*”It is sweet and right to die for your country”

Patriotism is one of humankind’s odder traits, at least on the face of it. For many hundreds of years, dying in a war hundreds of miles away from home defending/stealing for what were, essentially, the business interests and egos of rich men too powerful to even acknowledge your existence was considered the absolute pinnacle of honour, the ultimate way to bridge the gap between this world and the next. This near-universal image of the valiance of dying for your country was heavily damaged by the first world war, near-crushing “the old lie: Dulce Et Decorum Est/Pro Patria Mori*” (to quote Wilfred Owen), but even nowadays soldiers fighting in a dubiously moral war that has killed far more people than the events it was ‘payback’ for are regarded as heroes, their deaths always granted both respect and news coverage (and rightly so). Both the existence and extent of patriotism become increasingly bizarre and prevalent when we look away from the field of conflict; national identity is one of the most hotly argued and defended topics we have, stereotypes and national slurs form the basis for a vast range of insults, and the level of passion and pride in ‘our’ people and teams on the sporting stage is quite staggering to behold (as the recent London 2012 games showed to a truly spectacular degree).

But… why? What’s the point? Why is ‘our’ country any better than everyone else’s, to us at least, just by virtue of us having been born there by chance? Why do we feel such a connection to a certain group of sportspeople, many of whom we might hate as people more than any of their competitors, simply because we share an accent? Why are we patriotic?

The source of the whole business may have its roots in my old friend, the hypothetical neolithic tribe. In such a situation, one so small that everybody knows and constantly interacts with everyone else, then pride in connection with the achievements of one’s tribe is understandable. Every achievement made by your tribe is of direct benefit to you, and is therefore worthy of celebration. Over an extended period of time, during which your tribe may enjoy a run of success, you start to develop a sense of pride that you are achieving so much, and that you are doing better than surrounding others.

This may, at least to a degree, have something to do with why we enjoy successes that are, on the scale of countries, wholly unconnected to us, but nonetheless are done in the name of our extended ‘tribe’. But what it doesn’t explain so well is the whole ‘through thick and thin mentality’- that of supporting your country’s endeavours throughout its failings as well as its successes, of continuing to salvage a vestige of pride even if your country’s name has been dragged through the mud.

We may find a clue to this by, once again, turning our attention to the sporting field, this time on the level of clubs (who, again, receive a level of support and devotion wholly out of proportion to their achievements, and who are a story in their own right). Fans are, obviously, always proud and passionate when their side is doing well- but just as important to be considered a ‘true’ fan is the ability to carry on supporting during the days when you’re bouncing along the bottom of the table praying to avoid relegation. Those who do not, either abandoning their side or switching allegiance to another, are considered akin to traitors, and when the good times return may be ostracized (or at least disrespected) for not having faith. We can apply this same idea to being proud of our country despite its poor behaviour and its failings- for how can we claim to be proud of our great achievements if we do not at least remain loyal to our country throughout its darkest moments?

But to me, the core of the whole business is simply a question of self-respect. Like it or not, our nationality is a huge part of our personal identity, a core segment of our identification and being that cannot be ignored by us, for it certainly will not be by others. We are, to a surprisingly large degree, identified by our country, and if we are to have a degree of pride in ourselves, a sense of our own worth and place, then we must take pride in all facets of our identity- not only that, but a massed front of people prepared to be proud of their nationality in and of itself gives us a reason, or at least part of one, to be proud of. It may be irrational, illogical and largely irrelevant, but taking pride in every pointless achievement made in the name of our nation is a natural part of identifying with and being proud of ourselves, and who we are.

My apologies for the slightly shorter than normal post today, I’ve been feeling a little run down today. I’ll try and make it up next time…

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Up one level

In my last post (well, last excepting Wednesday’s little topical deviation), I talked about the real nuts and bolts of a computer, detailing the function of the transistors that are so vital to the workings of a computer. Today, I’m going to take one step up and study a slightly broader picture, this time concerned with the integrated circuits that utilise such components to do the real grunt work of computing.

