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Related Words, Beliefs, Background for Choice #48

Worldview Theme #45A: Borrowing Mentality                       Worldview Theme #45B: Work, Play, Pay As You Go

for a summary read these 5 entries in order: credit, mortgage, interest--simple vs. compound,  national debt, bankruptcy

for a summary read these 5 entries in order: sweat equity, Protestant work ethic, discounting the future, pay as you go--energy and environmental connection, ecological debt 

alternative hedonism—inspired by London economist Kate Soper’s 2017 lengthy article “A New Hedonism: A Post-Consumerism Vision”, in her words this provides “a more sustainable and more sensually, spiritually, and aesthetically rewarding way of living” than wasteful, throw away consumerism does.  Alternative hedonists find enjoyment—not in having material possessions—but in experiences and socially just / eco-benign consumption   Getting beyond a “more is better mentality,” they don’t have to work as much, since they aren’t paying for things they don’t need. So they have more freedom, more time for family and personal relationships, more opportunity for civic engagement, etc. They find pleasure in helping people, giving back, teaching, celebrating with friends / music, enjoying nature, hiking, holding hands, love-making.  And simply enjoying that they have time to stop and smell the flowers.  They don’t measure success by how much money you have, the size of your house, the car you drive, a prestigious job title, etc. They don’t equate money and property with pleasure, happiness, and well-being.

avocation--a hobby, a pursuit chosen for enjoyment rather livelihood purposes

bankruptcy Continued borrowing and the inability to pay the resulting financial debt leads to bankruptcy.  In seeking relief from monetary debt and associated creditors, bill collectors, etc, declaring financial insolvency and filing for bankruptcy, one is in effect seeking to walk away from a financial mess he or she (to some extent) created.

What about the ethics of bankruptcy: Is it Just a Practical Fix or is it Morally Wrong?”  The argument for Practical Fix: "Personal bankruptcy generally is considered the debt management option of last resort because the results are long-lasting and far reaching.  People who follow the bankruptcy rules receive a discharge— a court order that says they don’t have to repay certain debts.  However, bankruptcy information stays on your credit report for 10 years, and can make it difficult to obtain credit, buy a home, get life insurance, or sometimes get a job. Still, bankruptcy is a legal procedure that offers a fresh start for people who have gotten into financial difficulty and can’t satisfy their debts." (from US FTC  booklet)   The argument for Morally Wrong: As Dr. Jukka Kilpi puts it, "The fundamental ethical problem in bankruptcy is that insolvents have promised to pay their debts, but cannot keep their promise."  In December 2002, when the Roman Catholic Archdiocese of Boston's finance committee gave Cardinal Bernard Law permission to file for bankruptcy, many priests objected.  As Michael Paulsen reported on the PBS news weekly Religion and Ethics program, "There are priests who don't like the symbolic import of the word "bankruptcy."  They think it suggests a kind of moral and spiritual bankruptcy as well as financial bankruptcy." And from a utilitarian perspective, one can ask about bankruptcy, "What if everyone so flagrantly reneged on promises to pay debts?" 

There is an ecological debt environmental analog to this: Someone (usually a corporation) in the course of operating a profit making business continually generates waste, which is not immediately treated, but allowed to build up. If the corporation ceases operations and closes, it can walk away and leave behind an environmental mess. After passage in the late 1970s of  legislation, which  also established a Superfund and identified  toxic waste dump sites needing cleanup, finding American companies engaging in such environmental bankruptcy  became the exception rather than the rule. 

barter economy—this is based on people simply trading goods and services without the added complication of money. Since no money is involved government levied taxes are avoided.

capital–an economics term referring to accumulated goods and resources (or their value) devoted to the production of other goods or set aside to produce income.  Capital can take the form of money, raw materials, buildings, equipment, inventories, etc.  While economists have long distinguished between "physical capital" and "human capital", some have recently extended this scheme to include "natural capital". 

