I have spent a good deal of time trying to wrap my head around how S&D would actually work, without assuming particular norms of exchange or property rights. Duration is a new concept for me, and my inclination is that interest rates should not be terribly important, even though they in fact are very important in our financial systems. A quarter of a percent change on the interest paid on the U.S. national debt amounts to a $60 billion dollar change in interest payments annually. If all that money went to one person, that person would make the top 10 list of the world’s wealthiest individuals the next year. It’s a scale that is hard to wrap your head around.

I have not seen supply for bonds defined that way, and have not really seen that identity, so I will consider it.

In general, I think a lot of notions about interest are outdated, because addition is more accurate than multiplication. In other words, we used to have no other choice but to rely on estimating things with rough aggregates and percentages, but with modern information systems we can count and add everything exactly, and measure distributional effects and resource limits using exact numbers. This applies especially to things like the stocks/flows of fiat assets, which are inherently quantified. An interest rate is almost more of a summary of changes, and is still useful for presentation, etc, but we can now assess profitability on razor thin margins in the aggregate, and employ collective strategies that look at the exact value of aggregate costs and benefits. For example, a worker’s wage is cost for a firm, but their contribution is a benefit. Conventionally we might have made the decision to add a worker based on their individual marginal costs and marginal benefits, but now we can just compare total costs and total benefits of any two alternative strategies, which does a better job of accounting for third-party and unintentional effects(Playing chess forces you to look at the board holistically). Obviously there still issues of computational tractability, but a lot of the decision making has moved from business viability to optimality.

However, any assessment of optimality necessarily must give weight to certain relative outcomes over others. The worker views their wage as a benefit, but the shareholders view it as a cost. There are many options for layering surplus benefits in finance besides simply fixing a rate of return with interest on debts, or splitting it equally with equity.

Incidentally, this reality that addition is more accurate than multiplication, is why insurance firms can be so incredibly profitable. If you try to estimate only individual risk, and then multiply that by the number of individuals, you end up with a lot more variation than trying to estimate the variation for the aggregate. Resources are local but information is global. The value proposition of shared governance is better accounting, and that gives you a wide berth for those fiat assets to “eat” that extra 60 billion of interest service, without necessarily causing inflation.