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 economy—this 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, 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.

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

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.