On 23/08/11 8:15 AM, Jon Cox wrote:
>
> Dear p2p-hackers,
>
> After thinking about the similarities between the commons issues
> faced by the PaulGardner-Stephen's Serval project& Zooko's Tahoe
> LAFS, I was motivated try (yet again!) to refine my understanding
> of currency systems, barter and money.
OK.
> I'd like some help!
OK. First point: this is economics, plain and simple.
> These concepts seem to have direct bearing on problems that arise
> when bootstrapping new users into a p2p/mesh system, trust, credit,
> fairness protocols& so on, yet I lack a standard terminology for
> talking about them in a precise way.
Right. The essence here is that these systems create micro-economies,
which stand in need of a money.
> First, I'd like to share a speculation:
(snipped)
> That said, here's my first shot at defining a few terms, along with
> a note to the Serval project that may be of more general interest:
>
>
> o Benefit
> That which produces a net increase
> in some desired state of being.
>
> o Intrinsic value
> Non-bartered perceived benefit.
Typically we would drop the word "intrinsic". Also, non-bartered :)
This is to recognise that benefit and/or value is really only a
perceived thing at its core. That is, I perceive a value in a house. I
do not perceive that value in a pile of wood. They may be the same
item; it is only my perception that changes and gives the first wood
"value" and the second pile "not value".
> o Value
> Optimally bartered perceived benefit.
And from the above, no. Value is not empirically determinable because
it is too tied to perception. What we can do is provide upper and lower
bounds on perceived value (as opposed to value) according to trades that
happen. So, limited by bounds and by moments in time.
That is, if I sell you my pile of wood (aka house) in a routine trade,
we know that, at the instant of sale, the perceived value to me was at
or in excess of the exchanged money, and the perceived value to you was
at or below the exchanged money.
Two bounds have been set, and a moment in time. But, those bounds do
not really support a concrete expression of "value". Hence we typically
say "price" to distinguish from "value".
(But we also have to be careful to distinguish offered price from
exchanged price. Offered prices aren't really anything, they're just
numbers in opening discussions.)
> o Money
> The mathematical abstraction of value
Nope. Money classically is thought to have three major characteristics:
a store of value, a medium of exchange and a unit of account.
So, the characteristic "store of value" comes somewhat close to your
hope there.
> Note: this can be a positive or negative quantity.
I'm not sure what that means. It sounds like you're conflating debt
with money, which is easy in an accounting perspective, but not an econ
perspective.
> o Currency
> The concrete manifestation of money.
> Note: currency always has a non-negative value.
>
> Example: physical dollars& coins.
Close! Money is a conceptual class. Currency is that money which is
current. Current means can be used as a medium of exchange (more or less).
E.g., gold bricks may be "money" but they are not "currency" because it
is too hard to slice bits of gold off the end of a bar. On the other
hand, gold coins can be currency, if they are sufficiently convenient
enough.
> o Pure liability
> Something of negative value that isn't the result
> of owing anybody something.
>
> Example: an inadequate reputation
>
> o Debt
> A liability resulting from owing something of
> positive value to another party.
Hmmm.... how about a concrete liability expressed in contract terms?
> o Pure asset
> Positive value that isn't the result of someone owing you.
>
> Example: good health.
By pure, do you mean something that can't be easily priced (e.g., at a
market)?
> o Credit
> A liability that another party owes to you and recognizes.
>
> o Commodity currency
> Some fungible good or service
Typically we would distinguish goods from services, and commodities are
on the goods side. There is a narrow definition of commodities as goods
that are fungible. Then there is a wider view that might include
services in the sense of commoditisation of services, but that's really
a marketing concept, and doesn't lend itself well to discussion of
currencies.
(I suspect you're trying to define commodities to be like currency
because later on you want to use commodities as currency.)
> that is easy measurable
> and comparable, transferable and transportable,
> sufficiently divisible and durable, widely bartered
> with known rates of exchange,
This would come under the heading of "medium of exchange." So, a money
might make a good medium of exchange, if all the above are true.
