Economics, currency and time

Any competent observer of economics would acknowledge that the money-based model on which most current economics is based is in deep trouble right now: somewhere between seriously-dysfunctional and completely broken. Many of the purported key-metrics such as GDP and GNP don’t really tell us anything useful at all about the actual functioning of the economy: all they describe, really, is the potential tax-base, in monetary terms – and the distortions that this introduces into the economic picture are the direct cause of many economic problems. Banking and, especially, finance have moved so far from their functional roots that they’re now little more than engines for embezzlement on an almost unimaginable scale. And the preferred ‘solution’ to the fact that many, many things cannot be meaningfully described in monetary terms is simply to declare that such things do not exist or, if they do, they cannot conceivably matter within the overall economy.

(I won’t give links for any of those assertions above: we’d be here all day. They’re all well-known and long-proven problems, as a few hours’ worth of careful web-searches will demonstrate all too clearly. Just take it as read for the moment that that’s so, because the details as such aren’t that relevant right here.)

Given that there’s a perceived problem with the ‘money-economy’, what can we do about it? Well, the usual ‘solution’ – and I use that term advisedly – is to rush out and devise some form of alternative-currency. I’ve seen dozens of these so far, and apparently there are actually thousands of these projects, across a whole spectrum from simple barter to community-based currencies to time-based currencies. But they all have one thing in common: they won’t work.

Not just ‘won’t work’: they actually can’t work. They can’t solve the problems that we face.

No form of currency will satisfy all of the requirements for managing an economy, without requiring distortions to the economy itself that will render that economy non-viable or non-sustainable, especially over the longer term.

And there’s no way round that fact.

My apologies if that fact offends anyone, but it is indeed a fact. And refusing to face that fact is not going to help anyone. Sorry.

Which point often makes me kind of unpopular with the proponents of such ‘alternative-currencies’ – the latest being a none-too-happy run-in with something called the Ingenesist Project, whose spokesman Dan Robles asserts loudly that ‘The ONLY Social Currency Is Time‘:

Thousands of social currencies are emerging as people lose confidence in the ability of the dollar to store value. At the end of the day, a currency is a social agreement. People need to agree that whatever they use for the storage and exchange of value accurately represents their productivity – otherwise they will not work for it.

Of course this is much easier said than done. Alternate currency advocates continue to stumble across substantial structural issue is defining their currency; It must be scarce, it must be difficult to forge, debase, or counterfeit and it must be accepted by everyone.

The only thing that fits all of those criteria is ‘Time’.

(See the video on that post for more details. To give some idea, their proposed currency-unit has the revoltingly-’cutesy’ name of ‘rallod’, being the inverse of ‘dollar’… Oh well…)

Dan Robles’ article was a guest-post on Jay Deragon’s ‘Relationship Economy‘ weblog, which has the tagline “You cannot see what you do not understand”. Which is unfortunate, because what’s being displayed in this case is a serious lack of understanding of the real nature of economics. But this is by no means the fault of one writer, one group: it’s a fault that’s common to all proponents of ‘alternative-currencies’.

The problem isn’t in the detail of the currency: that’s literally just detail. The problem is deeper than that – much deeper.

To use the over-worn metaphor, all the different would-be currencies are just different-shaped deckchairs on the Titanic. The real problem is that the ‘unsinkable ship’ of current economics is in the process of disembowelling itself against an immoveable iceberg – meeting up with a world-scale ‘mythquake‘, to use another metaphor – and right now that entire structure is in the process of coming apart at the seams. Shifting deckchairs around and arguing about which deckchair is ‘best’ is not going to make much difference to that: and the deckchairs themselves are not going to be much use for keeping anything afloat when the structure itself has sunk beneath the waves.

In other words, the arguments about currencies and the like are all at the wrong level: they build everything outward from a specific assumption, but the reality is that it’s only an assumption, one that only works in certain special-cases, and we’re now in the process of moving beyond the conditions under which it can work.

