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Toward Consecrated Capital
Capitalism is the engine of our world; more than anything else, it is what has made us rich over the last few centuries. It is not just that we are free to trade stuff at market prices. It is also that we have teams who bet huge chunks of capital on risky ventures that attempt big changes to key methods and distributions of production. And that many of our best and most ambitious folks are drawn into such teams, hoping to win big from these gambles. That is the magic combo that has made our world vroom, via rapid adaptation and innovation.
We give this powerful engine pretty free rein in most mundane parts of our world, the parts that seem too boring to think about. In such areas, we let capitalists decide what are our products, how and where they are made, how they are priced, how work is divided among organizations, which workers do what, which ones are fired, who gets rich, and how often all of this changes. And in such mundane areas, we overall have seen spectacular progress.
But alas, the more interesting and important an area of life seems to us, the less willing we are to let this powerful engine work there. For example, we are revolted by things like prostitution and recreational drugs, and so try to ban them. Resulting in “black markets” which mediate about 13% of GDP in developed nations, and 36% in others. Yes trade happens in black markets, but capitalists are greatly restrained there.
Many other areas of life seem to us, in contrast, to be too important, too sacred even, for us to feel comfortable giving capitalists free rein there. And so we instead push to have governments or non-profits to run those areas. In the US today, 10% of (non-black-market) workers are self-employed, 10% work at non-profits, and 14% work for governments. Furthermore a third of those who work at for-profits are at publicly-traded firms, where the power of capitalists is substantially constrained relative to at privately held firms. Thus only 38% of US workers are where capitalists are most free to adapt and innovate. This figure is probably even lower in most other nations.
Furthermore, even at the most capitalist firms, government regulations often greatly limit allowed changes. Because most people apparently trust government regulators more than they do non-government certifiers or evaluators. In addition, heavy regulations and high taxes induce us to do a lot of things for ourselves (e.g., cooking and cleaning), instead of paying outsiders to do them. Considering all these factors, my guess is that capitalists today are free to change less than a quarter of what they’d be free to change in a completely capitalist economy.
This problem also shows itself in reactions to reform proposals. Over the years I’ve proposed alternative institutions for many important areas of life. Being an economist, my proposals usually include money and capitalists. And that has consistently make many dislike them. For example, critics often imagine extreme scenarios wherein some hurt others for money, and they aren’t moved by stats showing related acts to be quite rare. It is enough that they can imagine them. Yet most worry little about analogous scenarios that remain quite possible with non-profits or governments. Those they trust; money and capitalists they don’t.
The fundamental problem here seems to be our old friend, the sacred: money seems profane. Money doesn’t distinguish sacred from profane. It can be spent to get sacred or profane things, and can be obtained via sacred or profane activities. Which violates our norm that the sacred and profane should be clearly separated. Because of this, we can more easily imagine money inspiring profane motives and acts. Furthermore, the vast inequality that rich capitalists represent seems itself profane, making it especially easily imagine such capitalists acting profanely from profane motives. After all, we often care more about others’ motives than the effectiveness of their actions.
To prevent the profane from corrupting the sacred, we often try to restrict how money can be used by non-profits, government, and individuals. For example, for individuals we authorize and limit education, retirement, and health-savings accounts. We like employees to be paid straight salaries and given only promotion incentives, rather than detailed performance incentives. We limit org purposes to a few pre-approved options, and we divide their budgets into many non-mixable “colors of money”.
Alas, such limits not only tend to be crude and ad hoc, they also greatly hinder capitalists from adapting and innovating in such areas. Which has led me to wonder: could we somehow change money to avoid the things that most make it seem profane, while still enabling something close to capitalism? And that has led me to the idea of: sacred money. I briefly outlined this idea before. Now let me say more.
Here is the key idea: create “sacred banks” that enable consecration of capital:
Anyone may “consecrate” any ordinary asset, and thereby commit its value to be used only by sacred ventures to achieve sacred ends.
For example, you could take some money to a sacred bank, in trade for which they would give you the same amount of sacred money. You could then take that sacred money to a hospital which is approved by a sacred bank to be a sacred venture. This hospital may (if they choose) accept your sacred money as payment for a sacred hospital service. The hospital uses sacred money to pay its suppliers, such as employees. A surgeon supplier, for example, could take that sacred money to a sacred bank, who would then exchange it back to regular money, if that bank approved of the kind and price of the inputs that this suppliers provided to that sacred venture.
In this scenario, the key promise has been kept: the original assets that were made sacred were only used to achieve sacred ends. Except, what if a sacred venture collects more scared money from its customers than it pays out to its suppliers? In this case, the difference accrues as a sacred profit. You see, sacred capitalists can convert ordinary capital into sacred capital, which they then invest in creating or changing sacred ventures. Sacred capitalists can own sacred ventures, or loan sacred money to such ventures.
