Tag: money

In this episode of the Economics Explored podcast, host Gene Tunny chats with John August, Treasurer of the Pirate Party of Australia and host of the Roving Spotlight show on Radio Skid Row in Sydney. Together, they discuss previous episodes on topics such as the invisible hand, Goldbacks, and cryptocurrencies. Listeners are encouraged to share their thoughts on these topics.

Please get in touch with any questions, comments and suggestions by emailing us at contact@economicsexplored.com or sending a voice message via https://www.speakpipe.com/economicsexplored. 

You can listen to the episode via the embedded player below or via podcasting apps including Google Podcasts, Apple Podcasts, Spotify, and Stitcher.

What’s covered in EP194

• [00:02:44] The invisible hand. 
• [00:04:27] Hidden assumptions in economics. 
• [00:08:15] Problem with gambling addiction. 
• [00:14:39] Soviet Union. 
• [00:26:03] Military expenditure and Soviet collapse. 
• [00:30:16] Social media and liberty. 
• [00:33:37] Censorship in social media. 
• [00:39:01] History of currency. [00:40:47] 
• [00:44:25] Central Bank Digital Currency. 
• [00:50:34] Crypto as a solution. 
• [00:55:46] CBDC concerns and conspiracy theories.

Links relevant to the conversation

John’s website where you can find his writings and a link to his radio show:

https://johnaugust.com.au/

Gene’s previous conversations with John:

https://www.mixcloud.com/Johnorg/roving-spotlight-24-may-22-post-election-all-over-gene-tunny-economics-internet-purchases/

https://economicsexplored.com/2022/06/21/advertising-surveillance-capitalism-w-john-august-ep144/

https://economicsexplored.com/2022/05/11/the-pirate-partys-economic-policy-platform-w-john-august-ep138-transcript/

Recent episodes mentioned in the conversation:

https://economicsexplored.com/2023/05/12/govt-wellbeing-budgets-frameworks-useful-or-useless-w-nicholas-gruen-ep187/

https://economicsexplored.com/2023/04/29/the-invisible-hand-economic-religious-or-mystical-concept-w-dan-sanchez-fee-ep185/

https://economicsexplored.com/2023/04/12/what-are-goldbacks-and-whos-buying-them-e-g-preppers-libertarians-collectors-w-goldback-founder-jeremy-cordon-ep183/

https://economicsexplored.com/2023/03/31/odd-way-to-fix-housing-crisis-proposed-by-aus-govt-invest-in-stocks-first-w-dr-cameron-murray-sydney-uni/

https://economicsexplored.com/2022/09/18/bitcoin-books-w-author-ex-fighter-pilot-lars-emmerich-ep157/

https://economicsexplored.com/2023/03/08/crypto-arbitrage-searcher-dave-belvedere-on-crypto-and-dapps-such-as-wizards-dragons-ep178/

https://economicsexplored.com/2022/12/19/aussie-energy-crisis-net-zero-transition-w-josh-stabler-energy-edge-ep170/

Transcript:
Invisible Hand, social media, money & crypto w/ John August – thoughts on recent episodes – EP194

N.B. This is a lightly edited version of a transcript originally created using the AI application otter.ai. It was then looked over by a human, Tim Hughes from Adept Economics, to check for mondegreens, things that otters might have misheard. It may not be 100 percent accurate, but should be pretty close. If you’d like to quote from it, please check the quoted segment in the recording.

Gene Tunny  00:06

Welcome to the Economics Explored podcast, a frank and fearless exploration of important economic issues. I’m your host Gene Tunny. I’m a professional economist and former Australian Treasury official. The aim of this show is to help you better understand the big economic issues affecting all our lives. We do this by considering the theory evidence and by hearing a wide range of views. I’m delighted that you could join me for this episode, please check out the show notes for relevant information.

Now on to the show.

Hello, thanks for tuning into the show. In this episode, I chat with previous guest and regular listener John August about some recent episodes. John is the treasurer of the Pirate Party of Australia. And he hosts the roving spotlight show on Radio Skid Row in Sydney. When he was in Brisbane, recently, John dropped into my office and he gave me some thoughtful and provocative feedback on some recent episodes. First, we discuss my conversation on the invisible hand with Dan Sanchez from the Foundation for Economic Education. John and I went on to chat about goldbacks and cryptocurrencies. They were the topics of some other recent episodes. I’ll put links to all those recent episodes in the show notes. If you have any thoughts on what John and I have to say in this episode, or previous episodes, then please get in touch via contact@economicsexplored.com. Okay, let’s get into the show. I hope you enjoy my conversation with John August.

Gene Tunny 01:44

John August, good to be chatting with you.

John August  01:48

Yes, well, you do say at the end of the show, you know, we’d like to know what you’re thinking and boy have I listened to a lot of shows. And boy, have I done a lot of thinking about your show. So so I’m here to sort of follow through on that invitation, I guess you might say,

Gene Tunny  02:01

very good, John. So yes. Good to be chatting with you again. So we’ve previously chatted about things like advertising and, and some other issues. I was on your show talking about economics and philosophy of economics. If I remember, correctly,

John August  02:15

well, I think I was inviting you to talk about three famous economist three issues, three things important. So I think there was a sort of nine things to talk about. And okay, oops, oops, I can’t remember the

Gene Tunny  02:28

Okay, I’ll put a link to it. I remember that was good fun. But you’ve you’ve had some thoughts on some recent episodes, as you said, and I mean, one of the ones was the one I did with Dan Sanchez, from Foundation for Economic Education on the invisible hand. So I’m interested in what do you think about that conversation? What are your reactions to that one?

