...... Money, money money ........
Money is nothing but a license to acquire a portion of whatever goods or services are available. It is not wealth, but when properly created and managed it is meant to accurately represent the "stuff", real goods and services in an economy, that people wish to trade with each other. Regardless of what it is made of or supposedly "backed" by, it has no value in and of itself. Your desire to have money is not because you want to paste it overtop of that nasty wallpaper in the bathroom or because it tastes good.
Money is supposed to allow the two ends of a barter transaction to be separated in space (I sell wood here, buy nails there), time (I sell now, buy later), and granularity (I sell a whole cow, but don't have to buy 1,000 chickens). In order to perform this function, the people at the ends of every transaction (where goods or services are exchanged for money) must have a good idea of how much "stuff" a certain amount of money represents, and that notion of value must be fairly consistent across both distance and time. If not, folks may well decide not to trade or be unable to trade.
Currency is just the name and physical form of the "license to acquire".
The real or monetary value of any currency lies entirely in the "stuff" available to acquire with it:
[1.0] (Value of currency) = (Everything available to acquire) ÷ (Amount of currency available to acquire it with).
Equation (1.0) tells a very big story: the amount of currency needs to be adjusted to stay in the same rough balance as the amount of "stuff" grows or shrinks over time, or the value will fluctuate. And the more the value fluctuates, the less efficient transactions become and the poorer the economy performs.
Equation (1.0) also
explains why it works so poorly in the long run when a government attempts to
dictate the value of a currency, i.e. set prices or wages.
Inevitably, either "stuff" or currency runs short and the economy stumbles when
people curtail their activity in response to the mismatch between the real and
the dictated values.
Keeping the value of a currency stable presents some tough problems:
A.) How do you know just how much "stuff" there is, or failing that, what the apparent value of the currency seems to be at any given time?
B.) How do you determine the amount of currency in circulation, particularly when a lot of it isn't physical but simply numbers on records?
C.) How do you control the amount of currency in circulation in a way that doesn't significantly favor some participants over others?
There are no easy
or even precise answers to these problems, especially A & C. The huge institutions of national and
international finance - economic activity monitoring, trade frameworks, central
banks, currency exchange agreements, etc. - are what the nations of the world
use in the attempt to prevent instability of currency values from disrupting the
ability to trade, both internally and with each other. Notice the word "attempt".
In the end, the point of money and
financial systems is to have money be a good representation or model of the
positions and flows of "stuff", materials and labor, within an economy; it is
supposed to be a universal picture of whatever is in the economy and allow
people to exchange their stuff by converting freely between real stuff and
pictures of stuff. The hard part is making sure that the pictures closely
represent the stuff at all times. And very big trouble brews whenever people
(read: politicians & governments) get the stupid idea that they can alter
reality by simply editing the pictures.
"Backing" a currency by a fixed ratio to gold or anything else really does nothing to stabilize equation (1.0), since an inflexible amount of currency still does not address the problem of changing economic activity. Whether a currency is gold, paper or even weasel skins makes no difference as long as the amount is properly controlled. The problem with paper money has been irresponsible governments failing to meet their obligation to protect the value by controlling the amount, not the fact that it is paper.
Just what is "the economy" anyway?
People
talk about it, quote numbers for it, and usually think they are not receiving
their fair share out of it no matter how much they are getting.
Add to that all the fancy "-isms" ... capitalism, socialism,
communism and all that junk ... and you have quite a
mess. But what is this thing we call "the economy", underneath all the noise and
blather?
I started wondering
about this when I read on a message board the claim that "the economy exists for the workers,
the workers don't exist for the economy" as part of a rant about the evil of
corporations and so on. Hmmmmm, all very philosophical sounding
, but so what ... is it valid?