common good, the–can be defined in various ways depending on one's perspective.  Some define it narrowly as that which is good for every member of the community; others broaden the community here to include all human beings.  While libertarians argue it is a meaningless concept, utilitarians equate it with "the greatest good for the greatest  number of individuals." 

credit -- a monetary loan or transfer of capital from a person, business or financial institution to someone (a borrower) who needs it in order to pay for something and thus immediately enjoy its benefits or assume possession of it. Those who extend credit must trust in the borrower’s ability to repay the loan in timely fashion, and, both to compensate them for the risk they incur and build some profit into the arrangement, typically receive not only payments on the loan principal but also interest payments from the borrower based on outstanding loan principal and interest rate. Banks and  credit card companies will give borrowers a credit limit--beyond which they can not borrow more. (See leverage.) A credit based financial system grew up with developing commerce spurred by the Industrial Revolution. Its spread to millions of consumers was given a boost with the invention of buying things on “the installment plan” in the early 20th century, and still a greater push years later with the proliferation of plastic credit cards. See next entry. 

credit score--a numerical score computed by lenders (credit card companies, banks, etc) based on a person's credit history (history of repaying debts / bills in timely fashion) and believed  to reflect the person's ability to repay future debts and gauge the risk to lenders of their extending credit to this person.

credit union--a member-owned co-operative association that accepts deposits from and loans money to its members.   

dearth--deficit or scarity                   

debt bondage--someone's labor is promised as payment for a loan. In the 17th and 18th centuries, the system brought many to the New World as indentured servants.  In its most notorious modern form, a child's labor is pledged by parents as payment for debts they contract.

delaying gratification--the ability to postpone receiving some reward and control impulses pushing for instant gratification.  Those possessing this are believed to be more emotionally mature than those lacking it.

discounting and net present value -- these are economics terms that provide a way of comparing payments that occur at different times. For example, assuming an annual interest rate of 10%, $100 payable one year from today is worth $91 today (see note* below); $100 payable two years from today is worth $83 today; $100 payable three years from today is worth $75 today, etc. The reduced value of the future dollars is the result of discounting. The example provides the net present value, which is the present value of a future stream of payments discounted to the present using the appropriate discount (interest) rate. (Note: the above example assumes that the inflation rate is zero.) * [note: solve 100 = .10 x + x where x is the net present value, 100 was used as future value and .10 = 10 % is the annual discount rate])

discounting the future -- doing or having (consuming) something now, rather than waiting , or rather than investing the money you would have spent and getting a high return on the investment. For a quantitative look at this concept, see the above entry.  Those who adopt a "Pay as you go approach" are doing the opposite of discounting the future: they are valuing it. They do this in two ways: 1) by not saddling themselves (or their children) with freedom robbing debt, 2) by cleaning up (or avoiding the creation of to begin with) environmental pollution messes that will detract from future quality of life. The discounting the future vs. valuing the future tradeoff can be seen in the bumper sticker: "I'm spending my children's inheritance." See also free lunch, noting that consequences of something you appear to be getting for free will become apparent in the future. 

do it yourself approach--rather than pay certain professionals (carpenters, plumbers, electricians, auto mechanics, tax preparers, lawyers, etc.) self reliant people who wish to save money will do the work themselves.  Typically they begin by educating themselves as to the professional details of the task they face.  

ecological debt -- refers to irreplaceable resources being consumed or natural cycles disrupted in an impossible or difficult to fix manner by human activities. While people today benefit from the consumption or the activity, the consequences of ecological debt incurred today will be left to future generations to deal with. Examples: hundreds or thousands of years from now people 1) might have to deal with highly radioactive nuclear waste that escapes repositories, a legacy of today’s nuclear generated electricity, 2) will no longer burn fossil fuels to power automobiles or heat homes. The fossil fuel era will be over, the vast quantity of this huge resource, that it took nature millions of years to produce, having been consumed by human beings in a brief few hundred year period; 3) will suffer through uncomfortably hot summers, contend with incredibly strong hurricanes in coastal areas, and have memories of parts of the world long ago flooded by rising sea levels -- all resulting from the global warming , a legacy of long ago massive burning of fossil fuels and associated release of its carbon dioxide gas / greenhouse effect enhancing byproduct.

