An intellectual's review

[Petrus2]

Blake: It seems to me that you are saying usury = interest rate, which is not true. Usury is "the lending or practice of lending money at an exhorbitant interest" (Dictionary.com). So to me, usury IS evil. Those are the scumbag payday loan people, as an example.

Paying (or earning) interest is just fine. As Couer said, I give you money now, you pay me for use of MY money (you want to use a car for a few days, you pay the rental company to use their asset - same idea). You don't have to borrow (house purchases an exception for almost all people), but then you don't need that 60" plasma TV either. Now if you WANT it, and are impatient, sure then you pay interest. The interest should be reasonable, and if you look at banking institution's profits, those 15% or more credit cards are a rip off. Still... you don't have to buy those toys.

I did a very quick skim of that LETS thing last night, in between things on my honey-do list. While it sounds nice on paper, it is a huge inhibitor to trade. I mean, look back at France oh... 200 yrs ago? Maybe more, I'd have to go dig out the book I read which discussed it. But they had exactly that - local barter systems. My "unit" for grain wouldn't be the same as the next town's. My exchange rate of grain for sheep might be different. Good grief, how do you conduct efficient trade in such a system? And when I leave my home area, how do I convert my credits to buy gasoline in the next state? I do admit, I didn't read in depth, don't have the time since it isn't gonna happen. But it seemed like a pie-in-the-sky idea that looks good until it crashes into the face of reality. Didn't it say the one attempt crashed when the members lost trust? Humans are humans, SOMEBODY will cheat the system, and it will crash.

If the global economy were to fail, maybe LETS things would pop up, but I don't believe they are better. Oh, and we'd all have a lot of problems beyond our cash if the global economy failed. Society would crash, and everything about the way of life we expect in the western world would be utterly disrupted.

Uni - debt = guilt has a certain truth to it! Not buying a house, or even a car that you need. But consumer debt is a millstone around all our necks

[Unimatrix11]

You know its really simple acually: Property may not by itself produce more property, cause to say it naively, that is simply unfair. That does not mean that everybody oughta have the same or that people working hard should not be rewarded for that. But if rich makes richer almost automatically and in comparison to those who actually work for that to happen, then that aint right... (i liked that movie )

[Unimatrix11]

You know we actually have that in our constitution. "Property "enduties" (is that a word ?) to commen good" - of course thats pretty hallow and interpretable...

[Petrus2]

Originally posted by Unimatrix11
When you are working for someone else for money, then you are selling your work, by the same laws you just decribed. ...If you had the means to do the same work with the same effieciency and sell the products instead of your work, you´d either earn more, or you´d work less (which would actually become an option). Thats why capitalism, were it comes up, first destroys or takes away the means of production of people living on self-substanance...

But a person or family business CAN'T do what a factory can. Example: I'm a cobbler, making shoes. I can make 4 pair a day. A factory, with its machines, allows a production level of 8 pair per worker (even after accounting for the overhead personnel as 'workers'). So why don't I just buy those machines and make 12 pair a day (remember, -I- have no overhead, it is just me)? Well I can't afford the machine, because it is complex and expensive. Therefore, without capitalism, all the cobblers are making a mere 4 pair a day.

Extend this across all crafts, etc.

The amount of goods produced by an economy is much less than with factories. The standard of living is much lower than today. This doesn't even get into more high-tech production, which requires an even larger capital investment.

Do factories have downsides? Yes. Are there chances for corruption and abuse? Yes. But hey, are you claiming that there were no abuses and no corruption in the Hanseatic League? By those in power in all the towns, cities, and other settings before factories? I hope not, because we all know there were.

Based on the fact that we are conducting this discussion using computers, the internet, electricity... I'm assuming none involved are volunteering to go back to the homemade shoes, wagons, etc.

[couerdelion]

Yes but the existing of the employer gives the individual the opportunity to do work that they would not otherwise be able to do. So the employer is better off because they make a profit by employing people – strictly speaking they are getting a sufficient return on their capital invested to justify employing someone – and the individual is better of because they can earn more than they would do if the job/employer did not exist.

This is one reason why capital invested in a country is such an important figure but this translates into work opportunities that would not exist without that investment.

Maybe I’m just picking on technical or grammatical points. I just don’t understand how capital is destroying the “means of production” when it is creating opportunities that did not exist before.

[DirtyMartini]

Petrus,

Listening to NPR this morning on the way too work, I heard a story discussing the kind of economies that (I think) Blake is describing (I haven't checked out those links yet). Apparently in a few places in the US, communites are strongly emphasizing a "buy local" movement by, among other things, issuing their own local currency. The idea being that local communities are more sustainable and have a smaller impact on the environment -- no transportation costs/pollution etc.

I agree that rolling back economies to a 19th century pre-industrial form has a certain appeal, but is a bit unrealistic for most people. People are going to want certain luxury goods that cannot be produced locally, at which point the system breaks down as you've described. Buying local produce/meat/etc seems like a very good idea, but doesn't require an independent global economy.