First, let's forget all the philosophies, theories, and "-isms" folks use to make wildly complicated arguments in an attempt to "prove" their point. Let's begin at the beginning. I have my little farm and you have yours. Due to soil or skill or whatever I can grow more blueberries with less effort than you, and you can grow more corn with less effort than I. We could each stick to doing everything for ourselves. But if we strike a bargain to trade blueberries for corn, we can each have just as much blueberries and corn as we could alone, but for less effort. We just made an economy - an invisible thread binds our well-beings together because we chose to trade.
Now we each have some spare time because it takes less effort to obtain what we each need. So I make a shovel to ease my blueberry work and you make a hoe to ease your corn work. Now we can each produce enough more that we can trade not just with each other, but with several more farmers and for other crops. Our lives improve because we have more goodies with less effort. We expanded the economy: the number and reach of the invisible threads increased because we chose to trade more. With increasing spare time maybe I make extra shovels because I'm good at it, you make extra hoes, and we trade them to others in return for a promise of a share in next year's larger crop. As the tools spread, so does rising production and trade. And so it goes - rising numbers of invisible threads reaching farther and wider, tying the participants into a vast web. However, the flip side is that the choice of each member on the web to make, break, strengthen or weaken some of his threads jostles other members, which may in turn affect their choices.
The economy is NOT the goods and services themselves, NOT the money or jobs or wages involved, and above all NOT the rules, regulations, or "-isms", or the financial institutions such as banks or corporations. It is just a name we tag onto the effects that happen as all the participants make their individual choices about what, or if, or how much to trade. The things we measure (GDP, jobs, wages, debt, etc.) are an attempt to attach numbers to it and get an idea of what is going on, and the rules or philosophies we apply are how we attempt (with dubious success) to achieve some particular outcome. What the economy really is, is what is happening as people play the game of trade.
So to answer the
question posed at the beginning, the economy does not exist
for anyone or anything in particular, it simply exists by
virtue of being the basket of effects that happen when we choose to trade. It is
also not an arbitrary thing we can manipulate into whatever we want with a bunch
of rules
, because underneath all the hoopla
it is based on the behavior of people making their choices. And controlling
human behavior without squashing its vitality is a very dicey proposition at
best - even when done with great care, the results are seldom what was
anticipated. 
Governments have
tried any number of different approaches to forcing an economy to behave as they
desire, and history is littered with the smoking ruins of such attempts.
Economic terms sometimes seem to mean different things to different people, which makes talking about them tricky. Labor and resources are pretty clear, but what about wealth and capital? I'm not claiming I'm completely correct in this, but my understanding of economic terms is that wealth is anything that serves my needs or wants, and capital is anything used to produce wealth.
In terms of my humble homestead then:
Therefore, as a homesteader I am a
capitalist 
because I
own the capital for producing the wealth, I decide to what use that capital will
be put, and I own the wealth that is produced. A neighbor cannot take my tiller
for a week without my consent simply because he needs it. The government cannot
arbitrarily take away my food and firewood, nor force me to let others use my
garden and woods. And I would not want it any other way!
If I were a communist, I would not own the capital
individually (the community would), would not have the right to determine how
the capital is used, and would not own the wealth my labor produced. I'd have to trust
that everyone else would work as hard and share fairly. Yeah, right.
If I were a fascist, I would own the capital and the wealth it
produced, but I would not have the right to determine the use the capital is put
to - the government would dictate that. So when they order too much firewood and
not enough food, I'm going to be warm and starving. Great.
If I were a socialist, I would not own the capital but sort-of lease it, I would determine the use it is put to (this I'm not entirely clear on), but I would not own the wealth that is produced. So I could work my butt off to put up a nice store of food and firewood, and the government could simply take whatever it sees fit to distribute to others.
UH OH, that last bit actually sounds a tad familiar, when April 15 rolls around!
You see it all the time - claims by half of the self-appointed experts about how if we did this or put a tariff on that it would create a whole bunch of high-paying jobs and we would all be on easy street. Or according to the other half, if we did the exact same thing, the world would come crashing down upon our heads. So what is the real deal ... how is a mere peasant to know what the truth is about these economic "what-ifs"?
