Tuesday, September 26, 2017

With Liberty And Dividends For All

"With Liberty And Dividends For All" is a 2014 book by Peter Barnes. It is 193 pages long, 9 chapters with a preface and an appendix. It is subtitled "How to Save Our Middle Class When Jobs Don't Pay Enough". It is a quick and easy read. It can easily be read in an afternoon.

I wanted to see how Barnes' thinking had evolved since his 2006 book "Capitalism 3.0", which I just read in June and blogged here. I liked that book a lot and learned a bunch from it.

When I finished "With Liberty And Dividends For All", which I will abbreviate WLADFA, I kind of thought, well, that was like "Capitalism 3.0 Lite". It seemed much shorter, but actually it was 193 pages vs only 216. Maybe it seemed shorter because I was already familiar with most of the material.

I don't think Barnes introduces any real new concepts beyond those of "Capitalism 3.0", but he does introduce some new verbiage, some new people, and some numbers. But, all in all, I felt that "Capitalism 3.0" was much stronger, particularly for these reasons:

  • it seemed to have much more information about trusts and the duties, responsibilities, and legal status of trustees, and maybe did a better job of emphasizing the importance of trusts as the best way to protect The Commons;
  • it introduced the very important concept of "propertization" for our common wealth - important because property rights are so ingrained in our legal system; searching for "propertization" in WLADFA gives no matches.
I had also wondered (in an update to the "Capitalism 3.0 blog post in July) if Barnes had any ideas on how to empower and realize the value of the household realm of provisioning in the economy. He does not address this topic; his focus is solely on The Commons, which is not a bad thing.

I am not going to do an in-depth review/summary of this book like I usually do. I think there would be too much duplication of the "Capitalism 3.0" post. So instead, I will try just reviewing and summarizing the new stuff, and including striking passages. If you have not read my post on "Capitalism 3.0", I would recommend doing so now - I think this post will seem pretty jumbled otherwise.

New Verbiage and Facts

  • Would dividends from co-owned wealth mean the end of capitalism? Not at all. They would mean the end of winner-take-all capitalism, our currently dominant version, and the beginning of a more balanced version that respects all members of society, including those not yet born. This better-balanced capitalism—we could call it everyone-gets-a-share capitalism—wouldn’t solve all our problems, but it would do more than any other potential remedy to preserve our middle class, our democracy, and our planet.
  • I also adopt a wider-than-conventional view of the purpose of an economy. Most economists believe that ever-increasing production is the principal, if not the only, goal of an economy, because if we produce enough stuff, everything else will sort itself out. This mode of thinking made sense in the days when we lacked material goods. Those days, however, are over. Our current surplus production capacity demands two higher purposes for our economy: ensuring the security of a large middle class and synchronizing human activity with nature. Neither of these objectives arises automatically from producing more stuff. Unless they’re consciously built into our economy’s structure, we’re highly unlikely to achieve them.
  • To heighten our awareness of co-owned wealth, I use the adjective our in places you might not expect. For example, instead of the atmosphere I say our atmosphere, and instead of the money supply I say our money supply.
  • Barnes references a cognitive illusion which is new to me: "the fallacy of composition, that what works for a few will work for all."
  • First, we’ll need new pipes to deliver income on a basis other than labor. These pipes should be capable of being installed in the not-too-distant future. This means they need to mesh with the pipes we have today.

    Second, the new pipes should be solidly built. Anything that requires repeated refinancing by Congress isn’t likely to last.

    Third, the pipes should have — and be able to retain — a broad base of public support. This requires them to appeal across the political spectrum.

  • Ha ha, I like the use of "slur du jour" here.
    SOCIAL INSURANCE AS IT NOW STANDS can’t solve the problems of the twenty-first century, but it offers several useful lessons.

    Policies come and go; institutions endure.


    Universality beats means testing. ...

    Universality also avoids the pejorative distinctions that come with means testing. If only economic “losers” get benefits, they become “takers,” “moochers,” or whatever is the slur du jour. Those who don’t get benefits resent those who do, and those who do feel bad about themselves. No one is happy with the arrangement.


    Build external costs into current prices.


    Build the pipes first; then add water.

  • In "Capitalism 3.0", Barnes talked about and defined "commons rent" in a way I had not heard before. In WLADFA, he again defines rent: "rent is income received not because of anything a person or business produces but because of rights or power a person or business possesses." Barnes differentiates "recyled rent" - rents for everyone (good) - from "extracted rent" - rents for the 1% (bad).