As to what that assumption is, and what we can do instead, is something that I’ll come back to in a moment. But right now it’s worth noting that there’s an almost exact parallel here between currencies in relation to economics, and IT and the like in relation to enterprise-architectures.

In both cases, the entire requirements-analysis process is run backwards. Instead of trying to understand the problem-space, currency-proponents and IT-system proponents alike will start in solution-space, clarify their own understanding of the solution-space, and only then turn to look at the problem. Everything about the problem-space is viewed in terms of the assumptions and preferences of the chosen ‘solution’: “This is the solution! We can solve every problem with this solution!” The result is that the problem-space is distorted, often to extremes, in order to fit in with the constraints and limitations and inadequacies and assumptions of the ‘solution’: all too frequently the attitude is that if the world doesn’t match up with the ‘solution’, it’s the world that’s at fault, and should and must change itself to suit the ‘solution’ – as in the old joke about Levine the Genius Tailor.

We come across this problem all the time in enterprise-architectures. Vendor-driven ‘architectures’ are probably the worst examples: ERP systems, CRM systems, cloud-systems, intranet ‘information-management’ portals that make it almost impossible to share information, and so on. In process-architectures, Six Sigma and other so-called ‘best-practices’ frequently fall into much the same kind of category. Even enterprise-architecture itself is still near-crippled by a term-hijack that purports that the whole domain of EA is primarily or even exclusively about IT, when in reality IT represents only a very small proportion of the overall enterprise. These daft back-to-front attitudes are a routinely recurrent and really serious menace that cause untold damage, loss and risk throughout every type of enterprise.

So too with currencies and economics. At its base, every proposed ‘currency’ is a predefined ‘solution’ looking for a problem that will fit its own assumptions and constraints. The result, again, is that the world is forced to distort itself to fit those constraints. In monetarist economics many of these distortions are so bizarre as to be laughable: for example, every aspect of human relationships must either be defined as a form of prostitution (“what price is a hug today? could I get one cheaper from someone else?”) or is deemed not to exist. The latter particularly applies to emergent ‘network effects’ that cannot be associated with a single transaction – hence Margaret Thatcher’s infamous assertion that “there is no such thing as society”. But the same distortions also in all of the would-be ‘alternative-currencies’ – as can be seen clearly in Dan Robles’ response to a critique by Stephen Smith:

Steven Smith: I respectfully disagree, as people will always make time for things that they care about and believe in. Trust and Passion are equally important Social Currencies.

Dan Robles: @stephen true, but you may have it backwards. Passion and reputation are derivatives of Time currency. Passion is what a person does with their time that is how the spend their time (note currency = spend) Reputation is how a person has spent their time. Influence is the ability to save time or increase the value of the time for another person. A person with a good reputation makes a recommendation to 1000 people saves 1000 people time in having to research or distrust the words of someone else. It boils down to time. Time is the only real scarce commodity. Like money, you can’t take it with you….spend it wisely.

In this case it’s not that “Passion and reputation are derivatives of Time currency”, but that passion and reputation and influence and the like have all been reinterpreted in the terms of the chosen ‘solution’ (‘Time currency). They’re are no longer viewed or even acknowledged as existing within their own terms – in other words, as orthogonal entities or attributes – but solely through the arbitrary filter of time, as supposed subsidiary ‘derivatives’.

Note also the artificial usage of scarcity as the defining factor for the currency. Scarcity does indeed apply to physical resources – but does not apply to any other type of resources. One of the key reasons why the money-economy is breaking down is because of the mismatch between its assumptions about scarcity on one side, and the effective infinity of virtual-resources (including money itself) on the other side. A time-based currency that focusses on linear-scarcity as the controlling factor misses out on many other crucial aspects of time – synergy, serendipity, perceived relative-time and much else besides.

