IN EARLIER ARTICLES, I explained how the pursuit of profit guarantees loss, inequality, poverty, and instability, and why economic competition results in prices and outcomes that are not at all ‘optimal’. This article details the extreme sub-optimality of prices, and how they compel social problems and ecological damage.
Our current economic (and political) games use ancient habituated rules, based around the so-called Law of $upply and Demand (L$D). According to economics textbooks, L$D ensures that prices of goods and services function as accurate and meaningful market signals, so guaranteeing the most efficient use of resources and the most optimal of all possible economic outcomes. Yet this lofty claim, like so many in economics, depends on a plethora of unrealistic assumptions: uniform market prices for identical goods, no expenses for tracking down or delivering them, perfect foresight or no change, rising costs with the scale of production, and enough buyers and sellers to avoid any being able to control prices.  Even some economists admit that the assumptions do not hold, in which case, L$D-prices need not be accurate or meaningful, resources need not be used efficiently, outcomes need not be optimal, and markets can fail.
But how could L$D-prices be considered accurate or meaningful when they do not include costs avoided while pursuing profit maximisation ― costs passed to the environment and society to bear: air, water, soil and noise pollution; soil erosion and salinity; desertification; reduced biodiversity; urban congestion and gridlock; diminished physical and mental health from over-work, under-work, and the stresses of economic competition. One estimate of “only those costs which had been properly established by authoritative studies” suggested that
“...in 1994 corporations in the United States were permitted to inflict $2.6 trillion-worth of social and environmental damage, or five times the value of their total profits.” 
Nor do L$D-prices take account of the direct and indirect savings to businesses that result from work done outside the official market economy by members of households and by volunteers ― or even those savings resulting from the presence of roads, railways, ports, police, free or subsidised education, energy and communication networks, and much else paid for by governments. Let’s also not forget public-funded bailouts of ‘too-big-to-fail’ corporations ― even, or especially, of those who most ardently chant that the market knows best and must not be regulated. Just the direct subsidizing of business by government through grants, tax breaks, incentive schemes, loan guarantees, wage allowances, investment rebates and the like, sometimes exceeds reported profits. 
But although many costs are excluded from L$D-prices, many others are inappropriately included ― such as those of political lobbying; excess packaging; unduly lavish office furniture and equipment; prestigious petrol-guzzling company cars; exorbitant business lunches and dubious client entertainment expenses; jobs for the boys; Picassos and weekly lock-changes for executive washrooms; million-dollar consultancy fees for five minutes of pre-determined discussion with self-styled authorities long past their use-by dates; ‘brainstorming’ retreats and overseas ‘business’ trips, that include five-star accommodation, century-old brandy, and Kama Sutra instructors; gambles that don’t pay off and other miscalculations; miscellaneous forms of waste, duplication, ego gratification and high living... the list is near endless.
Rather than ensuring an efficient use of resources, L$D misleads us and wastes our time. One estimate  suggested only thirty percent of work in modern economies produces real wealth, the rest merely keeps us busy, such as by creating weapons of mass destruction then, after signing treaties, destroying them at fifty times the cost of production ; writing memos in quadruplicate full of inaccurate details about subjects of no relevance to people who aren’t interested; juggling paper profits; advertising to persuade increased debt to afford items no one ever realised they could possibly want let alone need. Another study of how abysmally the market allocates resources found that
“...half to three quarters of annual resource inputs to industrial economies are returned to the environment as wastes within a year”.
To achieve these very sub-optimal outcomes, L$D rewards necessary but comparatively easily supplied work to produce food, housing and clothing with far lower wages than non-essential work in art, music, sport, literature, film and TV. L$D also grants often offensively high payments for ‘labour’ in pen-pushing paper-shuffling bureaucracy, marketing, legitimised gambling, finance, post-15-minutes-of-fame speaking engagements, and other activities that produce no real wealth whatsoever. But wait ― there’s more.
Instead of functioning as accurate and meaningful market signals, L$D-prices encourage delusion. With no more than the flourish of a pen, loaves-and-fishes banking systems lend money many times greater in amount than the savings left by depositors. Reserve Banks create money on receipt of nothing more tangible than government-completed forms. Currencies fluctuate, constantly shifting values based on perceptions; incessantly being bet upon, for and against. Creative accountancy manipulates ledgers to transform the reality of bankruptcy into a LIBOR-rated pretence of profit. Fickle manic-depressive (sometimes paranoid) markets for bonds, stocks, shorts, derivatives, credit swaps, mortgage-based bundles, collateralized debt obligations, and other too-clever-by-half exercises in self-deception – glorified IOUs and bets upon gambles – conjure up cash flows with almost as much ease as they lose them ― the traders’ assumptions, biases and perceptions now enshrined in automated computer trading programs.
Modern financial exchange requires belief in order to work at all, otherwise it looks like sleight-of-hand. Not facts but perceptions rule. For instance, if the latest official estimate of inflation is calculated as a mere tenth of a percent more or less than the average anticipated by so-called authorities, then stock markets, interest rates and currencies can fall or rise out of all proportion. Or if a somnambulant federal treasurer casually includes the phrase “banana republic” while publicly speculating about his nation’s future, the currency can sink like a stone. Figments of hyperactive imaginations, L$D’s misleading numbers mean next to nothing – mean only what we perceive or choose to ascribe to them.
Nevertheless, the modern world is hooked on L$D, and so, deafened by the hallucinatory sound of money talking, we pursue profits and cash flows ― not the satisfaction of needs. Money is mistaken for real wealth, and energies frittered accordingly. Lacking money and (consequently) demand, the poor cannot offer businesses any chance of maximising profits, so their needs take a back seat to the mere desires of others. Work of great need is sacrificed for work that makes great profits. Mercedes are built for the Mercedes-less rather than homes for the homeless. Medical research panders to the vanity of the rich rather than curing diseases of the poor. The First World stockpiles mountains of excess food while the Third World starves.
So, prices need not function as accurate or meaningful market signals, resources need not be efficiently used, and outcomes need not prove optimal ― the ‘market’ need not provide the best solution. Instead, market competition often misleads, creates unnecessary work, ensures instability, guarantees loss for some, ignores and aggravates the needs of the poor and the environment, and compels many other inefficient unwelcome outcomes. Indeed, the ecological and social problems besetting the world can all be traced back as mostly unavoidable symptoms of the real disease ― market competition for profits.
Yet the economic rules that compel this fiasco are not god-given, self-evident, unalterable commandments. They have become entrenched due to historical accident, so ingrained from long use that alternatives evoke cognitive dissonance ― but they remain arbitrary. Perhaps we have grown too used to it all to consider changing – too habituated to recognise the addiction – but other more balanced and controlled rules – suited to modern times, needs and abilities – can be devised.
Pssst... New system for sale. It’s got the lot. A one-day working week. No more financial hardship, unemployment, job insecurity, mortgages, rent, corporate tyranny. New and improved local stewardship, environmental care, international security, unfettered aid, truly sustainable development, and political self-determination. Change… You know you want it.
Herman Royce is God Almighty’s biographer and self-appointed spokesperson, inventor of A Free Lunch, and the first person in history to say “Now I’ve seen you naked, I could never eat turkey.”
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