Many alluring ideas that seem intuitively attractive turn out to be wrong
In 2017 I went to a British Constitution Group event in Nottingham, where I first heard of the “Bradbury Pound”. This is a footnote from history during WW1, where the British government directly printed its own money, rather than borrowing from a central bank. Many freedom activists have latched onto this mechanism as a way of escaping from a usurious banking system run by psychopaths who like to fund both sides of all wars. Sadly, it isn’t the silver bullet that it is portrayed to be. That said, what is really of interest is not why this particular scheme is a fallacy, but the higher-order kind of thinking that lets us conclude that.
I used to work in telecoms, developing a meta-theory about what a “good theory” was about internet architecture. Much of the present Internet orthodoxy is unscientific, but highly numerate and complex, thus impenetrable to outsiders seeking clarity. It is not an idle boast to say that I was working with colleagues who were finishing off the fundamental work of people like Alan Turing. Just as he provided a foundational theory of computability (what does it mean to successfully compute), we were doing translocatability (what does it mean to successfully copy information). I know what it is like to work at the apex of one’s discipline — and yet be scoffed at by Ivy League professors who are provably under-informed.
My former university tutorial partner is Chris Rimmer, an autodidact economist. By chance, he embarked on a parallel journey to develop a rigorous meta-theory of economics. As undergraduates, we both studied formal methods of software design and proof of correctness. He applied this thinking on invariants to balance sheets, in a way that lets you qualify economic theories like the Bradbury Pound. Illegitimate theories break the invariant, so definitely cannot be true; where the invariant is maintained, you have a possibly true theory.
So the finding is in one direction only — “shows up bad theory” — but cannot prove theory to be true. Critically, this takes matters of “attractive fallacies” from being subjective to objective. There is no room left for debate between competing narratives. It puts a lot of current economic controversies to bed instantly, and exposes many powerful people as fools. If there was any justice in this world, Chris would now be a famous tenured economics professor with many acolytes! Maybe that’s in the future…
The Bradbury Pound is one of the many stories our hearts would love to believe in, but our heads must reject as a logical fallacy. However, the situation can be recovered, in the sense that the meta-theory can be used to qualify other economic concepts and policies that might be adopted into a new Chartist type movement, and there are plenty of things to consider as alternatives. I believe Chris’s ideas deserve a much wider audience, and the struggle is to locate people receptive to having their core beliefs challenged.
How can something so elementary have been overlooked by so many? Yet here both myself and Chris are, having separately discovered that a dogged determination to locate clarity requires perseverance and curiosity that few have. Over to Chris in his own words, so you can get a taste of the power of his meta-theory insight…
I simply observe that people (and corporations) can own tangible assets, and can be owed, or owe, debts; and I define “Raw Net Worth” (RNW) as what a person owns, plus what they’re owed, minus what they owe. (More strictly, the heterogeneous vector sum/difference.)
I then look at how a person’s assets and liabilities change, and what invariants exist. For example, if Alice loses a tangible apple, there are only 2 possibilities: either she has consumed it (which includes losing it, or it rotting), or someone else (e.g. Bob) has gained the same tangible apple. See this article:
This image lists the possible actions:
Importantly, apart from producing or consuming tangible assets, literally everything in economics is a zero-sum game for RNW. Furthermore, the model is linear (a.k.a compositional). That is to say, the effect of a set of actions is the exact sum of the effects of the individual actions. It is the economic equivalent of Newtonian mechanics.
None of this requires a single assumption about how people decide what economic actions to engage in. It is a universal foundational economic model, or as Martin says, a meta-theory. Any economic theory in which total RNW increases without it resulting from production of tangible assets *must* be wrong.
A Bradbury pound appears to have been a non-convertible (can’t exchange for gold) debt instrument, like our current money. In principle, it decreases the government’s RNW by £1 and increases the holder’s by £1. However, the holder can’t use it to obtain anything from the government apart from the write-off of a subsequent tax debt imposed by the government.
This lack of constraint allows the government to issue as many IOUs as it wants, becoming deeply insolvent, and there is little that can be done by the public to prevent it. It puts enormous power in the hands of the executive, which I imagine would be very concerning to those who love liberty. By contrast, when the government must sell bonds to the public in order to obtain funds for spending, the risk of default can at least be compensated by the interest demanded, and a rising gilt rate provides a brake on government excesses.
Incidentally, I only recently discovered that our current system (The Sterling Currency Framework) isn’t that different from the Bradbury pound. The Bank of England is required by law to create as much money for government as parliament approves, simply in exchange for a government IOU. There is effectively no constraint to government spending. The Debt Management Agency does sell bonds (gilts) to reduce the government overdraft with the BoE, but this is a policy decision, not a requirement.
People often ask “what is modern money?” and “why is it valuable?”. Interestingly, both questions have exactly the same answer: modern money is a debt owed by a bank to the holder. Economist Richard Werner implies that a bank can get something for nothing by simply writing an IOU in exchange, as though that is the end of the matter. He ignores the fact that making a promise obliges the debtor to *keep* the promise. Banks don’t become wealthy by writing IOUs to people!
There is a short series on Money and Banking on my Substack, which examines different approaches to money:
One big insight I have gained from my study is that the modern global economy is really just barter, in which not only goods and services, but also debt assets and liabilities are created, transferred and destroyed. Or to put it more concisely, it is barter of raw net worth.
I have no telecoms qualifications to show or defend, so when I moved into the industry from adjacent discipline of IT it was easy for me to ask “dumb” questions. I had been hired for my ability to think clearly, not my prior knowledge of the business or technology. Because my pioneering R&D colleagues could build things that nobody else could, they clearly knew something that other “leading experts” did not! So there was no real argument over whether it was right, just how useful it was. Nonetheless, I found it enough to get myself booted out of “polite society” (without even a hint of being a “conspiracy theorist” at the time) just for questioning Internet design dogma.
Likewise, Chris has no economics PhD or industry awards. By applying cybernetic type clear thinking, Chris has (on his own!) done the a comparable thing for economics to what we were doing for distributed computing. Endless hours are spent debating ideas like modern monetary theory, in a subjective clash of narratives. This meta-theory instantly resolves the matter by making it purely objective. The power of such an approach that returns to fundamentals cannot be overstated: this really is an Isaac Newton moment for economics. That it took an amateur economist to do it tells you a lot; the academic incumbents are not incentivised to put themselves out of job.
I hope this gives readers confidence to continue in their own quest for simplicity and clarity in every intellectual domain. If a subject appears confusing and is full of arrogant experts, whose status depends on knowing all the wrinkles and exceptions, then that is a problem. The subject is probably lacking the kind of “first principles” meta-theory that lets us discard the nonsense and complexity. Ultimately this quest for core truth is a spiritual one, and those who settle for anything less than it are rejecting the more righteous path. The universe may abhor a vacuum, but it adores a valid meta-theory — and all of us are born fully equipped to grasp the divine.
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