(I also find it both intriguing and annoying that any critique of a proposed ‘alternative-currency’ is usually met by an aggressive and/or mocking “Show us your solution, then!” This can be seen in Dan Robles’ response to my critique in the comments section of that ‘The Only Social Currency’ post; another example in a comment to an earlier post of mine can be seen here. Disappointing, but there ’tis – though it certainly doesn’t help…)

To me, and I would imagine to anyone who actually thinks about this in any depth at all, the domain that a currency attempts to operate in is a ‘wicked problem‘. To quote the CogNexus website:

A wicked problem is one for which each attempt to create a solution changes the understanding of the problem. Wicked problems cannot be solved in a traditional linear fashion, because the problem definition evolves as new possible solutions are considered and/or implemented. The term was originally coined by Horst Rittel.

Wicked problems always occur in a social context — the wickedness of the problem reflects the diversity among the stakeholders in the problem.

Most projects in organizations — and virtually all technology-related projects these days — are about wicked problems. Indeed, it is the social complexity of these problems, not their technical complexity, that overwhelms most current problem solving and project management approaches.

A currency is a technical ‘solution’ to a societal problem. But the point is that there is no single ‘solution’ to a wicked-problem – they cannot be solved in the same sense that, say, a mathematical equation or a crossword-puzzle can be solved. Yet that’s exactly what a currency purports to do, and in fact must do if it is to succeed in practice: namely ‘solve’ every facet of the wicked-problem of resource-management in a highly-complex social context. It promises to provide a means to control ‘double-entry life-keeping’ in every aspect of everyone’s life, not just in the present but indefinitely into the future: an aim and assertion which, given that this is a wicked-problem, is patently absurd in practice. Which is one of the core reasons why a currency cannot work: not just a specific currency, but any currency.

In wicked-problems, the main purpose of ‘solutions’ is to provide some kind of working-anchor, in order to trigger responses from the real-world context so as to aid understanding: if we assume that a currency or whatever is ‘the solution’, we actually prevent further understanding of the (wicked)-problem from taking place. Worse, as above, the ‘solution’ requires that the real-world must distort itself to fit the expectations of the ‘solution’, which is then taken as ‘proof’ that the solution itself is correct – otherwise known as circular-reasoning. This is not a good approach to use when attempting to tackle a wicked-problem…

Yet the core failure of the concept of currency goes deeper than this.

To make sense of this, we need look past the filter that each type of currency represents, and instead explore what that whole category of currencies is a solution for. If we do that, working deeper at each step, what we come to is this:

  • a currency represents rights to societal resources
  • the resources must be exchangeable resources – resources that can be linked to and valued in terms of the currency, that are considered to be ‘held by right’ by an individual or collective, and that is capable of being transferred to another individual or collective in an identifiable and meaningful fashion
  • (this type of model assumes that we may safely ignore any ‘non-exchangeable assets’ such as relationships or feelings, or ‘non-possessable’ resources such as time itself – note that this is an assumption which, within this model itself, it is impossible to test or prove)
  • simple point-to-point exchanges (barter) require that each side of the transaction has an exchangeable resource that the other would value
  • the currency is a form of token and metric agreed and accepted across the whole of a social context, which can be used as an intermediate abstract ‘exchangeable resource’, and that can therefore bypass the barter-requirement that transactions may only be point-to-point direct exchange, enabling indirect exchange
  • in some forms of currency, the ‘rights’ represented by the currency may be stored and aggregated as capital

Other than the questionable assumptions about ‘non-exchangeable’ and ‘non-possessable’ resources, that might all seem fair enough so far – except that we then walk straight into the morass of methods by which the structure may be ‘gamed’. The classic example is scarcity being used to push up a purported ‘value’ of a resource, leading to artificial manufacture of purported ‘scarcity’ in order to game the value. Printing money is the inverse of this: in effect, it dilutes the value of every other item of that currency. But in each case, the key point is that the currency represents purported rights to resources, which in turn rest upon a core concept of right of possession.

Which has no functional basis at all. It’s a fiction.