An integrated circuit is simply a circuit that is not comprised of multiple, separate, electronic components- in effect, whilst a standard circuit might consist of a few bits of metal and plastic connected to one another by wires, in an IC they are all stuck in the same place and all assembled as one. The main advantage of this is that since all the components don’t have to be manually stuck to one another, but are built in circuit form from the start, there is no worrying about the fiddliness of assembly and they can be mass-produced quickly and cheaply with components on a truly microscopic scale. They generally consist of several layers on top of the silicon itself, simply to allow space for all of the metal connecting tracks and insulating materials to run over one another (this pattern is usually, perhaps ironically, worked out on a computer), and the sheer detail required of their manufacture surely makes it one of the marvels of the engineering world.

But… how do they make a computer work? Well, let’s start by looking at a computer’s memory, which in all modern computers takes the form of semiconductor memory. Memory takes the form of millions upon millions of microscopically small circuits known as memory circuits, each of which consists of one or more transistors. Computers are electronic, meaning to only thing they understand is electricity- for the sake of simplicity and reliability, this takes the form of whether the current flowing in a given memory circuit is ‘on’ or ‘off’. If the switch is on, then the circuit is represented as a 1, or a 0 if it is switched off. These memory circuits are generally grouped together, and so each group will consist of an ordered pattern of ones and zeroes, of which there are many different permutations. This method of counting in ones and zeroes is known as binary arithmetic, and is sometimes thought of as the simplest form of counting. On a hard disk, patches of magnetically charged material represent binary information rather than memory circuits.

Each little memory circuit, with its simple on/off value, represents one bit of information. 8 bits grouped together forms a byte, and there may be billions of bytes in a computer’s memory. The key task of a computer programmer is, therefore, to ensure that all the data that a computer needs to process is written in binary form- but this pattern of 1s and 0s might be needed to represent any information from the content of an email to the colour of one pixel of a video. Clearly, memory on its own is not enough, and the computer needs some way of translating the information stored into the appropriate form.

A computer’s tool for doing this is known as a logic gate, a simple electronic device consisting of (you guessed it) yet more transistor switches. This takes one or two inputs, either ‘on’ or ‘off’ binary ones, and translates them into another value. There are three basic types:  AND gates (if both inputs equal 1, output equals 1- otherwise, output equals 0), OR gates (if either input equals 1, output equals 1- if both inputs equal 0, output equals 0), and NOT gates (if input equals 1, output equals 0, if input equals 0, output equals 1). The NOT gate is the only one of these with a single input, and combinations of these gates can perform other functions too, such as NAND (not-and) or XOR (exclusive OR; if either input equals 1, output equals 1, but if both inputs equal 1 or 0, output equals 0) gates. A computer’s CPU (central processing unit) will contain hundreds of these, connected up in such a way as to link various parts of the computer together appropriately, translate the instructions of the memory into what function a given program should be performing, and thus cause the relevant bit (if you’ll pardon the pun) of information to translate into the correct process for the computer to perform.

For example, if you click on an icon on your desktop, your computer will put the position of your mouse and the input of the clicking action through an AND gate to determine that it should first highlight that icon. To do this, it orders the three different parts of each of the many pixels of that symbol to change their shade by a certain degree, and the the part of the computer responsible for the monitor’s colour sends a message to the Arithmetic Logic Unit (ALU), the computer’s counting department, to ask what the numerical values of the old shades plus the highlighting is, to give it the new shades of colour for the various pictures. Oh, and the CPU should also open the program. To do this, its connections send a signal off to the memory to say that program X should open now. Another bit of the computer then searches through the memory to find program X, giving it the master ‘1’ signal that causes it to open. Now that it is open, this program routes a huge amount of data back through the CPU to tell it to change the pattern of pretty colours on the screen again, requiring another slue of data to go through the ALU, and that areas of the screen A, B and C are now all buttons, so if you click there then we’re going to have to go through this business all over again. Basically the CPU’s logical function consists of ‘IF this AND/OR this happens, which signal do I send off to ask the right part of the memory what to do next?’. And it will do all this in a miniscule fraction of a second. Computers are amazing.