envy -- painful or resentful awareness of someone who is more fortunate or enjoys some advantage

free lunch, there is no such thing as a--refers to the belief that neither a person nor a society can truly get something for nothing: even if something appears to be free there are always hidden costs. The costs may have to be paid in the future, someplace far away, by someone else, be distributed over many people, or they may show up in another form (such as an opportunity cost, environmental cost, increased disorder, etc.)  The physical basis for this belief--which becomes a principle for ecologists and others studying closed systems--can be found in the laws of thermodynamics.  Economists link it to opportunity costs being incurred when choices are made. (If something is free, no opportunities are forfeited!)

gift economythis is based on people simply freely giving goods / consumer items they don’t need  so that those who do can benefit. It has the benefit of the giver avoiding the guilt associated with being part of “the throw away society.” And older people, who have perhaps accumulated a lifetime of things and perhaps in retirement, where they derive income from state welfare state system programs, are indirectly supported by younger working people, can give something back to less affluent younger folks. Websites such as Craigslist, free cycle, etc. freely advertise the availability of things people are giving away. Note: older people gifting the young helps them as they start out and lack a pool of accumulated capital for buying a house, car or whatever. 

guilt -- an emotional state produced by knowing that one has committed a breach of conduct or violated moral standards. If one accepts society’ s version of acceptable behavior, the punishment guilt produces is self administered. From a different (equation based) perspective, guilt can be considered to be: guilt = conscientious behavior — actual behavior .                                              

impulse control disorder -- a condition characterized by being unable to rein in impulses or resist temptation to engage in behavior known to be (or potentially be) personally risky or harmful.

inflation / inflation rate, annual–Inflation refers to an increase in the prices of goods and services. Associated with it:  each unit of currency ($ dollar) buys less given the higher prices. This is essentially a reduction in purchasing power. The inflation rate provides a  measure of how much prices generally increase over one year.  At 2% / yr inflation prices would double in 36 years; at 6 %/ yr in 12 years; at 12 % / yr in 6 years.  See Rule of 72.

instant gratification -- the thrill that comes when you immediately get a desired something. Driving this is a childish “I want that now!” force. For some, this force is powerful enough to overcome the opposing force: a rational, restraining adult attitude that questions whether the desired something is really needed and whether there is money to pay for it.

interest, simple vs. compound--interest refers to compensation paid for the loan of money, typically calculated by using an interest rate. Thus the simple interest on a deposit (where the bank is loaned money) of $2000 earning 7% for five years would  be $2000 x .07/yr x 5 yrs = $700.  Compound interest differs from simple interest in that the principal is not fixed--it is compounded or added to by the interest earned. This addition takes place over a specified compounding period.  Thus interest on $2000 earning 7% compounded annually for five years would be ($2000 x .07/yr  for 1st year = $140) + ($2140 x .07/yr for 2nd year = $149.80) + ($2289.80 x .07 / yr for 3rd year =$160.29) + (2450.09 x .07 /yr for 4th year = $171.51) + ($2621.60 x .07 / yr x for  year =$183.51) = $805.11.  If you keep doing this for five more years, you'll find the cumulative interest is nearly $2000--meaning the original amount invested has nearly doubled.  See Rule of 72. Most financial arrangements involving loans or deposits involve compound interest.

interest, deduction of--taxpayers in the United States can deduct interest they paid on home mortgages from their income and get a tax break. About half of homeowners (those with mortgages who itemize deductions) claim this deduction. On a median priced home with a 6% mortgage, instead of initially paying around $12,000 / year in interest, those in the 25% tax bracket can use this deduction and effectively save $3,000 and only pay $9,000 / year in interest.

interest rate, annual--what it costs someone to borrow a dollar (or unit of currency in general) for one year. Thus a .07 = 7 % annual interest rate means that it costs $.07 dollars to borrow 1 dollar for one year, or 7 dollars to borrow $100 for one year.  