John August  02:51

Well, in a narrow sort of way, I guess I do celebrate elements of the, you know, the invisible hand. But you know, the overall position, I guess he had just too a naive, a sunny view of things, and I’m going to maybe say, you know, things that I strongly disagree with him. But I hope at the end of the day, maybe I could buy him a beer or something like that. I don’t want it to be that negative. But yes, there’s a lot of things I disagreed with, with him on now, one of the things that he was saying is, look, you know, there are atheists out there that disagree with the whole idea of the invisible hand, just because the guy made one reference to God saying that. Now look, I can’t speak for other atheists. And maybe he has experienced some atheists who have actually said that. But I would never say that a religious view has got no validity to it. Now, I would say to the extent that it does have validity, it’s because people lived certain things. They thought about the world around us, around them, and they tried to put into writing and try to think it through. In other words, it may have some merit, but it’s not revealed truth from God, but it can still have merit. What I’m trying to say is, as an atheist, I think deeply about religion and the ideas and how they propagate. So so that’s a bit of a diversion. But what I’m trying to say is, I would never dismiss something, merely because someone mentions God once, twice or three times in developing their argument. So I would never challenge the idea of the invisible hand on that basis. But as far as the story of the pencil goes, Look, it is remarkable that there’s so much coordination to make the pencil. Okay, that’s impressive. But there’s also a decent number of hidden assumptions built in. Now one is that we’re assuming everyone in that chain are paid reasonably. We’re also assuming that there’s no particular externalities like people are mining whatever minerals they need to make the to make the pencils or they’re cutting down trees or whatever. And we won’t need to assume that. We’re also assuming that people are buying those pencils for legitimate needs. Now, let’s say someone’s buying pencils, because they’re addicted to chewing the ends of it, not because they actually want to design a building with those pencils that people will benefit from. And notice I’m, I’m sneaking in, to some degree, what I think you call in economics, a normative judgement. But keep in mind, if you say, here is this system, it is good. You’re making a normative judgement. So I think I can push back and challenge the normative judgments and say, if people are buying these pencils, because they’re addicted to chewing the ends of the pencils, and they’re addicted to that, like they’re addicted to heroin, well, is it really such a good thing that these pencils are being made. So there’s one equilibrium where things are made that people legitimately need. And, you know, the market coordinates itself in very impressive ways to do that. And I won’t deny that. That’s the good side of the invisible hand. But I think there’s other equilibrium that can also arise in the market, the equilibrium between people’s ability to be manipulated, and the market having the energy to manipulate them, because there’s money to be made from that. Now, we’ve discussed advertising before. But let’s say there’s so many things where there’s a legitimate side, and as you slide down the slope, it gets worse and worse. Now, let’s say someone makes a bet on a footy game of $10. Okay, that bet is recreation. Now, but then at the other end of the scale, you have people who queue up at the clubs at 9am, waiting to go in and play the pokies. Right. And clearly, that’s gone to the end of being addiction. So an in between, I mean, this is one of the things that Dan is also thinking, look, I guess, on one sense, I do celebrate the idea of the sovereign individual, but the psychologist is sort of unpacking the way our brains work, and realising that it’s not such a simple story. Now, we may well struggle to lose weight. And then when the cake is sitting in front of us, you know, we’ll sort of indulge and there’s in a sense there’s two people inside of us that want different things that are struggling for control. And, you know, this naive idea of here is this sovereign individual that wants X Y, Z, they know what they want. And it’s the government that is getting in the way. Now, look, I do not believe in paternalistic intervention, I suppose. But equally, the story Dan Sanchez is telling us just doesn’t seem to be engaging what I think is a much more complicated reality. I mean, let’s talk about or maybe I’ve told this story before, someone’s a heroin addict, did they go out in the market, seek amongst the options and decide and end up becoming a heroin addict because they engage with those options? You know, other stories coming out of AFL? You know, yes, notice I’ve said a certain amount of gambling is a recreation. At the other end, you can say you’re just pandering to someone’s addiction. And there’s this movement within AFL, which is saying, follow the game, not the odds. Because while people do not mind, you know, the single bet on the game sort of thing, which is adding to your experience, when the odds are flashing onto the screen, every advert while the game is playing. A lot of people I think, are getting legitimately concerned about that. And as I say, I’ve got nothing against gambling, per se, but when there’s this big feedback loop, which is I guess ceding to its excesses, then you have a problem there. So that’s one problem that I have with that sort of idea. So notice, I am acknowledging the magic of the pencil. At the same time, I’m also saying there are all these other equilibrium that can happen. And we’ve had the discussion about advertising before. And this is I guess, part of that thing, so. Okay, so we’ve talked about gambling, people queuing up at 9am. Okay, the fact that we struggle to lose weight, and that’s telling us things, okay, then yeah, I mean, it’s the perspective from the affluent society by John Galbraith. He sort of says that in the ideal, we are a sovereign people who have our, to have our wants, we go out into the market, and we satisfy those wants. But he’s saying advertising is a lot more pernicious than that advertising actually shapes our wants, rather than being something a means by which we’re informed of the options to satisfy our wants. So I guess this is a subtle philosophical point. But I would still say, advertising can inform us of our options, or basically our options for satisfying our wants, or it can actively shape our wants. And I think there’s a bit of a conceptual muddle there. So I suppose Dan Sanchez’s view is like, you go out into the world, and the world is this passive thing. And you just, you just pick and choose as a sovereign individual who knows what you want, is totally clear unstressed, no psychological hammocks. But in fact, when you go out in the world, it’s an active thing. It’s reaching out to you. Right. So I think that a lot of his story is problematic there. But at the same time, I do endorse the idea of distributed innovation, people thinking, and, you know, elements of that story. So, so what am I trying to say, look, I acknowledge part of that story of the pencil and that integration. But it’s just that I think people are going too far with it. And taking it’s past its load limit. So in a sense, this is a bit of a bigger dip point of disagreement between myself and Dan Sanchez, and perhaps others, you do say, look, there is this bad stuff going on in the economy, and maybe we need to manage it or have antitrust regulation, and so on. But it’s a matter of how we relate to it. I think, I think people on the other side of the fence, say, it’s over there, we quarantine it conceptually. And then we get on with the interesting stuff, which is thinking about the magic of the pencil, while I sort of say Hang on, it’s all very strongly integrated together. And you can’t really separate them out so clearly or neatly.