Obviously, nobody in their right mind is going to go through the whole business of telling the computer exactly what to do with each individual piece of binary data manually, because if they did nothing would ever get done. For this purpose, therefore, programmers have invented programming languages to translate their wishes into binary, and for a little more detail about them, tune in to my final post on the subject…

Scrum Solutions

First up- sorry I suddenly disappeared over last week. I was away, and although I’d planned to tell WordPress to publish a few for me (I have a backlog now and everything), I was unfortunately away from my computer on Saturday and could not do so. Sorry. Today I would like to follow on from last Wednesday’s post dealing with the problems faced in the modern rugby scrum, to discuss a few solutions that have been suggested for dealing with the issue, and even throw in a couple of ideas of my own. But first, I’d like to offer my thoughts to another topic that has sprung up amid the chaos of scrummaging discussions (mainly by rugby league fans): the place, value and even existence of the scrum.

As the modern game has got faster and more free-flowing, the key focus of the game of rugby union has shifted. Where once entire game plans were built around the scrum and (especially) lineout, nowadays the battle of the breakdown is the vital one, as is so ably demonstrated by the world’s current openside flanker population. Thus, the scrum is becoming less and less important as a tactical tool, and the extremists may argue that it is no more than a way to restart play. This is the exact situation that has been wholeheartedly embraced by rugby league, where lineouts are non-existent and scrums are an uncontested way of restarting play after a minor infringement. To some there is, therefore, something of a crossroads: do we as a game follow the league path of speed and fluidity at the expense of structure, or stick to our guns and keep the scrum (and set piece generally) as a core tenet of our game?

There is no denying that our modern play style, centred around fast rucks and ball-in-hand play, is certainly faster and more entertaining than its slow, sluggish predecessor, if only for the fans watching it, and has certainly helped transform rugby union into the fun, flowing spectators game we know and love today. However having said that, if we just wanted to watch players run with the ball and nothing else of any interest to happen, then we’d all just go and play rugby league, and whilst league is certainly a worthwhile sport (with, among other things, the most passionate fans of any sport on earth), there is no point trying to turn union into its clone. In any case, the extent to which league as a game has been simplified has meant that there are now hardly any infringements or stoppages to speak of and that a scrum is a very rare occurence. This is very much unlike its union cousin, and to do away with the scrum as a tool in the union code would perhaps not suit the game as well as it does in union. Thus, it is certainly worth at least trying to prevent the scrum turning into a dour affair of constant collapses and resets before everyone dies of boredom and we simply scrap the thing.

(I know I’ve probably broken my ‘no Views’ rule here, but I could go on all day about the various arguments and I’d like to get onto some solutions)

The main problem with the modern scrum according to the IRB concerns the engage procedure- arguing (as do many other people) that trying to restrain eight athletes straining to let rip their strength is a tough task for even the stoutest front rower, they have this year changed the engage procedure to omit the ‘pause’ instruction from the ‘crouch, touch, pause, engage’ sequence. Originally included to both help the early players structure their engagement (thus ensuring they didn’t have to spend too much time bent down too far) and to ensure the referee had control over the engagement, they are now arguing that it has no place in the modern game and that it is time to see what effect getting rid of it will have (they have also replaced the ‘engage’ instruction with ‘set’ to reduce confusion about which syllable to engage on).

