We no longer understand economy as the study of human interaction under the conditions of scarcity. As production tends to near zero marginal cost, the manufacturing of artificial scarcity becomes more difficult every day. If only capital wasn’t biased towards scarce resources and abundant labor to exploit, but adapted to a world of abundant resources and scarce labor.
In a world where all necessities are abundantly available, prices tend toward zero: zero-cost production, free for the taking. Essential resources (food, water, clothing, shelter, transportation, energy) will be abundantly available. The rationale for saving or hedging against future risk will be undermined for a resource, the longer it is “just there”.
Abundant resources are best organized by a gift economy, because the value (or worth) of transactions doesn’t lie in the gifted item but in the transaction. The act of gifting always builds a relationship as opposed to a monetary transfer. The intrinsic value of a gift transaction is that relationship.
Gift economies rely on the connectedness of the underlying social fabric to function, so they are essentially local economies. With local green energy and food production, they can provide for all necessities of life, because local economies have access to all knowledge of humankind. It also means that transactions beyond your community still require a form of money. It is in that realm that the endgame of capitalism can be played without too many casualties. Bubbles can inflate and burst, tremendous sums of “dollars” can be amassed and spent on conspicuous status symbols, preferably the kind of art that flirts most intensely with its own uniqueness. That is the realm into which capitalism will retract and wither.
In what follows, I explore the way in which a virtual currency could make the transformation toward a larger share of gifting in the real economy easier.
Measuring the economy
According to standard economics, the size of the economy is measured by the gross domestic product, en is expressed in dollars. It includes the “money made” by war, disease, exploitation and despoliation of the planet. The very definition of standard economics includes the qualifier under the condition of scarcity. The information revolution, which made information rather than goods and services at the heart of the economy, is something that can be indefinitely replicated. Information’s natural condition is abundance, not scarcity. In turn, the abundance of information, the possibility to connect and share our smarts, leads to increasingly better solutions to our other scarcity problems. It becomes more and more obvious that scarcity is fabricated. In fact, not just covering it up with planned obsolescence schemes, but downright manufacturing it, will be the only way to keep “the economy” alive.
This cannot last. We now understand that for a reasonable account of reality we should redefine “the economy” to include other human interactions as well. Imagine a pure gift economy, in which everybody is kind-hearted and has a perfect memory. There would be no distribution problem and no need for money to record transactions, measure value, or denominate savings. Such an economy would provide for everyone’s needs with a GDP of exactly zero. When a significant portion of our economic activity takes on the nature of gift economy, our GDP-obsessed economics will be even further away from reality than they already are.
In a gift economy, the “size of the economy” is better termed the “quality of the economy”, meaning the quality of the relationships it helps creating through the gift.
With the advent of abundance, society gradually moves towards an equilibrium where gift economies manage all they can manage (having understood that under abundance, the true surplus is the relationship created through the gift) while the rolling thunder of monetary mediation dies away as it helps an insatiable group of deranged trillionaires quench their thirst for tokens for their own uniqueness.
What we need is the right economic policy during that transition. To determine this, we ask what the size of the gift economy is.
Measuring the gift economy
We don’t need to measure the gift economy precisely. After all, the traditional indicators for the size of the economy were given only a distorted shadow of what we really wanted to measure. What we need is a workable indication of how far we have progressed toward a pure gift economy, so we can adopt a monetary policy that is suitable in our current phase of the transition.
The gift economy doesn’t know infinite growth. It grows towards an asymptote, a (fictional) state of pure gift, where all mutations of resources are direct and don’t need to be counterbalanced with a symbolic monetary transfer.
The economic activity going on in the money economy is of course measured by the GDP. All economic activity is measured using estimates of transportation miles, land and resource use and consumer questionnaires. Using benchmarks, economists can express this quantity as a number. The size of the emerging gift economy is the difference. Again, these are very rough estimates. They can be compared with voluntary entries in “gift ledgers” to record the size of the gift economy more accurately.
Individuals can move entire transaction spheres from the money economy to the gift economy, when they trust each other enough, or the other way around when trust between members of a community is damaged. The overall tendency is towards more trust, because under abundance the surplus value of economic transactions lies in the act of gifting itself.
An auxiliary economy
One of the problems with the transition toward a more gift-like economy is our cultural appetite for hoarding. What about our savings when we embrace the gift economy? If we cannot reliably denominate what we have toiled for, we are forced to spend it immediately and remain forever exactly as poor as our neighbours. This, by the way, might be an apt description Ayn Rand would give of “hell”.
In order to make the transition more palatable we introduce an auxiliary economy. We look at the measured size of the gift economy and create a proportional amount of new “trustcoins”. Each trustcoin represents a share of the trust we believe materialized in the gift economy. It is a more conventional way than the vague “pay-it-forward-the-universe-will-return-it-to-you” promise of some gift economy spirituals.
Of course, you don’t earn trustcoins by gifting (that would destroy the idea of gift economy) but you will receive, as a reward for the trust you invested by giving, a fair, proportional share of the gift economy in return. For this reason, the auxiliary economy must be cyclical. After each cycle, let’s say every year, there is a “jubilee” and everybody receives a “basic income” proportional to the estimated size of the gift economy, adjusted for her own gifting activity as registered in the receiver’s ledger entries.