Gene Tunny  11:31

So what do you mean by on the other side of the fence? So you see yourself as philosophically different from Dan? Because you, I mean, I’ll have to go back and, you know, really pay close attention to what Dan was saying, because I will, my view was he was making a really good argument that let’s not dismiss what this idea of the market as some sort of fairy tale, because that’s what it all some sort of mystical thing. That’s, that’s what he was reacting to. He was reacting to some commentary that he’d seen where people were saying, Well, you believe in this Invisible Hand thing, and it’s something mystical or religious concept. It’s not something that is, is guiding our, it’s not something legitimate, but he’s saying, well, actually, this is this is what’s supporting the bulk of our society, really, I mean, this is what leads to a higher living standard, higher living standard than, say, in the Soviet Union, which tried a different system. And it proved not to work. So I think he’s making a legitimate point. I would I probably differ from Dan in some of the judgments as you know, what regulations needed. But broadly, I agree with him. I would say that, yeah, I take your points about what economists would call market failures they’re clearly market failures of some kind of different kinds that there could be scope for government intervention to address those. And yeah, people aren’t always rational, they’re not this idea of consumer sovereignty is that’s questionable. And that’s why we have behavioural economics now. So I would say that, largely, Dan is, is on the right track. And I mean, you you yourself, acknowledge the pencil story, there’s some there’s some legitimacy in it. And I guess what you’re saying, or my interpretation is that you think that in telling that story, you you’re not giving enough acknowledgement of these other these deviations from

John August  13:25

I guess so look, I suppose who knows, maybe I need to talk to Dan face to face to sort of get to the bottom of it. But yeah my recollection of that episode was not only was he defending the story of the pencil from unfair criticism, and I think there’s a narrow sense in which I do feel that anybody who dismisses something just because someone mentions God, two or three times, that is wrong. That’s that that’s not right. So in a sense, let’s just say, I will defend Dan against the atheists who make that claim. But then Dan goes a lot further than that. And that was sort of my recollection of the episode that, so notice, I’m saying, Look, I will defend Dan against fellow atheists who, who do behave in the way that he identifies but yeah, there’s a lot more to the story than that. But I suppose there’s some other things that I can talk about that come out of Dan’s story. Now, one of them was social media, but the other one was actually the Soviet Union. Yes. And I suppose you’ve actually mentioned that. And this whole thing of the Soviet Union does actually go into the US and Ukraine. I don’t know whether we want to park that for a later discussion. But let me get started on some stories about the Soviet Union. So my heritage is Lithuania, Lithuanian. And I did actually go to Lithuania, some time after the revolution, and they had sort of, basically they’ve gotten gotten rid of communism on the one hand, and the interesting thing is, the first government that took over Lithuania was not communist, and then they had a successive election and they actually put the old communist back in. Now depends on what you mean by Communism. Now my uncle who was seriously anti Russia and anti communist, he said, Well, if they’re willing to subject themselves to a democratic election and leave based on that, then he says, Well, they’re not really communist. Now this is madder than that. What you mean by communist? Do you mean state control? And obviously, I think the sentiment was those notional communists were Lithuanians first and communist second. And yeah, that was the sort of the way they related to the story there. But there’s this view that like the Soviet Union had shoddy workmanship, but I spoke to people. And there was this idea of, I guess, in the West, you’d call it branding. But people said, if you get a washing machine, or a refrigerator from a factory of known repute, it will just go on and on and on and keep working. Because as far as design goes in the Soviet Union, okay, quality of workmanship, may have been an issue. And it may have varied a bit with the factory. But the engineers were not constrained by what we in the West might call, you know, trade offs to make profit, or, you know, planned obsolescence or those sorts of things. Their design principle was, we make this to work, we make it to last. And if you actually got a factory that did a decent job with putting the bits together, it really did work and last, and what some other stories as you wander around, you see little country towns that have, you know, two storey brick buildings. And if you wander around Australia, you’d say you, you only get two storey buildings when there’s a sufficient density in the township. So on the abstract, you could say that’s wasteful, you know, you don’t need a two storey building in this small township. But you also have the benefits of uniformity, right, a scale, if you know what I mean. Like it’s basically they have one unit that runs around making two storey buildings and makes them wherever and so you have the benefits of scale. So for me, it’s not quite that bad. But let me also tell you a story. Now, this is I’m not sure that people on your show have exactly made this critique, but I know there are commentators who talk about Soviet Union was a place where culture went to die. And now there was a woman I know from Lithuania, who came to Australia to start a family, and she was very musically inclined. And her she actually took her family back to Lithuania, because under the Soviet system, and they actually kept this after the revolution, if your child is musically talented, they can go off to a particular school where their talent is developed, at no particular cost to the parent. Now, we can do that in Australia, but there’s private tuition going to the Conservatorium, this sort of thing. So someone actually went back to Lithuania because of that. So there’s some good things going on there. But let me say, you know, I went to those museums, where the former Soviet Union with the three stamps of the judge, you know, before they execute someone for being a political dissident or whatever. So there was that, you know, evil stuff going on there. And I suppose this is going away from Dan Sanchez, to some of your other commentators that basically I’m very strongly pro Ukraine, partially because of that, that heritage from Lithuania and, and, you know, sure, there are some people on the internet who say that they’re American and very strongly pro Ukraine and I have to take their I take them at face value, but you know, I look at it I’ve seen my my relative with her family from Lithuania. And it’s like, the US theme feels like they’re playing geopolitical chess. But for Poland, the Baltic states, you know, Lithuania, Finland, whatever the Soviet Union is, Russia, I should say is over there and they’re a geographical proximate threat. So they’re actually shall we say, Lithuanian seem more Lithuanian government even seems more pro Ukraine than the US government not to criticise, there are some very strongly pro Ukrainian individual Americans out there who are identifying themselves on the internet. But you know, there’s, there’s an interesting subtlety there. I do actually say that there are some pro Ukraine forces that are stronger even than the US not to deny the US has given us a bucketload of positive aid there. But I suppose with Dan Sanchez, you were having that discussion. You know, what is the story about the Soviet Union there? There are a few little little strange things with the Soviet Union, like compared to China, they’ve got more social capital, you stumble while you’re on the stairs, getting on the train people will be concerned and try to help you up or whatever. But the other story is, remember, once upon a time, when everyone was getting their car stereos pinched out of their cars and and people were putting in the boot and had these special connectors and this sort of thing. And then you went to the stage of having you know, encoding so if I remove it from the power you had to get the code put back into there. Yeah, the thing is you talk to people in Lithuania. And I remember my, my cousin there, you know, people were saying to Oh, why are you putting the stereo in the boot and you don’t have these like, like security keys? And she says, I know, in Lithuania, if you know if there’s money in it, and there’s some technician who can sort of blag the codes, well, you know, it’s not very secure. Now, in Australia, let’s assume that you are some sort of automatic technician that does have access to the codes. And you abuse that I’m not sure it may, maybe you’ll never end up being taken seriously by any automotive firm again, maybe you’ll end up in prison. It’s a very different deal in Australia, if you were to betray that sort of trust. Yeah. But you can see that the degree to which you submit to those sorts of regulations, you know, there were obviously some, I won’t say that. I mean, obviously, yes. Lithuanians will be concerned about you in the street if you stumbled and you know, had that sort of thing. But there was also that sort of aura of criminality, I suppose there as well. And I hope, hopefully, Lithuania is not going to take a swipe at me for saying that. But there’s, I guess, some complexities of the story about the Soviet Union. And I suppose I can but say even though I’m a lefty, I’m certainly not in favour of the Soviet Union or Russia in the way that it was. I mean, going back far enough, I’m aware of that history, you know, way back when, if you’re a dissident in Russia, you would be executed, then the next step is you’d be shipped off to a gulag in Siberia, you might not survive the trip. And then at the end of it, they they locked you up in a lunatic asylum because only the insane would not believe that the Soviet Union could not effective, then right at the end of the thing, if you’re inconvenient, but they didn’t particularly want to lock you up, they’d ship you off to an anonymous township in Siberia would sort of be like the Tower of London, you live a reasonably comfortable but irrelevant existence. So. So anyway, there’s my sort of, I guess, glib summary of the Soviet Union, acknowledging all of the sins along the way.