Whether this will work or not is a matter of some debate. It’s certainly a nice idea- speaking as a forward myself, I can attest that giving the scrum time to wind itself up is perhaps not the best way to ensure they come together in a safe, controlled fashion. However, what this does do is place a lot of onus on the referee to get his timing right. If the ‘crouch, touch, set’ procedure is said too quickly, it can be guaranteed that one team will not have prepared themselves properly and the whole engagement will be a complete mess. Say it too slowly, and both sides will have got themselves all wound up and we’ll be back to square one again. I suppose we’ll all find out how well it works come the new season (although I do advise giving teams time to settle back in- I expect to see a lot of packs waiting for a split second on the ‘set’ instruction as they wait for the fourth command they are so used to)

Other solutions have also been put forward. Many advocate a new law demanding gripping areas on the shirts of front row players to ensure they have something to get hold of on modern, skintight shirts, although the implementation of such a law would undoubtedly be both expensive and rather chaotic for all concerned, which is presumably why the IRB didn’t go for it. With the increasing use and importance of the Television Match Official (TMO) in international matches, there are a few suggesting that both they and the line judge should be granted extra responsibilities at scrum time to ensure the referee’s attention is not distracted, but it is understandable that referees do not want to be patronised by and become over-reliant on a hardly universally present system where the official in question is wholly dependent on whether the TV crews think that the front row binding will make a good shot.

However, whilst these ideas may help to prevent the scrum collapsing, with regards to the scrum’s place in the modern game they are little more than papering over the cracks. On their own, they will not change the way the game is played and will certainly not magically bring the scrum back to centre stage in the professional game.

For that to happen though, things may have to change quite radically. We must remember that the scrum as an invention is over 150 years old and was made for a game that has since changed beyond all recognition, so it could well be time that it began to reflect that. It’s all well and good playing the running game of today, but if the scrum starts to become little more than a restart then it has lost all its value. However, it is also true that if it is allowed to simply become a complete lottery, then the advantage for the team putting the ball in is lost and everyone just gets frustrated with it.

An answer could be (to pick an example idea) to turn the scrum into a more slippery affair, capable of moving back and forth far more easily than it can at the moment, almost more like a maul than anything else. This would almost certainly require radical changes regarding the structure and engagement of it- perhaps we should say that any number of players (between, say, three and ten) can take part in a scrum, in the same way as happens at lineouts, thereby introducing a tactical element to the setup and meaning that some sneaky trickery and preplanned plays could turn an opposition scrum on its head. Perhaps the laws on how the players are allowed to bind up should be relaxed, forcing teams to choose between a more powerful pushing setup and a looser one allowing for faster attacking & defending responses. Perhaps a law should be trialled demanding that if two teams engaged correctly, but the scrum collapsed because one side went lower than the other then the free kick would be awarded to the ‘lower’ side, thus placing a greater onus on technique over sheer power and turning the balance of the scrum on its head. Would any of these work? Maybe not, but they’re ideas.

I, obviously, do not have all the definitive answers, and I couldn’t say I’m a definite advocate of any of the ideas I voiced above (especially the last one, now I think how ridiculously impractical it would be to manage). But it is at least worth thinking about how much the game has evolved since the scrum’s invention, and whether it’s time for it to catch up.

OK, this WILL be the last money post…

First up, an apology for lateness- I know I said that this post would be up on Saturday, but had forgotten at the time that I would be spending my Saturday doing an 80km hike (18 and a half hours, if you want to know- it hurt). My feet have thankfully recovered since then, and since I really CBA to do a Six Nations Post given that there was only one game at the weekend (France-Ireland), it was a draw (17 all) and I only saw the last half hour, I thought I would give it a miss and concentrate on wrapping up my recurrent theme of money.

To quickly summarise what we’ve covered so far:
1) Money is an arbitrary human situation to give us a reference point for relative value
2) The economic system is based upon the world’s value being increased by doing work on raw materials, and people making money from it by the difference between the value the workers increase the raw materials by, and the amount they get paid [This differential is partly a necessary artificial creation, and is partly due to the price of labour being effected by the workforce’s size and attitudes itself- see point 4]
3) The process of people buying stuff in an economy almost invariably leads to inflation. A low level of inflation is indicative of this- a high level indicates an economy getting desperate, and a negative level a stagnant one
4) The process of value increase and inflation is necessary to balance out the human race’s resource consumption (for living resources we have reproduction- for finite ones, economics)
5) The fundamental rule of economics- when supply goes up, or demand goes down, the price drops.

