Economic Systems

What is a system in the natural world?

A system is an arrangement of populations and resources that

distributes resources across the populations within it keeping a
balance or eventually dying out due to disbalance

Systems come out of chaos through logic

 Logic is not something created by a conscious being

It is an emergent quality that can be interpreted by conscious

beings

Logic that is controlled can be called reason or reasonability

Logic that cannot be controlled can be called inevitability

 Take an eco-system of lions and deer

The lions hunt the sick, the weak and the old deer because
they’re the easiest to catch

This keeps the population healthy

 Decrease
in the
lion population Increase
in the
deer population

Decrease
in the
deer population
Increase
in the
lion population
 Humans have a conscious understanding of systems

So we ended up creating our own systems

The biggest and most overarching of which are societies or communities

 What is a society?

A collection of individuals who could be considered a

“Population”

The population in society is most often considered to be “Humans”

 What is the goal of a society?

“To ensure that the population has 3 things:

1. Access to resources
2. Ability to maximize their potential
3. Experience fulfilment, perceive beauty and feel happiness
What is an Economic system?
 “A system that oversees and regulates the logistics of resource
management

1. Creating resources
2. Sustaining resources
3. Distributing resources

Anything non-human is generally considered a resource in society

What is the goal of creating an Economic system?
 “Appropriate and fair allocation of resources across different
sections of the population to meet the other 2 goals of society

The fixed amount of most resources means that economics ends up being zero-sum in reality

In theory, however, it looks at things being less fixed

What do most economic systems end up creating?
 “An inefficient distribution of resources that results in
accumulation of large amounts by tiny sections of the
population, leading to unhappy, unhealthy populations that
experience significant anxiety, have an inability to maximise
their potential and that end up fighting for base survival which
results in high amounts of death”
Leave this going on long enough and it leads to eventual
economic collapse which leads to societal collapse

Why do economic systems end up malfunctioning?

“Due to incorrect definitions of “Population, resources, potential
maximization and happiness/fulfilment”

Definitions of these depend on context that is based on time

and place

Correct definitions for one culture in one era could be incorrect

definitions in another culture or another era
 How have we defined these parts of economic systems?

We’ve defined them materially

Current society needs to look at more than just the material

aspects of these parts
How should we attempt to understand Economic systems?

Materially
What kind of practical implications they pose

Psychologically
How they affect the psyches of their members

Externally
How they interact with other economic systems and societies

Philosophically
The implications they have on ethics, morality and metaphysical purpose
 The big issue in economics always seems to be
inequality

But inequality exists in all systems

In fact, it is a necessary component that

keeps systems energized and dynamic

Systems without inequality die out as there is no

necessity for populations to take part in them
Economics could then be considered to
be a study of the balancing act of
inequality
 Types of Economic Systems

There are quite a lot of different proposed economic

systems

There are three main ones that current society

knows of and talks about a lot
Capitalism

Socialism

Communism
 Capitalism

An economic system characterized by private or corporate ownership of

capital goods, by investments that are determined by private decision,
and by prices, production, and the distribution of goods that are
determined mainly by competition in a free market

The creation of a system in which individuals are

free to compete for the maximization of their
potentials
Accumulate resources ---- Maximize potential ----- Experience fulfilment and feel happy
 Capitalism owes its existence to money

A walk into the history of money will give us insight into why
capitalism is structured the way it is

How did we create money?

 Society was originally organized with group sharing

There was no private ownership of anything

As societies grew larger, they employed the barter system

The barter system worked well in small societies of 10-20 individuals but became
problematic as societies grew past 100 individuals and so on

So leaders tried to collect resources and distribute it themselves

That led to widespread corruption and cheating and failed

pretty fast
Another issue that cropped up was that resources that were large
could not be moved easily

So we needed a transactional element that could give fixed

values to different resources

Thus primitive money was born

Fast forward a few thousand years and the roots of capitalism took place
with the publishing of the first book on accounting

For most of our history, people lived in abject

poverty

Money was regulated by power and was only accessible

to the aristocrats and the churches
What values did monarchs aristocrats and religions
ask people to embody?
How did they restrict one from embodying
those values?
 Business slowly trounced nobility
and virtuosity

It appealed to our more primitive roots where

individuals survived only by how well they
performed
With the advent of capitalism and consumerism, a revolution
occurred

People got pulled out of poverty

But more importantly, moral and ethical dilemmas

were solved as well
 What is the goal of a society?

