A Hacker’s Approach to Fixing the Economy

I’m no expert on economics. I found both Macro and Micro Economics in undergrad to be insanely dull classes, and that was as far as I got.

But I do know a thing or two about getting large numbers of people to do what you want them to do with positive and negative stimulus. I’ve learned this from working in the web for pretty much forever.

So while I have no idea what an economist would do to fix the economy (I’m not sure Ben Bernake has any idea about that either, BTW), I DO know what a hacker would do to fix it: they’d change around the incentives in the system to get people doing what they want them to do.

What, specifically, does that mean?

Well it seems to me that we’re in a crunch right now because of two things: 1) some people and governments are spending money they don’t have, buying excessively on credit, and 2) other people are sitting on piles and piles of money, keeping it essentially locked up and out of the ecosystem. They get a $200k Christmas bonus for working on Wall St, and it goes into their savings account instead of back into the economy.

Both of these things have negative consequences, but we don’t exert disincentives on either of them. We instead put disincentives on buying things, in the form of sales tax.

What if we instead put disincentives (i.e. tax) on buying on credit, as well as on not spending the excess money you make?

So imagine: you can spend as much as you like, tax-free, but if you buy it on credit, there’s a tax. And you can make as much money as you want each year, but if you don’t spend most of it and put it back into circulation, you get taxed on that as well.

The result? You get people less inclined to live beyond their means using credit, and you get people less inclined to sock away their huge bonuses, and instead inclined to spend, stimulating the economy.

Of course you add exemptions to the system so it makes sense – you don’t tax savings for retirement, you don’t tax credit for buying a house – all of the responsible, sensible behavior you want to encourage gets exempted.

What you end up with is a system that’s roaring – people spending like crazy, but not spending beyond their means.

Now don’t go accusing me of being a libertarian here. Libertarians would say make as much money as you want tax-free, and who cares what the hell you do with it. I say instead it’s fine to make money – we like to encourage that. But spend it – put it back into the ecosystem. However you like. It’s not the making of the money we want to discourage, it’s the keeping of the money, the hoarding of the money. It’s tying up all of those resources, like oil that’s locked up underground, unavailable for use. Get rid of that. Add it to the fire, to keep it going.

I know, I know – that sounds crazy. How could I even be saying this?

Remember: I can say it because I’m not an economist. I’m a hacker.

Does it make sense? I have no idea if it does from an economics point of view. Maybe it would have some insanely negative consequences. Maybe it would cause the world to split apart. Maybe it isn’t fair. But from a hacking point of view, it makes total sense. It’s putting brakes on the things you want to discourage, while taking the brakes off the things you want to encourage. Every web product person knows that.

And what are the chances that something this innovative and radical would ever come into being? Less than zero. Which is one reason I work in the web, not in Washington. But it’s an interesting thought experiment, nonetheless.

What would your hack be to fix the economy?

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