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I = S - M

The modern way of thinking about economics has been I = M - S Where I is the I as in me, M is what is 'mine' and S is what ...

4/20/15

What is the economy of use?

The economy of more more more survives only because we tend to think of economics in terms of twos. We assume that trade happens between two, a buyer and a seller, and that that is the end of the matter. In fact economics involves three parties. The buyer, the seller and the innocent affected by the actions of the buyer and seller. 

A buys an expensive and gaudy trinket from B. The novelty wears off in less than a week. The trinket lies in a dusty corner of A's house along with all the other useless things accumulated over a lifetime of participating in the economy of more more more. "But hold on, B got paid for it!" you exclaim. "Surely B benefitted from A's action. B uses the money earned from A to buy things. There is a net gain to society." This, my friend, is bad economics. This view misses the important point that there is a third party to the transaction between A and B. This third party is the innocent. 

The innocent is trying to use resources available to her locally to make a living. She works very hard simply to keep her family eating regular meals. There are billions of these innocents all over the world. When A buys the trinket from B, A effectively diverts resources aways from the innocent. Resources are, after all, scarce. When A buys the trinket and B sells it, all the resources used to conceive of, make, package, market and transport the trinket are no longer available to the innocent for use. Similar resources may be available but they will be more expensive. This is because the transaction between A and B competes resources away from alternate uses and raises the price of these and similar resources.

So the thoughtless action of buying and selling that which is not used steals resources away from the innocent. When we understand that economics always involves three parties not two we come to realize the folly of our ways, let go of the economy of more more more and adopt the economy of use. 

Keep what you use and give away, in a creative way, what you don't use. That is the first lesson in economics we need to learn. This is what I call the economy of use.

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