Politicians, business, unions, special interest groups and others with an agenda do
their best to needlessly complicate the issue in order to make their claims seem
valid no matter what their claims are. But it is
not that hard to estimate the effect of an issue once you strip away all the
smoke and mirrors. There are two simple equations:
[2.0]: (Amount available to consume) = (Total Economic Base) - (Amount fed back in to make it go) - (Amount put into nonproductive sectors).
[2.1]: (Amount available to me) = (Amount available to consume) - (Amount everyone else is consuming). This is what we consider our standard of living.
The "Total Economic Base" is everything of economic value: raw materials, labor pool, existing capital (buildings, tools, infrastructure, etc), and total produced goods. Remember, labor is also a limited commodity and an hour of labor put to either goods production or nonproductive use cannot be consumed as a service.
The "Amount fed back in to make it go" is what is usually referred to as economic input - it is the hours of labor and the material that goes into direct production, the building and maintaining of facilities & tooling, the building and maintaining of the general infrastructure such as roads and utilities, the extracting and refining of resources, the education & skills training of the workforce, and so on. Material can be either raw resources or produced items.
The "Amount put into nonproductive sectors" includes the cost (in labor hours and materials) of meeting regulations such as safety, environmental protection & restoration, records & reporting, and so on; the cost of litigation and insurance; the cost of government facilities, supplies, and equipment, including the courts and the military; the cost of law enforcement and fire protection; and so on. Remember, cost here is the labor hours and materials.
NOTE:
the pay cost of both productive personnel (direct and supporting)
and nonproductive personnel (government, military,
welfare, retirees, etc.), shows up in (2.1) as "amount everyone else
is consuming". Dollars, wages, jobs, and all that hoopla is just petty details primarily
related to dividing the available goodies among the consumers, i.e. who can get
how much of what is available in (2.1). You cannot consume what isn't available regardless of
dollars. 
You can consider the short-term and the long-term effects of any issue using the basic equations. Short-term effects are usually easier to think about.
And you're done!
There will be
more, less, or the same available to you, strictly due to the issue. Of course
your personal situation is always subject to change, but we're merely trying to
nail down the effect of the issue alone. To assess long-term effects, you do the
short-term analysis for several points in time and judge the trend that emerges.
At any particular moment in time the equations always balance.
Notice that wages never enter the picture.
The entire notion of "high wages
means high standard of living" only works on the personal level; it is
bogus nonsense in the big picture.
Only increasing the productivity faster than the costs,
i.e. raising the "amount available to consume" in (2.0), can
improve the average standard of living.
There is a notion that the only way to make the benefits of rising productivity flow to the workers is to force an increase in wages, either by laws or by unions.
Not so! There is another mechanism that causes rising productivity to benefit the workers without any such heavy-handed intervention: the price of stuff.
Let's say you're a
manufacturer, and you have been wisely investing in major capital improvements
that significantly raised productivity at your plant over time, just as others
in your industry have been doing (other than the stupid ones, who have been
driven out of the business for being noncompetitive). At some point, the output
of your industry catches up with demand, and unsold goods start to clutter up
the warehouse. What now? 
You could raise
wages at your plant to encourage consumption by your workers, and that would
work to a point. But your workers won't use all their extra pay to buy your
stuff, so you'd be also subsidizing other industries. Unless all industries
match your generosity, you're going to eventually cannibalize yourself.
The socialist folks
say you must pass laws or the union folks say you must organize, to force wages
higher so that people can buy more goods. But how much higher is enough but not
too much, and who is going to determine that? And can you easily back off when
demand catches back up to supply, yet wages are so high by law or by contract
that you cannot afford to reinvest in better facilities, causing productivity to
fall off?
