One among my favorite books of the yr was Randall Munroe’s What If? 2, which like its predecessor affords critical scientific solutions to absurd hypothetical questions. For instance, “What would occur if the photo voltaic system was full of soup out to Jupiter?” The brief reply is nothing good. Munroe’s extensively researched reply begins merely with “Please be certain that everyone seems to be safely out of the Photo voltaic System earlier than you fill it with soup.” Or, what would occur in case you put in a big iron dice cooled to absolute zero in your front room? (When you can keep away from the chance that liquid oxygen collects like dew on the dice’s floor, then units your home on hearth, you’ll be nice. Simply don’t lick the dice.)
Impressed, I took to Twitter to ask folks for his or her absurd hypothetical questions concerning the economic system, to which I would try critical solutions. This column is just too brief — and this columnist insufficiently gifted — to do justice to Munroe’s books. But I need to strive; these absurd hypothetical questions aren’t going to reply themselves.
What does the world seem like if all financial transactions at the moment are carried out with solely penny cash?
— Stuart Langridge
The apparent downside is that your purse would change into moderately heavy. The British penny weighs 3.56 grammes; put one other means, £2.81 weighs a kilogramme. Most merchandise would weigh considerably lower than the cash required to purchase them. A grocery store store costing £100 would require 35.6kg of pennies, so ensure you park subsequent to the procuring trolleys.
All this might be inconvenient. Individuals may begin to determine workarounds. What may they do?
Historical past affords a clue. A few thousand years in the past, the residents of Sichuan, China, had been ordered to make use of cash made from iron. (Sichuan was a frontier province, and China’s rulers didn’t need gold and silver circulating round Sichuan, presumably leaking into international lands.) Sichuan’s residents instantly confronted the penny downside, particularly that hardly something weighed greater than the iron cash you would want to lug round to purchase it.
Relatively than pushing round wagonloads of iron cash, retailers would write IOUs, promising to settle their payments later when it was extra handy for everybody. Then — this step is clear in hindsight — folks began paying for issues by passing across the IOUs. If the extensively revered Mr Zhou purchased one thing from my store and wrote me an IOU, then after I went to your store later, I may write you an IOU in flip. However you may want it if I gave you Mr Zhou’s IOU as an alternative. In spite of everything, we each know that Mr Zhou all the time pays his money owed.
Now you and I, and Mr Zhou, have collectively created a form of paper cash. It’s a promise to repay that has a marketable worth of its personal that may be handed round from individual to individual with out being redeemed with these tiresome iron cash. I think that if we had been compelled to undertake Stuart’s “pay in penny cash” system, we’d invent paper or digital options simply because the Sichuanese did, and be again the place we began.
What if we had not a minimal wage however a most wage?
— Rachel Wrangham
The perennial concern with a minimal wage is that it would destroy jobs. Oddly, the utmost wage may have the identical impact. In each circumstances, staff and employers must discover a candy spot in wage negotiations: a wage that’s excessive sufficient to draw the employee, however low sufficient to be worthwhile for the employer. An issue with each minimal and most wages is that the candy spot could also be unlawful — during which case the job received’t exist. Both it’s unprofitable for employers, or unattractive for the employees. Oops.
Wage guidelines additionally change the ability dynamic within the office. Minimal wages put extra bargaining energy into the arms of staff. A authorized wage most would put extra bargaining energy into the arms of employers. It’d nicely improve company income whereas lowering celebrity salaries.
I think that extremely paid staff would attempt to discover loopholes, for instance, within the type of self-employment. However then self-employment has been a loophole for avoiding the minimal wage, too.
What would occur if tax wasn’t a factor?
— John Cronin
The quick consequence can be that we’d have to seek out one other approach to pay for, or go with out, issues corresponding to the military, the police, roads, the NHS, colleges, state pensions and repaying public debt. For a touch at what this may seem like, decide up a British newspaper this month.
After all it might be extra intense than that. UK authorities debt can be repudiated, pensioners would return to work or beg for alms, and healthcare and education can be paid for in the identical means as meals and housing — out of individuals’s personal pockets.
Many individuals may be shocked at how little distinction such a radical change made to their lives. What they saved in taxes, they’d pay as an alternative on visits to the physician or faculty charges. However an enormous quantity of redistribution is quietly carried out by public spending, so the nation can be full of people that couldn’t afford healthcare, education, street pricing, pensions or a lot of the rest.
And a few issues simply don’t lend themselves to person charges. The Meteorological Workplace may most likely pay for public climate forecasts by voluntary contributions, nevertheless it’s unclear that you might pay for the military, navy and air power just by having a whip-round.
A radical various is to pay for public spending by printing cash. This is able to trigger inflation, and eat away at everybody’s spending energy. At a primary approximation, it ought to value residents about as a lot as their taxes would have achieved. The burden would fall otherwise, although. Individuals with massive money holdings or nominally fastened incomes would lose most. Those that held tangible belongings or had been simply in a position to maintain their wealth in foreign exchange would lose the least.
Making an attempt to pay for all current public spending by printing cash can be disastrous pretty shortly. Within the UK, the federal government is answerable for about half of all spending within the economic system, so firing up the printing presses would quickly trigger chaotic hyperinflation. But when public spending had been dramatically diminished, and well being, schooling and different companies had been offered on a fee-for-service foundation, then maybe the printing presses may remedy that nagging query of the best way to pay for the military.
In abstract: be certain that everyone seems to be safely in a foreign country earlier than you abolish all taxation.
What would occur if everybody in Coventry was given £1mn on situation they didn’t go away Coventry?
— Neil Pattinson
Coventry would change into the Qatar of the West Midlands. With everybody in Coventry instantly changing into a millionaire, it might be onerous to steer anybody to do disagreeable work. Nonetheless disagreeable work would should be achieved. That might imply persuading a brand new class of non-resident staff to commute into the town to do it — an association that’s prone to show inefficient and costly. Inside the metropolis’s boundaries, it might be absurd to attempt to produce something aside from Michelin-starred restaurant meals or luxurious spa remedies for Coventry’s unique residents. And the entire thing would finish in tears if the cash ran out. On the upside, Coventry would host a unbelievable World Cup.
In case you have different absurd hypothetical questions concerning the economic system to ask me, please ship them to [email protected]. In the meantime I can solely apologise to Randall Munroe.
Tim Harford’s new ebook is ‘How to Make the World Add Up’
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