Digifesto

There’s a longer version of this argument to be made, but I wanted to see if I could present it briefly.

1. What is wealth?
2. Nominal financial worth — in terms of, e.g. US dollars, and other fiat currency, is clearly not a good measure of wealth.
   • Because it is often based on speculative pricing.
   • Because it is vulnerable to inflation.
   • Because of all kinds of market irregularities and exogenous shocks that are not ‘priced in’.
3. Purchasing power or exchange value of owned assets is not a coherent measure of wealth, because that would not direct which trades are favorable.
   • A practical consequence of a theory of wealth is that it should provide a guide as to what sorts of things are comparatively worth having; this is a quite different question from which trades are tactically advantageous for accumulation.
4. Macroeconomic theory provides an interesting answer:
   • The economy creates ‘value’, which is stored in assets that people own.
   • This value is ultimately, well, valuable, when it is consumed — destroyed — which provides utility to the consumer.
   • Wealth is thus a store of potential utility attain through the destruction of wealth.
   • It has been said that this is a ‘thermodynamic’ theory, because utility realization is a form of ‘entropy’. Energy is constant until it is lost.
5. This macroeconomic theory is also a bad theory of wealth.
   • Nobody really believes the foolish idea that what people most prefer is the thermodynamic destruction of what is valuable.
   • To the extent that this is the prevailing scientific theory that our society is built around, it’s a disastrous one.
   • It’s appalling that, given what’s at stake in ‘the economy’, the world hasn’t come up with a better theory.
   • I think this is largely a methods technology issue, and that motivates a lot of my current research, but I digress.
6. Some good things about this macroeconomic theory of wealth:
   • Wealth is a store of value, where ‘storage’ is due to the situatedness of wealth in a larger system of exchange.
   • The value is realized by personal needs or preferences.
7. What do people actually want or need?
   • It’s not setting valuable things on fire — most of the time.
   • The big idea: the intrinsic motivation of all things is self-preservation over time.
     • This is conatus to Hobbes and Spinoza.
     • This is at the heart of enactivist psychology, and the connection between constitutive autonomy and intrinsic motivation.
       • (Christoph Salge and I are working on a book chapter about this, connecting it to AI legal responsibility. But I think this point also applies to economic theory.)
   • Self-preservation of (dynamic) systems actually requires very good energy retention, or Weiner’s negentropy, not entropy. Utility is about life continuation, not fireworks.
     • (Ok, it is a little of both.)
   • Implications:
     • “Health is wealth.”
     • “Sustainability” is wealth.
8. A mathematically coherent, falsifiable theory of human and economic behavior that tracked the right variables for measuring wealth would be good.
   • It could help households make better decisions.
   • It could help governments make better decisions.
   • It could help businesses make better decisions.
   • I expect that this does not imply a very radical change in how accounting is done. Rather, I think it’s a meaningful but subtle distinction worth making.

In other news, we’re exploring solar panels on our house, and will finally improve our insulation and windows this year. These kind of home improvements for energy efficiency are subsidized by the federal government and state of New York, and this is wise policy. I believe this is aligned with this ‘theory of wealth’, since energy efficient residential real estate is perhaps the sina qua non of wealth in the sense articulated here.