This is true. We've got a human in the loop, who is primed with alot of context around your request. Customer service + advice on coverage is the primary thrust of the feature.
CEO of Cover here. This is super surprising, as we sell our own policies + own a national insurance brokerage. No need to share/sell your information at all (nor would we, as a matter of principle), because we have access to most carriers in the US. We'd prefer to sell you a Cover policy or one from our partner panel that can be managed via our service.
Do you mind sharing which companies sent you physical mail? I'm at karn at cover.com. Would be great to dig in.
I don't remember exactly since this was a year o more ago. A lot of companies! I only remember talking with the Cover agent via text message.
I was quoting for basic Renter's Insurance. She gave me a price of 125/year which was too much since I only need it super basic insurance and both Lemonade and Assurant give you that for half. Anyway. Not a big deal.
Exactly one week after that I started getting junk mail from insurance companies.
I never quoted with anyone else besides Cover. I bought from Assurant after quoting with Cover. Cover was the only possible culprit for that burst of junk mail.
I don't know how you guys share data with other companies or vendors but definitely something happened in the way my info was handled. The timing between that interaction and the correspondence I started getting made it pretty evident.
Sounding in here - I bought the domain. Let's start with it was a lot of money, and to the credit of some of the folks here it remains to be seen whether or not the purchase was prescient or not from a ROI perspective. Whichever way it goes, the purchase won't be the reason that we succeed, or fail. Reasons for the purchase are enumerated in the article, but more than anything else, we're in the trust business and our customers cross-reference our web presence before spending thousands of dollars with us via our apps. Insurance is a business with consumer scale, and best in class SaaS-like economics (very low churn, predictable CF) - in this context, we became more comfortable pulling the trigger.
I think you made a fantastic decision on this. When you're going for a billion dollar valuation you need to be impeccable. This domain name gets you one step closer to that and saves on a costly rebrand later + it's a high value resalable asset.
Easy IPO if you hit all the right notes. Good luck!
As a tech company, many of the things we do to improve the insurance experience can (and perhaps shouldn't, per my prior comments), have zero marginal cost. Say your house burns down - the carrier is going to request receipts, and pictures from your kids' birthday party to prove you owned property you're claiming against. This is not delightful, and is one of the reasons we built out our auto-cataloguing tool.
Insurance companies, largely offer the same products and "differentiate" on customer service. My view is that value-added services, and pressure on price will win the day. Highlighted a few in the article, but perhaps, press a button to get free roadside assistance, talk to a mechanic 24/7, sensors in your home to mitigate risk. The premium volumes are certainly there to support greater value being transferred to the customer.
> Insurance companies, largely offer the same products and "differentiate" on customer service.
UK market, so somewhat different. A large proportion of our insurance sales go through various comparison websites who are the new "zero value add" broker. This leads to a large number of decisions being largely price based.
I have no idea whether this transition occurred in the states?
On the commercial side we offer business property, professional liability, errors & omissions etc. The financial guarantees you're describing do exist:
> For most of the insurance world, the hardest and most important thing to find is effective distribution and customer acquisition.
This is absolutely true. If you look at how regional, family-owned P&C carriers got their start, you'll find they started as brokers. These brokers found a profitable niche (call it motorcycles in California, or non-standard auto in Texas) that they wanted to own, moved on to become MGAs, and then admitted carriers offering multiple lines of business.
If you can find a way to own the customer as a distributor, you own the life-blood of the entire business downstream. As a result, P&C insurance companies are huge spenders on marketing (GEICO, spends $1.7B/year). It would be game-changing if this cash was used to provide utility to their customers above and beyond the insurance transaction.
I'm of the opinion that insurance premiums could be the new ad dollars - used to create products that promote lock-in, and much more consumer-centric insurance companies.
"An economy based increasingly on rent extraction by the few and debt buildup by the many is, in essence, the feudal model applied in a sophisticated financial system."
The financial services sector adds value to society by providing mechanisms to diversify risk, price assets, and make capital available for productive uses.
These mechanisms are valuable, but are gamed to extract economic rents greater than their value to society. Extract too much, and you kill the underlying economy.
>The financial services sector adds value to society by providing mechanisms to diversify risk, price assets, and make capital available for productive uses.
Capital isn't an object, it's a belief system, with a strong faith-based component. So in a purely rational sense it's impossible to "make capital available."
