Day 217: Who's Free Riding Who?

In economics you have the 'free-rider' phenomenon, a concept which if often brought forward in favour of capitalism.

The free rider concept refers to instances where someone enjoys the benefits of a product or service, without having paid for that particular good or service.

A classic example that is used in text books is where someone uses a form of public transportation such as a train, without having paid for a ticket, and is thus 'free riding'. The same goes when there is for example a project where there is collective action to reduce emissions as to increase air quality. Some may not want to participate/contribute and keep their emission levels the same while everyone else is lowering theirs, still resulting in better air quality for them, even though they did not contribute.

Now, within the context of economics, capitalism thinks to have the solution for the free rider problem, by trying to capitalize on as much as possible. If everything has a price, then everyone who uses whatever good or service, will pay.

Linked to this is also the whole 'but I worked so hard for this' and 'it's not fair that I have worked for this and that others besides me are benefiting from it, if they want it they should just work for it' mentality. This is the result from believing that our current society and economic system truly provide everyone with 'equal opportunity' -- while this is not the case.

When the Equal Money System is put forward, the 'free rider problem' gets hauled in to show how 'unfair' the system is, because everyone is provided for even though not everyone may be contributing (because they are unable to).

The problem with the free rider concept is that it is only ever brought up in the interest of holding on to one's money where "it's mine! And I worked for it!". Other forms of free riding are never brought up.

If everyone consumed as much as an average American, we would need 5 planet Earths. Put otherwise, it's a situation where 5% of the population consumes 20% of the Earth's resources. Isn't that free riding as well? You are then free riding because other people both now and in the future will bare the consequences of the unsustainable lifestyle someone else enjoys. Free riding doesn't only occur when someone is enjoying the benefits, but when someone is not taking part in resolving the consequences of the actions you are involved in.
People are being deprived of resources which are being directed towards unsustainable lifestyles – and so people are free riding on the lives of others and free riding on borrowed time from generations to come. Dumping waste into the ocean or poor countries with weak environmental regulations is free riding the Earth. The continuous postponement of coming to an actual agreement that is binding for everyone to reduce emissions and use of fossil fuels is free riding. Each time we wait with making crucial decisions which we KNOW will affect future generations is free riding. Just because ‘we won’t be here to face the music’, we don’t care = free riding.

We live in a polarized world of massive inequality – where some have more than they’ll ever need and other barely, and even don’t, get by on a day to day basis. Rich countries positions today are the result of free riding other countries in the past under forms such as colonisation and slavery. Without free riding, capitalism as it exists today would not have been possible.

Instead of moaning about people benefiting from your efforts, it would be better to spend one’s energy towards ensuring that we have a world that is Best for All to make sure that we can all live and live sustainably while ensuring the safety of life for future generations. This is the only form of free riding that is really a problem – as it has actual physical consequences on the life of others, while the free riding problems most people currently care about only hurts one’s self-interest and ego and does not really pose any real problems.

In an Equal Money System, we care about real free riding problems and will act according to the principle of Prevention is the Best Cure to minimize consequence as much as we are able to

Related articles

• Day 363: Basic Human Rights and Crime (Part One)
• 338. What is Equal Money Capitalism?
• Day 336: Democracy and Capitalism are the Redistribution of Wealth - (Part Two)
• 361. Food is a Human Right | Equal Money
• Day 359: Pricing and Labeling in Equal Money Capitalism Profit-Share (Part Two)
• 339. Value in Equal Money

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Day 172: Retirement and Holidays within Equal Money Capitalism

Also see the following blogs on more points within EMC:

Day 162: EQUAL MONEY CAPITALISM - The Way Forward
Day 163: Equal Money Capitalism - Redefining Profit
Day 164: Equal Money Capitalism - Preparing the Road for Change
Day 165: Equal Profit Share and Equal Money Capitalism
Day 166: Corporate Social Responsibility in Equal Money Capitalism
Day 167: Harmony and Equilibrium within Equal Money Capitalism
Day 168: The Future of Integrity with Equal Money Capitalism
Day 169: Equal Living within Equal Money Capitalism
Day 170: Companies and Industries in EMC
Day 171: LIfe-Force and Expression in Equal Money Capitalism

Retirement in EMC

Q: Will retirement be funded from taxes?

A: No - once one has contributed to a company's production process or service provision process, one continues to receive a profit share from the products sold or services provided after retirement - because one has played a part within the company - one has added value to the company - and this value will continue to be recognized, even after one is retired. Where pressure occurs due to, for instance, a reduced birth rate and a reduced death rate - which would create a smaller labor force and a larger population of retirees - government tax will provide an additional point of support to ensure each one continues to receive an income that ensures equal dignified living.

