It is always a pleasure to learn that one’s scratchings have been of value to someone else; it’s even better when they’ve been used in such a way that comes back to the author, thereby expanding his thinking in some way. That’s what’s happened here lately—NonEntity has had another essay, titled Non-Money, published at Strike the Root; and he credits my recent musings on trust as an inspirational factor. It’s hard for me to winnow out a good, representative snippet, because he touches on several important facets in the challenge of creating economic systems independent of the state. Instead I encourage interested folk to read it in its entirety—it’s pretty short—then return here, where I’ll toss out some thoughts I have and invite feedback on any and all relevant issues.
It wasn’t until I became a stepmother and started homeschooling Lobo’s boys that I started to really think about the value of a dollar. Whether financially comfortable or not, up until then I bought what I wanted when I could or needed to, maybe grumbling a little about price increases or vacillations (milk and gasoline seem to be the favorite targets) but not thinking about the underlying issue: was I really getting what I perceived to be value for the amount of FRNs I was handing over? In trying to teach them basic economics, I stumbled upon my own ignorance.
And now, while it may appear that in some areas I’m spending more than before, that may be because of the observer’s focus on the dollar cost rather than deeper value. While poor, we bought very cheap silverware from a thrift store. Predictably, it feels cheap, bends easily, and is rather unpleasant to use. It became enough of an annoyance to me to buy some new utensils that were of higher quality—not top-quality real silver, mind you, but something decent enough from WalMart. That was at a time when I didn’t really have any income that was “disposable”. Some may say it was foolish to buy new utensils when we had serviceable ones, but I think the value of having spoons and forks that don’t have rough edges to hurt lips and fingers has proven otherwise. Everybody seems to prefer using them.
I can’t help but engage that cost–value calculation now. So I don’t buy Snickers or other candy bars any more, but I do happily spend much more money on couverture chocolate and top-quality nuts and other ingredients so that I can make and enjoy my own treats. The money spent, and the time involved, is worth it to me. Similarly, the time driving among various farmers’ stands in our area may be seen as wasted time and energy, but I strenuously disagree: 98 times out of 100, the day is lovely, my children are interesting and pleasant company, and the trip seen as a fun quest for fresh, nutritious pood.
Part of my awakening involved realizing that exchanging fiat money is, as NonEntity said, “shuffling paper”. Most of the time while I was young, the dollar’s declining value had such a shallow slope that I didn’t notice it happening. Now I see it; but it’s pretty much inescapable today, as the race to zero worth has accelerated. The trust is gone. Was it ever warranted? I would say no, at least not since competing currencies were disallowed when the Federal Reserve was created. The real value of the exchange is too often obscured by the number of FRNs changing hands.
Just like the state as a separate extant entity is something of an illusion, so is its paper money. Especially when individuals aren’t “permitted” to create or use alternatives, it can be hard to even grok that alternatives are possible. But, as NonE. pointed out, there are deep limitations to pure barter. Hawala provides an example of one means of avoiding cash ... another I encountered in And Then There Were None—the concept of an “ob”. Both of these may provide a means of thinking about NonEntity’s suggestion and bringing it into reality ... I don’t think my talents lie in that direction, but I’m certainly interested in helping create such alternatives in whatever form I might.
I think it will take the same kind of realizations I had with respect to the dollar to even get this kind of conversation going in the population at large; thus focusing on pro-freedom individuals as a place to start seems more realistic. The real challenge I see in that direction is this: is there sufficient trust between various branches in the freedom family to scale such a thing up to where it becomes a useful alternative to the mainstream economy? (Then we get to consider the other fun challenge: getting more Family members interested in doing something constructive rather than griping about how bad things are.)
Exploring Cash Alternatives
Maybe in the "developed" world
This assumes wide spread access to, and use of, the Internet. One day this will surely be the case, but right now, it is not.
The suggestion to use cell phones likewise assumes very inexpensive Internet enabled phones. In Costa Rica cell phone Internet access is very expensive. Cell phone usage is also fairly low when compared to the US or Europe, because it is expensive relative to income.
It could work on a local level, but there would be a lot of work to do to make sure the system was secure, and there would be privacy concerns.
OTOH there is already an alternate currency in place, with the technology to use it readily available, that is not controlled by governments, in the form of cell phone minutes.
Perhaps it will be easier to convince your phone company to provide this service than it will be to start a whole new system.