Capital is actually an executive instantiation of social patronage. Someone says "I want to try this..." and someone else with capital - usually of higher status - says 'OK, I think that's a good idea. Here are some imaginary social credits you can swap for resources because everyone believes in them. Now that you have credits, your project looks more believable too."
Nothing real changes hands. There's simply a nod of political approval from interests who stand to gain status if the project succeeds.
The system would work just as well without the credits. The credits are really only there to hide the politics.
Risk doesn't exist at all in the market sense, because risk is only defined by loss of capital - i.e. loss of face and status - and not by any other possible losses, no matter how physical. (E.g. loss of biosphere and future carrying capacity, social opportunity costs, loss of life through profitable war, and so on.)
I doubt you can have an economy without at least some executive decision-making and planning. But the current system is so completely disconnected from true social and economic value creation that it's actively hampering real growth.
Property is the belief system. Capital is just an optimization of it.
Resources are finite. Not everyone is equally efficient at allocating resources. Not everyone specializes in analyzing the most effective way to distribute resources. Capitol is intended to fit this role: those with past success in correctly distributing resources in productive areas make a profit, and thus have better ability to select correctly.
Of course, there are are a few great problems with capitalism under this perspective.
- Inheritence only makes sense as an incentive to keep being optimal close to death, but after the generation gap, the "wealth belongs to proven optimizers" is no longer true.
- Benefit of the system is skewed significantly towards the wealthy, which is counterproductive if happiness scales logartithmically with wealth, as it seems to.
- (What this article talks about) Wealth is encouraged to create more wealth, even if it is to the detriment of overall production in some cases.
> Risk doesn't exist at all in the market sense, because risk is only defined by loss of capital - i.e. loss of face and status - and not by any other possible losses.
Why is social status not something that has value? Almost everyone wants more social status and would trade things for it, so it seems that it has value.
You're drawing a distinction that I don't understand between things that are "real" and "not real".
> Capital isn't an object, it's a belief system, with a strong faith-based component. So in a purely rational sense it's impossible to "make capital available."
If I have a bunch of gold in a safe, then that's very much an object. If I decide you have a good project and could use that gold to finance that project, then I can "make capital available" to you.
Sure, but replace the term "gold" above with lumber/steel/concrete/apartment buildings/oil/prepaid employees/automobiles/etc.
If I have a bunch of stuff which I can loan to someone else then I have "capital". That "capital" can just as easily be physical as it can be financial.
Capital has universal value. The value of food is the preservation of life. That has value. That is objective reality for all life on Earth. If an animal can store food (read capital) then it improves it survivability.
Once basic needs are satisfied you cannot double-satisfy them. Paying for twice the amount of food does not make you live twice as long. So that's a fixed demand, while luxury goods are unbounded in their potential costs.
If you subtracted all that value spent on basic needs there there still would be a lot of capital flowing around.
I think the ancestor comment is arguing that there basically are two separate value circulations. One to distribute and allocate the essentials and the rest for social-value-signalling. Maybe that's also something UBI gets wrong. That we actually would need two currencies.
Post-scarcity scifi settings often feature something like that
a) all the basic stuff including housing is essentially given away for free
b) you get a fixed amount of luxury resource allocations on top of that
c) you can gain additional ones via some kind of work
d) they can be traded if others find whatever you're doing valuable.
so you don't have to work for the government or megacorp.
> Once basic needs are satisfied you cannot double-satisfy them.
Yes you can, food can be stored! At a later date less food can be consumed with no work was needed to harvest it.
> Paying for twice the amount of food does not make you live twice as long.
No but using your acquired food (read capital) to trade for medical supplies will increase your longevity. And it will increases the doctor's because he gets to eat!
> If you subtracted all that value spent on basic needs there there still would be a lot of capital flowing around.
Yes and isn't it wonderful? Its what allows things like food stamps and vacations to exist. Excess capital allows things like scientific research to occur.
> ...the rest for social-value-signalling.
That's a pretty pessimistic view of wealth.
---
I think I've been pretty realistic in my assessments of capital and its uses. But now, I'm going to enter territory where I'm wildly speculating.
I don't believe post-scarcity can exist or should exist. I don't believe it can exist for two reasons:
1). There simply is not an infinite amount of energy and matter (but there may be enough that it doesn't matter that its finite).
2). Even if there is enough resources, time will always be the limiting factor. Time contributes to scarcity the same way money does.