Q: Won't this system cause inflation, as the same products have to provide an income to more people. Because all those who used to be part of the company also require to be paid out a profit share - and so, the amount of people receiving a profit share of the products will increase as people retire.

A: No. Have a look - if the retired population is included within the price-calculation from the start, the point will remain relatively stable. Where fluctuations and pressures occur, government tax will assist to create an equilibrium.

Q: At what age will I be allowed to retire - will it be the same as today - at 60, 60+?
A: Age of retirement will be calculated in terms of the amount of labor that requires to be done. It is expected that once everyone is employed and meaningless or harmful jobs have been abolished, one will be able to retire at a much earlier age.

Holidays in EMC

Q: Will I receive paid holidays in EMC?

A: Yes - one continues to receive one's profit share of the products sold or services provided by the company when one is on holiday.

Q: Will I receive more holidays in an EMC?

A: Here we suggest each person receives two months of holidays per year. If one has children, one goes on holiday at the same time one's children go on school-break. If one doesn't have children, one's holidays will fall during the school year.

Related articles

• Day 171: Life-Force and Expression in Equal Money Capitalism
• Day 162: EQUAL MONEY CAPITALISM - The Way Forward
• Day 163: Equal Money Capitalism - Redefining Profit
• Day 166: Corporate Social Responsibility in Equal Money Capitalism
• Day 165: Equal Profit Share and Equal Money Capitalism
• Day 169: Equal Living within Equal Money Capitalism
• Day 170: Companies and Industries in EMC
• Day 167: Harmony and Equilibrium within Equal Money Capitalism
• The Future of Integrity with Equal Money Capitalism
• Day 259: Give Happiness, Get Happiness

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Day 167: Harmony and Equilibrium within Equal Money Capitalism

Note: The EMC is an entirely new project that was started a week ago. We’re at the moment in the phase where we are brainstorming by answering questions. It’s a messy process – but an effective one to get all the relevant points addressed. So – also note that points will evolve and change as we go as we are not setting things in stone, but on a journey towards designing the EMC. The principles upon which EMC is based are laid out in the previous blog-posts. From those principles, we work our way towards what life in EMC would practically be like and how the system will function from an economic perspective.

Income Gap?

Q: There is a gap in production before a product reaches sales, how is that gap covered, meaning before this whole system is in place who is going to pay the living wages to people?

Everyone from birth will have an income allocated through the parent - so until your income from profit share is equal to everyone else's income - this point will remain in place and one will still receive an income within such transition periods.

Company Oversight

Q: Will there be a large bureaucracy to ensure compliance with EMC principles?

A: Within EMC the principle will be that everything is to work in harmony with each other.

Therefore - dependent on at which level a point of disharmony occurs, it will be addressed accordingly.
If there is a worker within a company that is not acting in a way that is best for the company as a whole - this point will be addressed by a tribunal within the company.
If it is an entire company that is behaving in a disharmonious way - it will be addressed by government departments.

Taxation and Banks

Q: Will VAT as being the only tax generate enough income for government to pay for all the infrastructure, sanitation, basic human rights and so on?

A: VAT will be added to each product in a way to make sure there is enough within the common pool of money - which is the tax - to ensure all the basic rights can be provided. Also consider that with all military expenditure falling away - there will actually be quite a substantial amount of money available to governments with which to fund these projects.

Q: Will there be also company tax - where any profits higher than what is necessary to pay employees - go as tax to government?

A: No, surplus profit that successful companies make, will be transferred to a bank.

Banks in an EMC will exist as financial intermediaries, gathering surpluses to cover deficits in other places. So - the banks will be in charge of providing extra funds to companies who are running a deficit. This point will always be temporary and the required funding will lessen as there is an intervention that takes place and action is taken to make the company more effective and able to compete.

When companies with deficits are identified - someone will be sent to intervene, because it might indicate that the company is not effective. Then the problem must be identified and they have to learn from those companies that are successful - so that all may become equally successful and effective within managing resources and distributing goods and services.

Global School Curriculum

Q: Will we have a global school?

A: The principles of the educational curriculum will be the same on a global level, where the goal is to educate humans to become the most happy, the most effective and the most empowered individuals. How this is practically implemented and translated into a curriculum will be specific to each region.

Q: Why specific to each region?

