How do you settle disputes in the absence of a legal system? Or more bluntly, how do you get people to uphold their end of a deal without pointing a gun at their head?
The best answer I've found came from someone who named his avatar Judge Jude. His avatar and the project we were mutually involved in passed into the aether long ago, so I can't provide any references. I also haven't seen this idea anywhere else, but I only claim copyright for these words, if anyone wants to take the idea and implement it, please feel free.
There already is a mechanism for settling disputes without resorting directly to the legal system: arbitration. All the "judges" you see on television, whether they were judges previously, are technically acting as arbitrators. One feature of most arbitration is that the arbitrators only get involved after a dispute is arisen. This can make it a contentious and expensive process.
Judge Jude's innovation was to get involved before the contract was signed. His fee was a certain small percentage of the contract. (How small can be an area of competition between different arbitrators.) The contract wasn't binding until both parties and the arbitrator signed off on it. This makes for great incentives. The arbitrator has a huge incentive to make sure that everyone understands and agrees to exactly what they're getting into, so there won't be a dispute later on. The better he does this job, the more satisfied his clients will be, the better his reputation, and the more he can charge.
What if a dispute does come up, and someone does not want to comply with the arbitrator's decision? That person then gets blacklisted: the arbitrator will no longer adjudicate any disputes or sign off on any contracts for that person. If they do that several times, they will soon find no one wants to do business with them.
Settling disputes before they arise will be key to prosperity on the Long Ascent.
Showing posts with label Finances. Show all posts
Showing posts with label Finances. Show all posts
Friday, August 10, 2012
Friday, April 13, 2012
A Penny Saved...
... is two or three pre-tax pennies earned.
Seriously.
If you work in the United States, you pay Social Security and Medicare taxes on the very first dollar you earn. (I'm not well-versed in the tax codes of other countries; some are better, some are worse.) Your employer pays an equal amount, too, and if you're self-employed, you get to pay both. That's almost 1/6 of your income off the top, unless you happen to earn more than the cap on Social Security taxes.
Next comes income taxes. If you're poor, you do get a break. You can earn almost $10,000 before you start paying federal income taxes. If you have children, you can do even better through the Earned Income Credit. But once you start earning more, you can end up paying up to 35% of your income to Uncle Sam. Add to that state income taxes of up to 11% (for Hawaiians who earn over $200,000).
If you spend what money is left, you may have to pay state and local sales taxes up to 9.45%. At least you get to see that. When I was in Poland, the 22% sales tax was included in the sticker price. Other countries hide their sales taxes as "value-added taxes" that the companies pay.
Of course, part of the money that you pay for stuff you buy goes to other peoples' wages, which gets taxed all over again. If the money goes to a corporation and generates any profits, they get taxed again; if it pays out a dividend to its stockholders, they get taxed once again on that.
Direct taxes are not the only issue. Other expenses are involved in having a job, such as commuting and having nice clothes. I have known several couples where they ended up better off financially when one person quit working and took care of the household.
Cutting expenses by doing more for ourselves will get us further on the Long Ascent.
Seriously.
If you work in the United States, you pay Social Security and Medicare taxes on the very first dollar you earn. (I'm not well-versed in the tax codes of other countries; some are better, some are worse.) Your employer pays an equal amount, too, and if you're self-employed, you get to pay both. That's almost 1/6 of your income off the top, unless you happen to earn more than the cap on Social Security taxes.
Next comes income taxes. If you're poor, you do get a break. You can earn almost $10,000 before you start paying federal income taxes. If you have children, you can do even better through the Earned Income Credit. But once you start earning more, you can end up paying up to 35% of your income to Uncle Sam. Add to that state income taxes of up to 11% (for Hawaiians who earn over $200,000).
If you spend what money is left, you may have to pay state and local sales taxes up to 9.45%. At least you get to see that. When I was in Poland, the 22% sales tax was included in the sticker price. Other countries hide their sales taxes as "value-added taxes" that the companies pay.
Of course, part of the money that you pay for stuff you buy goes to other peoples' wages, which gets taxed all over again. If the money goes to a corporation and generates any profits, they get taxed again; if it pays out a dividend to its stockholders, they get taxed once again on that.
Direct taxes are not the only issue. Other expenses are involved in having a job, such as commuting and having nice clothes. I have known several couples where they ended up better off financially when one person quit working and took care of the household.
Cutting expenses by doing more for ourselves will get us further on the Long Ascent.
