Post on 31-Mar-2015
Frederick Soddy
Sharon BillingsSpring 2012Ecological Economics
Background
1877-1956
Chemistry Advances
Coined “isotopes”
radioactive disintegration
Modern atomic theory and structure
Nobel Peace prize 1910
Professor at McGill, Glasgow, Aberdeen, and Oxford
After WW1, started looking at worlds problems
Conclusions:Problem was not science, but scientists did have blame for contribution to society
Economics = pseudoscience
Faulty
Unsafe with science advances
Good and evil
Must change economics
Action
Soddy decided to analyze and find solutions to the economy and it’s institutions
Free of paradigm of economics when he started his analysis
Contempt. Lots of Contempt.
Review of Wealth, Virtual Wealth, and Debt
Sad to see a respected chemist ruin his reputation by writing on a subject about which he was quite ignorant. (The Times Literary Supplement)
Economic Flaws
The principles and ethics of human law and convention must not run counter to those of thermodynamics (Cartesian Economics)
Soddy’s basis for critique of economics as a perpetual motion machine
“how does man live? On sunshine”
Sunshine = continuous flow of energy
Not a stock source
must obey the laws of thermodynamics
Real WealthNot material goods
Matter and energy useful to humans
2 dimensions
Physical: matter – energy
Theological: usefulness subject to mind and will
Wealth
Physical, subject to physics
Eventually will degrade
Debt
Imaginary quantity
Subject to mathematics
Endures forever
Actually a lien against future sunshine because sunshine rates are constant and don’t grow at compound interest rates like debt
Not a 1:1 ratio = compound interest will eventually create inflation and bankruptcy
Ex nihilo: out of nothingwealth can’t be created this way, so money (debt) shouldn’t be either
Monetary Flow
Main Problem: banks create money
Becomes virtual wealth of community
National debt is moneyDoesn’t obey laws of conservationNegative wealth quantityMoney used to replace bartering and inconvenience
Virtual wealth = utility cost of holding money
Banks are counterfeitersHave made a mockery of measurement standards“ convert pounds of sterling to rubber yardsticks”
Soddy’s ReformBanks must have 100% reserves
Could no longer create money
Virtual wealth ownership restored to state
Maintain a constant price-indexFalls: government prints money, lowers taxes, redeems interest on national debt
Deflation corrected by money-creating gov’t deficit
Raises: government raises taxes and doesn’t spend revenue
Inflation corrected by money-destroying gov’t surplus
Freely fluctuating exchange rates internationally
World payment maintained in equilibrium
Purchasing powers among currencies
Eliminate inflation and deflation pressure between economies
Free trade regulation, such as tariffs, would
disappear
MoralsLet us have an end of the pretence that economics should not be concerned with morals. (Role of Money)
Economics should have honest weights and measures under exchange
Current system gives false accounting
ReferencesDaly, H. E. 1980. The economic thought of Frederick Soddy. History of Political Economy. 12 (4): 469-488Daly, H. E. & Farley, J. 2004. Ecological Economics: Principles and Applications. Washington: Island Press.Soddy, F. 1921. Money versus Man. England: Purnell and Sons. Soddy. F. 1933. Wealth, Virtual Wealth, And Debt. USA: E.P. Dutton & CO. Inc.