Pavlos (pavlos) wrote,
Pavlos
pavlos

Five flavours of good

There are just five kinds of assets that our economy is based on:


1. Material resources are things like oil, wood, fruit, energy, fresh water, or (with negative value) waste. These is the class of things that at are consumed in order to achieve their use, and are also ownable and transferable in arbitrary quantities. Some of these resources are limited while others can be regenerated, but at any time they exist in a finite amount. The ability to generate such resources, for example generating food by farming, is best thought of as a separate kind of asset.

Although material resources can be intenesely the subject of capital (by virtue of being arbitrarily ownable), they make a very mediocre investment because of the fact that they are consumed. An oil company may appear extremely keen to invest in oil, but in reality is doing one of two somewhat subtler things: Block-buying a huge quantity of a finite resource, hence using its capital to profit from futures and retailing, which are trading activities; Or investing in land, energy extraction, and distribution rights, which are more valueble "space" type assets (see below).

2. Egalitarian resources are things like labour, time, the capacity to think and act independently, the capacity to acquire knowledge and skills, the ability to have children, and the moral and compassionate status of being a human being with whatever "rights" that enjoys. These are things distributed more or less equally by nature among all human beings. Although variations exist between individuals, they cannot be amplified by investment, accumulated, or traded, and so these resources remain, substantially, egalitarian. Egalitarian resources are generally consumed to meet needs or achieve production, but this happens at a relatively standard rate and they are also replenished naturally at a simiral rate for everyone.

Egalitarian resources have long been regarded the best hope society has. They are no more, and perhaps less. Labour has long been afforded special status, for example by Marxists, as something defining of all production, but in reality it is just a consumable resource - a cheap and commoditized one at that. The only special feature is that everyone is endowed with a roughly similar labour-generating capacity that cannot be traded away (except through slavery). Most ideologies of the left have sought social justice by artificially elevating the value of egalitarian resources, from labour to human compassion. This has not been a great success. A better outcome may be possible by admitting hat they have only moderate value, and fighting over certain other assets.

3. Productive capital is the class of things traditionally understood as "capital" or "investment": Factories, machinery, resource extraction equipment, computers, but also mathematics, scientific progress, personal education, skills, and everything else that is both the product of our culture and can be used to amplify production. Capital is not significantly consumed in order to achieve production. It multiplies the value of material resources and labour passing through it with little wear to itself, and that is the cause of its explosive success.

However, although capital is not consumed, it depreciates, either by changing circumstances (shifting supply of resources, volatile market demands) or by becoming technically obsolete. And that depreciation is a very powerful brake on productive capital. Every given embodiment of productive capital has a finite, often unpredictable productive life, so monetary capital has to flow from one productive embodiment to another in order to survive change (or it can invest in resisting change). The amount of value actually embodied in production each time is lost, so the profit must be sufficient to pay for the next productive embodiment.

4. Space share is ownership of a portion of some space, material or intangible. Some obvious examples are land, rights of way, radio frequency spectrum, brand awareness, Google rank, or advertising time. Intellectual property is also a form of space asset. Works of music or literature expand the space of everything that has been written or composed, and also lay claim to the new patch for a number of years. Patents publish a chart of paths through the space of technical possibility, and demand tolls for others following these paths. The unifying characteristic of space resources is that, although the available space can be expand, contract, or change in value, it is at any time substantially finite and not consumed by it use.

These last characteristics make space share an extremely attractive form of long-term investment, and indeed there's fierce competition to both expand and claim such assets. This may seem somewhat surprising, since these assets are unproductive, compared with labour or capital. The key is that their finite extent allows them to parasitise on the unrestricted value generated by other assets: As capital and labour generate more and more value, this production has to rest on some space (be stored, be seen, operate in, etc) and it also seeks to convert its value into something permanent to avoid the limits of scalability and the depreciation risks of capital. Thus, value production creates an inflationary premium for the inert but finite space assets.

5. Loyalty and trust is knowledge that some agent is going to behave in a particular, usually desirable, way in the relevant future. This applies to intent, for example trust that a certain manager or trading partner will behave reliably, as well as factual concerns such as ability of a person or company to deliver, quality of certain goods, confidence that your communication is reaching only the intended party, or knowing that a certain small island is a beautiful beaches. An example of an unsavoury but sometimes effective version of trust is prejudice. Ebay sells trust, a few dollars per auction. Trust provides information efficiency from the point of view of the person having the beliefs.

Manipulating the value of trust is, largely, the way that people change their status in society. People become executives or heads of state not primarily on the basis of ability but on trust that they are are going do whatever is in the interests of those who put them there. Some really nice people stay poor for the converse reasons. Businesses get customers partly through brand awareness (a space asset) and partly through trust that their products and services will be at least adequate. Trust manipulation is a big business. Trust has the merciful and also ruinous property that it is multi-rooted, with a certain subject having different trust values in different eyes. This provides refuge, and also a niche where gangsters and dictators can grow. States and other organisations compete to increase their trust assets over individuals or each other by deploying tools such as spying or databases.
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