investment decisions, basis for--typically the key piece of information behind whether to invest in something or not  is whether the expected annual rate of return on the investment exceeds the annual interest rate charged for the money borrowed to make the investment or finance the project.

liability--obligation that most be honored,  debt that must be paid, or other legally-binding responsibilities based on contractual or other agreements

leverage—in an economics sense this refers to one’s ability to borrow money based on one’s wealth.  Basically the wealthier one is, the more money one can borrow—or the more assets one can control or leverage.

making do -- instead of giving in to forces urging one to “get what you want now!” and incurring debt to do so, one can instead make do with what one has or one’s current situation. The ability to “make do” depends on several factors, including one’s self restraint, patience, ability to live within a budget, ability to find pleasure in lower cost (i.e. affordable) activities, and do it yourself skills. The latter can be especially valuable in keeping older vehicles, appliances or whatever functioning. With respect to housing costs, some “do it yourselfers” who frugally save their money while renting are eventually able to avoid being tied to a home mortgage by refurbishing a lower cost “fixer upper” house -- or even building from the ground up.

marginal propensity to consume -- in the economic theory behind consumer spending and disposable income, this term is defined as the fraction of an extra dollar of income that goes to purchase consumer goods.

marginal utility -- the added satisfaction to be had by consuming an additional unit of a commodity. Economic theory suggests that as a person consumes increasingly more of a commodity the marginal utility eventually declines.

microcredit -- a scheme in which very small loans are made to very poor people who have no collateral. The loans are typically made to boost income generating economic endeavors, and surprisingly they have been repaid with a very low history of nonpayment.  The Grameen Bank in Bangladesh pioneered this type of lending in the mid 1970s.

money--a token or object that is generally accepted (both legally and socially) as a medium of exchange in paying for goods provided, services rendered, or settling debts. It also provides a measure of value or standard for gauging relative worth / wealth. Most economic transactions directly or indirectly involve money--one exception being a barter economy where money is not needed.

mortgage--a  loan to finance the purchase of real estate (a house, piece of land, etc.) in which the borrower puts up the title to the real estate as security to the lender (collateral) --protecting him or her against default (the borrower's failure to repay the loan).

national debt -- the amount of money that a national government owes to its creditors, who can be either its own citizens, corporations, foreign citizens, corporations or other national governments. To finance the debt -- which grows each year that expenditures exceed tax revenues -- the government sells notes, bonds, and other IOUs. By spring of 2022, the U.S. government cumulative national debt exceeded  $30 trillion dollars. Spread over the entire 330+ million people population, the U.S. national debt exceeds $90,000 per person!  As a government incurs more debt / engages in more deficit spending (spending not offset by revenue) it essentially needs to print more money--something which causes the value of money already out there to decrease. Money worth less / buying less is what happens with increasing prices /inflation (see inflation.

obligation--a compelling based on a social, legal, or moral claim; note some obligations carry with them some legally-binding responsibilities called  liabilities; see also liability

obsession -- an idea, feeling or emotion that persistently haunts or disturbs one’s consciousness and leads to what becomes, either through its repetition or otherwise, inappropriate, unreasonable behavior. Many obsessions are beyond willful control, even with the recognition of their inappropriateness.

opportunity cost--an economics concept that puts the cost of resources used in a certain way at the value of what these resources could have brought in or produced if they had instead been used in some alternative way (deemed to be the best). It represents the most highly valued opportunity forfeited when a choice is made.

pay as you go,  energy and environmental connection -- instead of borrowing in the form of basing an economy on energy from fossil fuels / nonrenewable resources, an economy could be based on renewable energy that is continually being replenished as Earth intercepts solar energy. So no “energy debts” are incurred. Similarly, basing an economy on sustainable, environmentally sound activities would mean that  no or minimal ecological debt is incurred. 

permissiveness -- a liberal orientation adopted by some in positions of authority in which those who might otherwise be dominated and controlled are instead granted considerable freedom as to how they can behave, and behavior that some might see as a transgression is instead viewed with leniency.

prisoners of consumerism-- a derogatory term referring to those who have unthinkingly succumbed to the all pervasive advertising messages of multinational corporations and adopted a consumerist lifestyle based on wanting, valuing, and continually spending money on things that they don’t really need.

