Mr. Keynes and I sat down in a nearby Cafe. I was looking forward to finding out how much economic growth he deemed to be enough for society. "Every government is obsessed about growth, why do you think that is?" He asked. "Errr... so the country can grow richer?" I replied. He then asked "Why do we want to grow rich?" in which I replied "So we could all have a good life!"
"And what is a good life?" Asked Mr. Keynes. I started thinking about a myriad of things a person could desire and before I could reply, Mr Keynes carried on, "People buy fast cars, beautiful houses, go on expensive holidays, it all boils down to beautiful things isn't it? The sleek body of a fast car, the architecture of a nice house and the beautiful things one sees on holiday. People essentially seek to experience Aesthetic Emotions."
"Another emotion people seek to have is to be In Love. I believe that one doesn't require any explanation." Smile Mr. Keynes. "We have now established that people seek to experience Aesthetic Emotions and being In Love, but is wealth the path to ascertain these two ultimate goods?" asked Mr. Keynes. "As they say, money can't buy happiness!" I replied. "Yes, that's correct but wealth is necessary at the basic level. One could hardly be thinking about aesthetics or love when one is hungry or hasn't got a roof over their heads. Wealth can buy beautiful things but it may not necessarily convey Aesthetic Emotions and in many cases it would make one more appealing to a potential lover. However, wealth is not necessary to attain these two ultimate goods." elucidated Mr Keynes further.
"Since money is necessary in a basic level to even allow us to start thinking of aesthetics and love, it has infiltrated our psyche as a 'Love of Money'. Money is a means to an end but our Love of Money has made Money into an end instead!" explained Mr. Keynes. "This 'Love of Money' is morally inefficient because it is actually not what people seek in life. 'Love of Money' also leads to hoarding which is economically inefficient as it impedes the spending of money which then hinders income and wealth distribution." Mr Keynes carried on.
"But, that still doesn't answer how much economic growth is enough!" Interjected I. "Ethically, the more appropriate question is how do we get more people to achieve the two ultimate goods in life." said Mr. Keynes. "That is to say how we are going to ensure economic growth goes to the poorer in society so they are able to achieve these ultimate goods."
At this point, I looked at my watch. I was running late for my lunch appointment. I left Mr. Keynes with a cordial goodbye. The last sight of him was him reading the business section of the Herald while shaking his head.
I do hope I bump into him again.
Tuesday 13 September 2011
Friday 2 September 2011
Otara market with Mr. Keynes, Part II
It was morning tea time as we walked pass a nearby bakery busy with people. "That's funny," I said "I don't recall the bakery being so busy in the past." Mr. Keynes pointed out, "See how most of the customers are tradesmen buying morning tea? They're all building that new council swimming pool across the road. Demand from the tradesmen have been so good that the bakery have had to hire extra staff!"
"That's pretty good going considering we've just come out of a recession! How lucky!" I commented. "Lucky? I think not," said Mr. Keynes, "See the road works over there for a new motorway? And the power cables being laid further away in the other direction? There has been a concerted effort in infrastructure building by the council as part of fiscal stimulus to keep the economy in positive growth!" Mr. Keynes carried on, "The follow on effect is that the tradesmen employed spends their money and the stimulus is spread to other parts like the bakery."
"Is that necessary?" I said, "I'm sure private enterprise could do the same especially now that interest rates are low and it costs less to borrow money." Mr Keynes smiled and said "That's what one would think wouldn't it? With GDP growth at less than 2% per annum and the US and Europe verging on bankruptcy, would you invest your money into an uncertain economic climate or keep it in a bank? " countered Mr. Keynes, "The great depression in the 1930's lasted 10 years, there's no knowing how long any economic doldrums would last. It was only through the massive military spending of WWII that ended the great depression."
"But where is this money going to come from especially now that unemployment rate is high; hence tax collection is low?" protested I. Mr Keynes went on to explain, "A good government would have had enough money put away during the good times in preparation of bad times like these, otherwise it'll have to borrow." With that last statement, I thought finally I've got Mr. Keynes cornered so I quickly asked "Is that wise? borrowing? Look at America and the predicament it's in!"
"That is a good point!" said Mr. Keynes calmly, "One only borrows when one knows one can pay it back, hence investment in infrastructure like roads and power lines is always a good idea because it help support growth in other parts of the economy like manufacturing and agriculture." Defended Mr . Keynes, "The 2003 black out in North-eastern United States and 2001 black out in California is a classic case of infrastructure under investment. Not to mention the thousands of bridges that are categorised as structurally deficient in the US. The US have not invested the borrowed money to give them a follow on return on investment."