  • I disagree with this statement by Barnes on "debt-free money distribution", aka QE for the People: "One oft-heard objection to debt-free money distribution is that the Treasury would print too much of it, thereby triggering inflation." I see this as bogus Friedman Monetarism. During the Fed's QE program following the 2008 economic meltdown, the Fed tripled the amount of money in circulation and there was no sign of inflation. I think that inflation is only caused by supply-side scarcity, not the money supply or wages.

  • Barnes makes again a point which is so obvious but so totally overlooked in discussions of "free stuff".
    AN OFT-CITED RISK OF PAYING PEOPLE money they don’t work for is that they’ll get lazy. This is the scare story that’s thrown at every suggested method of reducing inequality, so it’s wise to be skeptical.


    Why does it apply only to those at the bottom and middle of the income scale and not to those at the top, where immunity to the perils of nonlabor income happily reigns? One could argue that the rich have more “moral fiber” than the poor, but that would be difficult to prove. A more logical thesis, if one accepts the premise that the need for money motivates people to work, is that those at the bottom will always work at least as hard as those at the top.

    He also makes another point worth remembering.
    The flip side of this argument is that even if some people did work less because of dividends, it might not be such a bad thing. Americans are among the most overworked people on the planet.
  • In 2009, we almost had a cap-and-dividend carbon bill pass congress. Barnes proposes getting ready in case we get another chance:
    Get the architecture right. Since we’ll get, at most, only one timely shot at installing a national carbon cap, we’d better do it right the first time.


    Keep it simple. Simplicity (as in the thirty-five-page Social Security Act) now seems passé in Washington; thousand page bills are the norm. That’s not because the world is more complex; it’s because lobbyists drive legislative language. So beware of any carbon-capping bill that’s longer than fifty pages—or can’t be explained in a few sentences.

    Benefit the many rather than the few.


    linking nature’s well-being to that of our middle class is the key to harmonizing capitalism with nature.

  • Barnes references the
    Jevons Paradox, first noticed by British economist William Stanley Jevons in 1865. Jevons observed that improvements in the efficiency of coal use led to greater consumption of coal in a wide range of industries, an increase that more than offset the savings from efficiency.
  • Chapter 9 (the last), titled "From Here to the Adjacent Possible", begins from a quote from Milton Friedman: "Only a crisis—actual or perceived—produces real change. When that crisis occurs, the actions that are taken depend on the ideas that are lying around."

    Barnes discusses the theory of punctuated equilibrium from evolutionary biology. I think this is entirely appropriate, as I think I have posited several times that the economy is an ecosystem, with occupations as species.

    The reason for this punctuated pattern seems to be that complex systems live near equilibrium but never quite at it. They hover in a zone between equilibrium and chaos, and every once in a while a crisis pushes them toward (or over) the chaotic edge. At such times, they either collapse or shift into what biologist Stuart Kauffman calls the “adjacent possible."


    It’s important to distinguish between the adjacent possible and what might be called the incremental possible. By the latter I mean adjustments to the existing system that don’t require a serious crisis (aka a punctuation).


    In my mind, a market economy with liberty and dividends for all is a plausible adjacent possibility. I also believe that a crisis—more severe than that of 2008—isn’t far away and that we need to prepare for it.

    Using a crisis an an opportunity to enact sweeping structural change rings true. The Great Depression is what made FDR's New Deal possible. Kim Stanley Robinson's excellent novel "New York 2140" uses this idea. I borrowed this in The Plan which, in a fit of frustration, I wrote up in June 2016.

    But, I am at this point unsure if we can count on another economic meltdown. In "Capitalism 3.0", Barnes pointed out that we moved from an economy of scarcity to an economy of plenty in the 1950's - Capitalism 2.0. In the 1930's, Keynes speculated that, in a century or so, capitalism would have accumulated so much capital that it would no longer be needed.

    Lately, I find myself thinking we are there. The total personal wealth of the world has been somewhat stable the last few years at around $250T, according to recent Credit Suisse world wealth reports. I can't see another crisis without a stock market crash, and I don't see that happening. I'm thinking that interest rates hanging near the Zero Lower Bound shows that there is more capital in the world than is needed for investment. And with interest rates so low, where else can you get any Return On Investment besides the stock market? The 2008 crash clearly involved fraudulent financial instruments (why is no one in jail?) which I would think at this point markets would reject.

    I wish Barnes had provided more detail about the crisis he sees looming. Well, if the financial markets don't cooperate in providing a crisis, we can be sure that Mother Nature via the climate crisis will.