Friday, January 27, 2012
Expense vs. Expenditure
In common everyday usage, expense and expenditure are used synonymously. Even some accountants use them interchangeably. In the United States tax code, there is a subtle but important difference. No, even though one of my careers is a professional tax preparer, I am not turning this blog into a detailed discussion of taxes. However, the distinction between expense and expenditure is a critical one for any discussion of sustainable economics, especially from the top of Hubbert's Mesa.
To put it simply, an expense is spending money for something which you completely benefit from in the current year; an expenditure is spending money for something which you benefit from for multiple years. For example, your car is an expenditure (or at least I hope if you're reading this blog, you're not buying a new car every year!), the gasoline to fill it is an expense.
Where this distinction relates to sustainability and Peak Oil is that it doesn't just apply to money. For those purposes, though, one year is very arbitrary; it probably should be expanded. For example, making concrete takes a tremendous amount of energy, invariably from fossil fuels these days. If you make concrete objects so that they are only put to one use and then discarded, that represents a substantial energy expense. On the other hand, concrete objects that are designed to be reused over and over are an expenditure that can pay dividends for centuries.
We need to carefully analyze whether the resources we use are expenses or expenditures, because on the Long Ascent, expenses weigh us down, but expenditures are what allow us to go higher.
To put it simply, an expense is spending money for something which you completely benefit from in the current year; an expenditure is spending money for something which you benefit from for multiple years. For example, your car is an expenditure (or at least I hope if you're reading this blog, you're not buying a new car every year!), the gasoline to fill it is an expense.
Where this distinction relates to sustainability and Peak Oil is that it doesn't just apply to money. For those purposes, though, one year is very arbitrary; it probably should be expanded. For example, making concrete takes a tremendous amount of energy, invariably from fossil fuels these days. If you make concrete objects so that they are only put to one use and then discarded, that represents a substantial energy expense. On the other hand, concrete objects that are designed to be reused over and over are an expenditure that can pay dividends for centuries.
We need to carefully analyze whether the resources we use are expenses or expenditures, because on the Long Ascent, expenses weigh us down, but expenditures are what allow us to go higher.
Friday, November 11, 2011
Class vs. Income
Recently in the United States there has been much talk about class warfare. As disturbing as the concept is, I am more concerned about a fundamental distinction that has been lost in modern America: the difference between class and income.
This is due in large part to the success of the US in allowing people to change their circumstances. Class used to have a far different meaning. When you were born into the slave class in nineteenth century America, not only did you remain a slave for the rest of your life, but your children were similarly condemned. If you were born into the aristocracy in sixteenth century England, you remained an aristocrat, no matter how much a fool or scoundrel you were.
These class distinctions were maintained by law, and thanks to the struggles of those who came before us, they are largely gone. The term "middle class" still exists, but the way it is used now, people only mean "middle income", between "rich" and "poor". The distinction between them is rather arbitrary; for example, "the poor" are those who earn less than the "poverty level". This arbitrariness makes it easy to go from rich to poor and possible to go from poor to rich.
Even though we don't have the same kind of legally enforced class system as in the past, I think it is still a useful concept. We still have mental and cultural barriers that keep people in their same circumstances. I define the middle class as those who work for a living; the lower class does not work, and the upper class has others work for them. As a further gradation, the upper middle class work for themselves, and the lower middle class work for someone else. This is a completely separate dimension from wealth and poverty; each class has rich and poor members. The importance is that members within each class have more interests in common than they do with people of equal income in other classes. For example, the lower middle class still has to show up for work every day, whether they are flipping burgers or starring in movies.
It is important to understand that no class is better than the other. All are necessary, or at least unavoidable. (Even if we work until the day we die, no one works from the day they are born.) Each class requires different strengths. We just need to think clearly about our circumstances.
If you are confused about which class you fit in, you can easily get lost on the Long Ascent.
This is due in large part to the success of the US in allowing people to change their circumstances. Class used to have a far different meaning. When you were born into the slave class in nineteenth century America, not only did you remain a slave for the rest of your life, but your children were similarly condemned. If you were born into the aristocracy in sixteenth century England, you remained an aristocrat, no matter how much a fool or scoundrel you were.
These class distinctions were maintained by law, and thanks to the struggles of those who came before us, they are largely gone. The term "middle class" still exists, but the way it is used now, people only mean "middle income", between "rich" and "poor". The distinction between them is rather arbitrary; for example, "the poor" are those who earn less than the "poverty level". This arbitrariness makes it easy to go from rich to poor and possible to go from poor to rich.