“To ensure that the population has 3 things:

1. Access to resources
2. Ability to maximize their potential
3. Experience fulfilment, perceive beauty and feel happiness
 Capitalism

An economic system characterized by private or corporate ownership of

capital goods, by investments that are determined by private decision,
and by prices, production, and the distribution of goods that are
determined mainly by competition in a free market

The creation of a system in which individuals are

free to compete for the maximization of their
potentials
Accumulate resources ---- Maximize potential ----- Experience fulfilment and feel happy

The Division of Labour Consumerism

 The Division of Labour

A breakdown of the production process into simpler parts

increasing production and decreasing costs

Consumerism

A social and economic order that encourages the acquisition of

goods and services in ever-increasing amounts
 Accumulating resources

Individuals cannot just go out and

accumulate resources

They must organize themselves into a group

with divisions of labour

We call these groupings “Private Companies”

 We can try to control all parts of the production process but that isn’t
feasible because an individually run company will always be outperformed
by a company with clear division of labour

A private company is very rarely democratic and while most

may have democratic elements to them, they are mostly
feudalistic in nature

They will usually have a CEO and a Board of

Directors who oversee the production
process
 There is an assumption that companies will be pushed
into becoming more democratic over time

To the contrary, the arrival of the internet has seen an even bigger
push towards feudalistic structures proliferating private enterprise
 With companies becoming tiny feudalistic
economies of their own, they all are focused on only
one goal…

Growth!
 There is then a need to strike a balance between giving freedom to
companies to grow the way they want to and preventing them from
taking away the freedoms of their constituents and the consumer

This is where anti-trust laws, anti-monopoly laws

and so on become useful

This is also where a majority of the discussion

around capitalism takes place
 The problem is that companies are big
enough to influence policy changes

So we’ve ended up with a situation where the lions are in charge of deciding
how much the lions sacrifice to keep the eco-system stable

And due to the establishment of feudalistic miniature economies, the

major goals of the lions in this situation is to be the biggest lion

This fundamental inconsistency is what causes

the economic inequality we see today
 Maximizing Potential

What are the needs of individuals?

There are basic survival needs and then there
are social needs
 Social needs

The Need for Power

The Need for Achievement

The Need for Affiliation

To be loved, appreciated, understood and believed in
Capitalism seeks to make people specialize to reach this goal
Why specialization?
 • Greater expertise that improves and quickens the work done

• Greater expertise gives one a feeling of control and improves self esteem

• Greater expertise allows one to climb up the dominant social hierarchy

What are the dangers of specialization?
 • Specialization is only accessible to those with capital

• Specialization reduces the understanding an individual can have of the

functioning of a system

• Specialization reduces the individuals ability to act in any other sphere

• It alienates individuals from the rest of their social class

• It reduces the control an individual can have in other facets of their life,

thereby increasing anxiety

 This results in a situation where true maximization
of potential is impossible

Individuals are far too specialized to be able to fulfil

their needs

And since there is no specific ceiling for maximization, we

end up with billionaires who can’t stop amassing money
 Experiencing beauty and fulfilment

This is the end goal of a capitalist society

The structures of the other two goals, however, result in the permeation
of competition as a fundamental aspect of any capitalist endeavour

So let’s discuss competition

What are the benefits of competition?
 • It Pushes progress and creates new things

• It gives individuals a sense of achievement and value through their behaviour

• It promotes the best and most efficient utilization of resources

• It gives individuals goals without which they would be lost and without purpose

• It creates a fair system to distribute resources which are limited in nature

What are the problems with competition?
Intrinsic Rewards Extrinsic Rewards
 • Only the victors get to reap the reward for their efforts

• Parties tend to use underhanded tactics to get ahead

• The original goal gets changed to the attainment of a reward over time

• It devalues individuals who cannot succeed within its limited boundaries

• It isolates individuals from their peers

 The effects of competition on art and entertainment

The most obvious effect is the replacement of

intrinsic rewards with money

Competition, like natural selection, breaks down complex

structures to their simplistic foundations

This causes art to undergo a simplification over time

resulting in a sedimentation of banal replications
This results in a situation where specialization as well as
competition prevent individuals from satisfying their
fundamental needs

This is where consumerism’s most insidious role comes in

 It seeks to satisfy an individual’s need

“To be loved, appreciated, understood and believed in”

with products and commodities that emulate that warmth

 Product  Money  Product

Money  Product  More Money

 • Rampant consumerism and uncontrolled production

• Specialization leading to an impotent populace

• Damage to the environment and workers rights

• The shrinkage of the middle class and a subsequent increase in inequality across
the board

• Commodification of every object and relationship

• Alienation from one’s work

• Commodification of experiences

• Reduction of individual ownership through subscription models