Can You Solve This Riddle?

I recently wrote a piece about Bill Gross’s May Investment Letter.  In the letter Bill predicts a jobless society in the not too distant future suggesting technology will replace human labour at a lower cost.  Now to solve this problem Bill proposes the government implement a program of Universal Basic Income (UBI – an allowance for the citizenry to enable them to consume which will be paid for by government).  The point of my article was that capitalism (i.e. free markets) would never seek a jobless society.  It is only through socialism that investors can generate profits in a jobless society.  Without government subsidies investors are incentivized to optimize not minimize labour costs.  And that if Bill was proposing what he was proposing he doesn’t understand or believe in free market capitalism.

In short, the problem of a jobless society is not a problem unless we implement Bill’s solution to the problem.  Meaning it is only by way of the very solution proposed (UBI) that investors would seek a jobless society.  A truly government concept.

While most understood my point it seems the syllogism, to many, was lost in translation.  I’ve had an abundance of comments by Bill’s likewise faux ‘free market supporters’ explaining that preventing profit maximization by not allowing investors to replace humans with robots is akin to socialism and that we must allow the free markets to be efficient.  But I wasn’t suggesting preventing anything, only that a jobless society is an impossibility in a free market.  And so it was obvious to me I had done a poor job of clarifying my point sufficiently so that even the low hanging fruit could eat.   Therefore, given the immense significance of this subject currently, I’d like to take another stab at it by getting rid of the literary clutter from my article and really simplify the point.  It is an extremely important matter as it transcends into the concept of ‘free’ trade agreements (think NAFTA, GATT, TTIP &TPP) for obvious reasons.

Here is the same point from my earlier piece but without the clutter.

Solve this riddle.

A true free market exists with no government intervention.  So let’s assume no government exists and thus no government income subsidies of any form can exist.  The following then is a representation of a free market at work:

Investment requires profit, profit requires consumption, consumption requires income, income requires investment, investment requires profit….

Now explain, in a free market i.e. in a world with no government, how do investors profit if income (i.e. labour cost) is taken to zero?  (And remember with no government no additional public debt i.e. money stock or welfare can be created.)

Send a note to the Nobel committee if you come up with a viable answer.  You are a sure bet to win.

A second riddle…

If we are going to simply print money and hand it out with no expectation or means to pay it back, why would we not print enough to make everyone wealthy?

Socialism is not about equality, quite the opposite.  If it were Bill (and the ECB) would be discussing limitless debit cards paid for by the Central Banks.  Socialism is a mechanism to subsidize profits and cement control of the masses.

So to those that couldn’t get it on the first pass…. how do you like them apples?  Great.

6 thoughts on “Can You Solve This Riddle?

  1. Two possibilities:
    1. Every human and natural transaction has a cost, but not all the costs are recognized in our legal and market system. Enhancing property rights to every micro-transaction may change panorama. The technology is there, but needs to point to all directions.
    2. Entities (people, corporations, governments) do peering when they consider are in power equality, or are new in the environment. Any rivalrous action is a snowball, untying reciprocity, rising opportunity. How to mitigate that action? With forewarned and conditioned participants…. genetically? Maybe technology is there too.

  2. Hi, I like the post. It’s thought-provoking. Just some ideas to offer:

    Lower costs lead to lower prices, lower prices lead to more consumption, more consumption leads to more profit, more profit leads to more investment, and more investment leads to lower costs…

    Applying that to the first riddle: Lower income (human labor) requires lower investment, lower investment requires lower profit, lower profit requires lower consumption, and lower consumption requires lower income… Basically, costs go down as technology advances.

    It seems that your model assumes a perpetual and ever increasing need for human labor. I would argue that the most pure and ideal system would be the opposite, reducing the need for human labor by replacing it with lower cost alternatives until eventually there is no cost and thus no scarcity.

    Further thoughts: All costs are derived from human needs, and technology reduces both the need for humans and the cost of their needs. After technology has advanced far enough, when needs costs near-nothing, then the system can afford to take care of a multitude that cannot take care of itself. Until those costs are reduced, in the meantime, what solution is there for those who will need to be subsidized if they are to stay alive? I don’t see how quintessential capitalism and free market economics can do it through employment.

    In a technologically advanced economy, the employment of a massive force of unskilled workers would itself be a subsidy. They can be subsidized with false employment or with a check from the government. In fact, the check may be less costly because it wouldn’t require maintaining an apparatus to facilitate the illusion of working. As technology advances, more investment must go into people for them to stay relevant in the fight to add value, and it will only become more difficult as machines progress. Ultimately, superintelligence will be the last invention humans need ever make, the last being they need ever employ.

    People are becoming increasingly less needed, much like the history of the horse, and there is little these days that a capitalist can do with horses to earn a profit. It is not bad policy or economic impurities that outdated our earlier tools.


  3. Because black people and poor white trash don’t deserve a free ride?

  4. The better question is how one enforces the notion of property without a government.

    Capitalism can only function within a system that respects and enforces property rights. To be honest, I cannot think of a system that would achieve this that wouldn’t automatically be analogous to a government, so I consider the validity of the first riddle to be somewhat dubious.

    As soon as one accepts the paradigm of property and ownership, then one can create mechanised labour that interacts with that property (farming, industrial production, etc.) in a way beneficial to the owner, which the owner then “profits” from in the form of fruits derived from the mechanised labour.

    Under this paradigm, if you don’t have property, you have no means of generating wealth. If your services cannot compete with mechanised labour, your services will not be used and you die; the “jobs” will always go to the machines as they can do the same job at a lower cost.

    If you want a stable civilisation which doesn’t tear itself apart as the propertyless masses starve, you either need to forbid mechanised labour, allocate a portion land to each individual as a natural right that is large enough for them to sustain their own existence, or provide some kind of subsidy so that those who do not have the luxury of owning wealth-generating property can also share in the abundance of a finite planet.

Comments are closed.