Even cell phone minutes
Even cell phone minutes aren't perfect.
Competition makes the difference.
I have to share my cell phone story.
A couple years back, I was seriously considering getting a cellphone. Even though I really don't like the idea of being tracked down and constantly at someone else's beck and call.
Anyway, the carrier with the best coverage in the area I was likely to use it in was Verizon. Now I was being smart. I researched. I was considering everything from a basic model to the top of the line Palm Treo. But it seemed every time I fed information into the website, I was getting different answers.
Finally I got frustrated. I fired up two different browsers side by side on the same computer. I filled out the information exactly the same. And I got two different plans at two different prices.
That night I went down and bought a cheapo TracFone from WalMart. It does about 80% of what I wanted a cell phone to do. I bought the doubling plan so every time I add minutes it doubles them at no additional cost. Total cost is about $22 per month, a little more on the busy months.
Oh, and officially the cell phone number is one of Verizon's. TracFone doesn't have any capacity of their own, they buy capacity as needed from the other carriers.
Verizon lost me as a direct customer and they probably don't make a lot of cash from me. But I still use their system. Something ironic there.
Griping about lawnmower blades.
Okay, so I started off with a rant. Hey, I kin do better, really I kin!
Having lived through the insanity of the inflation or stagflation or whatever-flation it was in the 70s, I learned really well. I remember that whenever I had ANY cash I would instantly go out and spend it on something tangible that I knew I would be able to use later, for as sure as the sun was going to come up tomorrow, so were the prices going to be higher. It was stunning there for a while, then Paul Volker came along and saved our butts by making the interest rates insanely high. Tough times.
I'm not looking forward to the next year or five.
I sure hope we can find a way to make something like this (or cellphone minutes) work. (How many cellphone minutes is a used lawnmower blade worth anyway?)
- NonE
barter is hard, but not impossible
While reading NonEntity's post I found myself with an objection, which I believe is well-grounded in the Austrian economics theory of value, though I can't provide citations or a rigorous defense.
NonEntity writes: But what if I could know with reasonable certainty that my lawnmower blade was worth "x" units on some universal scale, and that your hamburger was worth roughly "y" units.
The problem begins right here. There is no universal value scale against which to judge the relative worths of different items. All values are subjective values, and are only revealed when trade actually occurs. A glass of water in the desert to a man dying of thirst likely has far greater subjective value than that same glass of water would have at a five-star restaurant, and the dying man might gladly trade all the gold he could carry (while dying in the desert) to obtain it, while if he were at the restaurant might scoff at the very idea of being asked to pay. Said another way, tea in China costs much less than tea in London, because differences in local conditions create differences in the supply/demand equation.
Additionally, there's an element of the theory which holds that trade only occurs when values are unequal on both sides of the transaction. If my subjective valuation of the lawnmower blade is exactly equal to my subjective valuation of the hamburger, what impetus would there be for me to seek out the exchange? I'm not willing to give up a dollar in exchange for a can of soda because I feel that the can of soda is worth one dollar, I give up the dollar because, at the moment of exchange, I value the soda more highly than I value the dollar. The same logic applies on the other side of the transaction, to the soda vendor.
If we accept this analysis, I believe we can see that NonEntity's vision of a distributed system for reckoning value against an abstract and putatively "universal" scale is problematic. Nobody can input a value calculation there which will hold true for everyone.
Having made my less-than-rigorous objection, I very much like the idea of a decentralized, non-state market, whatever form it might take. The cypherpunks and crypto-anarchists have been on about this for years, and having just finished reading A Lodging of Wayfaring Men, I find myself wondering why such as a system as "Gamma" in the book hasn't yet been created.
Finally, to Sunni, the And then there were none scenario I find to be a lovely description of a sort of memetic-viral takeover by the freedom philosophy. I think the "ob" system might work on a small, local level like the towns described in the story, but beyond a certain scale it becomes very difficult to make economic calculations. Fortunately, the medium of exchange used in the story isn't central to its major thrust, and "obs" could well be replaced instead with any sort of commodity money. They key point of "obs", to me, was that one ought to refuse to become indebted to someone -- or even to trade with them at all -- if one thinks that someone is a jerk.
Ur Right, of course...
Mike,
Thanks for your comments. You are correct, of course. I stated my case poorly, or inaccurately. Each and every transaction is between individuals who have their own situations and hence each is different from any other. Nonetheless, there does develop a general common level of valuations in normal circumstances. It would be very rare for a person to trade a stereo for a loaf of bread, for instance. Or buy a Rolls Royce for a penny or in trade for a white lab rat.
