DDI: An Institutional Construct, Not a Theory

changing the existing economy from relativistic to mechanistic

Photo by Aaron Barnaby on Unsplash

In economics as in the physical sciences, theories involve predictions: if this occurs, then that will occur. In science, theorizing has sought to explain how that which is observed in this world came to be. In economics, theory seeks to predict what will result, given some change to what is. Economists’ attempts at accurate predictions are as infamous as they are unceasing.

Once exception to that general rule in the physical sciences is meteorology. More similar to economics, it seeks to predict what will be in the future as a result of what is going on in the present. In meteorology, though, human beings have no immediate control over any of the variables that determine what the weather will be. We can, it turns out, influence the climate, but the weather is something humans are hard-pressed to predict with any accuracy; there is no influencing, much less determining outcomes there.

On the other hand, human beings determine everything that happens in the the economy (the process of producing and acquiring goods and services). Everything that happens in it is the result of some choice being effected: some decision-maker choosing among perceived alternatives and taking action to bring that choice to fruition. Those individual choices are the subject of ‘microeconomics’; the cumulative effect of those choices is the subject of ‘macroeconomics’. [The bit about ‘effecting choices’ comes from Warren J. Samuels.]

There are some choices that are intended to influence the economy as a whole. The central bank and government can effect such choices. In those cases economists are called upon to predict what will happen if one or the other enacts some change in policy: raising or lowering interest rates, raising or lowering taxes rates, etc. Like the weather, such predictions are almost impossible to get exactly right.

To be fair, there are understandable reasons why economists are so well-known for being such poor prognosticators. Like the weather, all of the variables in the economy are interdependent: a change in any variable will cause changes in all other variables. That is the definition of a chaotic system, one that avoids equilibrium like a ‘playa’ avoids commitment: it never settles into a stable set of relationships, but is “like a circus wheel, changing all the time,” as a song puts it. On top of that, the economy, as noted, is all about human beings making decisions, which we all know can happen for any reason or no reason at all — even contrary to all reason.

I am an economist by training. I have been writing for some time about a DDI: a “democratically distributed income.” I routinely enumerate the outcomes for society that a DDI would produce: the existing economy would become fully self-regulating, with no unemployment, no poverty, no taxes, no public debt, and an increase in sustainability (all accomplished, by the way, without redistributing anything or imposing any limit on income/wealth). It even has built-in safeguards against inflation.

So far as I know, only one person other than I has advocated for instituting a DDI. I am vexed by that. I would like very much to live in a nation with a DDI.

I also wonder why it is so. Why do people — people who have purported to care about one or more of the outcomes cited — ignore this solution to all of those problems? It is contrary to all reason.

It has occurred to me (finally) that people might confuse those outcomes with theoretical predictions. They are not outcomes predicted by theory. They are the absolutely, positively irrefutable outcomes of an institutional construct.

Albert Einstein famously changed our understanding of the Universe. Before, it was thought to operate like a machine. Specifically, all bodies were thought to be governed by a force called ‘gravity’. Einstein found instead that all bodies mutually affect all other bodies (though most of those effects are vanishingly small) by warping the space-time continuum: gravity is a relativistic thing, not a mechanistic thing.

The existing economy is relativistic: as mentioned, all of the variables in the economy affect and are affected by one another. Implementing a DDI would make it mechanistic: the previously enumerated outcomes would follow from a DDI like day follows from night.

How can that be?

Instead of all of the variables in the economy being interdependent, there would be one variable that would not be affected by any other variable in it. That variable would be money (as currency). It would affect — actually, govern (passively but effectively) — all other variables, but would not be affected by any of them.

That variable would be determined by demographics, and only that. No person, committee, or organization would have any say in how much currency would be created. It would change over time — it would vary — but only due to demographic changes: the number of people eligible for (and opting to be paid) the DDI.

[The amount of currency created would also presumably be influenced by the size of the population the nation, which would determine the amount of money supplied for government (which technically isn’t the DDI, but is the same process applied to funding government so as to eliminate using taxes/public debt for that purpose, which presumably any nation implementing a DDI would opt to do at the same time); but the important point is that demographics would in any event determine the amount of currency created.]

To implement a DDI would be to change the institutional functioning of the economy. It would be the same economic system, but with a different way of supplying the economy with money (as currency). Instead of being relativistic, the economy would be mechanistic. Instead of being eternally a chaotic, unstable mess, it would function like a well-oiled machine.