A: Education doesn't require to be the same for every person all over the world - environments differ and so the curriculum must be tailored to ensure effective living within each one’s particular environment and culture

Related articles

• Day 166: Corporate Social Responsibility in Equal Money Capitalism
• Day 163: Equal Money Capitalism - Redefining Profit
• Day 165: Equal Profit Share and Equal Money Capitalism
• Day 259: Give Happiness, Get Happiness
• Day 158: Prevention is the Best Cure - Equal Money System

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Day 83: Nationalisation and Privatisation

Nationalisation

Nationalisation refers to the transfer of ownership of an industry/sector/company to the government. It then becomes publicly owned. Most 'conservative' economists have a consus that nationalisation most of the time works as a synonym for 'economic failure'. The reasons why will become clearer as we look at the point of Privatisation.

Privatisation

Privatisation refers to the opposite of nationalisation, where the transfer of ownership moves from the publict sector to the private sector.

There are several points economists usually refer to in support of privatisation:

1. Selling off public enterprises to the private sector will give the government an influx of money which they can use towards financing their expenditure or any debts/deficits they may have. This way for instance, instead of using tax money, they could use this 'new money' to finance their expenditure and lower tax rates.

2. The second point refers to the well known 'government is inefficient' opinion, whereby economists always see the private sector as more efficient than the government. Accordingly, it is thought that the government should only involve in those industries where there's little to no profit involved and let the private sector handle the rest.

3. The third point refers to the idea that since government owned enterprises are inefficient, that they run losses and that these losses are an important source of budget deficits and other fiscal related issues.

4. As part of 'government inefficiency' state-owned enterprises are seen as bureaucratic, ineffective, not meeting consumer wishes and a burden to the taxpayer. Due to lack of competition they are also seen as lacking creativity, bad investment decisions, poor financial management, low levels of productivity and a lack of accountability to the public.

5. Since private enterprises are more profit motivated, they will attract foreign direct investment and consequently increase the country's foreign exchange reserves. Additionally, due to increased investment, privately owned enterpises will be more easily able to adapt to the ever rapid changing economic/business environment.

6. Since public enterprises are state-owned, they do not pay any tax. So another reason which gets put forward is that the government can increase its income throught selling off its enterprises as they than become part of the tax base.

7. The money the government receives can be used towards increased spending on hoising, education, health, transport and so on.

There are also some cons which are considered:

1. Enterprises which have been privatised are not necessarily going to find themselves in a more 'competitive' environment, and thus not become more 'efficient'

2. Publicly owned firms usually have to take into account possible external costs or benefits (since they are working with a bigger sphere than just 'the one company' that they own). Privately owned firms won't do this since their 'sphere' is quite limited.

3. Publicly owned firms will usually be more 'public' driven than 'profit' driven -- so they will for instance make sure that there are particular infrastructures in place in poor areas, even though these areas aren't "productive" in the sense that the people who live there have little money to offer. Privately owned firms would not make such 'bad business decisions' and will go where the money is. Since they are 'profit' driven instead of 'people' driven, they will work within those areas where there is money and where people can pay for their services. So either privately owned companies will 'move away' from those areas or 'up the prices' -- both which will affect those with little money in a negative way.

4. Trade unionists are generally against privatization. This is because within the whole 'government is inefficient', how the government employs people is also seen as inefficient. Privately owned enterprises want to 'squeeze the most' out of everyting and so they will try to have the least amount of people employed to do the same amount of work (as this results in higher profits since less wages need to be paid out). As such, when enterprises get privatised, one of the first things that happens is massive job cuts.

Privatization often forms part of one of the basic components of Structural Adjustment Programs. This will be further expanded on in blogs to come.  

Related articles

• Day 82: Government Failure
• Day 52: Government Intervention
• Day 49: Resource Distribution: Supply & Demand
• Day 67: The Functions of Money
• Day 128: Economic Slavery and True Activism
• Day 75: The Demand for Money - Part 1

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Day 81: The Role of Government in the Economy

In one of the previous blogs, we explained how there's different degrees of government involvement in different economies.

The information within this blog will specifically relate to the role of government within the context of a free market system approach.

Supporters of the free market system see the private sector as way more efficient than the public sector/government because of its 'competitive nature'. So keep this in mind when reading the blog.

The role of the government within the economy is considered within four points:

1. The first point is that the government should not get involved in the production of good and services lol.
2. The market system / economy does however need the government in terms of providing a form of stability and certainty through laws, rules, regulation, monitoring and enforcement. These points need to be in place for firms and consumers to make contracts. Also think about for instance property and copyright laws.
3.  Markets do not always produce efficient outcomes, and sometimes the government requires to intervene to 'correct' the market failure (think Bailouts)

4.  It's generally acknowledged that markets produce relatively efficient outcomes but not equitable ones. So when society wants a higher level of equity as for instance in the form of a more equitable distribution of income -- then this requires government intervention. This is seen as a controversial topic within economics as our system is designed in a way where there is mostly always a trade-off between efficiency and equity

There are generally five ways in which the government can intervene within the economy:

1. A first way is through public provision of goods and services such as infrastructure and 'national defence'. This is done through either public ownership or by public financing within the production processes of the private sector (eg subsidies). In recent years it also has become more popular for the government to hire the private sector for the provision of public goods.

2. Another way in which the government can intervene is within its position as a market participant. The government is the largest employer of labour within the economy and as such it can through for instance its wage policies and other practices achieve certain objectives.

3. The government can also influence the economy through its expenditure/spending. Besides influencing the economy through its spending patterns of goods and services, it can also engage in something called 'transfer payments' -- these are basically payments where the government doesn't receive anything in return. Examples are subsidies, child support grants, disability grants

4. Another method is through taxation. Although taxations' primary purpose is that of government income, it can also be used to manipulate the economy (eg sin taxes on tobacco, alcohol or lower tax rates for smaller businesses). In those cases taxes function as incentives.

5. As mentioned before, the government is important to the economy for a rule of law point of view. Through laws and regulations the government can also impact the economy. Here consider minimum wages, anti-tobacco laws, minimum prices, etc.)

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Day 53: Government Intervention - Part 2

I forgive myself that I have accepted and allowed myself to believe that if we just edit or adjust a few things within our current economic system that things will get better

I forgive myself that I haven’t accepted and allowed myself to see and realise that we can try and change/manipulate whatever we want – but as long as we do not change the starting point of our current economic system as justified self-interest – we’ll simply play the same game under a different picture

I forgive myself that I have accepted and allowed myself to believe that there is a solution within the system – not seeing and realising that the system is the problem – and within that I forgive myself that I have accepted and allowed myself to fear losing / giving up the current economic system because I fear losing / giving up my self interest

I forgive myself that I have accepted and allowed myself to rather want and go change bits and pieces here and there to make things more ‘equitable’ for those less fortunate – but never take on the system as a whole because I secretly want to hold on to the problem as self-interest because I do not want to give up my hopes and dreams of wealth and living a care free life while others slave away their existence to make my care free life possible

I forgive myself that I have accepted and allowed myself advocate particular points such as for instance ‘minimum wage’ and ‘banning child labour’ – without taking into consideration what the consequences/effects/results would be of such actions as I have failed to investigate this reality for real

I forgive myself that I have accepted and allowed myself to have created a political system where leaders and decision makers are placed in positions of power based on a popularity contest which is based on money – as whoever gets the must funding for their campaign will win the contest – where we end up with leaders who were not trained to be leaders and which lack the skill and understanding of how the world actually operates – and then end up implementing policies to “do good” but end up doing “bad” within not having investigate the nature and dynamics of the current world system

I forgive myself that I haven’t accepted and allowed myself to see and realise that there is no solution possible within the system – as it will only create side-effects / consequences which result in a world worse off instead of better off – since we’ve accepted and allowed self-interest to be the guiding principle for all our actions and within that we’ve accepted and justified abuse – so as long as we safeguard and protect self-interest – it will always be the dominating variable in any equation which will overpower and determine the outcome

I forgive myself that I haven’t accepted and allowed myself to see and realise that no ‘altruism’, ‘goodness’ or ‘love’ can exist as long as we live in and accept the current world system, as it can only result in more evil, hate and self interest

I forgive myself that I haven’t accepted and allowed myself to admit that which I know needs to be done – which is the implementation of an Equal Money System so all may finally be equal in accessibility of life sustaining resources

I forgive myself that I haven’t accepted and allowed myself to see and realise that we cannot go on like this forever – so we might as well stop now, as it has to be done sooner or later – and the sooner the better

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Day 52: Government Intervention

In this section we will have a look at the outflows and consequences which manifest when the government intervenes in the economy. The economic model is designed to ‘stand on its own’, where the forces of supply and demand ought to rule and regulate the market without anyone exerting any form of control or manipulation. It is designed to balance itself out.

However, due to the free market principle – some people are excluded from being able to access (basic) resources because of insufficient financial means. The government might find it necessary to intervene in the economy to allow for more people to be able to access these goods and services.

