A long time ago, back at Eidetic Illuminations, I wrote this post on what I called then (in a moment of pretension and vanity) Jeremy Trombley’s Economic Principle No. 1. I called it Economic Principle No. 1 because, to me, it was (and still is) the most fundamental principle of economics – something that every economic theory should take for granted (but most don’t) and that should inform our economic choices. The principle as formulated back then (and I like the vulgarity of it, so I’m not going to dress it up now):
Wealth may trickle down, but it fucking FLOWS upward!
What this means is that, in order to function appropriately, every economy needs a redistributive mechanism. Without some kind of redistribution, wealth will tend to accumulate in the hands of fewer and fewer people creating an instability in the system – a blockage of flow, you might say. Every economy has some kind of redistribution – taxes, potlatch, gift economies, etc. – even our own. However, increasingly, what I think we see is a co-opting of redistribution such that the wealth goes back to the wealthy – creating the illusion of redistribution without the actual benefits. In any case, I’ve covered all that before. The point of this post is different.
I called this Economic Principle No. 1, and I stand by that. However, thinking about it recently, I’ve realized that there’s a more fundamental issue – a necessary condition for Economic Principle No. 1 to be valid, which also goes largely unrecognized and has major economic implications. That is:
Wealth is fluid.
In order for Economic Principle No. 1 to work, wealth must be understood to flow as a fluid rather than to be solid and static. In fact, this is implicit in many of the ways we talk about wealth and money now – liquid assets, capital flows, etc., but I don’t think that the real implications are taken into consideration. That wealth is fluid means that it’s about relations and flows rather than individual accumulation. We have all probably heard parables of wealthy men with their gold on, say, a deserted island. There the gold does the men no good, because it is not the substance that matters – not the artefact that bears the wealth – but the ability to exchange – to move wealth from one person to another and transform it from one kind of substance to another like the alchemist trick of turning lead into gold. If, on the other hand, we treat wealth as static, solid stuff, then the motivation will be to hold it, to keep it solid as much as possible, and allow it to accumulate.
All of this is fairly simplistic, I know. Someday when I’ve finished my PhD and have time and resources to research whatever I want, I will indulge my interest in Economic Anthropology and explore these ideas in more complex and ethnographic contexts. I kick myself for not having taken a course back at KU when I had the chance, but my schedule didn’t allow it. Nevertheless, I believe that these principles are important for a reasonable understanding of economics, though they may not be deterministic and many complex factors may come into play in any given economy. I wanted to put the idea out there, though, and see what kind of thought it generates.