Work less, Live more – A hybrid model of economy

In his essay ‘In Praise of Idleness‘, written in 1932, Bertrand Russell writes:

« Modern technique has made it possible to diminish enormously the amount of labor required to secure the necessaries of life for everyone. This was made obvious during the war. At that time all the men in the armed forces, and all the men and women engaged in the production of munitions, all the men and women engaged in spying, war propaganda, or Government offices connected with the war, were withdrawn from productive occupations. In spite of this, the general level of well-being among unskilled wage-earners on the side of the Allies was higher than before or since. The significance of this fact was concealed by finance: borrowing made it appear as if the future was nourishing the present. But that, of course, would have been impossible; a man cannot eat a loaf of bread that does not yet exist. The war showed conclusively that, by the scientific organization of production, it is possible to keep modern populations in fair comfort on a small part of the working capacity of the modern world. If, at the end of the war, the scientific organization, which had been created in order to liberate men for fighting and munition work, had been preserved, and the hours of the week had been cut down to four, all would have been well. Instead of that the old chaos was restored, those whose work was demanded were made to work long hours, and the rest were left to starve as unemployed. Why? Because work is a duty, and a man should not receive wages in proportion to what he has produced, but in proportion to his virtue as exemplified by his industry. »

We have come a long way since. What Bertrand Russell considered ‘essential’ then can now probably be produced by everyone doing only 30 minutes of work. On the other hand, what is now considered ‘essential’, has changed. Smartphones, Internet, Cars are some examples of the newest additions to the ‘essential’ list. However, the argument put forth by Russell remains valid. Basically, if one reduces the wastefulness induced by competition and consumerism, one can better optimize the distribution of leisure which should by itself be seen as an important goal of individuals. Moreover, one can reduce the unemployment in one stroke and use the extra man-power to compensate for the eventual reduction in efficiency induced by the new system. And come-on, who hasn’t dreamt of working fewer hours everyday, officially! Keynes in his essay ‘Economic possibilities for our Grand children’, predicted that the income would increase 4-8 times in the next hundred years and our grandchildren will have to essentially not do any work. The income has increased 6 times already (with 15 years to go for the prediction), but we are still working like bitches dogs! Why? Essentially because of wealth disparity and hunger for ever faster growth. [Raghuram Rajan speech]

Meanwhile, the ever-increasing consumerism fanned by hypercompetition in the innovation age is making us deplete resources and destroy the planet at a rapid rate [Insert COP21 reference]. Essentially, all this mass-scale destruction is to fill the pockets of the richest as evidenced by increasingly lopsided wealth distribution. [Insert some report reference]. Everything till now is reminiscent of the old Capitalism vs Communism debate. However, to strike a balance between the two, socialism was invented. Socialism is a way of imposing communist structures as add-ons on free-market economies, as is the case of France. However Socialism is willingly too restricted in its scope due to justified apprehension about communism and efficiency of state-run companies. Indeed, one sees in a country like India that state is highly inefficient in providing services. Yet, the services it provides are accessible to all. Since state-run companies usually survive through monopoly, people do not have alternatives for free-market solutions.

My claim is, if we provide people with two parallel systems; one with a commonly decided social goal, and another a highly capitalistic version of free market economy, we can dilute many problems currently inflicting us like unemployment, wealth disparity*, unsustainable development, immigration etc., if not solve them. We know that the extreme communist or capitalist systems fail, throught experience, and now even in theory. The solution to that is different ways of combining the two extremes. This has given rise to various degrees of socialism. However, the main problem of socialism is that it mixes two contrasting objectives into one optimization problem. Thus, the solutions found are average with respect to each general objective. I argue that instead we should create 2 parallel systems, each with a single objective, and let people individually choose the combination they want.

Noam Chomsky (Modern Bertrand Russell) in a recent interview claimed that increasing anger over the current dysfunctional systems is manifesting itself in increasing support for the extremes. Rise of Donald Trump, Marine Le Pen, UKip and other such extreme right-wingers, as well as left wingers like Bernie Sanders, Justin Trudeau are some recent examples that can be cited. I believe this is the right environment to propose parallel systems as it helps people choose their kind of economy and not be forced to follow the majority. This is to mitigate the negative side-effects of democracy. This is simply because in a democracy, one has to accept and abide by the majority. Parallel systems give a real choice to the people with everyone being able to choose and follow their system. We can even go a step further and let people choose a certain combination of the two parallel systems depending on their needs and wishes. If I am satisfied with a basic smartphone, I should have the choice to not be contributing towards the resources wasted for making even better smartphones.

Of course, the question is, ‘why would anyone not want a better smartphone?’ My claim is that if people realise the real price associated with the negative effects of competition, some might choose to not participate in the wastage induced by unregulated capitalism. The price of competition (or Price of Anarchy as it is known in Game Theory) is an important parameter which measures, in essence, the price related to the selfish behaviour of all the agents. The agents here could be considered as companies and financial systems. Clearly, the motives of each company is not completely aligned with what would be optimal for society (Assuming we manage to all sit down and agree on the goals as a society).

If one manages to quantify this price of anarchy, for example by creating indices for similar products produced by the two parallel economies, one could even tax the people opting out of the co-operative system proportionally. A sort of ‘competition tax’, or if you want to hit the message harder, a ‘destroying the planet tax’. This will help sustain interest of people to opt, atleast partially, to the co-operative system. It also leaves the choice for someone to opt out in case they think they have a much higher value in the competitive economy, enough to compensate for the damage it does to the society as a whole.

Yes, all this is very vague. The mechanisms for it to work are not clear immediately. Predicting the impact of the global economy on the sustainability of such a system in a local region is non trivial. The two biggest challlenges for co-operative economies would be; maintaining the incentives, which is always considered as the raison d’etre of capitalism, and avoiding concentration of decision making power, which numerous examples have shown to not work. The latter is a difficult problem as it implies that a robust and adaptable set of rules have to be established beforehand, with emphasis on decentralized decision making. A mechanism for incentivizing could be reduction of work hours in cases of greater efficiency, for the same minimum ‘pay’ guranteed. The objective for the co-operative economy is the utopia of all work being done by robots, with everyones’ basic need fulfilled . The mechanisms and policies could be shaped with this single objective, so as to have a clear direction which would also incentivize people. It helps reduce the otherwise very complex problem of optimal policy making.

Its clear how unemployment, and excessive consumerism would be tackled if one manages to implement such a system. I think the time is right for debating dramatic changes in how economies and politics are structures. Many mechanisms need to be tested as its always difficult to predict side effects of economic changes. Otherwise the increased anger of people might push the world to an unsustainable brink, where countries would have to wage wars to continue on path of development. We all know where that ends this time.

* Interesting thing to note is that wealth disparity is a good indicator of world events. Every increase in disparity is followed by wars (1915 and 1938), or economic crisis (1930 and 2008), and yet we are at dangerously high and increasing level. Doomsyear prediction : 2030. We have 15 years to get our shit together. Co-incidentally its the case with climate change too!