If a sacred venture goes badly, its sacred capital disappears, and its owners own less. But if a sacred venture goes well, it collects even more sacred capital, which its owners can then use to create or change even more sacred ventures. Or to directly buy sacred services for themselves from other sacred ventures. Either way we have kept the key promise: scared assets are committed toward sacred ends.
My hope is that this promise could make sacred capitalists seem more acceptable to most people, at least compared to ordinary capitalists. Yes, a successful sacred capitalist might become much richer than ordinary people. But they are only “rich” in resources devoted to sacred ends. They are “rich” like a president or pope or celebrity is, via having influence, not not necessarily stuff. To have wealth that they could spend on profane ends, a sacred capitalist would have to provide legitimate inputs at fair prices to sacred ventures. Or get regular money in a usual way, just like anyone else.
Note that when one makes an asset sacred, one is not committing that specific asset, but instead only committing the value embodied in it. So one is allowed to sell a sacred asset for sacred money, or to trade it for other sacred assets. One can even trade a sacred asset (at a fair market price) for a non-sacred asset, converting that new asset into sacred while converting the old asset into non-sacred.
Note also that sacred capital acquired from offering one kind of sacred service can be used to support new ventures offering other kinds of sacred services. That is the goal here, to allow maximum flexibility in how sacred assets can be used to achieve sacred ends, while maintaining the key constraint that the value in sacred assets can only be used achieve sacred ends, so as to clearly distinguish sacred and profane assets and ventures.
Now let’s consider some possible problems with this proposal. First is the fact that people often disagree about what are sacred ends. But note that tax law has long created shared answers to this question, in the form of what activities are tax-exempt:
The [tax] exempt purposes… are charitable, religious, educational, scientific, literary, testing for public safety, fostering national or international amateur sports competition, and preventing cruelty to children or animals. The term charitable is used in its generally accepted legal sense and includes relief of the poor, the distressed, or the underprivileged; advancement of religion; advancement of education or science; erecting or maintaining public buildings, monuments, or works; lessening the burdens of government; lessening neighborhood tensions; eliminating prejudice and discrimination; defending human and civil rights secured by law; and combating community deterioration and juvenile delinquency. (More)
Another issue is what non-sacred services can sacred ventures sell? For example, can sacred hospitals that save lives also sell cosmetic surgery? Tax law also has shared answers to this sort of question:
Requirements for charitable organizations: These prohibitions include providing private inurement to insiders or any private benefit, participating in political campaigns, and conducting substantial lobbying activities. Finally, in recognition that charitable assets must be preserved for future generations and not return to private hands, the organizing documents must contain assurances that on its dissolution or termination, the organization’s assets will be distributed only to other tax-exempt charities. (More)
Tax and accounting rules also constrain venture prices, to prevent the “laundering” of assets via exchanges at fake prices. These examples suggest to me that it could be possible to get sufficient agreement on such questions to implement general sacred banks. This seems an improvement over the status quo, even if some truly “sacred” ends are not recognized as such by sacred banks.
In charities there is the problem that the customers who contribute to charities can find it hard to evaluate how much their donations are benefiting their intended recipients. This sacred money design does not obviously make it easier to make such evaluations, but neither does it make that harder. That’s just a separate problem.
I see a big hard policy choice here: do we allow trades between sacred money and ordinary money? On the one hand, more trade enables a more efficient economy, and it seems hard to enforce rules against such trades. On the other hand, however, if we allow such trades, then some sacred capitalists might sell the sacred capital that they accumulated from building successful sacred ventures for ordinary money, and then visibly flaunt their ability to spend that money on profane ends. Thereby tainting the sacred image of all sacred capitalists, making ordinary people hate this system.
To avoid that outcome, it seems prudent to consider the version of this system wherein sacred capitalists may not sell, but can only give away, their sacred capital. (Like we do for sex and kids today; things you can give away but not sell.) This would reduce individual incentives to become sacred capitalists, relative to the alternative. But if this incentive cut is only modest, it might be a reasonable price to pay.
Even when sacred capital cannot be sold, it could be given to friends or relatives. In addition, sacred capitalists could create sacred investment ventures, ventures that pay them a personal salary for their management efforts. Furthermore, both sacred venture owners and sacred capitalist wannabes would kiss up to sacred capitalists, inviting them to conferences, dinners, parties, etc., to entice such capitalists to invest in their ventures, or to give away their sacred capital to them. That is, they’d try to induce gift exchange as a substitute for direct trade. As these incentives together seem to me sufficient to induce many to badly want to become sacred capitalists, I tentatively support prohibiting direct trading between sacred and profane assets.
And that’s my proposal for consecrated capital. By which we might comfort and assure people who fear letting ordinary money and capitalists have full rein over sacred areas of life. We might allow nearly the full power of capitalism to induce adaptation and innovation, but only for sacred capitalists regarding sacred assets, i.e., regarding capital that has been consecrated to the sacred. Sacred capitalists who get “rich” would only be rich in ways to promote the sacred.
Added 11p: One could plausibly hope for sacred ventures, and income paid in sacred money, to be tax exempt.