Of Automation, Economic Value, and Slavery: Inflation Versus the Tide

After devoting some thought to defining the economy, a critical, subtle question remains.  If you invent something that inspires people to work in order to earn it, and they increase the human productivity in the economy, and then somebody automates what they’re doing, after which the population returns to its prior level of human activity, hasn’t what I’ve been calling the “kinetic economy” grown?

If we define the economy in terms of things produced, then obviously the answer is “yes.”  But if we’re after a more expansive definition of the economy — one that allows us to assess all the numbers from above, rather than within — the answer is “no.”

Economic thinking seems currently to be bogged down observing economic factors and describing what they do, rather than questioning what they are. At bottom, what is inflation?  The dictionary tells us it’s:

a continuing rise in the general price level usually attributed to an increase in the volume of money and credit relative to available goods and services

That’s serviceable for doing math problems, but what is it?   Contrast that with the definition of “tide”:

the regular upward and downward movement of the level of the ocean that is caused by the pull of the Sun and the Moon on the Earth

If we were to wall off a bay and dump a whole bunch of stuff in it, the water level would go up, but it wouldn’t be the tide.  The tide is the gravitation pull of celestial bodies on water. So what is inflation.

Well, a precondition for inflation is the existence of transactions, so we could rephrase the definition to say inflation is a willingness to hand over more dollars for the same amount of things. My object, here, is to suggest that the material measures of the economy mainly describe the flow of value.  The total value — the definition of “the economy” — must come from elsewhere.

That source, ultimately, is people.  Fully automate everything and then wipe out humanity, and there is no economy, because there’s nobody to care whether the machines keep going or stop.

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