I don't believe it should exist because I believe that is the end of human progress. Scarcity, whether its a desire to own an iPhone or to acquire knowledge of quantum gravity, motivates humans to achieve.
In regards to "value" for food, let's consider beyond a certain universal unit of sustenance. For example, imagine two pieces of fish that are identical in size, nutrition etc... However, one was simply grilled by a fisherman, while another was "expertly" prepared by a specialized chef. The latter costs 10 times as much. This extra cost is the social value that is being added to the food.
Basically, the value associated with the fundamental nutritional benefit of food is objective and is something everyone can agree on. If this value is the only thing we cared about, the world would not be organized in the capitalist structure that it is today. Everyone would fish and equally distribute the produce. However, we as a species are hardwired to compete, to be "better". All capital is derived from "social-value-signaling".
My argument is that the "fundamental nutritional benefit" value is present in both types of fish while the fisherman/chef-prepared aspect is value-add on top of that baseline.
And the fixed baseline vs. subject-to-infinite-want value-add aspects make them categorically different.
One reason for post-scarcity to not exist is that the more resources we have, the more we will reproduce which will end up in consuming more and more resources. It degrades the ecosystem and brings down the quality of living for everyone involved.
This is pretty much what is happening around us. As we get hold of better resources, we reproduce more to make it impossible to have everything for everyone.
Again, we will have to re-discover the definition of scarcity because we have too many people unhappy with the system.
> This is pretty much what is happening around us. As we get hold of better resources, we reproduce more to make it impossible to have everything for everyone.
How does that jive with the fact that every developed country's reproduction rate has dropped as they developed?
> Once basic needs are satisfied you cannot double-satisfy them
why is there a boundary to surplus essentials? if you store enough essentials for one person, then storing more of them means you're increasing the number of people (or amount of time) you're storing essentials for.
storing them doesn't give you the same value. instead of enabling people to be alive you're now only increasing a safety margin for those who are already living. and there are rapidly diminishing returns for increasing the storage factor.
That's why it's categorically separate in my mind. For a fixed amount of people you only need a bounded amount of resources to satisfy their essential needs, which can be met with a relatively small fraction of the population's work capacity.
Everything beyond that is subject to drastically different dynamics where your want (not need) for luxury goods can gobble up a practically infinite amount of work capacity.
I think you might want to reconsider this. Arguably the first ever accumulation of capital in human history was grain storage in the ancient river civilizations (Egypt, Sumeria, Indus, etc.). Stockpiling capital in the form of grain reserves allowed these civilizations to shift labor efforts from subsistence farming to a more diverse range of economic activities.
That sounds like your opinion, so I can't say that it's "wrong", but according to the dictionary "capital" is defined as follows[0]:
> wealth in the form of money or other assets owned by a person or organization or available or contributed for a particular purpose such as starting a company or investing.
Capital is just wealth in some form which is available for investing. You don't have to ascribe a dollar value to tree trunks to say they could be used to build houses. That's capital.
Sounds to me like there some cross purpose debating going on here.
To me it is simple. If by "Capital" you mean "money" then of course it has no intrinsic value, it is based on faith. Zimbabwe's currency is an obvious example of that.
If we are talking about other stuff that is useful to our lives, then the value is relative to the beholder and their situation. Water is more valuable than gold from a survival point of view, but not from a $ point of view.
You're spot on, and this is a bit of an issue - there are a huge number of cross purposes in economic definitions, and the word "capital" is one of them.
My personal take on the word (informed by the dictionary source I gave above and a rather pragmatic approach to economics) is that "capital is stuff". Typically this "stuff" is in the form of either physical goods (lumber, food, concrete, gold, etc) and services (and I know services can't really be 'physical' but I can have a reasonable claim on the labour of someone through prepayment of salary, or a labour contract, etc); or financial assets (such as bank balances, stocks, bonds, etc).
Ultimately though, the "financial capital" is just a slightly divorced claim on the physical capital, and all anyone really cares about is the real stuff which they can eat or build with or develop, etc. You might have a big bank balance, but all you really care about is what you can ultimately cash it in for.
Ok, how about this. I have a bunch steel in by vault. Steel is worth something and can be used to build things. I loan you this steel in order to build a factory (perhaps even a steel mill!), on the hope that your project will be successful and you will pay me back even more steel.
No it's not. It's just a lump of metal that sits there.
> and can be used to build things.
