Saturday, September 13, 2014

Years of Living Cheaply

Here is some out loud wondering

After six plus years of digging around econ blogs, posting comments and reading everyones pet theory on what is wrong with the world today its clear that everyone with an income (or without one especially) really thinks life is just too damn expensive, in monetary terms.  Taxes are too high, health care is too expensive, education is too expensive and wages are too low.  If life were cheaper we would save more of our income and could feel more secure as we had more to deal with the future uncertainties.  Make life cheaper today so I can put more aside when it gets more expensive later. We want to have more of life today..... but also have enough next year and well beyond.

We all know that as we age things will get more expensive in real terms, meaning it will be harder to do many things, we will require more help or we will just have to give up some things. So in real terms life will get more and more expensive but we want it to get cheaper and cheaper in monetary terms.  Hows that gonna work out?  We've just completely disconnected the real and the financial.

In real terms, at some point the most expensive thing of all, death, will take each of us (I know its the most expensive of all because we try so hard to avoid it). Modern econ views the world of transactions as all having two sides; every cost to someone is an income to someone else, every borrower has a lender, credits and debts, a low rate of interest helps borrower put punishes savers etc etc.  The sheets must balance!  So death being the most expensive thing of all, makes its opposite, life, relatively cheap.  Right?! Life may cost a lot but death costs us everything.

 Now, you might say that the last sentence has it backwards;  "Life isn't cheap, life is the most valued thing we have, we are spending money to preserve life not avoid death!" Okay, obviously seeing life and death as the two sides of the "existence coin" and evaluating our decisions during the life part of existence can lead to some non intuitive conclusions. Obviously everything we do during life isn't strictly a hedge against death (much is an invitation to death and the thrill of avoiding it.... and we pay handsomely for that and to watch someone else do that as well) but I think if we are to believe what economics/finance/accounting teaches us then we really do have to wonder what it means when we want our life to be less expensive to live.  The heart of economics, Ive concluded, is finding a way to properly represent the real with monetary. To find a way where when talking about money, it really does reflect the non monetary part as fully and as honestly as it can. I think my second paragraph above demonstrates how far modern econ thinking is from accurately being able to reflect the real within the monetary. I think its an unbreachable chasm.

We deal with real life.  Life, death, births, weddings, sickness, hunger, accidents...... and we all know that none of these things are free.  Everyone knows that nothing is free.  EVERYONE!  Everyone also knows that the real costs of life are almost never accurately reflected in the monetary side. In fact
Ill bet everyone has said out loud more than once that the real important things in life are priceless. Meaning that no matter how much money they made they could never buy enough of them. Our accounting system woefully misrepresents real costs.  It botches, simply because it has to be as simple as possible, the true nature of many relationships.  Putting things on opposite sides of a coin that put our world in needless tension.  One huge shortcoming of economic thinking is that it can't, and honestly doesn't even try, to properly value work or effort.  So much of the work we do, which ends up being the costs we have to pay to deal with real life, doesn't count in todays accounting methods.  This is how we can have people claim, with a straight face no less, that poor people have no skin on the game and are just moochers.  Poor people have more than their skin in the game, their life is in the game. The consequences of a bad break mean destitution for them and often their family as well. The rich politicians or talking heads making these absurd claims are the ones with no real skin in the game. They are so protected from the real consequences of life, that short a WWIII they never fear of missed meals or forgone medical care.  Maybe this is why it appears that all great periods of accumulation of extreme inequalities end with war.  Its the only thing that gets the attention of the elites because it destroys their real wealth, equalizing them somewhat more with the common man.

How can we even try to make the most valuable thing we have cheaper and cheaper?  And what is the end result of cheaper and cheaper living? According to microeconomics when something is cheaper you get more demand for it.  Its like we are in this bizarro world where we can't get our real world to align with our financial world.  It looks like finance pushes us to oppo- worlds where we have to try and devalue the real things that matter in order for our monetary world to afford them.  We cant let the things we really care about  reflect their cost or we would be broke before age 40, almost all of us.  

The price we seem to be paying for finance is not just monetary, it leads to devaluing everything else.
The costs of finance are the most crippling costs in our society because the lens finance sees things through leads to a necessary cheapening of our real world.  When the goal is to make everything cheap we lose perspective of what matters.