Blake,

How can one save/invest money in the system you describe? If unused credits rot, how could your farmer ever save enough credits to buy a home, for example.

edit: Also, those local economies can't be completely removed from the global economy for the reasons you've stated -- travel, high end electronics, etc. I don't think anyone is really going to do shyamalan's "the Village" thing and live on a wilderness preserve and churn their own butter.

[Petrus2]

Originally posted by DirtyMartini
Petrus,

Listening to NPR this morning on the way too work, I heard a story discussing the kind of economies that (I think) Blake is describing (I haven't checked out those links yet). Apparently in a few places in the US, communites are strongly emphasizing a "buy local" movement by, among other things, issuing their own local currency. The idea being that local communities are more sustainable and have a smaller impact on the environment -- no transportation costs/pollution etc.

Buying local is fine (heck, it's a good thing, and Farmer's Markets are a great example of it). But it can only go so far. There are two big drawbacks that immediately come to mind:

1. Nobody in my neighborhood makes computers. Sure they may ASSEMBLE the parts, but that isn't really the same thing. And it isn't gonna come about that Dell has a mini-factory for the components in 2000 locales.

2. If my neighborhood has no effecient beef producer, due to lack of skill or climate or whatever, so local beef is $10/pound but non-local beef is $8/pound, which are people going to buy?

Well ok, a third. 3. As I mentioned before, when I sell my tomatos for local currency, what do I do when I go on vacation out of the area? Try to use my simoleons to pay for dinner? A hotel?

While I'm at it... heh. 4. What about my local area suddenly having a downturn. What happens to my simoleons? They are useless. True that could happen to my dollars, but if the US can't meet its obligations everything we have is down the toilet anyway, so it's kind of irrelevant. This trust in our (-my-, I know all here aren't from the US) government/economy is why dollars are a trusted investment in times of global turmoil.

Oh, I don't buy that local economies are more sustainable. Less of an impact on the environment, ok. But not more sustainable.

[DirtyMartini]

All very valid points, I made a few edits to my first post, which you may have missed. Sorry, I shouldn't do that

I guess by more sustainable I meant from a natural resource standpoint -- use less gas, less pollution, aim to be self sufficient with regard to electricity (biomass/wind/etc.) I didn't mean to imply that they were more robust.

8 vs 10 dollar beef? If people are truly committed to the idea and can afford it, they would buy the 10 dollar local beef. That's the key unfortunately -- most will be neither commiteed enough, nor rich enough to make that work.

Regarding the 8 dollar vs 10 dollar beef issue, which I think also touches on issues in your discussion with Unimatrix: WalMart is the antithesis of a local economy producing goods far, far away, probably using an exploited work force, then selling them cheaply, undercutting local producers. WalMart's good have a cheaper dollar cost to the consumer but which as a higher overall cost to the globe and more negatively impacts the community in the long run?

[Petrus2]

Originally posted by DirtyMartini
8 vs 10 dollar beef? If people are truly committed to the idea and can afford it, they would buy the 10 dollar local beef. That's the key unfortunately -- most will be neither commiteed enough, nor rich enough to make that work.

I think this is a key point. Few people are willing to spend more money for the same product just because it is local. Efficient marketplaces in fact discourage it.

[armoredcrawler]

Blake - the service provided by banks is the use of the bank's capital. This is costly because sometimes loans are not repaid, so banks need to be compensated for the risk. Since banks want to be repaid, they will carefully inspect the business or person doing the borrowing, which ensures that society's capital is being used carefully.

This is my simplistic understanding - where do I go wrong?

[wodan11]

Originally posted by couerdelion
If Value (C) > Value (B), then the rational individual will choose to move to State C.

Interesting discussion and I enjoyed reading. Let me point out two things though: your analysis requires 100% perfect foresight as well as 0% risk of the process failing to perform according to expectation.

Wodan

[DirtyMartini]

Originally posted by wodan11

Interesting discussion and I enjoyed reading. Let me point out two things though: your analysis requires 100% perfect foresight as well as 0% risk of the process failing to perform according to expectation.

Wodan

What, that's not how your investments work out?

[Blake]

The purpose of a local/community/complementary currency is to promote LOCAL trade and economic growth, COMPLEMENTING the national currency and promoting COMMUNITY growth.

It encourages cooperation, while a national fiat currency enforces competition, that's why it's a complementary currency.

It's not a system designed to replace a national currency, except in emergency when the national economy goes pear-shaped. Obviously if that happens you do lose the benefit of being able to buy plasma screens made in China, but then again, you get to continue working and eating.

There can come a time, when the only thing preventing people from doing work, is the lack of coins.

