In these days with discussions of deflation and inflation, and the fact that NO comodity such as gold is plentifull enough and of fixed extractive cost to be a non-fiat means of exchange, consider: Why could not a basket of labor, say one hour of a registered nurse plus one hour of a garbage collector plus one hour of a carpenter, summed and divided by three, be a Universal Manhour, acceptable as the reserve value basis of a fiat currency. I know the usual arguments, eg a keptocracy requires steady inflation to allow "value" growth and aid in retirement of the debts accumulated to provide means of production, but I can't say I agree with them. Note that as we move towards a one-world government (cringe...) this sort of a normalization will have to be adopted sometime. Comments, please. Use your flames to burn your currency.
Won't work because prices of many goods may not be linked with a generalized labour aggregate number. If general wage levels rise --> Rise in value of each unit of currency --> Deflationary forces on all goods with the same demand/supply levels as before --> Wages fall / unemployment/malinvestment
Comments appreciated but dissagree. Why would wages "rise?" Is tomorrow's manhour more valuable than todays?
Changing consumer trends, new technology, structural changes, etc. They would rise or fall based on these factors, triggering unnecessary inflation or deflation in unrelated goods markets. Of course, re-balancing may keep the generalized "Manhour" constant, but it would take significant effort and more or less be arbitrary. You may as well use a fiat currency where there is a fixed and permanent supply and backed by the faith of the US gov.
Um... the problem with your idea is that your currency's value is now tied to the demand for labor (in particular, the three types of labor you've defined). That demand isn't constant and subject to the business cycle. So, the value of your currency (against other goods) will now be cyclical... which is incredibly dangerous. Nice try - but your idea exhibits a failure to understand basic monetary economics.
Uh yeah it is. Capital investment increases the value of labor. Total capital investment generally increases over time. As the total aggregate capital investment rises, so does the value of a unit of labor. This part of why a certified operator of a backhoe gets paid more than a guy digging ditches with a shovel. The backhoe operator's labor is more valuable than the guy digging ditches with a shovel even though they both produce the same product.
To add on to what you are saying, moreover, time has value as well. Consuming goods tomorrow does not have the same value as consuming goods today because you have to be compensated to defer your consumption (otherwise, rationally you would want everything today, bounded only by storage cost and parishability).
I think the system should consist of: a) Fiat money b) Growth of money supply = rate of historical GDP growth associated with innovation (~3% +/- 100 bp's), would need detailed economic analysis to calculate. c) The growth rate should be applied consistently and through the mechanism of printing or creating currency for the government to use (inflation/deflation is a systemic issue so they should be responsible for it). d) Ban banks from creating money.
At least your plan is a bit more grounded in economic reality than the usual rants around here. A few problems too: (1) Your step (b) calculation is extremely difficult. There has been research done on this since the dawn of modern economics; Central banks are particularly resourced to do this kind of study. It's not a problem that can be solved conclusively. (2) Your step (d) is confusing. Banks extend credit, which has the effect of increasing the money supply. So do you propose that reserve requirement (or collateral requirement) should be set at 100%. You can - but the effect will be decreased economic activity and growth. You may be willing to make this trade off, I am not.
The growth caused by any "capital" creation (credit) in excess of the rate of saving of the economy is, by construction, unsustainable. It will cause inflation for those not "in the loop" of the credit, it will cause asset bubbles and periods of rapid deflation. Imagine a stable, upward sloping line. That is theoretical economic growth, given a stable monetary supply (adjusted for innovation). Then imagine a variable, stochastic process revolving around that line. That is the path of economic growth if we allow private institutions to create the money supply based on short / mid term profit objectives and based on the Nash equilibrium that such a player in a capitalist society may, at times, over-produce money with the specific aim of perpetuating asset bubbles and over-investment only because the effects will predominately be felt by all of society and not simply the singular agent. Further, and perhaps more importantly, the ability of banks to create money out of thin air runs counter to any fundamental stance on systemic fairness in regards to risk/return opportunities being equal for all participants.