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What are Boom and Bust? Alternative Economics 101 - Chapter 5: Tax Your Imagination!

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The beginning of the game is the boom cycle. Everyone appears to be getting richer together. This is the Keynesian approach, with the bank pumping more money into the game. Pent up demand is released, and buyers start buying. At this point, nobody owns any much property, so the players are equal. Slowly advantages form, as a result of luck with the dice roll. Eventually a tipping point is reached and the bust cycle begins. The bust cycle is not universal. There is the one person who is gaining from everyone else's losses, which serves as "proof' that the boom cycle is not dead. The data is being misread. The bust cycle is when the rich get richer, and the poor get poorer. It sets the stage for civil war and revolution, not just the end of a game.

The rags to riches phenomenon is considered to be a strength of democratic-capitalism. It is actually a symptom of dysfunctionalism. Rising to the top is not freedom; it is the process of desperation. Volatility causes the rich to fall and the poor to rise. Neither extreme would exist in a properly managed commonwealth.

Probably unwittingly, Monopoly is a model of two allegedly different economic systems: capitalism and socialism. It is capitalistic because everyone is free to buy and sell in an entrepreneurial way. It is socialist because everyone is paid the same amount: $200 for passing GO

Monopoly is also a perfect democratic model. People start as equals, and the laws apply to everyone equally. There is no graft, vice or corruption, or advantages for wealth, power, tradition or age. There is no emotional manipulation or advertising. People do not age or die, or increase or decrease their buying habits. It is a stable and predictable economic environment. Fellow players are honest. There is no government or overhead of checks and balances. It is a free population with one simple need, randomly chosen by the roll of dice. Despite this simplicity and utopian beginning, it is not long before the wealth divides and the economy collapses. 

The compounding of profit for one player is the compounding of loss for other players. It is the buy-low sell-high cycle that is being compounded. The conclusion is inevitable: inflation and debt. We are following a path of mutually assured destruction through competition, rather than mutually assured production and consumption through cooperation. Monopoly demonstrates a mathematical phenomenon that we ignore at our peril.

Capitalism & Socialism

Historically, we have seen capitalist systems move towards socialism, and, socialist systems move towards capitalism. This is not a coincidence, both systems are more similar than different. They start at opposite extremes in terms of private ownership of property. Capitalists want to liberate greed, wheres the socialists seek to restrain greed. In capitalism there is limited planning; under socialism there is an abundance of planning. Planning and budgeting is akin to controlling what numbers can be thrown on the dice. It does not change the mathematical formula of the game. It only impacts the arrival date of the inevitable outcome. The capitalists move toward more planning and more regulations, the communists move toward less planning and less regulations. Both are copying failure. Neither regulations, nor the lack of them, can work. The math is incorrect. 

Regulated Economies

Monopoly splits the difference between a regulated and unregulated economy. There is a diversity of rents from inexpensive to expensive. It uses a fixed price model so inflation is limited. Once the properties are developed to include hotels, all inflation stops. The steps to arrive at that point, however, are more than enough to determine the final outcome. The players would need a lot more than $200 for passing GO to survive, especially if they lack ownership of a property group. That is the situation for every new generation. 

In a game without property groups, it is important to recognize the condition of the bank. If the property is equally distributed and undeveloped, no players will go bankrupt, but the bank will eventually collapse.  Agrarian societies represent a slower model with fewer land transactions and smaller populations, but old monarchs failed financially the same way as modern governments and large societies. 

Once money is considered to be more than a chit, and has its own value, collapse is inevitable. The three sectors of the economy, government, businesses and private individuals, are each powerful enough on their own to destroy the economy. Everyone is connected to whatever debt exists, the struggle against inflation, and the looming bust cycle. Freedom can only work if everybody follows the same Golden Rule.

Our society, like Monopoly, guarantees few winners and many losers. This is not a logical way for any nation to be organized. The ideal of commonwealth is peace and prosperity for all members of society. To give the next generation a better world than the one we were given, then we must change the rules of the game. We need to teach something better than what we were taught, and change our accounting habits.

Revolutions

Revolutions are successful civil wars. Unsuccessful civil wars are regarded as uprisings. Both sides feel strongly that their way is the best way.

Civil wars are generally an attack by the middle-class against the upper class. An up-and-coming leader seeks recruits who aspire to have more. The young get involved because they have the most energy, nothing to lose, and the most to gain. They are also the easiest to sway with a lie, the cheapest to bribe, and, being young, lack self-awareness. The poor seldom get involved. They do not have the luxury of time, wealth or education to organize.

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Steve grew up in a family business, was a history major in college, and has owned a small business for 25 years. Practical experience (mistakes) have led him to recognize that political rhetoric and educated analysis often falls short of reality. (more...)
 

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