Frederick Soddy

Sharon BillingsSpring 2012Ecological Economics

Background1877-1956

Chemistry Advances

Coined “isotopes”

radioactive disintegration

Modern atomic theory and structure

Nobel Peace prize 1910

Professor at McGill, Glasgow, Aberdeen, and Oxford

After WW1, started looking at worlds problems

Conclusions:Problem was not science, but scientists did have blame for contribution to society

Economics = pseudoscience

Faulty

Unsafe with science advances

Good and evil

Must change economics

Action

Soddy decided to analyze and find solutions to the economy and it’s institutionsFree of paradigm of economics when he started his analysis

Contempt. Lots of Contempt.

Review of Wealth, Virtual Wealth, and DebtSad to see a respected chemist ruin his reputation by writing on a subject about which he was quite ignorant. (The Times Literary Supplement)

Economic FlawsThe principles and ethics of human law and convention must not run counter to those of thermodynamics (Cartesian Economics)

Soddy’s basis for critique of economics as a perpetual motion machine

“how does man live? On sunshine”

Sunshine = continuous flow of energy

Not a stock source

must obey the laws of thermodynamics

Real WealthNot material goodsMatter and energy useful to humans

2 dimensions

Physical: matter – energy

Theological: usefulness subject to mind and will

Wealth

Physical, subject to physics

Eventually will degrade

Debt

Imaginary quantity

Subject to mathematics

Endures foreverActually a lien against future sunshine because sunshine rates are constant and don’t grow at compound interest rates like debtNot a 1:1 ratio = compound interest will eventually create inflation and bankruptcy

Ex nihilo: out of nothingwealth can’t be created this way, so money (debt) shouldn’t be either

Monetary Flow

Main Problem: banks create moneyBecomes virtual wealth of community

National debt is moneyDoesn’t obey laws of conservationNegative wealth quantityMoney used to replace bartering and inconvenience

Virtual wealth = utility cost of holding money

Banks are counterfeitersHave made a mockery of measurement standards“ convert pounds of sterling to rubber yardsticks”

Soddy’s ReformBanks must have 100% reserves

Could no longer create moneyVirtual wealth ownership restored to state

Maintain a constant price-indexFalls: government prints money, lowers taxes, redeems interest on national debt

Deflation corrected by money-creating gov’t deficitRaises: government raises taxes and doesn’t spend revenue

Inflation corrected by money-destroying gov’t surplus

Freely fluctuating exchange rates internationally

World payment maintained in equilibrium

Purchasing powers among currenciesEliminate inflation and deflation pressure between economies

Free trade regulation, such as tariffs, would

disappear

MoralsLet us have an end of the pretence that economics should not be concerned with morals. (Role of Money)Economics should have honest weights and measures under exchange

Current system gives false accounting

ReferencesDaly, H. E. 1980. The economic thought of Frederick Soddy. History of Political Economy. 12 (4): 469-488Daly, H. E. & Farley, J. 2004. Ecological Economics: Principles and Applications. Washington: Island Press.Soddy, F. 1921. Money versus Man. England: Purnell and Sons. Soddy. F. 1933. Wealth, Virtual Wealth, And Debt. USA: E.P. Dutton & CO. Inc.