Gene Tunny  22:07

Yeah. Okay. So I just want to ask one more question about Soviet Union. So look, I acknowledge there were some, there were some positives, and I mean, some I think they had some of the greatest conductors. And certainly there’s some great music that came out of the Soviet Union Shostakovich, for example, or they had great dissident writers too. So that so I mean, that’s, that’s not a positive for the Soviet Union. That’s a that’s a positive for the people, and Solzhenitsyn, who wrote the Gulag Archipelago about the sins of the Soviet Union. But certainly, yeah, this system did encourage the Arts and Sport. They had great sporting achievements. Some of them were assisted by, by doping, of course,

John August  22:51

Well, though, one thing, there were the Olympics in Montreal, and afterwards, they were trawling the river and they found all these syringes there. Anyway, that’s one story about the Soviet Union. Yeah. Was that the 23rd? Olympics? Well, anyway, it was in Montreal.

Gene Tunny  23:11

Okay, we’ll take a short break here for a word from our sponsor.

Female speaker  23:16

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Gene Tunny  23:45

Now back to the show. Well, what led to the collapse of the Soviet Union, in your view? I mean, partly it was because of the oppression and partly it was because of the inability to deliver the consumer goods that the people needed and wanted. I mean, would you agree with that?

John August  24:02

Partially Yes. Well, I would say broadly speaking, it was corruption. And I guess endemic corruption was what what I would say was the downfall of the Soviet Union. I know that I think it may have been Dan Sanchez, but I know that one of your guests was talking about the price mechanism and the great things about the price mechanism. And goodness me I don’t want to go down. Well, I guess my my endorsement of the price mechanism is somewhat guarded. But yeah, I guess I would focus on corruption and lack of democracy and lack of transparency as being the things that undermine the Soviet Union, rather than a lack of price mechanism. But I suppose it’s, that’s a matter of judgement. I acknowledge.

Gene Tunny  24:51

Well, maybe I’ll do a another episode where I look at the economy of the Soviet Union because I acknowledge that it’s, yeah, it’d be good to get the nuance in there and just understand exactly what was going on and to what extent these stories about the bread lines, people queuing for bread, the shortages to what extent they were true. I mean, it looks like they were in many circumstances…

John August  25:13

Well, going off on quite a tangent. But there’s, you know, Hugh White, who’s the Australian academic. And I know, he’s someone who says that he did actually see the downfall of the Soviet Union before it happened, because he looked at it, did his economic calculation, thought, hang on, this is not sustainable. And maybe it’s worth checking out his analysis. But the very interesting contrast is, he’s an academic and like whether the Soviet Union collapses or not, he’s still got a job, right? Yes. But the very interesting thing is that there were all these people from the CIA, who were saying the Soviet Union is a threat, and will continue to be a threat. And this, this Australian academic with a degree of objectivity could actually see clearly that the collapse of the Soviet Union was coming. So I think that’s a very interesting contrast.

Gene Tunny  25:59

I’ll have to have a look at his stuff, whether was he making the argument that it was because of the economy that was just unsustainable, was it because of the big increase in military expenditure that they had to undertake to match what the US was doing? I mean, this is the this is the story. The the the Americans tell, isn’t it that I mean, Reagan defeated the Soviet Union, because he just massively ramped up US defences

John August  26:22

Well there was also, there was also SDI, which I think was, you know, basically, you know, lasers in space lasers on Earth, whatever, which was ultimately ineffective. But you could say that it was a propaganda ploy that prompted the the Soviet Union spend all this money on stuff that they didn’t need to do so. And that that was one of the things that broke the Soviet Union. Well, let’s just say all these things are possible. Notice I mostly tell the story about Hugh White because it’s a cute story. I don’t carry around all of his conceptual detail, although I’m sure he’d made quite a considered judgement at the time,

Gene Tunny  26:58

I’ll look into it. I’ll look into it. Okay.