Only if I want things. And I only want things if I value them, and I value things, just because, there is no fundamental value to things, only what value we believe there is.
How about food? Is that basic enough for you? I lend a hunter food so that he can take that temporary supply of food to eat while he is hunting and then potentially bring back more food.
You make a good point about the connection between money and social power etc. Very good point.
But I disagree in what seems to be your conclusion which is to simply do away with credits i.e. money.
I believe the solution to these types of problems is A) to understand the true nature of money as you have pointed out and then B) to use technology come up with a better type of money or better credit or overall system.
The problem I believe is that the universal point system we have (money) is to simplistic and too easily gamed. Its like the whole world is stuck playing Dungeons & Dragons, as if computers and the internet didn't exist -- its like every bank is a Dungeon Master. Only its worse than that, because even D&D tracks more than one number for each entity.
The universal application and transfer of these points, and the relative ease with with they are created or allocated (at least by certain entities), is key in our current system. I think we need a more sophisticated framework though both on a conceptual level and a technological one. We should not rely on regulation by decree. Its as if the World of Warcraft system administrators were not allowed to talk to the developers or even edit data in the system, and could only make announcements about new rules for types of gaming that were not allowed, could only stop people from hacking the system by sending them threatening chat messages or actually getting police to put them in jail. Because there is no server or common protocol really and there is only one number for each entity that is really integrated into the system.
I get your broad point, and I agree completely that money-getting is too often divorced from (or inimical to) value creation. But I think you take it too far here:
> So in a purely rational sense it's impossible to "make capital available."
Suppose I start a business making pies. I sell them to cafes and restaurants. I don't have a truck, but I need one for deliveries. However, my brother has a truck. I go to him and say, "Let me borrow your truck Tuesdays and Thursdays and give you a pie each time." The truck is a capital asset. By him letting me use it, he has made capital available. Risk too is real; there's a chance each time something will happen to his truck.
We can take this through various degrees of abstraction (e.g., my dad brokers the deal; a professional brokers the deal; I pay in free-meal coupons from restaurants; we develop a generic coupon for all goods) and end up where we are today. At no point is the next step obviously insane. But each abstraction strips information and increases the cognitive load to understand what's really going on.
So in practice yes, we definitely get to the point where people treat it as a faith-based system. Before the 2008 crash, more astute industry observers were pointing out that a lot of risk was somewhere, but nobody knew where. Everybody else was too busy pocketing money to think.
And I think the real problem is the extent to which profit paralyzes the brain. As Upton Sinclair wrote, "It is difficult to get a man to understand something when his salary depends upon his not understanding it." The real limit isn't human comprehension, it's the human capacity for willful ignorance. Capitalism works adequately in the small, but left to its own devices it will keep growing beyond our power to understand.
> Risk doesn't exist at all in the market sense, because risk is only defined by loss of capital - i.e. loss of face and status - and not by any other possible losses, no matter how physical.
Tell that to someone who loses their life savings and their house.
Capital is an economic system, but it absolutely governs people's physical lives.
The Bank of International Settlements ("the central bank of central banks"): Why does financial sector growth crowd out real economic growth? (2015) [0]
"In this paper we examine the negative relationship between the rate of growth of the financial sector and the rate of growth of total factor productivity."
IMF: Rethinking Financial Deepening: Stability and Growth in Emerging Markets (2015) [1]
"The analysis uncovers evidence of 'too much finance' in recent years—that is, beyond a certain level of financial
development the benefits to growth begin to decline and costs in terms of economic and financial volatility begin to rise."
On the optimal size of the financial sector, a speech by Benoît Cœuré, Member of the Executive Board of the European Central Bank (2014) [2]:
"While finance per se is necessary for growth, an oversized financial industry can be detrimental to real economic activity."
In their article, “Too Much Finance?” Jean-Louis Arcand, Enrico Berkes, and Ugo Panizza (2011) argue that expectation of bailouts may lead a financial sector to expand in size beyond the social optimum. They use a variety of empirical approaches to show that “too much” finance starts to have a negative effect on output growth when credit to the private sector reaches 110 percent of GDP. Stephen G. Cecchetti, M.S. Mohanty, and Fabrizio Zampolli (2011, 1) likewise argues that, “beyond a certain level, debt is a drag on growth.” The authors estimate the threshold for government and household debt to be around 85 percent of GDP and around 90 percent for corporate debt. Likewise, as we were writing this article, the OECD and the IMF both issued reports warning of a financial overgrowth (OECD 2015; Sahay et al. 2015).
