Cantillon Effect: The Prosperity Paradigm Perspective

Source: https://en.m.wikipedia.org/wiki/File:CantillonCircularFlow.png

Richard Cantillon was one of the earliest economists who could correctly analyse the flow of money in an economy through cause and effect mechanism. (https://en.wikipedia.org/wiki/Richard_Cantillon) He was the first to recognize the role of entrepreneurs in economy.

 

Cantillon suggested that inflation occurs gradually and that the new supply of money has a localised effect on inflation. He, not only made this observation, but also gained a lot by masterminding the Mississippi Bubble! This priced that the greatest benefit will accrue to the first in the flow while affecting the farthest in the worst manner in largely zero sum economy, which were built by the financial institutions and the predominant but largely nonproductive sociocultural forces!

 

Until recently, the flow of money has been the prerogative of the financial institutions and the respective governments. Largely, all these institutions have been working solely to appropriate the most value benefit at the lowest risk. While this arrangement has been helping the financial institutions and the leaders within these institutions to strengthen their grip on the economy as the time passed. At the same time, all other segments of the economy are getting less benefit while increasing benefit to the financial institutions but the segments down the flow further are losing to the segments prior to them heavily, in the zero sum economies. And due to this circular flow within the economies the disparity between the financial institutions in terms wealth & value has been increasing, exponentially. The disparity gets accentuated especially in the worst times such as the present Covid Crisis the world is going through. 

 

Effectively, till date, the money, hence wealth & economic value, has been in the ever stronger grips of the holders & hoarders of generally nonproductive yet high value assets, since many generations prior to them. The sociocultural forces till date have ensured increased concentration of wealth in the hands of few and most of the times, the money is stuck largely with the least effective & efficient value creating assets. Over centuries, whole world has experienced the worst effects of the Asset Bubbles, while the farthest segments in the economies have been affected by these bubbles. Due to series of such economic bubbles, the lower strata have been affected badly and many times revolted thus leading to chaos and failures. The most productive people and entrepreneurs have been at the receiving side of such consequences for millennia!

 

But, after centuries in human history, we have laid the foundation for the 'money' to be 'created' and 'propagated' right in the midst of entrepreneurs, thanks to cyber currencies! The greatest benefit of this new 'economy', due to Cantillon Effect, is in helping the entrepreneurs to not only create value but appropriate most of the value. In addition, the flow also happens in such a way to benefit the most productive assets, people and institutions the most. This brings the Prosperity Paradigm right in the centre of the economy ensuring not only the greatest value creation engines are created but also help the entrepreneurs to appropriate the most of the value, this encouraging and inventivising the entrepreneurs to create Virtuous Cycles of value & wealth creation and ensuring the faster velocity of flow among the most productive segments in the economy. Inaddition, the most of the high value creators will move up the sociocultural strata to perpetuate the Virtuous Cycles & Ecosystems in societies. Hence the greater benefits of Prosperity Paradigm are enjoyed by most of the people, especially the ones who were kept out of the 'old' economies! Effectively, the whole process driven by Prosperity Paradigm ensures evolution of mankind faster this ensuring the thriving of humanity leading to the predominant position for all of us collectively, in the universe!