could see the death of big government faster than we could have hoped only a decade ago; we could see an end to central banking by adopting completely private wallets, storing private money.

Without full control over money, nation states cannot maintain their power.

Main image: Image by Pete Linforth from Pixabay

https://pixabay.com/illustrations/crypto-currency-bitcoin-blockchain-3130381/