I want to proceed from point 3, with a quick (and possibly overly simple and completely unnecessary) detour into exactly why economists and politicians want people buying more stuff. The explanation is simple really- every time something is bought, a process of value-increasing is completed. The money you pay for anything will always be greater than the total cost of supplying, making, processing and serving it (serving here meaning everything from customer support and IT to the bloke behind the counter taking your money), so when stuff is bought the company who made it makes a profit. This is the bottom line that demonstrates the process of value-increase and provides the money for more of it. Thus, people buying things means, in the long run, that the value of the economy as a whole gets increased. This is what causes economic growth, and thus growth is vital for our way of existence.

This is the classical way that businesses, and economies, make money- people buyin’ stuffs. There is a fairly well-accepted model for the stages industry goes through to make money in this way. Primary industry concerns the acquisition of raw materials (so farming, logging or mining), secondary is manufacturing, tertiary is the service industry (so selling things to you) and quaternary is basically R&D- the development of new products to push companies forward. In addition to this, modern-day business has a huge sector dedicated to helping the business function properly- this is why you have the IT, HR and customer services departments, whose aim is to ensure that other companies do not get the edge on theirs in competency.

However, in the last 400 years or so, with the advent of more organised, larger-scale and less geographically restricted business (think the East India Company or modern-day multinationals), a new form of business has risen up- that of the stock market. The idea is fairly simple- instead of companies building and saving up their profit over time in an effort to gain money and grow slowly, they persuade other people to give them money in exchange for a slice of the profits, as a way of picking up some fast cash. This as a concept at first seems rather flawed, as it basically involves gambling on the individual skill and potential success of both business and businessman, but it is often a far more preferential strategy. For smaller businesses, accruing some serious cash, or getting past the point where meeting rent is a struggle, could take several years that the owner does not want to spend tearing his hair out, so a quicker way of making cash is highly preferable (although on a smaller scale all dealings will be private, rather than in the madness of the stock market, and are more likely to be in the form of loans to ensure ownership of the business). On a larger scale, dealing with all the attempts to buy and sell bits of the company gets far too complicated to deal with privately, so larger companies who want to trade themselves on a larger scale will ‘float’ themselves on the stock market- basically this means dividing their company up into several million tiny bits and waiting for people to buy them. From hereon in, the bits of the company itself behave like any other commodity- as the price fluctuates up and down (supply and demand again), professional stockbrokers will buy and sell them in an effort to make money. As a company becomes more valuable, its shares go up in value and people buy them, hoping they will continue to go up. As the price falls, people sell them in an effort to make a profit, or at least minimise the loss. This fluctuation can happen rapidly, over the course of mere hours, which is why pictures of stock exchanges seemingly all consist of men in suits screaming into phones- the stock market changes very, very fast.

However, the stock market itself presents a huge problem to an economy- while the investment of large amounts of money in companies is undoubtedly vital to the proper functioning of an economy, this can all go rapidly wrong. The problem is that because buying shares in a company involves giving that company money, it makes the company more valuable and so its shares more valuable. Thus, people buy more shares in it because they see the price rising- you see the problem. At its worst, this leads to people investing in a company solely because other people have invested in the company, meaning that the value of the shares is artificially high based solely on investment and speculation- nothing concrete. The problem arises when everyone suddenly decides to start selling their (now very valuable) shares- this pulls the invested money, now the backbone of the company’s high share price, out of the company, and the price begins to fall. Suddenly, all the investors (sensing the price is about to drop) sell all their shares too (incidentally, they don’t actually sell them to anyone- the rules of the stock market say the company have to buy them back at the appropriate price) and suddenly, all the money is gone, with nothing real for the company to trade to make them money the old-fashioned way (or at least not enough to justify their high share price). Suddenly, the company has had all its investment taken away and is facing the prospect of having to pay back dozens of aggressive investors, and has no cash left.

