Isegoria

Our best information on the origins of money, David Graeber says, goes back to ancient Mesopotamia — but there seems no particular reason to believe matters were radically different in Pharaonic Egypt, Bronze Age China, or the Indus Valley:

The Mesopotamian economy was dominated by large public institutions (Temples and Palaces) whose bureaucratic administrators effectively created money of account by establishing a fixed equivalent between silver and the staple crop, barley. Debts were calculated in silver, but silver was rarely used in transactions. Instead, payments were made in barley or in anything else that happened to be handy and acceptable. Major debts were recorded on cuneiform tablets kept as sureties by both parties to the transaction.

Certainly, markets did exist. Prices of certain commodities that were not produced within Temple or Palace holdings, and thus not subject to administered price schedules, would tend to fluctuate according to the vagaries of supply and demand. But most actual acts of everyday buying and selling, particularly those that were not carried out between absolute strangers, appear to have been made on credit.

“Ale women”, or local innkeepers, served beer, for example, and often rented rooms; customers ran up a tab; normally, the full sum was dispatched at harvest time. Market vendors presumably acted as they do in small-scale markets in Africa, or Central Asia, today, building up lists of trustworthy clients to whom they could extend credit.

The habit of money at interest also originates in Sumer — it remained unknown, for example, in Egypt. Interest rates, fixed at 20 percent, remained stable for 2,000 years. (This was not a sign of government control of the market: at this stage, institutions like this were what made markets possible.)

This, however, led to some serious social problems. In years with bad harvests especially, peasants would start becoming hopelessly indebted to the rich, and would have to surrender their farms and, ultimately, family members, in debt bondage. Gradually, this condition seems to have come to a social crisis — not so much leading to popular uprisings, but to common people abandoning the cities and settled territory entirely and becoming semi-nomadic “bandits” and raiders.

It soon became traditional for each new ruler to wipe the slate clean, cancel all debts, and declare a general amnesty or “freedom”, so that all bonded labourers could return to their families. (It is significant here that the first word for “freedom” known in any human language, the Sumerian amarga, literally means “return to mother”.) Biblical prophets instituted a similar custom, the Jubilee, whereby after seven years all debts were similarly cancelled. This is the direct ancestor of the New Testament notion of “redemption”.

Sometimes a nudge goes wrong:

The notion of illusory superiority — the misguided belief that we’re better than others — is a basic tenet of social psychology. In one early study, 93 percent of Americans rated themselves as better than average drivers (as compared with 69 percent among the more modestly deluded Swedes in the sample). It’s also one of the quirks of human behavior that best-selling author Robert Cialdini is exploiting to get us to behave better. In one academic study, Cialdini and his co-authors found that simply telling hotel guests that a majority of other guests reused their towels boosted reuse rates by 34 percent more than telling them to do it for the sake of the environment. Cialdini is now retired from his academic position at the Arizona State University and is working as chief scientist at Opower, a company that aims to make money by helping utility companies design social nudges to get their customers to conserve.

In early 2008, Opower collaborated with a California utility to send a Home Energy Report to 35,000 randomly selected customers. (It came bundled with the household’s regular energy bill.) Each report contained a bar depicting the household’s energy use alongside bars showing consumption for average neighbors and also “efficient” ones. The principle behind highlighting the household’s own use relative to its neighbors is the same as in Cialdini’s towel study — no one wants to be worse than average. In addition, Opower reinforced the household’s performance by awarding one or two smiley faces for good households and adding the words “ROOM TO IMPROVE” to the charts of energy gluttons. (The reports also included a few energy-saving tips and suggested what customers might save if they followed them.)

In a study evaluating the program’s effectiveness, Opower researchers compared power use before and after the HER reports began arriving, and further compared this change with a group of control households that never received the reports. On average, the HER households reduced their consumption in the months that followed by a little less than 2 percent. Not bad, but probably not enough to save the planet.

Working with the same utility as Opower, Costa and Kahn matched up information on the households in the pilot study to data on political affiliations and a database of past charitable giving to environmental organizations. The economists found that the 2 percent average decline in energy use obscured significant differences in the responsiveness of different types of households to the conservation message. Registered Democrats who give to environmental organizations and live near other liberals reduced their consumption by 3 percent. For liberals who started out as heavier-than-average consumers, the reduction was almost 6 percent. Republicans who live in conservative neighborhoods (and hence had no neighborly pressure to conserve) and had no record of giving to environmental organizations actually increased their consumption by 1 percent.

