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Tag: classical economics

Ideas Are The New Currency

‘Tis the season for “The Year In Pictures” – the annual new year pictorial accounting of the events of the outgoing year.  Any rational collection for 2011 would include three events; Arab Spring, The Earthquake / Tsunami in Japan, and Occupy Wall Street. These three events eclipsed the Royal Wedding, Steve Jobs, the tenth anniversary of 9/11, the space shuttle retirement and even the end of the war in Iraq.

These three events tell a very interesting story of who we are and where we are going as a civilization.  

Classical economists such as David Ricardo and Adam Smith brought us the idea that a merchant class allocates land, labor, and capital in various combinations as “the factors of production” that match supply and demand for all that societies need via the invisible hand of market capitalism.

Yet, in a single hour, land, labor, and billions of units of Capital were wiped off the surface of the Earth by in Japan.   While we see the images of total destruction, there are hundreds of square miles that were untouched and where all seems quite normal – except for that invisible hand of radioactive cesium.  Land, labor, and capital failed as a an economic cornerstone for all those who had once called this land home.

In the Middle East, with few jobs and even fewer opportunities for youth, the quaint notion of “land and labor allocations” crumbled under the forces of people with mobile access to dynamic data, free information, community knowledge, innovation, and wisdom. Governments, with no relative shortage of money, were unable to challenge the opposing factors.  Again, the idea of land, labor, and capital as the economic cornerstone had failed.

Quite appropriately, Occupy Wall Street was executed on borrowed land, with borrowed labor, and borrowed capital.   The operation was peaceful so nobody died. The stock market did not even crash.  Politicians went largely unscathed and the attorneys stayed in their collective offices. Nothing physical was actually created, and therefore, nothing physical was actually destroyed.  However, a great deal was produced.

All three of these events had something in common – they all produced something very tangible.  They all produced an idea in the minds of others.

As we review the year we review it is increasingly evident that land, labor, and capital are inadequate to articulate what people actually produce.  It will be through these shortcomings of classical economics that a new economy will form.  The degree to which society actually produces the things that society actually needs, this new economy should not look much different.  The degree to which society does not actually need the things that capitalism produces, great new ideas will emerge.

What was once the land of opportunity can now become a planet of opportunity.

Photo Credit: David Shankbone via Mashable 

Of Anxiety and Optimism

Keep it Simple

I’ll keep this simple because it is simple.  Most people know exactly what I am talking about.  Most people feel that a huge change is underway.  Most people feel deep in their hearts that whatever we are doing today will be different tomorrow.  Most people feel a strange combination of anxiety and optimism.

It’s Time to Change

No, it’s not just a political change or an economic change or even a social change.  All of these, in their simplicity, would not do justice to the magnitude of what is really about to happen.  The forces now in play will resolve to the equivalent difference between the hunter gatherer civilization, and the Renaissance.   The next economic paradigm will be as different as the abacus is from the computer itself.  Yet, the process by which this is happening is so simple, that the mind is repelled.

Factors of Production

In the Industrial revolution, a machine would make widgets.  It did not matter whether you or I ran the machine, the same widget would emerge.

Today, the machine is a computer.  Your interaction with the computer is entirely different than my interaction with the computer.  In fact, you could swap out the computers and our individual output would remain unchanged.

A HUGE difference

Factors of production are no longer the land, labor, and financial capital of Classical Economic theory.  The factors of production are social, creative, and intellectual capital of  people and their communities.

Classical economic theory is breaking down.  There is a huge change on the horizon. The new economic paradigm is in the process of siphoning off the old economic paradigm.  We’re approaching mid-span; both tanks are half empty or half full, depending on how you look at it.

Confidence is a mixture of anxiety and optimism

I can say with great confidence that anxiety and optimism are the correct emotions to be experiencing today.  So go ahead and tell the children in your life that everything will be OK.

Social Capitalism: Meet The New Intangibles

Today, land, labor, and capital make up the “Tangible” assets allocated by entrepreneurs in the production of all products and service.   Meanwhile, Social Capital, Creative Capital, and Intellectual Capital of people and communities are called “Intangible Assets” on the corporate balance sheet.

As soon as you leave the Corporation, this condition reverses.  What if the new generation of corporations were built on this reversal?

Suppose it is already happening.

The next economic paradigm will be built on Social Media as soon as people start getting together to build things.  Social Capital, Creative Capital and intellectual capital will be allocated by entrepreneurs in the production of all products and services.  Meanwhile land, labor, and capital will be the intangible assets.

This may not be so far out.

LAND: with Social media, Mobile internet, geolocation applications, mobile applications, and speed blogging – most activity is independent of physical land.  Instead, Public “land” or private “land” behave as the intangible component where people assemble and produce things.

LABOR: no longer means that two physical parts are assembled into a machine.  Instead two ideas are assembled into a third idea and redeployed as data, information, knowledge, innovation or wisdom.

CAPITAL: Seriously; what exactly is Capital these days except the thing that banks play with and politicians argue about? Capital is created from debt.  The continuation of Capital Markets as we know them exists more as the absence of a reasonable alternative than an actual proxy for true value or productivity.

Instead; 500 Million people flock to Facebook, Twitter, Google, Linkedin, Foursquare, Gowalla, etc., to collect options and store social value.  Uhm…Why?

The next phase for social media will become user generated productivity.  That is when people get together outside the construct of government and corporations to build something.  If we are lucky, this transition will happen before we are forced to “rebuild” something.

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The Ingenesist Project specifies an Innovation Economy built on a platform of social media as the next economic paradigm.  Material based on video series here

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