This story has repeated itself several times over the years- it is known as an economic ‘bubble’. It first occurred on any significant scale in the ‘South Sea Bubble’ in 1720, which disgraced an entire British government, collapsed a company and sent the economy into chaos (although the speculation and willingness to buy everything just before the bubble burst led to pleas for investment in square cannonballs and ‘a company for carrying out an undertaking of great advantage, but nobody to know what it is’. Genuinely). The largest ever such collapsed was the American Wall Street Crash of 1929, which (among other things), condemned a large chunk of the richest nation on earth to living in slums, provoked massive rioting, bankrupted large swathes of Europe as well (and was arguably responsible for the rise of the Nazis), lead the Democrats to control both the White House and Congress and let Franklin D. Roosevelt show the American government that a little liberal socialism now and again can work wonders, advice that they have so far steadfastly ignored for the last 80 years. So yeah- bad thing.

This is the (now muchly belated) point I was trying to make whence I first started out upon this trilogy- the Stock Market is a mental place. While investment is part of the economy we now live in, the way the stock exchange handles it does, in my opinion, far more harm than good (I know I promised to try and keep my Views out of this blog, but this is just an analysis so bear with me). The stock market does not exist for the good of the companies being invested in, it exists for the good of the stockbrokers themselves- basically, professional gamblers, betting on the economy which controls the well-being of thousands with one aim and one aim only in mind: to get rich as quickly, easily and with the least hassle possible. Don’t get me wrong- I’m sure the majority of them are just as nice, normal people as the rest of us, but as for their trade… its not one I’m a fan of.

I’m not sure I support the Occupy movements, leftie though I may be, and I certainly don’t advocate the overthrow of the entire capitalist system. But, to all those who think they are just a bunch of stupid hippies, just look at the suicide rates for 1930 and ask yourself this- do you want to live in a world where the actions of so few can ruin the lives of so many?

Money, part II

OK, and so I return from the heady excitement of a weekend’s rugby to the more confuzzling realities of base level economics- here comes the second (and hopefully final) part of my description of the precise way money works in the economic system. For those who haven’t read part one, do so (post before last), otherwise this will get confusing.

I must begin with a correction and apology for the end of the last post I did on this subject- towards the end, I began referring to the actual production of money & value in an economy as inflation, rather than what actually causes it- devaluing the effort inputted by the worker so as to create a profit margin for the company boss. This is very much NOT inflation- I was, once again, getting ahead of myself.

Just to clarify this, I thought I might begin on a slight tangent and define what inflation actually is. Inflation is the process of everything in an economy getting a little bit more expensive over time. Cat food, washing powder, the cost of your boss employing you (ie your salary)- over time, this all rises slowly, at a rate of a fer percent a year. This is why, if you read old books or hear people talking about days gone by, people seemed to be able to get things incredibly cheaply in the past. Case in point- when I was at primary school, my teacher used to tell us about this shop her son (several years older than us) used to go to to buy sweets. At this shop, there was a row of sweets worth a few pennies, ranging from 10 down to 1p in price. Nowadays if I go into my local newsagents, the cheapest sweet I could buy costs 12p, and most cost quite a bit more. Why? Inflation.

The reason I was getting inflation confused with the production of value (for want of a better term), is partly because it, superficially, appears to be the same basic idea. I mean, if everything’s worth more money, the value of everything must be going up, right? Wrong- remember that money is only an arbitrary construct to give us an idea of value. Everything might be getting slowly more expensive, yes- but everyone’s salary will also be increasing at, on average, the same rate. So, for example, while your groceries bill may be getting steadily more expensive as the years go by, it will still remain roughly the same proportion of what you earn (presuming you stay in roughly the same job), so will not actually be putting any greater strain on your bank account.