Instead of the above stupidity, try this on for size: you LOWER YOUR PRICE. Now more folks can afford your product with their existing pay, not just your workers but everybody. As long as your increasing productivity covers the reduction in price, it does you no harm and you go merrily on as before. Your competitors will, of course, be forced to follow suit or lose market share. Less competitive members of your industry will likely migrate to other products where there is unsatisfied demand (and thus higher prices), increasing production there and lowering it in your industry where it isn't as needed. Meanwhile the same overall process is occurring in other industries.
My my, bunky, look
at what is happening: the rising productivity is getting passed on to the
workers (and everyone else, to boot) by virtue of lower prices translating into higher buying power. All
without passing a law or going on strike.
Not only that, but production migrates from where it is in excess to where it is
needed, all without directives from the Ministry of Heavy Boilers And Ankle
Socks. 
Now, there's more to the overall progression of market adjustment than this simple look. If the process described above gets out of hand, it can lead to destructive deflation and recession. But the point is that there are effective natural mechanisms at work in open market economics, that things don't always need to be addressed by brute force. Like farming with nature rather than against it, better to work with the natural flow of economics than try to force it.
I’ve heard an assertion in many
different forms that since the government prints/mints
the money, it belongs to "the people", and invariably "the people" refers those
making the claim. This concept is utter
nonsense, but has an understandable gut appeal because the Federal Government
does indeed manufacture currency. Consider these important concepts in order
to grasp the crucial differences between currency and money.
To answer the question of "who owns the money", consider that when we speak of money we are generally referring to the value in terms of goods or services that it represents. Remember that money is merely a placeholder or token that is supposed to represent real-world goods and services, and that it has no intrinsic value regardless of what it is made of or "backed" by. Do you desire dollars because they taste good? It is not money you really want, it is "stuff" [see "What is Money?" in this category].
Let’s say you build a chair. It is your private property and you alone have the right to determine what becomes of it. If you were to trade that chair for a lamp, then the lamp would be your personal property, and it would have been strictly up to you and the owner of the lamp to decide that the exchange was satisfactory to you both. "The people" (or the government) certainly cannot claim ownership of either the chair or the lamp. Given that, why would it suddenly gain a claim on the value of the chair if you were to convert it into money before converting the money into a lamp? Since money is merely a placeholder which represents the value of the chair, the money is just as much your private property as the chair was before you sold it and the lamp will be after you buy it.
So to answer the question posed at
the beginning, money is private property in exactly the same fashion as
the real-world items it represents. It belongs to the individuals, companies, or
institutions which received it in exchange for something of value they provided.
The only money "the people" or the government legitimately owns is what has been
collected in taxes or obtained through the sale of government assets. Though governments
have and still sometimes do arbitrarily print money for the purpose of
government spending, this action constitutes theft because it transfers value
from citizens to the government without their consent.
The banking system is
supposed to act as the caretaker of the money (value) in the same way that the
government is supposed to act as the caretaker of the physical currency, because
while they can both have profound effects upon the money in their care, it does
not belong to them.
Along the line of the ludicrous
"money belongs to the people" argument is another insidious bit of nonsense that
states that the politicians and not the banking system should control the money (value).
Invariably this notion is put forth by folks who wish to use government control
of the money supply in some hair-brained scheme to dictate the behavior of the
economy to their liking, or because they feel there is something evil about
banks charging interest or making a profit. Aside from the fact that is has been
tried many times and been a disaster every time, a private banking system is the
only institution which has a strong incentive to keep the value of
money stable, and stability is an absolute requirement for an efficiently
operating economy. The more the value of money fluctuates over time, the less
likely it is that lenders and borrowers will be able to make rational decisions
or long range plans, stifling the economy and threatening the survival of the
banks. While individual banks can and do make terrible errors in judgment in
their handling of the money and thus compromise the stability of its future
value, the fact that they can suffer or fail as a result is a strong incentive
to avoid such misbehavior ... that is, unless they have an implied backstop from
the government that they will not be allowed to fail.