John August  27:01

So I suppose the last thing Dan Sanchez was also talking about was social media and the government getting its mitts in and causing problems. And let’s just say, Look, if you are into social media, if you were into the internet, and you understand the development of the Internet, now, look, I actually, as a pirate, I’m certainly concerned about government surveillance, I’m concerned about the protection of whistleblowers, more obviously concerned about companies sort of harvesting data and that sort of thing. You know, that rubric of thing. I mean, I am concerned about government and I’m concerned about business. But let’s focus on social media. The the history is, even of people who are very much, shall we say, anarchist inclined in the way that they relate to social media, the big problem has always been that a positive forum gets taken over by trolls, and you know, people who want to abuse the situation, it basically gets taken over by bad actors, if you’re not careful. And you need moderation to control that. And that is something that elements of the internet, you know, anarchist inclined elements on the internet, have struggled with to get on top of yet. And in a sense, if you set up a chat group, a forum, you know, you’re gonna have to be careful about trolls, to some degree, you’re going to be careful about obnoxious people, or you’re going to have to be careful about, you know, people trying to take over your website and promote gambling or something on it, you know, all those threats. But the idea that the government might come in, and censor you, you know, I just think that that just seems to me to be so naive compared to the lived experience, if you’re actually on the internet, trying to manage these things. Now, one of the things that has actually happened on the internet, it’s a concept they call it, this is the environment here is an amicable dinner party. Right? And this is the thing I do not want to send to someone based on what ideas they’re putting forward. But it may be appropriate to, to call someone out if they’re being obnoxious. And, you know, I thought I, you know, Facebook is a bit controlling and whatnot. Let’s go to some of the alternatives. And rather than the alternatives being a hotbed for interesting political debate and divergent opinions, they tend to get taken over by conspiracy theorists. And that’s my own lived experience on the internet. And it just seems polls apart from Dan Sanchez’s view and look, notice, I’ve told you a few things. You know, I’m not really impressed with government censorship. I’m not really impressed with lack of transparency, protection for whistleblowers, all those sorts of things. Those are a part of the things that I bring to the table. And I suspect we’ll get into it later on. But while I’m not totally against government involvement in society in the economy, by golly, there can be some obnoxious bureaucracy developing very easily. Yeah. And we’ll perhaps get to that.

Gene Tunny  30:04

Yeah. Can I ask you about social media, John? Because I’m actually surprised that your point of view on this, I want to make sure I understand it fully. Because isn’t the biggest threat to our liberty, really the government or government overreach or, you know, factions taking over the government and wanting to impose a totalitarian state? Isn’t that the biggest threat to liberty? Not some trolls online? I mean, you can ignore the trolls, can’t you? And isn’t it better to have a robust debate to have that exchange to? This is why Voltaire didn’t what’s the line from Voltaire about how I disagree with what you say, but I’ll defend, to

John August  30:47

defend to my death your right to say yes, yeah, the person Voltaire was talking about. He was probably saying something Voltaire disagreed with, but he was probably doing it in the context of an an amicable discussion over dinner. Okay, right. And remember, I’ve just I’ve just said, I guess I’m repeating myself. I’m not against people who disagree with me, I am against people who are assholes. And there’s a fundamental difference there. And my concern is not over ideas. Or to some degree, there’s an idea, like someone over there thinks blah, okay, they can think that I don’t care. Are they in my face yelling at me telling you this stuff? Okay, then I have an issue. But I don’t have an issue with someone over there thinking x y Z. So as far as like threat to Liberty now look, maybe you’ve got a point in terms of threats to liberty. Okay. Let’s see now that forget the social scientists who were sort of talking about the state having the monopoly on on violent coercive force, violence, being able to jail people, and so on. So one of the things is you got to understand there are corporate platforms, who are making choices, and some people call that censorship, I tend to think censorship is only something that government does, because the government is backed up by its legal monopoly on force. Right? So So when corporations make a corporate choice, to allow something on their platform, or not allow something on their platform, that’s more of a commercial choice than censorship. But when you have, let’s say, Facebook, or whatever, and there’s only one place you can go to to express yourself, then they’re starting to give state like power, because there’s only one place you can go to. So that’s where things start to get a bit murky. But, you know, let’s say that if there’s multiple platforms, and this platform decides, well, we’re not going to allow blah, for commercial reasons. And there’s other platforms you can go to, then I guess, you know, that’s the old thing of, you know, the, the world of possibilities. And that’s not really a problem. But it’s sort of like what’s, what’s the sentiment, you know, this is a, this is a private entity, but it’s becoming like a public utility. And even though it’s privately run the fact that it’s like a public utility, that makes it more complicated. So let me try to engage with what you’re saying in a more complicated way. If you’re talking about freedom, and the fact that government is the one with the legal, the legal monopoly on force, and that is something we should be concerned about. Okay, I agree with you. If you are saying here is this thing called social media, we want social media to be a social good, that does good things in our world, and is pleasant to use. Maybe that’s a different issue to whether we are free or not. But it is still a legitimate concern, that here is something going on in the world that basically shouldn’t have barbs or we shouldn’t be, we should be able to pick the roses without getting our thumbs sort of on the thorns or whatever. You know, it’s, it’s, as I say, it’s not an issue about freedom. But it’s an issue of is this thing actually worth doing? Is this effective? And I still think that then maybe if Dan Sanchez just wants to bang on about freedom, and ah the states got its legal monopoly on force, blah, blah, blah, okay, if that’s his argument, well, there’s a degree where I’ll back off and say alright if that’s what you want to say, but if he’s want to say, look, here’s this wonderful thing called the Internet, and the major threat to it being effective is the state and I’m sort of saying, no, that’s not the major threat to social media being effective. There’s other things going on that you’re totally blind to. So am I making sense there if you want to narrow your argument to freedom government with coercive monopoly on coercive force? Okay, but that what I guess I’m trying to say is, you’re confusing two different arguments there. And who knows, maybe Dan started out talking about personal freedom and then somehow sort of oozed into is social media effective or pleasant to use and he’s confusing those two concepts. Am I making sense there?

Gene Tunny  35:02

I think you are. Look, I mean, my view would be that we want to be careful how much we censor social media. And if there’s demand for that platform you’re talking about, then you would expect someone would try to set that up. And therefore you would sign up for some sort of moderation. So I don’t mind if people sign up for that, if they go into that. And there’s, you know, when you’re going when you join a platform, you’re conscious that yeah, there will be some moderation because people who are coming to this platform, they want to go to that dinner party you’re talking about. So I guess LinkedIn’s sort of like that, where people are talking about their professional accomplishments, and they’re sharing things on that, that seems to be well more behaved. And they they are expressing some opinions, it seems to be a lot better behaved than say, Facebook or Twitter. I mean, Twitter is bad, because it’s anonymous, isn’t it? So that’s one of the problems there. Yeah, yes. Yeah. Yeah. I mean, my view would be to look, I see the problem with trolling. I think the best thing is to ignore it. And you know, you can block trolls, can’t you?

