15:38

The meaning of money

This is by someone called Andrew Nason. It's one of the best Christmas messages I've come across.

"We have reached that time of year when we traditionally turn from the turmoil of the markets and the troubles with money, to the good life. From the rubble of the rouble, to a sizzling turkey, to re-discover the signal from the noise. But what is the good life?

The journey takes us back in time and to the ends of the earth, to St Helena, where we find a famous prisoner, Napoleon Bonaparte, who is in the midst of a furious fight over the size of his rose garden.  Believing himself to be absolute ruler of all that he surveys, he naturally wants to make his garden larger, but the Governor of St Helena is absolutely opposed to this land grab. He had seen its consequences. Napoleon, Ex-Emperor of France and Ruler of Europe, who had commanded vast armies now couldn’t even enlarge his own garden parterre a centimetre. His personality blindspot meant that he had lost the plot. His insatiable desire for  “more and more”  resulted in  “less and less”. He went from ruler to loser because he didn’t know when “enough was enough”.

So how much is enough? Economists cannot provide the answer. In society, insatiable appetites are considered pathological, and yet economists treat this mental illness as the norm. To economists we are all psychopaths mindlessly pursuing money, with seemingly  insatiable consumption. Don’t believe me - if your kitchen ceiling lights look even vaguely like those of Heathrow airport’s landing lights, then you will need to think again.

Keynes himself was aware of these limitations and had expected economists to become as useful as dentists. Their marginal utility putting them at the very margins of life. Yet strangely, their inability to say anything useful seems to have increased their importance.  Believing that money is the measure of one’s worth, makes no more sense than to believe that GDP is the measure of one’s economy.  Why still use a value that is increased by prostitution and yet decreased by voluntary work, like childcare?  That fails to subtract the cost of pollution and ascribes no value to leisure?  It is like measuring Christmas only by its tinsel and trinkets, which is of course exactly what they do.

Keynes  believed by 2030, we would 4x richer, and given the marginal return on income, work for only a quarter of the time.  As productivity increased, working hours would decrease. He expected us to work only 15 hours rather than the 50 or 60 hours per week we actually work.  He mistakenly believed that once we had satisfied our material needs, then we would enjoy our leisure, spending less time at work and more time enjoying ourselves. But the reverse is true - the richer you are, the more likely you are to work even longer hours.  Money has become the competitive yardstick, the way of keeping score. To the Swedish Economist, Staffan Linder - leisure is both a benefit and a cost, the cost of not working. This cost grows as productivity grows - thus the cost of lying in the grass for an executive is higher than that of a student. Weirdly, lower paid workers are working less than they want to and the richer ones are working more than they need to. The workaholic rich have replaced the idle rich or those fabled aristocrats. 

Keynes believed 4-8x the average income was enough for the professional classes to live the good life and the equivalent of Euro 46,000 per annum was enough to satisfy average needs. Sums echoed by Balzac and Austen.  Russian oligarch’s might think this sum is derisory. Putin himself said he works like a galley slave - but he certainly doesn’t live like one. He is rumoured to have  20 residences, including the  Constantine Palace, a Czarist-era estate, a ski lodge in the Caucasus Mountains and a Gothic revival palace in the Moscow region.  He has 15 helicopters, 4  yachts and 43 aircraft. Surely in aircraft at least, he has reached  a marginal return, given you can only fly in one at a time. This desire for more and more looks distinctly Napoleonic - especially given his description of ‘Eastern Ukraine, with the Czarist term “New Russia.” It is not as if Russia is short of land.

There is an old saying: as soon as a man get rich he goes bad and as soon as a woman goes bad, she becomes rich. Echoed by Mandeville’s view: “you can have riches and vice, poverty and virtue - but you can’t have riches and virtue.” Money, according to Robert and Edward Skidelsky, should only be the background noise. A means to help you achieve the good life. The good life is defined by seven basic goods: health, security, respect, personality, harmony with nature, friendship and leisure. The good life balances these needs.  This is the signal among the noise. According to Cicero - “if you have a garden and a library you have all you need!”

On that bombshell have a good Christmas"

 

 

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