Of course, such a system could be exploited by fraudulent behaviour. I could make a deal with my nephew to mutually declare receipt of services never delivered, only to earn a higher income at the beginning of the next cycle. However, this would mean risking my basic needs, which are covered by way of my being a trustworthy member of my community, for the sake of financial gain, which, I like to say this again, in a world of sufficient abundance only serves the wicked appetite for tokens of our own uniqueness. Besides, the cyclical nature of the auxiliary economy would require me to cheat again every year. There won’t be a great one-time heist after which I could rest on the laurels of my financial security. Every cycle I would be, if anything, less secure because last cycle’s cheating can still be discovered. That would take away almost all my fascination with fraud.
The whole idea of the auxiliary economy is to help people transition from an accounting system that lets them accumulate wealth in neutral terms to one that denotes their wealth in terms of their most fundamental value, the community they are part of. One that translates back their longing for material possessions into belonging to their community. People can still “accumulate wealth” as they improve their social standing. But they will be mature enough to accept that, as with all natural things, there is an upper limit to such wealth.
The auxiliary economy helps fostering trust relations between people that enable them to move to a next level in the gift economy. It allows people to collect tokens they can spend during the next cycle, which feels familiar for them. After they have collected their tokens for a couple of seasons, along with their peers, they will see the silliness and gradually abandon the practice.
Taxation and savings
Apart from implementing redistributive justice, the distribution at the beginning of each cycle in the form of a basic income, is a great political tool for taxation without the state. The automated process that issues new money proportional to the size of the gift economy could reserve a certain, democratically determined, amount for public spending. This money could be managed by an auxiliary state department. Because the new money is created in proportion to the size of the gift economy, the same incentive that grows the gift economy reduces the need for monetary subsidies because gift economies have already taken care of things.
Communities with an internal gift economy can trade with each other for their mutual benefit. Ties between communities will over time also turn into gift economy ties, because the transaction itself is the only thing that remains scarce. The most advanced networks of gift economies, and hence the public infastructure they share, such as roads, hospitals, utilities, will benefit the most from their allocated budget, because the money they receive all goes to stuff they can’t yet solve “in the gift”.
With the essential resources essentially abundant, storing value becomes a matter of social standing, of the depth and breadth of your social network. This is not recorded by the memory of computer servers, but by the memory of your community peers. Somebody’s wealth is not that person’s “own business”, it exists only as a property of her community. “Saving up for old age” means establishing yourself as a worthy member of your community. There is no securer pension possible, if we understand humans as social beings. “Saving up for a car” means (note that as the functional aspect of the car is abundant, the social status aspect is artificially scarce!) preparing your community for the idea that you, and not the Joneses, will henceforth drive around in that cabriolet.
The exact thing money can’t buy: love or respect of social standing, matters infinitely more in a society of abundance. Money will have its proper place again. It will facilitate, not dominate social interactions. It will help improve the quality of our social life, where our millenia-old money cult still resists the culture of the gift.
Bitcoins are created securely because they rely on scarce processing power. Forging a bitcoin means putting more “work” (computations) into it than all other computers combined. Because we can estimate the progress of technology, there is a rough upper limit on the creation of bitcoin. In principle, tying bitcoin to technological progress tames the beast of inflation. Money creation becomes dependent on technological progress – a very fascinating idea.
What I find even more fascinating, is tying money creation to social progress. In a perfect world, in which everybody is honest and kind, there is no need for money. Gift economies function at the local level, and interaction between gift economies is written down in ledgers, and dealt with respectfully. The more social progress we have, the less we need money. Of course, the world won’t be perfect tomorrow, that’s why we need the idea of transitioning towards it.
Why not reflect that in our concept of money? If we all agree that money is a thing we use because we can’t yet fully trust each other, we should embrace the consequences. What we want is mutual trust, so we make the amount of money proportional to that. The more we approach mutual trust, the more money we create.
This might sound counterintuitive: The further the gift economy has advanced, the less money we need, but the more money we will create. Because money production should follow real value and thus be roughly proportional to the size of the gift economy.
This is a situation of controlled hyperinflation: The larger the gift economy grows, the more money is issued. Inflation is thus determined precisely by what the extent to which money is rendered obsolete. The gift economy has real value and that value functions as a collateral for the creation of new money, that further aids in the transition toward the gift economy.
Common sense would suggest that the situation is exactly the other way around: The larger the gift economy, the smaller the amount of money we supply because we need less of it. This seems logical, but the purpose of the new money is to facilitate the transition to the gift economy. Money has to be as abundant as possible in order to make the transition as fast (and smooth) as possible. When the money supply is proportional to the size of the emerging gift economy, we keep inflation at the highest safe level and so stimulate the gift economy even more. The value of the money is pushed down, reflecting indeed the new reality in which most things can efficiently be gifted.
The blockchain can help the necessary transition towards an economic reality with a significant share of gift economies by facilitating a cyclical auxiliary economy. Gift economy transactions are recorded in ledgers every cycle. At the beginning of each cycle, new money is created according to the estimated size of the gift economy. Everybody receives a fair share of the new money created (a basic income), slightly adjusted as a reward for their personal gifting activity. As communities transition further towards a gift economy, the money supply will go up, but with no goods to chase. This controlled hyperinflation eventually makes money only attractive for those who still believe it to be an end in itself. Under the condition of abundance, what we value most is precisely what cannot be expressed in money: our social relationships.