New People

  • Americans were surprisingly slow to notice that the golden era of the middle class had passed. As former Labor Secretary Robert Reich has explained, three factors masked the middle class’s descent. First, women entered the labor force in large numbers, providing two incomes for many households. Second, many Americans made ends meet, or tried to, by working overtime and taking second jobs. And third, middle-class families maintained their lifestyles thanks to a vast expansion of consumer debt. But these masks couldn’t last forever. When the credit bubble burst in 2008, so did the accompanying illusions.
  • Pareto didn’t say why the 80/20 rule governed wealth distribution; he just noted (to his dismay) that it seemed to do so. In 1992, two American mathematicians, Joshua Epstein and Robert Axtell, dug deeper. Using technology unavailable to Pareto, they built a computer simulation of a market economy (which they called Sugarscape) to see what properties—including inequality—emerged when it ran,


    Though not startling, Epstein and Axtell’s finding is nevertheless sobering. It means that small initial differences, such as those in a bell curve, are inexorably magnified until they become extreme differences, such as those in a power law. Which means that, over time, our economic system will necessarily create a small upper crust and a shrunken middle.

  • Wow, a real blast from the past - a Republican who isn't a total asshole: "Jay Hammond, the Republican governor of Alaska from 1974 to 1982 and father of the Alaska Permanent Fund".

  • "Louis Kelso ... was a San Francisco lawyer and investment banker who is best known for inventing employee stock ownership plans, or ESOPs, which now cover about ten million Americans". Hmmm, Kelso looks really interesting. His ideas presage those of Barnes? I just bought his last book (1986) "Democracy and Economic Power: Extending the ESOP Revolution Through Binary Economics", $4.99 at Kobo. His earlier books "The Capitalist Manifesto", "The New Capitalists", and "Two-Factor Theory: The Economics of Reality" are available for download as PDFs from The Kelso Institute.

Old Favorites

  • "the map is not the territory" - I last saw this quote attributed to Alfred Korzybski in "Doughnut Economics".
  • Thomas Paine. Barnes again reminds us of how forward-thinking this Founding Father was.
  • "the euthanasia of the rentier" - I've said before, wouldn't it be great if Keynes were around now?
  • Also from Keynes, "Economic Possibilities for Our Grandchildren", which I 1st discussed here.


In Chapter 7, Barnes crunches some mumbers based on 2013 data. He posits an annual dividend of $5,000 for 300,000,000 Americans, which comes out to $1.5T. This is around 9% of GDP.

He identifies sources of dividends based on various types of our co-owned wealth, and the amount of dividends they could generate annually. I have put them in a handy table, rather than just capturing Barnes's Figure 7.1 as an image.

Shared AssetLow $BHigh $BMiddle $B
Atmospheric carbon storage
87 309 198
Securities transaction fees
268 446 347
New money creation
244 323 284
Intellectual-property protection
324 324 324
Spectrum use
84 84 84
Per capita share
3,357 4,953 4,157
Family of four share
13,428 19,812 16,628

[For some more recent and aggressive numbers, Scott Santens, a basic income advocate whom I support on Patreon for $5/month, published this past June, 2017 an amazingly comprehensive article on how to implement, and in particular how to fund, basic income. So many creative new taxes!]

Barnes discusses the basis for his numbers in the Appendix. Here's what he says about his "New money creation" figures:

With regard to new money creation: from 2001 to 2008 (before the financial crisis), the average yearly increase in what the Federal Reserve calls M2 was $244 billion.8 I use this figure (which is adjusted to 2013 dollars) to calculate the low end of the range in figure 7.1. For the high end I use the average annual change in M2 from 2001 to 2013, which includes several years of “quantitative easing.” That figure, translated into 2013 dollars, is $323 billion. The middle figure is halfway between.
This seems highly conservative to me. Why does he think we can only create additional new money at the rate at which the money supply was increasing? At the end of 2013, the M2 was $11T. His high figure represents 3% of that. That certainly seems safe to me. But why not 6%, 9%, 12%? Hell, why not 50%? Why not 100%? I am positing 2 things:
  1. Monetarism ala Friedman is totally invalid.
  2. The only thing that causes inflation is supply-side scarcity.
Maybe if you made every US citizen a multi-millionaire, then there might be some inflation - on, what, yachts? McMansions? Caviar? I think we could do a lot more than Barnes suggests without reaching that point.


Well, I said if you hadn't read my post on "Capitalism 3.0" that this post would seem jumbled. I think this post seems pretty jumbled even if you have read the earlier one. I am going to say that my attempt to do an incremental review has mostly failed. I started to think that this meant that I should not read incremental works, i.e., WLADFA, but I was able to read this book so quickly, and I am glad to be more up-to-date on Barnes' thinking - although that thinking did not seem to change that much in the 10 years between the 2 books. I guess the next time I read and review a follow-up book, I'll try something different and see if I can do better.

A final note, I recently read that, in her book, Hillary Clinton says that, after reading WLADFA, she wished that they had added basic income to the Democratic Platform she ran with.

No comments: