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Tulips, and so on

Lately, Your Humble Blogger has been reading a few columns about the economy; here's one from the Boston Globe, and Safire from this morning's Times. They are pretty typical of the stuff I've been reading on either side, in that they focus on the numbers, specifically the deficit and the inflation/deflation rate. This recession is defying predictions, just as the boom that proceeded it did, and because the same level of uncertainty is much less pleasant when applied to recession as prosperity, it's really getting up the economists' noses.

Which is a good time to think about the lilies of the field, or rather the tulips. Money, in my opinion, is a species of mass delusion. If I lend you $50, once it's out of your pocket, how does that now-phantom fifty affect your life and mine? Only because we have agreed that you will pay it back at some point: you treat your money as if I "own" $50 of it, and I treat it the same. If we both forgot about that phantom fifty, it wouldn't exist. It's a piece of the universe that we create by perceiving it. Money is like that.

Why is a movie ticket nine bucks? Because millions of people think that it's worth nine bucks to see a movie. If suddenly everybody changed their minds and said that no movie was worth more than two bucks, movie tickets would drop drastically and the industry would be destroyed. The only thing keeping that from happening is a popular idea about money, entertainment, and time. The movie industry is a piece of the universe that a few million people created by agreeing to it. Money is like that.

Economics, properly viewed, is as much a matter of psychology (or, if you prefer, anthropology) as mathematics. A lot of economists appear to deny this, which is why I tend to dismiss the whole pack of 'em as frauds. Which isn't fair. Still, particularly in regards to money, if enough people perceive a thing, it exists; if no-one does, it may not. Why do many people fear debt? Because of what happens when the debt gets called in. If creditors feel that they ultimately won't get paid, they can whistle for their money, of course, but when the debtor needs more money, you want new creditors who believe they will ultimately get paid. On the other hand, the creditors, most of 'em, are also investors (or "citizens" as I like to call 'em) with an interest in keeping the nation afloat; a clear conflict of interest, but there it is. They want their money, but they don't want inflation, or civil unrest, or whatnot.

The fact that money is an illusion, a construct of the national mind, makes it a tricky subject for policy. The fact that it's an illusion does not mean it doesn't exist, or that it isn't a powerful motivator, or that it can't harm us. If, as FDR said, the only thing we have to fear is fear itself, then we should fear that fear—fear of inflation caused years of needless unemployment for millions, fear of debt causes investments in research, development, and innovation to be delayed, fear of bankruptcy causes creditors to call in debts and repossess houses, fear of other people's fear causes millions of good decisions to be avoided every day.

Predicting which fears (and which hopes) will make people act in which ways is tricky business, though. And it's worse if you forget that the money doesn't actually exist. Like the tulips in 1636, the whole business could disappear in a moment. The government (or anyone dealing with the economy) has to be nimble enough to react, strong enough to influence, and humble enough to remember that the universe is created every moment by what we perceive it to be.

Thank you,


For some fascinating thoughts on this stuff, see Lawrence Weschler's Boggs: A Comedy of Values, a nonfiction book about JSG Boggs, a "money artist" who draws incredibly precise copies of paper money from various countries, as art. I haven't read the book, but I read the long article (in the New Yorker, I think) that I think it was based on.

For a much more concise look at Boggs and the significance of his work, see the Brendan Bernhard LA Weekly article "Making Money: The Conceptual Art of J.S.G. Boggs."

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