I've often wondered how much money is spent on the money system itself. There are people whose entire days are spent devoted to the goal of keeping the money system flowing. They could be off somewhere else, tending gardens, nurturing children, cooking, educating, repairing, cleaning, healing from stress and trauma, etc. But no, they are at some office working for the all mighty dollar. Keeping tabs on society at large.
I'm not saying that it is overall evil to count supply and demand of resources. I'm merely wondering if the current state of money systems is really well suited to do this without devastating collateral damage on its host, the "human resources."
The great success of capitalism is to allocate resources efficiently. Fundamentally, someone is paying banks for their services; either the value they're providing is more than they charge for it, or not, but in the latter case people would stop buying their services (conspiracy theories notwithstanding). Then at the individual level, the bank is willing to pay someone x amount for the value they provide the bank, and either that's where they can earn the most (because it's where they can contribute the most) or the person will be paid more elsewhere.
There are of course inefficiencies, but they're self-correcting. A bank that overpays its bankers will be undercut by one that doesn't. A company that overpays its banks will be undercut by one that doesn't. It works better than any alternative that's been tried.
Why not? There's a cost to keeping it clean. There's a finite amount. Some people consume more than others.
Answer: because keeping track of those costs and assigning them to individual persons would be way more expensive than just keeping the air clean and letting people consume as much as they want.
Food should be the same way - now that we produce so much of it, it's kind of insane to expect to keep diligent tabs on how much people are consuming.
This is why i think a basic income makes perfect economic sense. People already have the ability to consume society's resources without paying (medical care or prison care still cost money) - so we might as well just give everyone a small amount 'voice' in the system and then dismantle the barriers to entry that are ostensibly in place to protect poor folks.
Interesting question. This expense is something I'd classify as upkeep - costs that are necessary waste. Inefficiency. You need to pay them to keep the thing running, but we would do well to minimize them as much as possible.
The question of how much do we have to pay to get various financial services should in theory be solved by competition. The problem is that some financial institutions are behaving like a cartel and the government is undermining competition by stepping in to save failing financial institutions.
The problem isn't that Finance is "bad" any more than energy companies are "bad" or retailers are "bad". There are people accumulating wealth in a whole bunch of industries, why is the service Google or Facebook provides more valuable than what Bank of America provides?
I think its more than just what we pay for these services, I think there is the variability that is introduced to a market when people invest in that market not for the value of the good or service, but merely as an instrument of financial leverage.
If people bought houses merely to live in, prices would probably be lower and would be subject to much less volatility. Of course, there would be downsides as well (no houses available for rent, etc.) so I'm not suggesting we do away with finance.
In fact, I have no suggestions. I'm just pointing out that finance (treating goods and services as abstract financial instruments) creates opportunities for growth at the expense of added volatility to the markets being abstracted.
>The question of how much do we have to pay to get various financial services should in theory be solve by competition. The problem is that some financial institutions are behaving like a cartel and the government is undermining competition by stepping in to save failing financial institutions.
This is the endgame of all capitalist markets. There isn't any other end game, no matter how much people would like there to be one to satisfy their personal ideologies.
> There is also plenty of evidence for the narrative of capitalism as spontaneous collaboration and growth.
There is? Has capitalism developed in any region of the world without the explicit help of a state? Even the birth of capitalism in Europe was facilitated by governments forcibly enclosing land into larger estates.
The endgame is the endgame, not the beginning or middle. Ultimately, there is no capitalist mechanism to prevent the sale of the market, or the tragedy of any other commons.
That is a great question -- but there are also other aspects to the problem -- human talent is one. Finance can extract rents from society, and it can also lure away promising PhDs, academics and many of the brightest with superior salaries (financed via rents extracted.) I'm not passing judgement on the workers here -- I was one, trapped in the system for 10+yrs with golden handcuffs and nothing to show my family on what I actually created.
It's way too hard to have a career in research or even get into a decent PhD program at all for the "finance brain drain" to matter. Research salaries are low, the conditions are hit or miss and yet, somehow, a faculty job is one of the hardest positions to get. We can worry about that when mid-tier universities stop getting hundreds of resumes for tenure-track positions.
For now, the fact that technically minded people can have a backup plan that pays well is most definitely a feature, not a bug.