Protestant work ethic -- an ethic based on self reliance, hard work and frugality being the path to salvation that has been important in shaping post Reformation western (especially American) society of the last five hundred years. Thus, ingrained in my people’s heads, since their earliest childhood, were sayings like “God helps those who help themselves”, “Idle hands are the devil’s workshop”, “A penny saved is a penny earned”, etc. Only recently has a consumption ethic begun to seriously compete with, some would say replace, this work ethic.

repair clinic / “fix it” / troubleshooting  clinics—some communities offer free weekend clinics in which local repair experts / do-it-yourselfers volunteer to help people fix items they bring by that need repair. Some libraries offer a similar service for troubleshooting computer problems; some universities offer free bicycle repair services as part of an on campus bike repair clinic. All of this challenges a “throw away” mentality that drives the need for more mining / resource extraction. Critics point out that consumer spending is the lifeblood of the economy and that jobs will dry up if people fix things instead of buying new ones.  

renewable resources -- natural resources which are continually being replaced or replenished by natural processes ultimately driven by solar energy. Examples include wind energy, biofuels, hydropower, forest cover, etc.  Using them to meet one's livelihood or other needs is a "pay as you go approach" when compared to meeting such needs by  "borrowing" from the limited non-renewable, fossil fuel resources. 

resolute--associated with a firm, steadfast determination 

Rule of 72—this simple rule can be used to roughly calculate the doubling time for something (compounding) growing exponentially at a fixed % per year rate. You start with 72 and divide it by the fixed % per year rate. Examples:  1) An investment of $1000 at a 6 % /year fixed rate will take 72 divided by 6 or 12 years to have doubled and become $2000; 2) A country with one million people whose population is growing at roughly 2% / year will need 72 divided by 2 = 36 years before it has grown to two million people. 

scarcity--a condition that exists when peoples' "wants" exceed the limited resources available to satisfy them.  The related need to decide how limited resources are allocated leads to rationing and a means for doing so.  Price is one such rationing device. People compete  for what is scarce, and in making choices incur opportunity costs.  

subsidy–a government payment or incentive to businesses or individuals given in an effort to support a sector of the economy or encourage some type of production / consumption activity.  Two transportation related examples: 1) at one time USA subsidies to oil and gasoline  producers / refiners were such that consumers paid less for a gallon of gasoline than for a gallon of water; 2) electric cars in many countries are more affordable given government rebates of some % of the purchase price.  Subsidies can have many effects: subsidies benefiting consumers  effectively lower prices; some can lead industries to hiring more labor, exporting more products, expanding, etc. Products not getting subsidies often can’t compete with those which are. From a free market perspective, critics charge that by offering subsidies governments are effectively interfering and “picking winners”-- rather than letting the market do this. Many are not bothered by this charge at all, indeed they instead see subsidies as a tool planners can use to steer an economy in a direction they want it to move.                                 

sweat equity--refers to an investment of time and labor in a project rather than a financial investment. The opposite of investing lots of work in building something or using sweat equity to offset money required to buy something, it having having that something given to you. See gift economy

thrifty (or frugal) orientation -- making do with less, saving money and resources by finding creative ways to solve practical problems and maintaining one’s current possessions, thereby improving their functional efficiency and extending their useful life.

usury -- an archaic term that refers to the lending of money and charging an interest rate for its use

vocation--one’s employment, occupation or profession 

vocational training -- education and training designed to give students specific job skills and help prepare them for a particular profession or career

voluntary simplicity -- a simple, typically environmentally sound and ecologically grounded, non-consumerist lifestyle that people voluntarily choose, typically for ethical, environmental or spiritual reasons


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