Also, my use of the term universal may have actually been about the opposite of what I really meant. I'm not sure if I can do better, but let's just say that there is a general relationship, on average, at any given time of all things with all other things. It is this over-all-condition of the relation of things with other things that I was attempting to point to. In most instances of trade almost anywhere in the world, a gallon of gasoline will be worth more than a gallon of sea water. That is what I meant by the universal thing. Now with time all things change, of course, and that is why we need a dynamic record of trades, so that the relative changes in value are reflected in time.
So if it is generally true worldwide that hamburgers are worth more than used lawnmower blades, and automobiles are worth more than hamburgers and Monet paintings are worth more than automobiles, it may be stated generally that we KNOW that (absent extenuating circumstances) it will take a lot of used lawnmower blades to get someone to part with their Monet. That's sorta what I meant by the universal. I mean that the relationships tend to be fairly stable, at least in the relatively short term. But if one is not familiar with used lawnmower blades or maybe with Monet's paintings then one has no reference point by which to try and make a reasonably equitable trade. And if we are trying to get away from "money" then it would help to have a reference source of relative values, just as we use the Kelly Blue Book when trying to decide what is the best deal on a used automobile. We are using past trades on similiar items as a reference from which we can come to a decision on our own particular trade.
If we can map all of the trades which occur in the world into one big database then the relative values of all things will settle out. Including the dollar, the dinar, the ounce of gold and the used lawnmower blade. Thereby one may look up what one has to trade and see, in general world-wide average terms, how it ranks against the item one is hoping to acquire. At that point the two potential trading parties have a reasonable point from which to begin negotiations.
When I was a kid living in Mexico I soon learned that any price I was given in the "mercado" was, at a very minimum, at least twice what the vendor would be willing to sell to me. Seeing a "gringo" (me), they vendors would automatically increase their asking price by two to three times what they were willing to let it go for. Most often, a "gringo" tourist would not know this, and so would generally "over pay." True, you might say that since the price the vendor and the purchaser agreed upon was ... agreed upon, it obviously was not an "over payment," but I would suggest that in reality it was more than need have been spent if more information had been available to the purchaser.
The removal of "money" (in the form of legally required fiat currency) from the marketplace puts us at a serious disadvantage as one of the prime functions of money is as a universal valuation mechanism. That is what my idea is an attempt to replace.
Has this cleared up anything for you? Or maybe just shown you more errors in my thinking?
- NonE
Okay, glad to find we agree
Okay, glad to find we agree about subjective value theory :) Certainly any "this can't work due to conflict with reality" objection falls away if we make the qualification I pointed to.
It's an interesting idea, but I find myself wondering how to bring it about. In the current statist world, to start with, there would be an extremely strong (law enforcement/liberty eradication) disincentive for any black- or gray-market trades to be reported. This would result in an incomplete picture of the markets being given. Would there be value in such a system even if those transactions weren't reported? Probably yes. Imperfect information is better than no information at all, and markets function just fine today with less-centralized incomplete information available to participants.
Even if we imagine anarcho-utopia as the backdrop, with formerly black and gray markets becoming white markets and no disincentive against reporting, what would be the incentive for buyers and sellers to report their transactions to such a system? How would the system motivate the largest possible number of people to subscribe?
Additionally, what would be the incentive of the people who operate the system?
Data base of prices?
This data base for prices might work locally, for some big ticket things, but I fail to see how it could be of any use on a larger scale for everyday items - and never mind worldwide.
There are an unknown many thousands of various products, in several brands and forms in the small local grocery store. The number of items and brands at a major shopping center boggles the mind.
How many hundreds of computer printout pages would I need to drag along to go shopping? I do not always know what I'm going to buy when I head out the door, even though I carry a shopping list, so I must have some idea of prices after I leave the computer. And I'm NOT going to remember. [grin]
Does it not make a lot more sense to develop a relationship with various trading partners and share THAT information? Serious trade worked on that basis long before mass and instant communication. :)
Pay attention now, there'll be a quiz!
Mama,
You musta been flirting with the guy in the next row when I 'splained this all. The point is that communications and massively powerful computing is becoming almost free. The database would be in "the cloud" (the entire network of all of the world's computing power) and accessible via a cell-phone, blackberry or some other awesomely powerful cool new tool. All data would be virtually instantly available. You don't gotta 'member nutin'! Not nutin'. Well, maybe spelling would help.