I had a professor who gave up a good job at Harvard because he was tired of losing his best students to investment banking. It wasn't a field in any way directly related to business or finance, but Harvard students are highly recruited into lucrative investment banking positions.
What do you mean by kill? To me it's likely that finance represents a depressingly large drain on growth in output/welfare compared to a better regulated alternative but I can't see it making things bad enough to cause anarchy/ rebellion.
Ok, that's a reasonable view. How do you a) estimate the tipping point were finance becomes so dysfunctional that it causes a revolution B) measure the dysfunctionality of anther system relative to this benchmark level. To me this can only ever be a qualitative line of enquiry.
Correct. Many nonlinear systems cannot be modeled beyond describing their qualitative phenomena. The "butterfly effect" prevents precise estimations. You wouldn't expect the weatherman to tell you whether it'll rain this day next year.
Ok, but there are other less ambitious questions you can answer within the paradigm of economics. What are the losses caused by the current system vs an alternative according to a specific welfare measure?
But we don't yet even have a good model of the dynamics of the current system, let alone any good predictions for specific welfare measures of alternate systems.
Even if we don't understand higher order dynamics of the entire system, we have an approximately understanding of parts of the system and can use total intermediary fees as a welfare measure.
Imagine two worlds, one where American financial regulations remain unchanged, and one where financial advisers are not allowed to be paid a referral fee by asset managers they recommend to clients. What would you expect to happen to intermediary fees in this situation? Would you support the policy? Or are you totally agnostic because of 'Chaos Theory', 'Higher Order Effects' and 'Economics is a pseudoscience'.
Not exactly. The question is whether a capitalist society has a stable equilibrium growth path. Mainstream economics assumes a stable equilibrium, because that makes the math work nicely.
Physicists have known for a long time that many systems have unstable equilibria, where a random deviation knocking the system from equilibrium can result in catastrophe. This is the general field of nonlinear dynamics and chaos. The economists, the most famous ones at least, reject the idea without discussion, that the economy could be a chaotic system or even have manifolds where it might enter a chaotic regime.
Things get bad even before extractors enter the picture [0]; just a disadvantage in strategy update rate will result in the formation of cartel structures.
The economy will function as long as there are sufficient physical resources and human will. Finance cannot kill it.
For various definitions of human will. I think humans are somewhat fickle. Society might change its mind more easily than you expect. Case in point, Trump.
I would imagine the increase non-linear. As finance takes more ever more people catch on and realise there is no point working. This removes well-educated wealth creators from wealth creation and into finance. We've seen this in the UK where biologist, physicists and mathematicians are engaged in arbitraging each other.
No point working when work doesn't pay. UK is about to implode if Brexit goes ahead and all the fake fiat from The City evaporates with the confidence.
I can't help but put my own related ideology out there.
My belief is that whether you start from a fundamentally cooperative approach (communism) or a primarily competitive one (capitalism) you are ultimately going to run into the same main problem: over-centralization. This could be a large bureaucracy of state-run corporations or just large companies in a primarily capitalistic society that evolve into monopolies over time.
It seems in both systems whether they start with the sharing or competing idea that ideology gets diluted by practicalities over time. Which makes sense because we must be able to cooperate on some level in order to have a holistically functioning society, and we must also be able to compete in order to have some freedom for things to evolve.
But also in both systems we have conglomeration and over-aggregation. My belief is that we have proven that the basic structures are missing some key components that might prevent this from happening.
I think that the key is really to improve the basic technology of money and government as it intersects. To do that we need to examine carefully the underlying assumptions of what money and government are, and take a contemporary approach to improving those systems, employing our high technology. And as I said, one of the key problems we have with the relatively primitive systems in place is over-centralization. Capital/power accumulates and that makes it hard for the system to adjust to local circumstances, hard to evolve, and even hard to function.
So I subscribed to subreddits like r/rad_decentralization, r/bitcoin, r/btc, r/ethereum, r/polycentriclaw. I think those kinds of technologies and ideas are the general direction we need to go.
The most important part is that the fundamental structures and mechanisms are assumed to be unchangeable and correct. Unquestionably. As part of the belief system. To the degree that they are invisible. And the these basic societal technologies of money and government are not evaluated from the ground-up in a high technology context.
We exchange money for goods and services. It is paper or some digital token. It has universal application. It is scarce to some particular degree. It is one-dimensional even though it is universal. It is issued and maintained by authority. It is stored in digital or real form by banks. The allocation of money to various purposes is tracked internally only.
