What does Wordle tell us about Economics?

Many words start with TRU

Don't know how to play Wordle take a short course here.

Want to get a little better? Here are some strategies.

The strategies help, but the best strategies change as you progress. For example, if I have one or more green letters on a guess, I will often look for words without green letters and with different letters on my next guess. I try to eliminate as many words as possible rather than try to find the word. I have changed the algorithm in my head from finding the word to eliminating words. However, once I have eliminated most words, I select words with green letters. This proves to be a reasonable strategy as I always have six or fewer, and my average is in the low threes.

The point of this story is that algorithms matter, and once an algorithm is known, anyone who knows it can use it. There may be better algorithms, and I often try something different. The game, knowledge and person are the same, but the algorithm changes and the results are different.

It is the same with economics. Algorithms are important. In economics, the rules are set by governments and the algorithms are developed by lawyers and accountants. For example, big business spends money on lawyers and accountants to find ways to minimise taxes as it is easier to reduce taxes than sell more products.

With today's rules set by governments, there is a change to the economic algorithms that, amongst other things, will make housing affordable and provide enough Capital to fund the decarbonisation of the economy. The difference can operate for any business that wants to use it, and the business will become more competitive, so it is likely to spread.

The change is to use Community Capital rather than Equity Capital. Equity Capital is a share of ownership of assets, while Community Capital is a share of the output from the assets. Businesses still have shareholders, but they share assets differently. With Community Capital, each sale transfers a little of the Capital in the business from existing owners to the buyer, and the buyer becomes a part owner.

The change is within the rules that most governments set and is a change in the economic algorithm.

Community Capital will have a dramatic effect on economies. It spreads wealth through the population. You buy something and get part ownership of the company. That gives you a voice in the company's investment decisions, and the company will look for ways to become more efficient as that will lower prices. Employees can be partly paid in Community Capital and have a voice in investment decisions.

The change makes Capital quickly available for reinvestment, which can increase profits. For the business, it encourages customer loyalty and stops customer churn. For governments, it reduces the need to collect taxes for social welfare.

How much does it save? For businesses that provide dwellings, it halves the cost of buying a house. For companies that supply electricity, it halves the cost of electricity, and it is likely to do the same for all businesses with significant capital costs. Best of all, it costs little to implement as it is a change in the algorithm, not a change in business operations.

Business owners can benefit because they can arrange for their suppliers to use Community Capital and reduce their buying costs, which increases their profits. In particular, if businesses persuade the government tax office to use the approach, it will lower taxes because governments can borrow by accepting prepaid taxes and discounting future taxes.

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Kevin Cox

Kevin works on giving individuals control over their online information - particularly their financial information with local communities.