John August  36:10

Well, look, there are ways of engaging with this. But I’m just saying I guess it’s making the whole thing a bit bit more difficult to use. And let’s just say it’s betraying the promise of social media I suppose would be my sentiment. And yes, whatever problems there are, there are workarounds. But the fact that you need to apply workarounds, I think is perhaps telling.

Gene Tunny  36:32

Right. So, John, we’ve had a good chat about your thoughts on the invisible hand episode with Dan Sanchez. And I’ll have to let Dan know, and I might see if he has any reactions in, in reply

John August  36:45

Yes maybe it would be a bit simpler if we basically just had a face to face discussion some time. Because as I say, I’m yes, I strongly disagree. But I hope at the end of the day, maybe I can buy the guy a beer you know, I hit that.

Gene Tunny  36:56

Yeah, I think he might be in Atlanta, but we could certainly have a, we can certainly have a catch up on Zoom. Or if he’s coming over here to Australia. Or if you’re in Atlanta, you could get in touch with him. Okay, so we chatted about the invisible hand. You also had some thoughts on the goldbacks episode that I did with the gentleman who was who’s setting up the he’s got his goldbacks in the state in, in Utah, which is quite fascinating. Yeah, Jeremy Corden. That was, that was a conversation I really enjoyed. And I learned a lot. So what were your reactions to that conversation? John?

John August  37:32

Let’s just say as a as a pirate, and I say people can do whatever they damn well, like, you know, that within reason, I suppose obviously, the within reason is the big rider. But if people want to have these goldbacks, well, good luck to them, they can do that. And I suppose that it’s more people who were in terms of challenging the current norm. I think that was more something to do with crypto, but let me try to focus on on the goldbacks. I sort of scratched my head over whether this really is that useful? Or whether the mainstream monetary system is that corrupt that we need to bail and go down a different path. So in that sense, I wonder about the motivation. But at another level, I say people can do that whatever they damn well, like, and I don’t think anyone who’s buying goldbacks or trading goldbacks is hurting anyone. So good luck to them. They can they can do that. Now, if people want to have goldbacks, like for, like the imminent political crisis, when money becomes worthless then all the institutions of the US unravel, and they’re sort of survivalists, and that sort of thing. And that’s the way they relate to things. Well, I guess that’s your choice, you can do that. But one of the things where I do actually defend what was the gentleman’s name, Jeremy Corden, Jeremy Corden now one of the things where I defend Jeremy Corden and this goes back into the history of currency and the history currency more relates to modern monetary theory but nevertheless, I’ll talk about it now is that once upon a time you had coins, okay, and and the thing is, before you had coins, you actually had lumps of gold or lumps of silver or lumps of whatever. And when you use them to buy stuff, you’d actually have some scales and every time you bought something’s people would weigh out the gold or the whatever. And what you then had was the king would run a stamping unit and probably stamp their their impression onto the coin. And and what you did then, basically by counting out a given number of coins, you have confidence that that was a given weight of gold. So those coins you’re gonna understand it wasn’t theat currency it was obviously the the underlying value of the metal was what made this coin valuable, but the fact it was stamped made it more convenient than the metal itself. So that was the benefit you had. But let’s look at this stamping unit the Emperor running it. Now keep in mind, we didn’t have advanced economies with like, you know the amount of money you need for anything, because like, let’s just say even if people have got the proverbial licence to print money, even if they’re forging currency on their colour printer, the colour printer costs some dollars, the paper costs, the ink costs some dollars, the the electricity costs some dollars. So even if you’re forging currency, yeah, it still costs you some stuff. And going back to the Emperor with his stamping rig, you know, someone is sitting there, measuring out the gold, putting it there applying the stamp, and I guess they probably whacked it with a mallet or something to form it into a coin. That’s a labour intensive activity. Right. So that is a reasonable thing. So the thing is that this gentleman was charging for his goldbacks. And I think that was legitimate. The other thing is that the another metaphor here is, this goes back to the time of coal, okay, you someone will buy 10 tonnes of coal, and then sell it off in bags of coal. And basically, they’d buy those 10 tonnes of coal at a very cheap rate by volume. And because they were segmenting it out into smaller amounts, you know, you’d pay basically more per lump of more per pound of coal, I guess it would have been then. And the service was taking a large amount and turning into small units. Now, let’s say you go down to the service station and buy some petrol. Now I’m sure the person who runs a servo buys that petrol at a very cheaper amount than you would put in into your car, but you are buying the, the petrol one tankful at a time, that’s convenient, that is the service that the service station is providing you, they’re taking something of a large volume, and segmenting it into smaller amounts, smaller quantities that you as consumer can then officially use, and they are charging for that. And okay, they’re going off on quite a tangent, you know, farms will actually have a very big container of petrol. And you know, they’ll have a truck that visits you know, once every, I know, weeks or months, and that will fill up the container. And that’s because for someone who is on a farm, it’s a lot of effort to drive down to the servo to top up, yeah, right. So they have to go through that. But you and I can buy our petrol one tank at a time. And the servo person running the servo is charging, and I think they’re charging legitimately, it’s a reasonable thing to do for them to charge for that. And so running all these things back, it’s a legitimate thing for this gentleman to charge for the goldback in the same way as all these things. The only issue is, is he making a monopoly profit, who is competing with him? Is that a legitimate amount of money he’s charging. And, you know, if he actually wanted to be transparent about these books, we could all sort of look at that if he wanted to be that public about and then go Oh, yeah, okay. That’s a fair return. Okay. Fair enough. If he wanted to be that transparent, the thing that would keep him totally honest, would obviously be other people competing, then again, look, notice I said, Oh, it doesn’t hurt people, people can do what they damn well, like, blah, blah, blah. But I would still say this guy has been innovative. He’s putting himself out there. He’s trying something out. I guess there’s a legitimate moral return for taking that sort of risk and just having a go. Yeah. And that’s the thing, some things, you know, you wonder, is this a monopoly profit? Or is it a legitimate return on your creativity? Bit of a rubbery distinction between those things, but I don’t know how much he’s morally entitled to charge. He’s certainly morally entitled to charge something there.