Government has absolute authority and power over deadly force. Government is monolithic or at least has a monopoly on public control. Government has a central control system. Government is primarily organized and operated by actual human beings in hierarchical groups. Government is enforced by traditional taxation, manually applied fees determined by repetitive human judgement, legal writings, groups of human lawyers, and physical policemen or agents with physical force.
You can take a best practices approach: are we spending more, but getting no more, or even less than other industrial economies? The same could be applied to any part of the economy that does not directly produce goods: criminal justice, health care, military.
I fear that a measure of GDP that takes overspending on non productive activities into account would leave the US looking much worse.
It sounds like our measure of GDP needs to be narrower. For example, why are legal services revenues included in GDP? In theory, value created by the legal industry should already be reflected in the real economy. If two companies enter into a joint venture to produce widgets, in reliance on the legal system enforcing their joint venture agreement, that will be directly reflected in additional widgets being produced. But the cost of paying people to draw up the contracts is a transaction cost that should be excluded from GDP. Similar reasoning can be applied to the financial system. If two companies rely on financing to jumpstart the joint venture, the value created by the financial system will be reflected in the production of widgets. The investment banking fees and interest are transaction costs that should be excluded from GDP.
Of course, doesn't the same reasoning apply to everything that isn't consumption? For example, any value created by Google Search should be reflected in the productivity of the real economy. Any revenues to Google from search should be excluded from GDP, right?
It's not like GDP doesn't have other major flaws. For example, after Fukushima, Japan's GDP went up due to rebuilding. I.e. GDP is susceptible to the broken window fallacy!
You also have the converse problem, that a lot of value isn't transactionalised at all - if two people who look after their own children switch to paying each other to look after each other's children, GDP goes up.
So what should we be measuring? Value consumed by natural persons? That's the end goal of all economic activity, right? (But even then - if someone receives (privately purchased) medical treatment for an on-the-job industry, that would contribute to my "value consumption" measure but it shouldn't)
There's a long and involved discussion around this.
Adam Smith defined a nation's wealth as "the annual labour and produce of the nation". Which the astute reader will note is a flow rather than a stock. Smith's editor Cannan makes just this observation.
Simon Kuznets, who came up with GDP in 1934 when the United States (and much the rest of the world) suddenly discovered it had a pressing need to determine just how much stuff it was doing on a national basis, cautioned strongly about overreliance on the metric (there's some level of parallel here with Ansel Keys' cautions on his highly mis-used body mass index -- devising good, measureable, but proxy indices for a large, hard-to-measure thing, is hard.
Going back to Smith, he also states unambiguously that the only use of money is to stimulate the exchange of consumable goods, a definition which raises all kinds of interesting questions.
It's worth noting that Smith's economy essentially had three currencies: one aimed at retail, one at wholesale, one at finance. These were conducted in copper (pence), silver (shillings), and gold (guineas), respectively. That is, England had a tri-metallic system, and the values of the currencies floated, somewhat, relative to one another.
Yet another aside: in a great many instances, the name of a currency devolves to either a unit of weight, a denotation of authority, or a description of quality. Pound, mark, penny, peso, frank, and sheckel are all units of weight. Real, crown, kroner, and the like, denote royal authority, and arguably terms such as Euro could be taken as equivalents. "Dollar" comes from "Thaller", that is, "Jochinsthaller", referencing the quality of silver coin mined at the town of Jochin in Germany. Guinea refered to African gold, and nickel to the metal originally comprising it. A principle exception to this rule are names based on subdivisions: dime, quarter, possibly "shilling" according to some etymologies, dinar, denarius.
The question of how to measure net economic throughput strongly suggests a concept similar to that of biological or ecological metabolism. Leslie White, an anthropologist, suggested that civilisations and cultures be ranked according to their net energy consumption. Evidence I've seen suggests a very strong fit, though you'd likely want to impose an efficiency constraint. Just as a feverish animal's metabolic rate isn't a reasonable measure, you'd want a healthy economy's energy consumption.
GDP and economics generally suffers greatly from incomplete cost and value accounting.
Too reductive, and disingenuous. Of course some finance is a needed part of a healthy economy. But financialization generally isn't. At best that rent seeking is shifted onto overseas "customers."
Similarly, saving lives is good, but costing a multiple of other industrial nations makes that part of health care a drag on the rest of the economy.