Politicians have no such long-term outlook and repeatedly sacrifice the future
to secure a benefit in the present.
As we go about our daily lives dealing with our tiny personal economies, largely involving managing our finances, we develop an assumption that the way things works for us alone apply to the overall economy, only on a larger scale. We come to think that wealth and prosperity is based on money, that if we all have a higher income or more money in general then we all are more prosperous. This seems obvious because on an individual basis that is indeed how it works: if I have more money I can have a higher standard of living. But on an economy-wide basis, it does not work that way at all, and the common misconception that what works for me individually will also work when applied to everything and everybody is at the root of many foolish ideas and policies. Yes, “it’s the economy, stupid”, but the economy is the stuff and not the money.
o Money is not wealth. Wealth is the goods and labor (services), the stuff that you expect to get in exchange for money. Money is just a universal picture meant to represent actual stuff so as to make it easy to exchange your stuff (which you already traded away for money) for someone else’s stuff that you want.
o Our personal prosperity lies in how much stuff we get to consume. Money is the “license to acquire” some of the stuff that is available in the world, but since we got money for trading away our stuff, prosperity really comes down to how much stuff we get in return for the stuff we trade away.
o People work every day and create a certain amount of stuff, and that is all there is. After all, you cannot consume more than exists. On top of that, some of the stuff we create must be used in the process of making the stuff we wish to consume. The lumber and labor you use to build and maintain the sawmills & roads cannot be used for building houses. So we get to consume only the stuff in excess of what is needed to produce all the stuff in the first place.
Think about it: the overall economy consists of people working to produce all that goes into The Great Pool of Stuff, and everything we use for any purpose must be drawn from that pool. The amount of stuff in excess of what it takes to produce the pool of stuff determines overall prosperity, and the amount that each person draws determines individual prosperity. Under normal circumstances in an open market economy all of the stuff available to consume gets consumed, so the only way any one segment of the consumers can raise its consumption (prosperity) is either to increase the size of the consumable pool, or reduce the consumption of everyone else.
1) Saving money means you trade away your stuff but don’t demand anything in return right now, so that there is a bit more in the pool, with the expectation of getting the stuff later. IF the extra stuff left in the pool gets used to improve the ability to produce more stuff (true investment), then very likely the stuff you want will be available in the future. But if that stuff is merely consumed by someone else, then there may well be less stuff available to you in the future than you were expecting. This is what we experience as inflation, when our money gets us less from the pool because the amount of money has increased faster than the size of the pool.
2) The limitation that you cannot consume more from the pool than is put into it applies to each particular kind of stuff separately. If lots of socks but few shoes go into the pool, you cannot suddenly consume lots of shoes by simply consuming fewer socks; the production must shift, which requires time and investment. The money representing the stuff is all the same, but each sort of stuff is unique and cannot be arbitrarily transformed into some other kind of stuff.
3) The money price of each kind of stuff depends on whether it is a “commodity item” or not. Commodity items are goods or services (labor) which are widely produced and consumed. Their money price mostly reflects the amount of stuff required to produce them, so it is sensitive to changes in productivity, i.e. how much output stuff can be created from a certain amount of input stuff. But there are also things whose money price has less to do with the stuff used to make them, usually things which for one reason or another are desired but in limited supply. Many luxury items are extreme examples of the latter category, severely limited either by the natural world (caviar or beachfront property) or by circumstance (art, limited edition, antiques). Taking a million dollars away from a rich person who would have bought a rare painting and giving $100 to ten-thousand people to buy shoes doesn’t work because leaving the painting in the pool does not create any shoes, making all those shoes requires a lot of stuff, and the ten-thousand people aren’t making any more stuff so where does it all come from?
The world economy really does not run on money at all, it runs on stuff, and the finite nature of the Great Pool of Stuff has profound implications for the way policies often do not work the way we expect. We think about economic policies and prosperity in terms of who gets how much money, and while rules concerning how money is handled can affect the way stuff flows among groups (nations or institutions) and individuals, we rarely stop to consider how these policies affect the Great Pool.
