16 January 2011

True durability is inalienable

  • Markets transact in consumables and perishables; exchanges transact in assets and durables. 
  • Markets deal in surplus by virtue of the consumer and producer surplus that comes of a single, market clearing price; exchanges deal in surplus by virtue of the necessary endowment the passing on of durable assets entails from one generation to the next, and through leverage (or seigniorage, which is a particular kind of leverage). 
It's the passing along of the value and the creation of the durability of the value that's the challenge. Inevitably, as the value passes on from one transactor to another it becomes more alienable and less meaningful. In the end, for the value to be durable it must become part of the cultural substance of the society. 
The institutional envelope in which the durable assets are encased is what gives the assets their real longevity. God can give the people the land but the people must figure out how to introduce the value of that land into their seed as they pass the land on from generation to generation. 
What is true for families is also true for corporations. One generation of management needs to pass along onto the next generation the value embedded in the corporate structure. 
The deep source of societal failure and its resultant collapse is the disintegration of the value as it passes along from generation to generation: be it family, corporate management, or ruling class of the society at large. As the generations get weaker and less able to handle the challenges of maintaining the storage of the value, as the principal erodes, the descendant managements engage in false ways to seem to preserve the value: they simulate the preservation of the principal and even simulate the growth of the principal by degrading the principal's value or debasing the currency (which currency ostensibly reflects the projection of that value into financial format). 
The point is that true durability is inalienable. It can be maintained only by being passed on as a gift; and the one who receives the gift must in turn redeem the gift with acts of generosity. 
The truth is, value is only really ever preserved through acts of kindness. 

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