Price Ceiling
A ‘price ceiling’ is a legal upper limit on the price of a good or service. Once this price ceiling is imposed by the government; it becomes illegal for suppliers to sell the particular good or service at a higher rate than the set ceiling price. This is done to protect consumers from conditions that could possibly make basic commodities inaccessible.

Let us now have a look at the ‘ripple effect’ that comes about when a price ceiling is imposed.
We know that consumers like low prices and that suppliers enjoy high prices. Within the free market an equilibrium price is reached [See Day 49: Resource Distribution: Supply & Demand for a refresher on 'equilibrium price] where both demand and supply meet each other. For a price ceiling to be effective [a maximum price], the government has to set the ceiling below the equilibrium price. If for instance, the equilibrium price of bread is set at $3 a loaf – the government would set a price ceiling at let’s say $1,50 a loaf – to make the bread accessible for a wider range of people. This will initially make the consumer temporarily pleased as he or she can now buy bread or buy more bread with his or her available funds. Though, as we have seen before, the interest of the supplier lies at the opposite side of the equation. The supplier is now not making as much money as he could have been making at the equilibrium price, and considers being at loss with the new price rate. Producing the same amount of bread loaves at the new price is not (as) profitable anymore and the supplier starts producing less. The bread will still be available at $1,50 a loaf – but less bread will be offered. In the end, we have the exact same problem as before the price ceiling was imposed: some will be able to buy bread, and others won’t. The price ceiling has as a side-effect created a shortage in supply and no actual solution has been put in place.


Price Floor
A ‘price floor’ on the other hand, is an imposed minimum price that may be charged for a particular good or service. It becomes illegal to sell the particular good or service at a lower rate than the set floor price. Price floors are imposed by the government to prevent prices from being too low. The most common known price floor is the minimum wage for labour. Price floors are also often used in the agricultural sector in an attempt to protect farmers.

As you can guess, a price floor is not without consequence.

What happens when the price of a product or service increases? Potential buyers are more likely to refrain from buying the product or service as it is considered to be less lucrative to buy the product or service at the floor price. The quantity demanded of the particular good or service decreases.

On the other hand, there will be in an increase of supply, as more people are willing to supply this particular good or service since they can get more money for than at the equilibrium price – for the exact same amount.

If we now have to translate this into a real life practical example such as the minimum-wage, we get the following scenario:

Because of the increased in price for labour, companies are less likely to hire as many people as they would have done at the equilibrium price – because it became more expensive to do so.
Thus some people will be able to get jobs and have a minimum wage that they can live off. But at the same time there will now be people who will not be able to get a job at all, due to the decrease in available job positions. There is a surplus in supply.  In the end the people who were supposed to benefit from the government intervention, are the ones who are worse off in the long run.


Another example of the inefficiency of price floors within our current economic system plays out within the agricultural sector. To provide farmers with a decent income (and thus to keep them motivated to produce food for consumption), the government can introduce a price floor on certain types of food. The farmer will start producing and supplying more of that particular food, as he or she knows that a greater profit is being made. At the same time, a lesser quantity is being demanded as the particular food just became more expensive in the eye of the consumer. A surplus of food is thus created. This can cause massive amount of food to go to waste or lead governments to dump the surplus of food in other countries, which disrupts the local market there – where the farmers there end up not being able to sell their produce as they have been bombarded with cheap surplus food / food-aid from overseas.


Often politicians themselves are not even aware of the side-effects / consequences of making such decisions -- as they are playing a popularity game and are only concerned with doing that which 'looks good' and have no background in economics, or where they will know what the actual effect of their decisions is, but still do it anyway, as the voters are fooled within believing that the politician is being 'altruistic', while nothing really changes.

This again highlights that there is no solution possible within the system – since self-interest is at the base point of everything – and so no matter how you try and ‘manipulate’ the game – self-interest will always bite you in the ass and get what it wants. If you try and change some of the rules, self-interest will simply adapt and do what self-interest does = only care about self, and others will still be hurt in the process. And so no matter what you do, you’ll still end up with a broken system, because the very foundation, the very starting point is unsound. Whatever move you make to “try and make things better” will simply be matched by a counter movement which keeps the entire game / construct in place. 

This dynamic is important to keep in mind, as some people will for instance advocate ‘minimum wage’ without seeing/realizing what the consequences/side-effects are. This doesn’t mean that people shouldn’t have a basic income – it just means that it won’t work in our current system.

That’s why we cannot just ‘edit’ or ‘adjust’ the system – we have to completely and irrevocably replace it with a whole new value system – a value system as the Equal Money System which values Life over all, and works for the whole of Earth and its inhabitants.

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