Thank you. I submit my disproof as follows.

1.
“Income” means *net* income, after costs, right?

So why wouldn’t this reasoning apply to everything else, for example agriculture? If the aggregate net profit of all agriculture is greater than the aggregate costs of all agriculture, therefore agriculture in general is a good thing for society, and therefore society – and therefore government - should fund even loss-making agriculture, such as farming salamanders?

2.
Then why not fund it on the basis of profit and loss for individual projects, rather than aggregating R&D? You still haven’t got around the original problem. (Temporarily putting aside values outside money calculation) it’s the profitable R&D that produces demonstrable benefits for society, *not* the loss-making R&D.

3.
Not everyone in the community is a citizen, not all citizens vote, of those who do, not all vote for the major party, of those who do, not all agree with their decisions, and of those who do, not all pay for them. Besides, the innovation is presumed to benefit all human society, not just Australian taxpayers. So why should only 0.36 of one percent of the beneficiaries be forced to pay? I told you there’s aggregative errors all through your reasoning. What theory of property or ethics justifies your proposal ?

4. “The money comes where it all comes from - as a loan.”

Still not clear – WHO is going to lend WHOSE money to WHOM? Will all money be obtained by voluntary means? If not, why not? This is the central issue which underlies all the other issues: epistemological, ethical, economic, practical.

If you’re saying that everyone who wants to fund probably-loss-making R&D should be free to lend their own money interest-free, I agree. But you’re not saying that, are you? You’re saying people who DON’T want to fund it, should have the money taken from them by force and threats by the state, aren’t you?

5.
Yes, the question is, *who* is to do the valuation – the owners of the property, or someone who took it by threatening to physically violate him?

6. “I don't know if R&D is the best use of funds and have never claimed it to be so.”

Well if you don’t claim to know that it would be better spent than the alternative uses of the same resources, then you haven’t justified any policy.

“You think value can be determined purely in terms of price people are willing to pay.”

No I don’t. On the contrary, money being a *medium* of exchange - a means to other ends - ultimately the values are ends in themselves and therefore no values can be determined purely in terms of price. All economic calculation demonstrates is that one prefers satisfying the particular value over having the money, that is all, including in the values against torture and abuse. What we’re saying is, no exchange value ranks higher.

Therefore you have not shown
1. why funding decisions should lump loss-making R&D with profitable R&D
2. why R&D is in any different case, as regards government support, from any other thing that benefits society
3. that government represents people better than people represent themselves in deciding whether or not to fund R&D
4. how government would be in any better position to distinguish worthwhile from wasteful R&D, either with or without economic calculation as a mean of judging which values should have priority
5. any rational justification of any government support of any R&D.

1. You are correct. The reasoning does apply to any area of society and that is what makes it so powerful. We do have areas where - in our collective judgement through politicians - we need to direct resources. The Queensland rebuilding is a recent one. See http://cscoxk.wordpress.com/2011/01/21/funds-for-queensland-flood-relief/ to see how the method can apply to that problem.

2. Profit is largely determined by price and price has little to do with cost and little to do with value. Price enables us to choose between things and so is a comparative measure. However for most of our purchases prices are determined by how much a person is willing or able to pay. It is only loosely related to cost and value. We want a system where we can direct resources more closely to those things of greatest value for least cost. Unfortunately profit - because it is so heavily determined by price - is not enough to get resources directed to getting the greatest value.

3. As I keep telling you what is proposed is voluntary. You do not have to take out an interest free loan if you do not want to. No one is forcing anyone to do anything.

4. Money is a token of value. Money in itself has no value. It is only of use when there is agreement that we can exchange it for things of value. When we increase the number of money tokens in the system then those tokens should not have value in themselves. Our dysfunctional financial system is caused by the new tokens having a value because they are created when interest bearing loans are made and there is not enough money tokens in existence to make the loan. We can stop "the business cycle" recessions depressions by introducing extra money tokens into the system as interest free loans.

“The reasoning does apply to any area of society ...”

So in theory, there’s no reason why government couldn’t and shouldn’t take over any area of society?

“We do have areas where - in our collective judgement through politicians - we need to direct resources.”

You still haven’t justified your *assumption* that that politicians represent the people better than the people represent themselves.

You, and the author you cite, have not shown why government has any superior knowledge, virtue or competence in the first place.

2.
We know that price is *directly* related to value in that a person, in buying something, demonstrates that he values the good more than whatever else he could have got with the price.

Therefore you haven’t demonstrated that
a) profit is not enough to get resources directed to getting the greatest value
b) politicians would be in any better directing position – in fact they would be in a far far worse position, that’s the whole point.

“As I keep telling you what is proposed is voluntary.”

You keep on not-answering where the real capital is going to come from. *Receiving* stolen money is always voluntary. It’s *paying* it that’s the problem.

“No one is forcing anyone to do anything.”

That’s the situation now, so there’s no need for any policy is there?

4.
Agreed, money has no intrinsic value.

However if the government increases the number of new tokens they will still function as a medium of exchange for real goods, which is your whole purpose. They will function to divert capital from elsewhere, by diluting the currency, and stealing from everyone who uses money. It is this diversion of capital that is in issue. Whether or not the tokens are interest-bearing is completely irrelevant.

You still have not demonstrated that the ethical or economic benefit to society from withdrawing the property in issue by force or fraud from those who earned it, would be greater than the ethical or economic benefit to society from spending it – by politicians of all people! - on loss-making R&D projects.

It’s voodoo.

Also, if the tokens functioned to buy future goods in the present, then WHAT POWER ON EARTH COULD STOP PEOPLE ASCRIBING TO THEM A VALUE IN THE NATURE OF INTEREST? How would you stop the people who use them, from offering or accepting charges in the nature of interest?

Peter,

This is getting nowhere. You have your opinions which seem to be pretty well fixed. You seem to believe that we don't need to do anything as a community to encourage innovation.

I disagree with that opinion and believe that we can increase wealth at a greater rate by encouraging R&D and innovation.

The innovation proposed is to issue interest free loans for innovation and R&D and I have proposed a market based method of distributing the loans.

I do urge you to read Christensen's book on "The Innovators Dilemma" and you will see why we are not doing as well as we could.

We cannot prove beforehand if any system will work. We can prove it does not work after we build it. Your insistence on proving that paper models will work cannot be achieved. Paper models prove nothing. Building real systems and seeing if they work or not is the way we advance.

Planning reduces risk but no paper models will ever prove anything. At some time we need to take a punt and to innovate in order to advance.

Our current system is increasingly stifling innovation and those of us in the middle of it see how much more difficult it is becoming with each passing year. Your opinion that the system is "good enough" is exactly the sort of attitude that halts innovation.

Your judgement is to do nothing and it will all happen like magic. My judgement - like Gruen - is that we need to do something. There are many different ways of doing something. In other areas of life we have seen that trying many different ways is the best way to find the best way.