So why do we have inflation, then? Why do our economists and politicians always try to ensure a low,  steady rate of inflation is always ticking over? After all, hyperinflation like what occurred in Germany in the chaos after the First World War can devastate a country, and its economy ( I heard a story once of someone at the time whose coffee went up in price by a quarter in the time it took him to drink it). Simple answer- it promotes growth, and is inherently linked to the process of ‘creating value’.

To explain: imagine a company makes cars. Because there is a differential between how much the car’s value is increased by people working on it, and how much said people get paid, the head of the company makes money. This means he is able to go out and buy things from his friend’s company, who make motorbikes. This makes his friend some money, which he spends on something else, etc. etc. until eventually more people are able to buy the first guy’s cars. This increases the demand for his cars, and thus the price he can get away with charging for them (no.1 rule of economics- when demand exceeds supply, price goes up, and vice versa, because there will always be someone willing to pay a bit more to ensure he gets the car and the other guy doesn’t). This increases his turnover. At this point he thinks “hmm, I’ve got a bit more money now, so I’ll pay my workers more. That way, people will come to work for me, not the guy next door”. So he raises his wages. To combat this, the guy in the factory next door raises his wages so all his workers don’t leave him, and all the other factories do too. Thus everyone’s wages increase, all the prices increase and hey- inflation. Notice how this process has lead to more people buying things (in reality this  is not just the bosses who do this, but reality economics is heinously complicated), and thus growth. This is, therefore, the basic cycle of economic growth.

However, the same is not so true for hyperinflation- when inflation gets out of hand. Since inflation leads to everything being worth more money but having the same value, it, over time, leads to the gentle devaluation of currency. If this process happens too quickly, and money becomes rapidly worth less and less, everyone gets terrified of the economic situation and uncertainty (how would you feel if you had no idea how expensive the milk would be when you got to the supermarket, and had to carry a wheelbarrow full of notes to pay for it), so people stop buying things and the economy ceases to show any real growth. This is why the situation is so bad in countries like Zimbabwe at the moment, where a mixture of corruption in the political system and generalised chaos everywhere else has lead to idiotic economic policies that cause inflation to soar upwards just as the real economy plummets downhill. In summary, therefore, a low, steady rate of inflation is the best thing for all concerned.

Right, that’s inflation covered, now onto… ah, right, 950 words already. Damn, I really need to get less into this. Either that or economics has got to become a lot easier to explain. Either way, I’m probably going to need another post to actually make my point on this (yes, I did intend to make a point at the start of this but have got somewhat bogged down, it seems) if not more, so think I will sign off for tonight. Saturday’s post will contain the third instalment of what I hope ends up just being a trilogy of economics, and I may actually get round to going beyond an anatomical description. Although please- don’t hold me to that.

Money- what the &*$!?

Money is a funny old thing- the cornerstone of our way of existence, the bedrock of modern-day life, and the cause of, and solution to, 99% of all life’s problems. But… well, why? When you think about it, money doesn’t actually mean anything- it is an arbitrary creation brought in for convenience’s sake, and yet it as an entity has spiralled into so much more than a mere tool. Now how on earth did that happen?

Before about two and a half thousand (ish) years ago, money just about not exist. To the best of my knowledge, coinage only became commonplace in Europe with the rise of the Roman Empire- indeed, when they left Britain in the 5th century AD, much of the country went back to simply bartering- trading goods and services for other goods and services. This began to change as time went on however, and by the time of William the Conqueror’s invasion, the monetary system was firmly established across Europe. Coins were a far more efficient system than bartering- trading stuff for one another is a highly subjective process, and it can be hard to get a sense of value and to what extent you were being ripped off. By giving everything a fixed, arbitrary value (ie a price), everything suddenly had a value relative to one another. More importantly, this allowed for goods and services to be traded for the potential to buy more goods and services of equal value in coin form, rather than the things themselves, which was both easier and more efficient (there was now no risk of carrying a lampshade to the supermarket to exchange for a pint of milk, because a wallet is far easier to carry). The idea of money representing the potential to buy things can be seen by anyone looking on a British note, where it reads “I promise to pay the bearer on demand the sum of…” however many pounds (this is in fact a callback to the days when banks stuck to the gold standard, when you could theoretically walk into the Bank of England and ask for five pound’s worth of gold for your fiver).