To use an example of Time based currency, sometimes called a time bank. In such a system, people enter the system with a balance of zero credits, they are allowed to go into negatives, the degree they can go into negative balance depends mainly on how much trading they've done - it's a reputation based system. (typically people pay a little real money to "buy into" the system, this in a sense buys them the reputation to go into negatives)

Lets say there's a local builder called Bob, who is now retired/unemployed. He's getting a bit on in the years and chronic back problems have stopped him doing any real work. The poor economy makes him hard for him to find work anyway. Bob joins into the local system.

Craig is a local chiropractor, but because of the weak economy very few people can afford his services. He's underbooked. Because he has nothing better to do with his time, he agrees to join into the system and advertises his chiropractor services - just to fill those empty sessions, he justifies it as "almost like charity".

Bob notes this and decides it's worth a try, and Craig and Bob negotiate a price of 100 credits for 3 sessions.

Craig: 100
Bob: -100


Craig would like to decorate his waiting room, but business is poor so he doesn't really want to spend much doing so (he can't afford to, and people don't wait for long there...), Allison the local artist, is actually quite good though. Craig agrees to buy one of her paintings which took 12 hours, for 100 credits and $30.

Allison: 100
Craig: 0


Bob's now back in shape and can start working as a builder again (maybe not building houses, but doing something anyway). To be honest he's feeling rather guilty about being indebted, he's a hard working guy and he's eager to pay off that debt, so he advertises his service as a builder.

Allison would like a custom dog kennel for her mutts, but she's a starving artist with no practical skills and can't afford to pay anyone. She can afford the wood, but not the time. But then Bob's offer pops up and they agrees to 50 credits for the kennel (Allison pays for the wood with real $).
Allison: 50
Bob: -50

This kind of example shows how "A medium of exchange enables work". Time based currency is IDEAL for service. And a time based currency IS a medium of exchange and is NOT barter.

Bob and Allison can't barter - Allison wants what Bob can provide (at least in theory). Bob doesn't want what Allison can offer - he has no appreciation for art.
But if you throw Craig into the picture then a bunch of work is enabled - Bob gets his back fixed, Allison gets a new dog kennel, Craig gets artwork for his waiting room. Only a minimal amount of real $'s were spent.

Usually of course the cycles are longer, but the more people who participate, the more work is enabled. In this example there was no "Jack" to provide lumber so some real $'s were required. Allison needed to buy pastels for the painting and wood for the kennel. The real $'s are used to buy "Things", and the time-based currency is used to pay for the "Time". This is why it's called "Complementary Currency", it's not designed as replacement currency.

(apologies for alliteration of names/occupations. *sigh*)

Actually THINKING about this; how Medium of exchange ACTUALLY enables work, is absolutely fascinating, at least to me.

Note that the community currency concept cannot be separated from community building - it gets people in touch, the community building factor is undeniably one of it's positive aspects. What is ALSO undeniable is that actual work is enabled and actual wealth is created - another able bodied worker is wealth, a dog kennel is wealth, a painting is wealth.

As I noted in my first post on this subject, (most) people wont join such a system on ideological merit alone. It's only when the national economy collapses, when they find themselves wanting to work with no-one able to pay them, and wanting work done without being able to pay for it, that this kind of system can take off.

[Petrus2]

But Time = Money. In the system above, you are simply calling money "Credits". Or whatever euphemism you pick. In the end it does boil down to the same thing. And the smaller the circle of influence (or whatever you want to call it), the less efficient the "economy". Heck that's why eBay works for something you can't sell at a garage sale. You've widened the potential market and can find that odd person who wants your odd junk.

I don't think that the whole LETS thing is bad, just not practical. If the world economy failed, then it would be used by necessity. Not because it is better.

Just rambling a little maybe, but how does this credit system work when someone dies, leaving either a + or - balance? What about the person who has a - balance and says screw it, I'm outta here? Does everyone left pay a penalty to make up the negative balance just lost?

[Asmodeous]

It encourages cooperation, while a national fiat currency enforces competition, that's why it's a complementary currency.

With the fact that resources are currently incredibly limited in all aspects, I'm not really certain that Cooperation > Competition.

The reason economics work as they do now, and quite efficiently even if some people do silly things or don't understand what they're doing and end up boned, is because of the fact that Competition + Limited Resources == Innovation.

Until we get to the point where Supply is ALWAYS greater than Demand for EVERYTHING, competition will be the leading factor in economics.

It always has been, even before Capitalism really became the primary. (To the point that in tribal, communal societies, there was still competition for food, shelter, and other resources between tribes).

Now, I'm all for someone creating Replicators, care of Star Trek, but until that point it's kinda a pipe dream to assume that people are going to be able to live in a communal sort of society and still be able to advance at the rate we do. There's just too much at stake with limited resources.

If you note, the trigger in the Star Trek universe that united the Earth's nations was earth having First Contact. After that, the society was still largely a pseudo-capitalistic industrial and commercial society, until the invention of the Replicator, at which points everyone's needs were always met, and therefore the Competitive drive dwindled, as resources were no longer scarce.

To make a fictional parallel.

Me.