Even though we don't have the same kind of legally enforced class system as in the past, I think it is still a useful concept. We still have mental and cultural barriers that keep people in their same circumstances. I define the middle class as those who work for a living; the lower class does not work, and the upper class has others work for them. As a further gradation, the upper middle class work for themselves, and the lower middle class work for someone else. This is a completely separate dimension from wealth and poverty; each class has rich and poor members. The importance is that members within each class have more interests in common than they do with people of equal income in other classes. For example, the lower middle class still has to show up for work every day, whether they are flipping burgers or starring in movies.
It is important to understand that no class is better than the other. All are necessary, or at least unavoidable. (Even if we work until the day we die, no one works from the day they are born.) Each class requires different strengths. We just need to think clearly about our circumstances.
If you are confused about which class you fit in, you can easily get lost on the Long Ascent.
Friday, November 4, 2011
The Ultimate Forms of Savings
"Lay not up for yourselves treasures upon the earth, where moth and rust consume, and where thieves break through and steal; but lay up for yourselves treasures in heaven, where neither moth nor rust doth consume, and where thieves do not break through nor steal; for where thy treasure is, there will thy heart be also." Matthew 6:19-21 (ASV).
More and more people are coming to the realization that things cannot keep going on the way they have been. From the limited perspective of their own lifetimes, and possibly their parent's or children's lifetimes (even grandparent's or grandchildren's), they just see progress in the past and decline in the future. Many are asking what is the best way to hang on to what they have. For some, gold is the answer. Others rely on a well-stocked pantry. Guns and ammo are another popular option. There are good arguments for all of them. But none of them are ultimate; they can all be taken away or used up.
Obviously, the ultimate form of wealth is one that transcends death. Various religions have different concepts of what exactly that is. Jesus talked about "storing treasures in heaven." Karma is another such concept for those who believe in reincarnation. Spiritual growth is certainly a worthy pursuit, and I encourage anyone who is interested in this to find someone to help them. I cannot however help you choose; the best I can do is relate my own experiences.
After your favorite deity, the next best thing to rely on is yourself. Specifically, if you are looking to save what you can for the future, your knowledge and your health are the best investments. Both can be maintained for most of a lifetime. Neither can be stolen from you. Others may be able to damage both, but they cannot in doing so make themselves smarter or healthier. There are many options still available for improving both mind and body; I will touch upon a number of them in coming weeks.
After your spirit, mind, and body lies your relationships and your community. In this world, other people will continue on after you are gone. Hopefully, they will be there for you when your body and mind start to decline. Many sources of advice exist for how to have good relationships with others, and from the statistics, many need help in this area. How to build strong communities is a bit of a mystery to me. Many attempts have been made, but in a majority of cases they only grow while the founders are still alive; the next generation just maintains what they have, and decline sets in quickly thereafter.
Resilient, cohesive communities are one of the most valuable assets on the Long Ascent.
More and more people are coming to the realization that things cannot keep going on the way they have been. From the limited perspective of their own lifetimes, and possibly their parent's or children's lifetimes (even grandparent's or grandchildren's), they just see progress in the past and decline in the future. Many are asking what is the best way to hang on to what they have. For some, gold is the answer. Others rely on a well-stocked pantry. Guns and ammo are another popular option. There are good arguments for all of them. But none of them are ultimate; they can all be taken away or used up.
Obviously, the ultimate form of wealth is one that transcends death. Various religions have different concepts of what exactly that is. Jesus talked about "storing treasures in heaven." Karma is another such concept for those who believe in reincarnation. Spiritual growth is certainly a worthy pursuit, and I encourage anyone who is interested in this to find someone to help them. I cannot however help you choose; the best I can do is relate my own experiences.
After your favorite deity, the next best thing to rely on is yourself. Specifically, if you are looking to save what you can for the future, your knowledge and your health are the best investments. Both can be maintained for most of a lifetime. Neither can be stolen from you. Others may be able to damage both, but they cannot in doing so make themselves smarter or healthier. There are many options still available for improving both mind and body; I will touch upon a number of them in coming weeks.
After your spirit, mind, and body lies your relationships and your community. In this world, other people will continue on after you are gone. Hopefully, they will be there for you when your body and mind start to decline. Many sources of advice exist for how to have good relationships with others, and from the statistics, many need help in this area. How to build strong communities is a bit of a mystery to me. Many attempts have been made, but in a majority of cases they only grow while the founders are still alive; the next generation just maintains what they have, and decline sets in quickly thereafter.
Resilient, cohesive communities are one of the most valuable assets on the Long Ascent.
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