Gene Tunny  43:35

Well, I mean, that whole question of what’s he morally entitled to charge? I mean, who’s to say, I mean, this is, that would be a value judgement, wouldn’t it? So? Yeah, I mean, I asked the question, I asked him a question. Because when he will, how much of the value of the goldback is due to the gold? And it was a half? Was it a bit a bit under half? Or maybe half? Oh, okay. And I wasn’t, I should have thought more of the time. Okay. So he’s this, he’s got this new process, and he’s got some equipment, and he does need to earn a profit. Of course, I don’t have a problem with him earning a profit. And I guess this is a sort of thing where yeah competition that potentially this is something where there could be competition from other providers of goldbacks a similar type of currency.

John August  44:23

And you wonder if he’s got a patent on the technology. And yeah, my whole concern about IP, that is a pirate thing that for another time,

Gene Tunny  44:33

what about your thoughts on crypto? You had some thoughts on the crypto episodes that I’ve had recently had? Well, in the last several months or so?

John August  44:41

Yeah, yeah. Well, I suppose one of the things is that I guess I do have some understanding of the mathematics of it but I know you had one gentleman there who was trying to say, look, Bitcoin is good and Ether is about some sort of oligopoly controlling the flow of money. Yeah, and I will would differ with that based on what I understand. Now. Let’s also say there’s something called the central bank digital currency. And let me tell you some banks are actually doing trials in association with the Reserve Bank doing a central bank digital currency. And let me tell you, there are some people out there that are freaking out about this. They’re, they’re really going down the conspiracy, the conspiracy theory, rabbit hole. And I can but say, I tend to think it’s too contentious, you want to increase seriously increase the level of trust in government and the financial affairs, because a lot of people are going neurotic about this stuff. But the thing about Central Bank digital currency, and I think your guests identified this too. Central Bank digital currency is not crypto, metaphorically, it is a spreadsheet somewhere in the bowels of the Reserve Bank. And you’ve sort of put up your hand and someone changes the entry in in that spreadsheet in the Reserve Bank. Crypto is much more distributed. Like in order to run Bitcoin, you have computer many, I don’t know how long well have, let’s say, 1000s of computers around the world, but don’t quote me on that one. And the thing is, for something to be validated, more than 50% of those computers have to agree that x y Z is the case. Yeah, now that makes it very resilient against failure, very resilient against fraud, you know, various things like that. And yes, there has been fraud and dodgy stuff happening in crypto. But that’s been exchanges, not in, you know, the actual crypto itself. So your reserve bank, digital currency is a spreadsheet. Bitcoin is basically a consensus thing where you have to have more than 50% of those computers to say that certain thing is the case. And what that mean, that means it’s resilient, it means that it’s actually not subject to the whims of government policy not subject to the whims of the Reserve Bank, crypto is or bitcoin is, and it will continue to roll along, according to its algorithm that was predetermined however long ago. So so that’s a story with crypto. That’s one that’s a story with Bitcoin, I should say. And at the other end of the scale, you’ve got your central bank digital currency, which is just in so notice this thing, it’s a single point of failure. If someone hacks into the reserve bank, it can be compromised. You cannot meaningfully hack Bitcoin, the only way you can turn bitcoin is to control more than 50% of the computers around the world are doing Bitcoin. Right? Right. So and then the thing that’s in the middle is Ether. And my understanding is ether is still run by a pool of like, you know, let’s say 1000 1000 computers. And what you can say is that, okay, it’s in between the two, it’s not a total dispersion like Bitcoin. But equally, the idea that ether could somehow be swung by vested interests is hard to believe, right? Let’s, let’s say for the sake of argument, 500 people, and Ether is mostly running by its predetermined algorithm. You know, it’s hard to believe certainly, you had a guest who was critical of Ether as a quid, I sort of say it’s in between the point is, now the other thing that’s also an issue is, is our mainstream financial system that corrupt or that bad? Now, your guests were basically they were expressing their concerns. But I tend to think, look, you can say that this financial system, our democracy is messed up, and you can bail or you can say, Well, why is democracy not working to the point where we might have these dodgy policy outcomes and spend some time thinking about that? You know, it’s I have this feeling that they’re, that they’re, they’re bailing without due consideration, I suppose, right? In a sense, if people are free to do that. Now, the other thing they talk about, they do talk about the threat of banks suddenly denying us access to our funds. And people have some concern about that. So far, banks haven’t done that. I’m not saying this is a bad thing. But there are narky things like garnishee orders, like if you have a debt, yeah, you can actually make an arrangement. And the banks will sort of basically grab some, grab some of your money as it could flow through your account, and you have no control over that. That happens, but maybe that’s a legitimate thing for the government to enforce. But the point is, the stories of the banks being in some way arbitrarily abusing their power. I don’t think that really happens. I think the concern is overstated, but it’s a matter of judgement. If you really are that upset with the banks and you want to go your own way. Well, fair enough.

Gene Tunny  49:48

John, just on that, I mean, there have been some cases where the banks have denied access to funds to people, where the US Treasury has issued one of those what does it call the, there was that Russian businessman or was he? was he killed? Yeah.