Oops…

Worse, it’s a fiction that’s held together by other fictions, which in turn rest on other fictions, frequently rooted in nothing more than a socially-sanctioned theft, often historically accompanied by extreme violence. (Ask the descendants of any past-colony about their experience of this…) In short, the rights are actually little more than robbery-with-menaces. If nothing else, many of the resources – as again we can see all too clearly – are being stolen from the future, since those people are being offered no possible option to object to the current possession and exploitation of that resource.

Oops…

Then we get into fun items such as intellectual-property (a fraud held together by lawyers-bluff and an array of smoke-and-mirrors), or the notion of ‘buying’ a company (which in effect asserts that the people who make up that company are themselves ‘exchangeable resources’ that may be sold to a third-party – otherwise known as slavery), or branding (which classes belief and hope and aspirations of others as, again, an ‘exchangeable resource’). None of which works, in any viable, functioning sense, other than bluff, belief, myopia, wishful-thinking and self-delusion.

Oops…

And no form of currency will resolve any of those issues at all. Those fundamental flaws in reasoning are the foundations of virtually all current so-called ‘economics’.

Oops…

In short, there is no way in which a possession-based economy can be made sustainable. That’s it. Period. There is no way to do it. It does not, cannot, and never has worked.

So how come it seems to work? Because clearly it does – or at least it appears to, doesn’t it?

The crucial term there is ‘appears to’. A possession-based economy – in other words, what is expressed in a practice as a currency-based economy – does sort-of work quite well in a very specific context: a certain type of closed-system, in which all values are fixed and there are no possibilities to ‘game’ the system. (Those models have existed in the past in a few societies, but are very rare, and usual embed some kind of periodic ‘reset’ mechanism to invalidate the gains from ‘gaming’ and hence dissuade any form of ‘gaming’ – the ancient Jewish concept of the ‘jubilee’ is one such example.) A possession-based economy does also deliver better short-term results than the alternatives – but only because it sidesteps all of the societal costs of managing the long-term, which is what inevitably renders it unsustainable.

So to make a possession-based economy appear to work, it can only be run as a kind of pyramid-game, a complex multi-way bluff in which it purports to be a closed-system in order to leverage ‘gaming’ via artificial-scarcities, yet also be an open-system in which it assumes resources are infinite. It can sort-of keep going as long as it can continue to pull resources into the base of the pyramid – otherwise we get what is known as an ‘economic crash’, a period in which the pyramid in effect is forced to feed off itself. That was the reason for colonial-expansion – to re-open a pyramid-game that was in danger of reaching closure. And the reason why this whole structure is failing right now is because we’re hitting up against real, absolute, non-negotiable limits: the carrying-capacity and resource-capacity of the entire planet. A possession-based economy can only be run as a pyramid-game. Colonialism put off this limit for a while; then the re-engagement of women in the paid-workforce (after the women’s-movement had spent a full century trying to get them out of the paid-workforce…) put it off for another while; and the delusions about the ‘infinity’ of the virtual-economy put it off for another couple of decades; but we’re now reaching the point where putting off ‘the day of reckoning’ any further is only going to make it worse – much worse.

So what’s the alternative? Well, this is where it starts to get messy – particularly for US citizens, unfortunately, because the first thing that has to go is the entire concept of ‘rights’. The Bill of Rights is a really nice idea, but is unfortunately it is fundamentally and fatally flawed in real-world practice – and there is no possible way to escape that fact, other than by a pretence that in essence comes down to ‘might is right’. It’s not just that the concept of ‘right of possession’ is a problem – it’s the entire concept of ‘rights’, the belief in ‘entitlement’ to resources (in any of a myriad of forms) that accompanies that notion of ‘rights’.