Your little machine could advise you of the latest relative values of the things you wish to trade and thereby give you a basis for examining your own feelings on how you value the trade. Then you trade, or negotiate and trade, or fail to trade, and the YOUR new data gets added to the database. For the next person.
Yesterday I bought some diesel fuel at $3.24 per gallon. It seemed like a good price. Today it's $3.19. A few months ago I paid $4.79. If this was something I didn't use all the time, I wouldn't be aware of the changes in pricing. As it is, I watch it carefully. But with infrequent trades (tires, houses, horse trailers, rifles, hookers --- wait, scratch that last one, I'm not a politician...) it would be ever so helpful.
- NonE
Hey, now!
Don’t go maligning hookers like that—I bet most of them don’t associate with such vermin as politicians. ;-)
(Well, not knowingly, perhaps.)
Ok, maybe...
I'm too old, and old fashioned to event think that way. I don't have a cell phone, a "blackberry" or any of that other stuff - and don't want them. I tried a PDA type thing years ago, but it took more time to program it than using a pencil and paper, so I trashed it.
I'm perfectly happy to go to the local store and buy what I need. Knowing the price all over the world just wouldn't help much because I don't have any options except to pay the price they are asking right then and there - or do without.
Somehow, with the current and potential economic crisis going on, that doesn't seem likely to change any time soon. If we can ever get to a truly free market, I suspect that things like this data base might well become reality if that's what people want.
I guess I just am not bright enough to see any particular benefit to it right now.
Soon!
Mama sed:
Mama,
I think that you're agonna find out that EVERYTHING is going to change soon, and your "money" ain't gonna be worth the paper it's printed on. And that is the whole point.
Yesterday I drove through a city where there was a LOT of brand new construction. New subdivisions, new malls, and so on. The new malls had new stores... which were bankrupt before they even had the mall finished. A new (bankrupt) "Bed Bath and Beyond" to supply linens to all the people who aren't buying the new houses. The subdivisions had houses that were freshly built, but not painted, and were empty. You could look thru the windows of the empty rooms and see the empty houses on the next street over, just as empty. Block after block after block. Fortunately there isn't any apparent looting yet.
And the government is taking over the banking industry. That's sure to make things better for you and me! :-) HA HA HA!
Weimar Republic, Argentina, Zimbabwe, U.S.S.A.
At some point you will probably be wanting to know just how many pounds of beans a self-defense course is worth in trade.
Perhaps "we" will finally have a wakeup call with a sufficiently strident ring-tone. I like that supposed old Chinese symbol of "crisis" which means both danger and opportunity at the same time. This could turn out to be a wonderful gift for the future evolution of freedom and mutual human respect. Wouldn't THAT be cool?!
Speaking of which, have you considered giving your young friend a lesson in self-defense? Maybe someone you know has the skills to teach this young woman some critical moves to debilitate an aggressive male attacker. This whole thing might turn out to be a blessing in disguise in preparing her for life in an uncertain world.
- NonE
We'll see
I'm quite aware of the current problems and potential changes coming. The need to learn and adapt is obvious in all life, and always has been. I just don't see how some data base is a part of it right now, but I'm certainly open to whatever happens that works.
I think we must be talking about two different concepts here or something. Right now anyway, I don't really care much what anyone else would trade in beans or whatever for the thing they are selling. I know what my time is worth to me (Not just "FRNs," but in whatever I'm selling or buying), and I'm happy to negotiate with someone who wants to trade to find out what it's worth to them. What someone hundreds or thousands of miles away thinks about it is irrelevant to me because we have totally different situations, needs and experiences, as well as different costs of production.
I'm a certified instructor for handguns and self defense myself, and I've taught her what I can. The problem lies in her mind, and the fact that these people have emotional as well as physical power over her. The attacks are subtle and mostly emotional, right now anyway.
A 12 year old girl is not going to be able to debilitate a larger male attacker without a weapon of some kind, and I know that's not an option. But only she can supply the will to resist anyway.
She seems to be holding her own right now, and her mother is aware (and grateful) that I'm watching... and care. We'll see.
[Edited by Sunni for proper formatting ... forum code, with brackets, does not work here; you’ve gotta use html. The code for quoting someone is <blockquote> and </blockquote>.]