"It's the government's job to save while the times are good and spend when the times are bad. Not just that, the government also has the obligation to save for unforeseen circumstances." said Mr. Keynes. "What do you mean?" I said, "Isn't that what insurance policies are for?" thinking I've finally got him. "This whole market my friend, wouldn't be here if the stall owners had only their insurance policies to rely on!" expounded Mr . Keynes. "Two years ago, a tornado hit the open markets at Otara and caused considerable damage to the stalls and vans. Insurance policies nowadays do not and can not cover for natural disasters like a tornado! Thankfully the council squirrelled away a safety fund for many years from the fees stall owners pay and was able to compensate many of the stall owners after the tornado."
"Insurance companies charge premiums according to risk and the way risk is modelled is through the normal distribution curve. This is fine when it comes to fire and thefts where there are statistics to judge these risks on."
"There is no way anyone can model risk like natural disasters hence governments have to step in to compensate. The EQC (Earthquake Commission) is a good example! No one knew about the fault lines underneath Canterbury. For many years, it was compulsory for insurance companies to pay a levy to EQC for the very reason like Christchurch. If not for the government, Christchurch will never be rebuilt!"
Mr. Keynes has given me a great deal to think about. I noticed that all we've discussed in this second part is all to do with economic growth. I finally asked Mr. Keynes, "So, all this effort is given to sustain economic growth, how much growth do we actually need?". Mr. Keynes eyes lit up instantly, "Ahhh... my friends, that is the ultimate question, let's sit down for a coffee for this is a whole new topic to discuss."
"That's pretty good going considering we've just come out of a recession! How lucky!" I commented. "Lucky? I think not," said Mr. Keynes, "See the road works over there for a new motorway? And the power cables being laid further away in the other direction? There has been a concerted effort in infrastructure building by the council as part of fiscal stimulus to keep the economy in positive growth!" Mr. Keynes carried on, "The follow on effect is that the tradesmen employed spends their money and the stimulus is spread to other parts like the bakery."
"Is that necessary?" I said, "I'm sure private enterprise could do the same especially now that interest rates are low and it costs less to borrow money." Mr Keynes smiled and said "That's what one would think wouldn't it? With GDP growth at less than 2% per annum and the US and Europe verging on bankruptcy, would you invest your money into an uncertain economic climate or keep it in a bank? " countered Mr. Keynes, "The great depression in the 1930's lasted 10 years, there's no knowing how long any economic doldrums would last. It was only through the massive military spending of WWII that ended the great depression."
"But where is this money going to come from especially now that unemployment rate is high; hence tax collection is low?" protested I. Mr Keynes went on to explain, "A good government would have had enough money put away during the good times in preparation of bad times like these, otherwise it'll have to borrow." With that last statement, I thought finally I've got Mr. Keynes cornered so I quickly asked "Is that wise? borrowing? Look at America and the predicament it's in!"
"That is a good point!" said Mr. Keynes calmly, "One only borrows when one knows one can pay it back, hence investment in infrastructure like roads and power lines is always a good idea because it help support growth in other parts of the economy like manufacturing and agriculture." Defended Mr . Keynes, "The 2003 black out in North-eastern United States and 2001 black out in California is a classic case of infrastructure under investment. Not to mention the thousands of bridges that are categorised as structurally deficient in the US. The US have not invested the borrowed money to give them a follow on return on investment."
"It's the government's job to save while the times are good and spend when the times are bad. Not just that, the government also has the obligation to save for unforeseen circumstances." said Mr. Keynes. "What do you mean?" I said, "Isn't that what insurance policies are for?" thinking I've finally got him. "This whole market my friend, wouldn't be here if the stall owners had only their insurance policies to rely on!" expounded Mr . Keynes. "Two years ago, a tornado hit the open markets at Otara and caused considerable damage to the stalls and vans. Insurance policies nowadays do not and can not cover for natural disasters like a tornado! Thankfully the council squirrelled away a safety fund for many years from the fees stall owners pay and was able to compensate many of the stall owners after the tornado."
"Insurance companies charge premiums according to risk and the way risk is modelled is through the normal distribution curve. This is fine when it comes to fire and thefts where there are statistics to judge these risks on."
"There is no way anyone can model risk like natural disasters hence governments have to step in to compensate. The EQC (Earthquake Commission) is a good example! No one knew about the fault lines underneath Canterbury. For many years, it was compulsory for insurance companies to pay a levy to EQC for the very reason like Christchurch. If not for the government, Christchurch will never be rebuilt!"
Mr. Keynes has given me a great deal to think about. I noticed that all we've discussed in this second part is all to do with economic growth. I finally asked Mr. Keynes, "So, all this effort is given to sustain economic growth, how much growth do we actually need?". Mr. Keynes eyes lit up instantly, "Ahhh... my friends, that is the ultimate question, let's sit down for a coffee for this is a whole new topic to discuss."
Subscribe to:
Posts (Atom)