1) The notion that all we have to do is raise wages and that will increase prosperity is false. If wages get raised arbitrarily, be it by laws, unions or labor shortage, people go to work tomorrow and produce the same amount of stuff as yesterday so the consumable pool is no larger. What happens is that the ones that got a raise attempt to consume more than there is, which raises prices, and while they may get somewhat more it is less than they expect plus everyone else has to cut back. Increasing production or efficiency to grow the consumable pool requires removing stuff from the pool for investment rather than consumption, which reduces the consumable pool temporarily the same way saving money reduces your personal consumption. But investment is the only way to truly increase prosperity.
2) War does not inherently improve an economy. In war stuff gets removed from the pool and destroyed. By that logic we should be able to increase prosperity by making a bunch of cars, refrigerators, clothes and such, piling them in a field, and blowing them up. Obviously we’d be far better off using the stuff instead. War does increase economic activity, which in time may grow the pool, but translating that into prosperity is an entirely different matter since war goods are mostly not consumable items. Increasing activity without destroying stuff would clearly be much more efficient.
3) Government infrastructure spending improves prosperity only if the new infrastructure improves productivity and thus results in increasing the consumable pool. If existing bridges are handling the load and in no danger of failure, then improving them or building more does not improve transportation efficiency and no new stuff goes into the pool as a result, though a great deal of stuff gets removed from the pool. The problem is that politics and not economics usually determines what the government spends on.
4) Expecting wages to “keep up with inflation” is completely self-defeating. The cause of inflation is money increasing faster than the consumable pool. Arbitrarily adding yet more money only makes things worse. Cost-of-living adjustments and the inflation they cause steal from those who are trying to save, yet saving is exactly what is needed to provide the investment necessary to increase the consumable pool. Wages can rise no faster than the increase in the total Pool of Stuff minus the portion needed to keep the production going and minus the portion that taxes remove, or the result is simply inflation, which is the same as devaluing the money. Remember, the only thing that backs up money is the actual stuff you can buy with it, and you cannot consume more than exists regardless of money.
The general idea of taking away some money from the rich and using that money for ourselves to have a higher standard of living has always been appealing. It seems as if we ought to be able to have more goodies for ourselves in direct proportion to the dollars we receive when we redistribute the wealth, yet every time this procedure has been done it has not worked as well as it seems it ought to. Yes we peasants are a bit better off, but not nearly as much as the dollars would imply.
After giving this conundrum much thought, I believe I’ve come across a part of the reason this is so, and it can be illustrated by considering the issue of meat and cows. This is not to be confused with meeting cows, which is done in tacky bars behind the feed mill. That is, so I’m told … I certainly don’t have any direct personal experience with this bars-and-cows thing, you understand. So if any of those good old boys tell you they saw me down at Udders last Saturday night … at 2 AM … wearing jeans and a grey shirt, well that simply was not me. No sir, it most definitely was not. That was someone who, by the wildest coincidence, just happened to look a lot like me … and dress a lot like me … might have even sounded a lot like me … but it wasn’t me! Just so we’re clear on that.
OK, back to the subject at hand. When a cow is slaughtered there are a wide variety of meats produced, from filet mignon to hamburger. A cow produces only a little filet and a lot more hamburger, and varying amounts of steaks & roasts in between. The rich guy buys a couple of pounds of filet for $50 and we peasants each buy a pound of hamburger for $2. Along comes Populist Politician to save the day. He takes $40 away from the rich guy and gives $2 each to 20 peasants. We peasants cheer and expect that now we can each buy two pounds of hamburger. The rich guy, no longer rich, buys a couple of pounds of steak instead of the filet. But there are a few things wrong with this picture.