However, with coins representing potential to buy things, they instantly took on a value of their own, and here things start to get confusing. Because, when money itself takes on a value, it instantly becomes a commodity just like any other- just as people trade in gold bullion, oil and bits of companies, so people trade with money itself. And this… actually, I’ve got ahead of myself- let me take a step backward.

The input of human effort can be used to increase the value of various bits of the world we live in. For example- a heap of planks may be bought for £50 from a sawmill, but once you have gone home and spent 6 hours swearing at a hammer, you may now have a bench or something worth £500 or more. The materials themselves have not changed, but since a bench is more useful, better looking, and is better appreciated by people than a few planks, people set more value by it. Because more value is set by it, so it is worth more money.

This, at a base level, is how the economic system works- human effort is used to turn raw materials, which we don’t want, into products, which we do. Because people want these products, they pay money for them, and because they need this money to pay for them, they get a job. Because they are providing human effort to their boss (which itself has a value for its ability to raise the value of raw materials), their boss pays them the money they need. The boss gets the money he uses to pay his employees from selling things to people, which makes money because the human effort put in to make his final product raises the value of his final product above that of the raw materials he bought in order to make it- and thus we are back at the beginning of the cycle.

If we study this process, we can see that the only way the boss can make any money out of it is if the value of his final product (F) is greater than the value of its raw materials (M) plus however much he pays his employees for the effort they input (E)- ie, F>M+E. However, pretty much by definition, F should equal M+E- thereby the only way he can make money is by paying his workers less than their human effort is actually worth in the context of the product (A communist would seize on this as evidence of corporations exploiting the masses, but I refuse to go into this argument here- it is far too messy). This is the only way that any money actually gets produced in an economy, and the result is inflation. If inflation did not exist, then the only way anyone could make any money would be by spending less- but this automatically means that somebody else will not be getting your money, and so will be losing some. Thus inflation is vital to ensure that everybody in an economy gains money, and although this does lead to the gentle devaluation of currency, it allows the human race to stay one step ahead of a potential vicious cycle of decline- and inflation can only be generated by an economy manufacturing things.

But why do we need our level of money to continually rise? Well, imagine you have a steak worth £5 (It’s just an example, don’t judge me on my figures). When you eat that steak, something of value £5 has been turned into the contents of your gut, and ultimately into what comes out the other end- which is clearly worth a lot less than the steak. Thus, the human race consuming resources  reduces the overall value of planet earth, just as making stuff increases it. Nature in fact has an inbuilt system to prevent this from turning into a cycle of endless decline- reproduction. If the cow you ate your steak from had had a calf, then nature has ensured that your consumption of the steak has not, in the long run, decreased the overall steak value of the world due to the steak potential existing in the calf (I’ve just realised I’m making all these terms up on the fly- my apologies). I could go into the whole energy from calf <- energy from grass <- energy from sun <- universe in general etc. thing here, but this is extrapolating the economic problem somewhat. However, suffice it to say that ensuring our overall monetary value continues to rise via inflation is our version, from an economic perspective, of reproduction, balancing out our consumption of finite resources in terms of value.

Phew- this is getting longer than I anticipated. My apologies once again for it turning into a semi-coherent ramble, I only hope you could follow it. There is still quite a lot more to get through, so I think I’ll try to wind this all up on Wednesday (after another Six Nations post Monday- COME ON ENGLAND!). If you have been able to follow all of that then congratulations- you now understand core economics. If you haven’t then also congratulations- you are sufficiently normal to not understand my way of thinking.