Comparables can be compared. It's not as complex or inscrutable as you imply.
Obviously finance creates value, by enabling transactions that wouldn't otherwise happen. I'm not sure what "financialization" is other than "finance I don't like." My question is a specific one--what should be included in GDP?
That's an easy question with an obvious practical answer:
Include finance activities that are not out of line with comparables. Comparables: You know. Like the G7. Who do things like we do. Except sometimes they get it done for less. There is no reason to come up with a pure or dogmatic answer. Just a practical one.
Or do you think all medicine/pharma creates value, too? All prisons? All cops? All the military spending?
Some of all that is just self-injury. And you don't have to have a moralizing answer. All you need to know is that other nations get better results with less spending in those areas to know we are pissing that money away, not creating wealth, not improving quality of life.
And when I say disingenuous, I mean don't play stupid. You know very well what financializtion is.
Again, what does financialization mean other than "finance I don't like?" Comparing to other countries isn't a very objective way to establish what should be included in GDP. It renders your measure useless in analyzing trends that affect the whole G7. It's not like large finance industry profits and exploding real estate prices are unique to the US.
Surely there are some objective measures that can be derived in a principled way?
Roughly the same way you measure returns against a market index, or currency value against a weighted "basket" of currencies.
But some things should be obvious: The US vastly overpays for health care. The US is also a far outlier in prison spending. Finance probably isn't the biggest offender in soaking up money while failing to deliver quality of life or material output.
There are prevailing market rates for high profile appearances. There is an associated economic rationale: celebrities who show up at the club, earn those places more money.
Spending this kind of cash on public servants serves an economic purpose too: it buys access, influence, and favour by association. You can't really prove it, but you can reason that this is to the detriment of the public at large.
> There are prevailing market rates for high profile appearances.
The problem isn't that they charged for the speeches, which is standard. The problem is that they kept the money for themselves, which is a huge ethics issue.
It doesn't matter if they keep the money, donate it to their self run slush fund[1], or launder it through the Democratic Party[2]. The ethics issue is taking money from people who you're supposed to be regulating and misrepresenting your allegiances to voters.
If she's getting speaking appearances based on her position as secretary of state, I think it's fine as long as the money goes to the state department and there aren't any conflicts of interest. That obviously wasn't the case here though.
Regardless of politics, all private citizens have ethical obligations regarding what they do with their money. That's the nature of ethics.
I think you meant "conflicts-of-interest", as in private citizens don't have conflicts-of-interest about governance and policy in terms of their income. That would be a more valid statement.
Right now not. But it's definitely a warning sign if somebody who is running for president is indebted to banks.
They are also greedy. After the first 100 million they have made they should be rich enough to give their wisdom to non profits who have less money than banks.
The bankers are not stupid. They don't give a lot of money for nothing. They expect that the Clintons will open doors for them. The Clintons know that too so if they want to keep the money rolling they better be useful for the banks.
I am not telling them what to do with their money but it should be clear to everybody who their paymasters are.
Your explicit assumption there is that having the former president of the US give a speech at your Xmas dinner doesn't carry the speaking fee in terms of:
- Impressing your clients: "Of course we're large, powerful, and trustworthy - Bill came to talk us last week"
- Hospitality to your clients; offering important clients a chance to come and watch the speaker
- Making the partners feel like Very Important Peoples
- Morale boosting for current and future employees
As a random example, I note that CareerBuilder had Condoleeza Rice speak at their Empower 2015 sales conference. Do you think there was a political / regulatory angle there?
I think the bankers hope for some more direct benefits but I really don't know. It certainly would be interesting to find out if they pay the same money for other celebrities. One theory could be that by paying lots of money to former politicians they send a signal to active politicians that there is a lot of money to be made later if they play nice now. This seems to work for a lot of regulatory agencies where people switch to highly paid jobs in industry later (see SEC for example or Eric Holder could be an example too).
I don't know about CareerBuilder's motivations and I don't know how much they paid.
Blair is an interesting one - USD $600,000 (converted from GBP) for a speech. I'm really not sure what political influence the Filipino company that paid him that could have hoped to get, but I can certainly understand the PR benefits from their perspective.
> You can't really prove it, but you can reason that
> this is to the detriment of the public at large
I'm glad that high-profile politicians know they have a guaranteed income from speaking engagements so that they don't feel any need to make more nefarious pension arrangements.