1)
We cheering peasants suddenly expect to buy a lot more pounds of hamburger, and
nobody is buying the filet. So two pounds of filet gets left but 20 more pounds
of hamburger is needed. Grind the filet into hamburger and it is still only two
pounds, so where does the extra 18 pounds of hamburger come from?
2)
The amount of money involved is still the same, because the $40 simply moved
from the rich guy’s pocket to ours. Yet we expect to get a lot more meat with
those same dollars. The only way that can happen is if the average amount paid
for meat goes down,
because we have the same dollars divided by
more meat. Now if something brings less money will producers make more of that
stuff or less? Basic economics says lower reward leads to lower production, yet
we expect to be getting more. It doesn’t add up.
3) And lastly, let’s look at this from the farmer’s perspective. He needs a certain amount of money from the sale of a cow to buy the stuff he needs to raise the next cow. But now he gets less money per cow because the filet must either be marked down or go unsold. Thus, while peasants are clamoring for more meat, the barely profitable farmers get driven out of the market. Meanwhile the ones that were making a good profit per cow are already producing all they can since not doing so would have been passing up profits, and even the profitable ones had their profit fall some as well. This also doesn’t add up for having more meat the way we expect.
What really happens of course is that the prices of the various cuts of meat must change so that the farmers get at least as much money per cow in order to produce the needed cows. Since no one has the bucks to buy the previously expensive cuts, they must fall in price, and to make up for the loss all the other cuts must rise in price. We peasants that got the redistribution handout might end up with somewhat more hamburger but not as much as we were expecting. But at the same time, everyone else who did not get the handout is faced with higher meat prices and must cut back, which is really where the “extra” meat comes from. In the end, it takes a certain amount of stuff for the farmers to raise the cows, and we consumers must provide that much stuff regardless of the dollars or we don’t get the cows we want. If we somehow come up with more dollars but we don’t make any more stuff to trade to the farmers in return for cows, there still cannot be any more cows than before.
I don’t have a detailed grasp of what goes on with the process of how prices get to be what they are. The simple principle of “supply and demand” works for one single type of stuff, but does not account for the way supply, demand, and prices shift around from one sort of stuff to other sorts of stuff. And since it is the stuff that makes an economy run, not the money, the general idea we all seem to have that wealth and purchasing power lies with the money cannot be correct in the larger picture. The $50 the rich guy was willing to pay for two pounds of filet represents trading a certain amount of stuff to the farmer in return for two pounds of cow, whereas when we peasants pay $4 for two pounds of hamburger we are trading far less stuff for our two pounds of cow. Part of the reason we peasants could get two pounds of cow for little stuff in trade is that the rich guy gave so much in trade for his two pounds. Even if we grab all of the rich guy’s dollars and he buys no meat, all there is for us peasants to divide up is the two pounds he no longer buys, because there is no more cow than there was before and there won’t be any greater amount of cow in the future because the farmer is still getting only enough stuff in trade to raise the one next cow, just like before. The only way we can have a lot more cow is to trade more stuff to the farmer, i.e. pay more for our meat, which is exactly the way it was before. What did we accomplish with the big grab and redistribution? We got to divide the amount the one guy was consuming amongst the mob of us, which is far less than we were expecting. But that is the reality because while the amount of dollars can be anything at all, the amount of stuff is set by physical reality.
The one situation where clobbering the rich would give us noticeably more meat is if a lot of farmers are raising something inefficient, such as pheasant, that only the rich are buying. Shifting money to us peasants would allow us to shift those farmers to raising cows or chickens, because that's what we are willing to pay for. The extra meat comes from the increase in efficiency of getting more meat per the amount of stuff the farmer uses to raise his animals. But taking the money that the rich were using to buy caviar isn't going to get us anything we want, because the tiny resources and labor involved in producing caviar won't yield much of anything else that we do want. What the rich are buying in the case of caviar is rarity, and that's all the gets left in the Great Pool of Stuff when they don't pour a lot of dollars into buying it, but there isn't any more of the other stuff we would like to buy with those dollars.