Why would some energy-conscious Republicans all of a sudden become power hogs? One explanation is that many conservatives don’t believe that burning energy harms the planet, so when they learn that they’re better than average, they become less vigilant about turning the lights off. That is, they’re simply moving closer to what they now know is the norm (what psychologists call the boomerang effect). Costa and Kahn also look for guidance from the patron saint of right-wing fundamentalists, Rush Limbaugh, who encouraged his listeners to turn on all their lights during Earth Hour. Costa and Kahn suggest that ardently right-wing electricity customers might respond to paternalistic nudges by burning more energy, just to thumb their noses at Big Brother.

Former CIA director R. James Woolsey shares some oil factoids:

At the end of March, oil posted its fifth consecutive quarterly price increase: It’s now solidly above $80 per barrel. If it reaches $125 a barrel again, as it did in 2008, then approximately half the wealth in the world — above and below ground — will be controlled by OPEC nations.

Oil dominates transportation: About 95% of transportation fuel in the U.S. is derived from petroleum. And over three-quarters of the world’s reserves of conventional oil are in OPEC nations. But OPEC is pumping less than it did in the 1970s, despite a doubling in global demand, because it’s a cartel maximizing its income. OPEC sets oil’s price at a level that exploits our addiction but is generally not high enough for long enough that we go cold turkey.

Oil profits enhance the ability of dictators and autocrats to dominate their people. This is one reason that eight of the top nine oil exporters (Norway is the exception) are dictatorships or autocratic kingdoms, as are virtually all of the 22 states that depend on oil and gas for at least two-thirds of their exports.

Saudi Arabia’s oil wealth enables it to control around 90% of the world’s Islamic institutions even though it has less than 2% of the world’s Muslims. So the teaching in most Islamic schools is not the tolerant form of Islam associated with the late Indonesian President Abdurrahman Wahid. These schools teach Saudi Wahhabi doctrine — fundamental hostility to Shiites, Jews, homosexuals and apostates; oppression of women; and the pursuit of a global caliphate, or theocratic dictatorship. This doctrine bears startling resemblance to the substantive teachings of the Taliban and al Qaeda (although of course they and the Wahhabis disagree passionately about who should have power). The effect is that we now are financing both sides in our war with radical Islam.

Because OPEC has very large reserves and cheap extraction costs, the cartel can fend off competition from costly alternatives — so Woolsey recommends just such costly alternatives: improved internal-combustion vehicles, natural-gas vehicles, flex-fuel vehicles, and electric vehicles.

What he doesn’t suggest is a gas tax, which would transfer “excess profits” from the OPEC cartel to the US government, without increasing the price at the pump all that much:

The result is a simple application of the theory of tax incidence. The burden of a tax falls on those who can least afford to escape the tax. The world’s demand for oil is inelastic but the supply is even more inelastic. What is Saudi Arabia, for example, going to do with its oil except sell it? The oil is already fetching a price well above cost so if there is a world tax on oil that’s like a tax on land — Saudi Arabian land to be precise — and a tax on land is born by land owners not by consumers.

Thomas Sowell discusses the limits of power:

When I first began to study the history of slavery around the world, many years ago, one of the oddities that puzzled me was the practice of paying certain slaves, which existed in ancient Rome and in America’s antebellum South, among other places.

In both places, slave owners or their overseers whipped slaves to force them to work, and in neither place was whipping a slave literally to death likely to bring any serious consequences.

There could hardly be a greater power of one human being over another than the arbitrary power of life and death. Why then was it necessary to pay certain slaves? At the very least, it suggested that there were limits to what could be accomplished by power.

Most slaves performing most tasks were of course not paid, but were simply forced to work by the threat of punishment. That was sufficient for galley slaves or plantation slaves. But there were various kinds of work where that was not sufficient.

Tasks involving judgment or talents were different because no one can know how much judgment or talent someone else has. In short, knowledge is an inherent constraint on power. Payment can bring forth the knowledge or talent by giving those who have it an incentive to reveal it and to develop it.

Payment can vary in amount and in kind. Some slaves, especially eunuchs in the days of the Ottoman Empire, could amass both wealth and power. One reason they could be trusted in positions of power was that they had no incentive to betray the existing rulers and try to establish their own dynasties, which would obviously have been physically impossible for them.

At more mundane levels, such tasks as diving operations in the Carolina swamps required a level of discretion and skill far in excess of that required to pick cotton in the South or cut sugar cane in the tropics. Slaves doing this kind of work had financial incentives and were treated far better. So were slaves working in Virginia’s tobacco factories.

The point of all this is that when even slaves had to be paid to get certain kinds of work done, this shows the limits of what can be accomplished by power alone.

His punchline:

Yet so much of what is said and done by those who rely on the power of government to direct ever more sweeping areas of our life seem to have no sense of the limits of what can be accomplished that way.