Thursday, January 04, 2007

spinning too fast for money

P.Q = M.V

Brings me back to my days at University and monetary economics lectures. I listened to Michael Goldhaber at BayChi on the Emerging Attention Economy in July 2006 and one of his slides showed how in an attention economy, the number of transaction that happen are exponentially greater in volume than those in the current monetary/market based economy. I have been thinking about that slide and that lead me to recall the above equation. If you want some back ground on it, read the wikipedia entry.

are The half I was thinking about was the M.V and in particular the V. The velocity at which the speed of money needs to move. M is the amount of money in circulation. Then for economic progress to be made, lets simply say, that requires the number to get larger and increase over time. The point, I want to focus on. In today's economy, the framework has become too successful, we have the ability to make all the stuff (material) we need, in many cases, we are creating excess amounts. This means the V variable in the equation takes most, if not all the responsibility to contribute to 'making progress'. What happens? V spins, faster and faster and given the phyical nature of the cash, even digital cash this is creating an artificial sped up pace for economic life. We still are reving up the V, it seems to be still responding but the externalities are evident for all to see, from personal health to environmental imbalance.

Is there a way out? Yes, let assume we replace M with A. We replace Money with Attention. Attention is much lighter than cash (even digital cash). It is happy to spin quick, it can even spin at levels unimaginable to M. Given attention is human focused, the higher the rate of attention speed the better the social and I would speculate the wider environmental harmony will be put in place.

The intellectual equations are the easy part. However, I see plenty of evidence society is creating the necessary moves to allow A, Attention to replace money.

1 comment:

aboynejames said...

I have thought further on this. As the stock of money is replaced by the stock of attention, then V will slow down given the much higher stock available of attention. I expect V will increase with time again but that should be towards a better goal, life, not wealth.

For example, buying a new home. One financial transaction is recorded but how many interactions did you and your partner/family have before making the purchase decision, more than one?