|July 16, 2012||Posted by Fred Foldvary under Editorials|
In music, a melody is a sequence of sounds. The elements of the musical tones include pitch, rhythm, loudness, timbre, duration, texture, and harmony. Timbre, also called “tone color,” is the quality of the tone, such as whether it comes from a piano, trumpet, bird or human voice.
Whether a melody is pleasing or not is partly subjective and partly objective. The human brain is programmed to hear and appreciate music, as all cultures have music. There are sounds that people in general find displeasing, and others, such as some bird calls, that are generally pleasing. But people also become programmed to enjoy the music of their culture as an acquired taste, and there are individual differences in the perception of music as pleasing or not.
So too there is economic melody. Just as a melody can be fast or slow, and economy grows at a particular rate. This is not just the amount of output, but the pace of economic life. A traditional agricultural economy might have a slow pace, while a large city would typically have a fast pace, as busy people rush from one task to another.
The pitch of a melody is the highness of a tone. Physically, pitch is the frequency, in cycles per second, of the vibrations of sound waves, faster vibrations generating a higher pitch. A short string generates a higher pitch than a long string. Unpleasant sounds can be produced from irregular vibrations such as from street traffic.
So too an economy has a higher or lower pitch. A high economic pitch is a greater amount of economic activity. Too high a pitch creates an unpleasant sound. Subsidies from the government raise the economic pitch and distort the sounds of the economy, while taxes lower the pitch and generate disharmony. Unhampered market prices allow the economic melody to flow pleasantly, because the producers seek buyers, and people will buy the products with the most pleasing economic melodies.
The rhythm of a melody is its flow over time. A melody has an underlying periodic beat per unit of time, such as 3/4 or 4/4 timing. The tempo is the speed of the melody. So too an economy is a flow of goods, with various periods of production. There is the fast tempo of inventory, in which goods circulate rapidly, the slower tempo of investments in machines, and the slow tempo of investments in buildings. Land has the slowest tempo of all goods, since no more is being produced, and it sits there indefinitely.
The economic tempo is affected by the rate of interest. A low rate of interest generates a slower tempo and greater amount of goods with a slow speed, a long period of production, such as real estate construction. All is well if the low rate is due to more savings, but if the low rate of interest is caused by an injection of money, the slower tempo is unsustainable. The money injection causes price inflation and distorts the structure of relative prices. The economy becomes starved of goods with high tempo, such as consumer goods. High interest rates and high land values then choke investment, and the economy falls into depression.
Taxation too distorts the economic melody. In a market economy, there are orchestras led by a conductor, companies that have an organizational structure and a single leadership. But the economy as a whole is not an orchestra, but a forest of natural-like sounds, as birds tweet, frogs croak, and insects buzz. The economy is a spontaneous order of economic chirps, barks, meows, and roars. Subsidies and taxes distort the pitch, loudness, duration, and other elements of economic melody. Some may like the altered sounds, but alteration of the general equilibrium generates disharmony.
In the music of an economy, each player reacts to the other players. The trumpet player hears the drummer and toots his horn in harmony with the beat. There are consumers who want to hear particular musical styles, and producers who like to play and also profit from the consumer demands. Each economic tone is not just a product, but also conveys information to the other players. By altering the pitch, loudness, and speed, the players are no longer able to coordinate their melodies in harmony.
An economy has the best melody when there is no interference or alteration in the tunes. The tax system that avoids such disharmony is public revenue from land rent. A player of music has talent and exertion. A tax on the exertion reduces the exertion. But if only the sweetness of talent is tapped, the player will continue to do his best. Land value taxation is like the sharing of the talent without hurting the many hours of practice and the exertion needed to make a great melody.