Rights are an illusion: only responsibilities are real. Specifically, mutually-interlocking responsibilities, because they are the actual source of everything that we think of as ‘property’, or ‘possession’, or ‘rights’, or anything else in social or environmental context. The only way that works is the acknowledgement that everyone and everything is dependent on and responsible to everyone and everything else. Even the very concept of ‘rights’ is redundant once we understand what ‘mutual responsibility’ really means: in fact the outcomes are almost exactly the same, except that in a responsibility-based model we know how we get there, whereas in a possession-based model it’s supposedly ‘Somebody Else’s Problem‘ to create the conditions and context in which we achieve our ‘rights’.

Possession does not work: it’s not sustainable, hence sooner or later – and at this stage, it’s ‘sooner’ rather than ‘later’ – it will literally kill us all. Futzing around with different currency-models will not change that fact by one iota: it’s just shifting deckchairs on the Titanic. The only way that will work will require us to go right back to the roots, in mutual-responsibilities.

At which point someone always says: “But that’ll never work! Possession is human nature: you can’t fight against human nature!” And, yes, that’s entirely true. However, Kropotkin is just as valid as Darwin: altruism, mutual respect and empathy are human nature, just as much as are possessiveness and selfishness. Perhaps the most important difference is that the latter tend to be typical attributes of an immature child; the former are those that we associate with maturity. So what we currently have, in a possession-based economy, is a model that is designed to appeal to and support the most childish and dysfunctional aspects of human nature, and actively penalise and punish maturity in any form: it’s kind of embarrassing to realise that ‘ideal’ aim of our entire economy is to pander to a possessive toddler’s temper-tantrum. Might it perhaps be more sensible instead to provide active support for mature behaviours, and gently dissuade the dysfunctional ones? Because that’s all that we mean when we talk about a shift from a possession-based to responsibility-based economy.

It’s true that there are some big challenges that we’ll face in creating a shift to a responsibility-based economic model. But we do already know how to do it within organisations, and in many other societal contexts: for example, when we talk about a ‘process owner’ or ‘project owner’, we mean the person who’s responsible for that item – and in fact it’s when someone tries to ‘possess’ it that it all goes wrong. But we don’t know much as yet about how to apply all of this at a societal scale: our main examples are the often-damaged remnants of traditional societies – Aboriginal systems of law in Australia, for example, or the native-American Six Nations model on which the first federation of the United States was based – and there are many serious hurdles to face in adapting those concepts to a modern global and largely city-based context.  And Dunbar’s Number – the practical limit to personal social-connections – is a real human constraint which has far more severe impacts in a large, static, city-based culture than in a society made of small groups of nomadic hunter-gatherers. Yet all of these challenges must be overcome somehow – we don’t have much choice about that, because the blunt fact is that we will not survive the alternative.

A currency is a kludge to try to make a possession-based economy seem to work. But there’s no way it can work anyway, so there’s really not much point in futzing about with currency-models, whether based on time, barter or anything else. We would be much wiser to stop pretending that we can make them work, and instead turn to the real problem of how to wean ourselves off our addiction to the delectable delusions of the possession-economy, and onto a responsibility-based model that has some future chance of sustainable, survivable success.

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Posted in Business, Futures, Society, The Outsider
2 comments on “Economics, currency and time
  1. Fascinating analysis – I do agree that the focus on rights tends to bring out the selfish nature, while the focus on our responsibilities to each other is more likely to encourage a more mature attitude and behavior. Now, where are those lifeboats? :D

  2. Erik Cummins says:

    Your comment on gaming the currency through managing scarcity reminded me of a section in the Hitch Hikers Guide to the Galaxy when Ford and Arthur land on Earth

    “Since we decided a few weeks ago to adopt the leaf as legal tender, we have, of course, all become immensely rich. But we have also, run into a small inflation problem on account of the high level of leaf availability, which means that, I gather, the current going rate has something like three deciduous forests buying one ship’s peanut. So in order to obviate this problem, and effectively revaluate the leaf, we are about to embark on a massive defoliation campaign, and … er, burn down all the forests. I think you’ll all agree that’s a sensible move under the circumstances”

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