John August  50:05

So it’s the whole thing of Ukraine being pulled out of the SWIFT network. There’s a few dodgy things like that. But, but yeah, okay. You’re, you’re telling me something new? I must say,

Gene Tunny  50:14

No. I mean, so one of the one of the reasons people would, they’re concerned, and maybe this is something that’s a bit of an edge case, or it’s an extreme sort of scenario. But there are situations where government can tell banks deny people access to the funds. And you might argue, Well, okay, well, that’s a good thing, because these people are siding with a dictator, or they’re associated with a rogue regime. So fair enough that

John August  50:42

well, if that is a concern for you, then maybe crypto is a way of dealing with that. Now, let me say that there is there’s there’s one legitimate use case I can think of for crypto, that let’s say you’re a Filipino worker working in Saudi Arabia, or United Arab Emirates, or something like that, you want to get your money back home? My understanding is if you can play the game with crypto, you can actually do it with a much lower overhead than a means of international money transfer. Yeah, I mean, there’s cute stories about in Africa, I think telephone credits on mobile phones become used as currency. Now, again, that’s a centralised currency, like the spreadsheet at the Reserve Bank, but it’s still an interest in digital currency that sort of used instead of money. So there’s a use case there. Now the other thing I would say is that maybe crypto is keeping Visa card and so on honest. Now one of the things about if you’re I want to I’m not sure on the exact details, but if you are I wanted to transact in crypto would probably have to pay the miners like $100 to process our transaction. But that’s a fixed amount. These sorts of charges you a percentage, while you would imagine the amount of computational power to process my purchase of $1, or $1,000 is the same. While with crypto, it’s a fixed charge. Also, the banks run some pretty strange trade offs involving fraud because the calculations are there’s a nonzero quantity of fraud, which is acceptable, because otherwise you just make life too difficult and things don’t happen. So there’s some complicated trade offs that banks are making. And what I’m saying is maybe crypto is keeping the banks honest, is keeping Visa honest. But what I will also say the thing weird thing about crypto is once upon a time, you had all the evangelists, the people who really believed in an alternative currency that wasn’t controlled by the banks, or the government, and they really believe that whether they were right or wrong, they really believed it. But now I think you’ve got a lot of snake oil merchants, you know, people who just want to make dollars. And the scene has become dominated by the get rich quick people, rather than the genuine evangelists. And for me, that sort of changed the whole feeling of it. Yeah, you know, if it never left the, you know, you’ve got to be a nerd to really get into crypto. On the one hand, it’s limiting the market, but it would also have been kept its purity, you know, so yeah, there’s some stories there. Okay, so that’s a bit of a ramble. But I hope I’ve sort of said said some useful things about crypto.

Gene Tunny  53:16

It’s made me think, John, I like it. I’ll just ask one more question, because we’ll have to wrap up soon, unfortunately. But I know we could keep on talking. The thing I was thinking of was the Magnitsky Act. I don’t know if you’ve heard of that, which was there was a bill passed by US Congress and reading from Wikipedia signed into law by Obama in December 2012, intending to punish Russian officials responsible for the death of Russian tax lawyer, Sergei Magnitsky in a Moscow prison in 2009, and also to grant permanent normal trade relations status to Russia. Hang on. And then there’s another act of 2016 it authorises the US government to sanction those foreign officials worldwide, that a human rights offenders freeze their assets and ban them from entering entering the US. Now, I don’t have a problem with any of that, because some of these people probably deserve it. Yeah. But there is this concern that the banking system could be subject to political influence.

John August  54:11

Well, the thing is, at some level, how corrupt is democracy? Do we have faith in democracy? Do we have faith in the means by which the US government makes those decisions? Now this is going off on a whole ruddy other rabbit hole, but the US government has form in terms of meddling in global affairs. You know, there’s Diego Garcia. Goodness me, I think there was, you know, in El Salvador, that’s right. 1986 there were US trained trained soldiers that killed some priests and nuns, a whole family. The list will go on in terms of like the US doing dodgy shit around the planet. And it’s sort of like you know, they give a lot of foreign aid but equally they like, they like they run a protection racket. You got to pay your protection money along the way to participate in the rules of US rules based order and they, you know, they ignore the International Criminal Court and yada, yada yadi. So, look, the US does have a dodgy record. But notice I’ve shifted the ground a bit I’ve sort of said, look, what is the legitimacy of the US in broader terms, and it’s got its things to criticise, maybe those decisions you are making are valid decisions for the US government to make. And yeah, this is I guess, I’m not really answering any question. It’s getting a bit messy and awkward but yeah, if you think that participating in this global framework, and giving the US that sort of discretion is too much, then maybe crypto is the way to go.

Gene Tunny  55:43

Or any government. I mean, I don’t mean to pick on the US. It’s just that it’s the you know, the dominant country. And that’s, that’s very topical. Finally, because this will have to be the last question. What about the concerns people have about CBDC?, you mentioned, I’m trying to understand what your response is. You said, well, there are some people who may be there. You know, there are conspiracy theories about what it is. But you also said that this is CBDC, but you then also said that, are you concerned about political stability? Are you concerned that this is something that will make people more distrustful of government?

John August  56:21

Yes, I guess so, let’s say, look, this may not be what government is up to but there are people who are out there who are saying the banks and the governments are trying to wean us off cash, yes. So we do not use cash. And whatever, whatever these people are thinking they’re thinking government does not have good reasons for having that agenda. They wanting to wean us off cash, so they have more control of us. Right now, there’s a certain conspiracy theory, rabbit hole here, but a reasonable number of people. I don’t know what the proportion is, you’d have to talk to people who know more than me, but some proportion of people are very concerned about the government trying to stop people from using cash. And they see that as part of an agenda. And obviously, you can have your international connections. I do want to do not want to go there. But you know, there’s this whole constellation of conspiratorial concerns, and the government going down the route of central bank digital currency is feeding these people’s concerns. And whether you say that’s right or wrong, people are going to get very neurotic and conspiratorial about this.

Gene Tunny  57:28

Okay, yeah. All right. John August. Any any final thoughts before we wrap up, but it’s been great hearing your reactions to recent episodes, and it makes me think a lot more about these issues. So I appreciate it.

John August  57:43

Okay. Well, I’ve got many more things to say. But that’s probably the appropriate for the present, I think. Yes.

Gene Tunny  57:49

We’ll catch up again soon. John, for sure.

John August  57:55

Sounds good.

Gene Tunny 57:59

Okay, thank you. Thank you.

Righto thanks for listening to this episode of Economics Explored. If you have any questions, comments or suggestions, please get in touch. I’d love to hear from you. You can send me an email via contact@economicsexplored.com Or a voicemail via SpeakPipe. You can find the link in the show notes. If you’ve enjoyed the show, I’d be grateful if you could tell anyone you think would be interested about it. Word of mouth is one of the main ways that people learn about the show. Finally, if your podcasting app lets you then please write a review and leave a rating. Thanks for listening. I hope you can join me again next week.

58:42

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Credits

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