> and derives its value
> from its intrinsic usefulness rather than its role
> as a currency or as an item of speculation predicated
> on the existence of a greater fool.
Well! We have to be careful to identify where societal norms are
covering up basic econ like supply & demand.
> Example: cigarettes in a POW camp.
cigarettes' "value" in POW camps is predicated on fools-that-smoke
(demand) and the fools-that-are-charitable (Red Cross parcels created
frequent injections of supply of cigarettes into POW camps in WWII).
Another example is USD. The fools-paying-taxes tend to create demand.
The fools-of-policy tend to want to resolve questions of economic
gravity, so inject supply from time to time.
> o Native commodity currency
> A commodity currency whose production and consumption
> are intrinsic to the economy itself.
Um. This is perhaps to draw the term "economy" as to conveniently prove
the term?
> Example: Carpool rides in a ride-sharing network.
In this case there is a unit of account: the ride. There is no store
of value, and any medium of exchange is arguable because I can't
exchange a ride I had unused yesterday.
Classically we'd lump this difficult case under the general rubik of
"barter". Which sort of means a trade not facilitated by a medium of
exchange. I.e., not money. Not current.
> o Collectible currency
> Like a commodity currency, except that its value comes
> from the mutual speculation of those who create demand
> for it, rather than its intrinsic worth to any end user.
Strip out speculation from any discussion, that's a secondary effect of
value and demand.
(Value can only come from demand, there is no intrinsic value. Anything
demanded can be collected, aka speculated.)
> Example 1:
> Bitcoin is a perfect example of a collectible currency
> because its intrinsic worth is exactly zero (you can't
> even use them to line the bottom of a bird cage).
Right, so this is where we get into specious observations of zero value
because of a paradoxical law of money.
Typically, one of the secondary characteristics of money is that it is
of little alternative use to society. For example, paper money can be
used as paper, but its value (demand) for that is so low as to be
ignorable. Likewise, gold's use to society is pretty low too.
Bitcoins also have very little use to society. This could make them a
good fit for a money.
[ What somewhat sticks in the claw here is that to make Bitcoins, one
has to expend electricity (cycles) which is valuable. But that can be
seen as an analogue of the mining cost of gold or the seigniorage cost
of paper money. (Indeed, this analogue was a design goal of BitCoin,
deriving from Adam Back's hashcash.) ]
This is a paradox because money is in much demand, and the basic item
that forms the currency or medium of exchange must be highly demanded,
but its demand must be of the perverse quality that we don't need it for
anything important.
Hence, gold. It's apparently beautiful for jewelry, but no use for
anything "important". Paradox!
> Example 2:
> Gold and silver are best thought of as being somewhere
> between commodity and collectible currencies; however,
> the volatility of silver prices relative to its supply
> and industrial demand shows it's more on the speculation-
> driven "collectible" side if things.
As before, strip speculation out of any serious discussion. Presence of
speculation is simply some minor proof of apparent supply & demand.
It's typical use in newspapers is confused and meaningless.
Silver is somewhat dominated by gold because of various arcane,
historical and supply factors. It's easiest to ignore silver and just
think of gold as money.
> o Fiat obligation currency
> Like a collectible currency, except that every unit created
> represents the transfer of value from someone who has actually
> produced a good or service of non-zero intrinsic worth to a
> person or institution that has offered nothing in exchange
> for it but the currency itself. Crucially, the production
> of fiat obligation currency is restricted by law, and demand
> for it is created by requiring its use. Hence, every unit
> represents a claim by its producer to simply extract things
> of actual value from those who cannot create the currency
> themselves, and yet are bound to use it by law or necessity.
Well, this is to bring in all sorts of personal moral and philosophical
objections.
It's perhaps easier to think of Fiat currency as debt obligations
exchangable with a Fiat issuer. Where Fiat means approximately the
ability to impose laws.
Otherwise one gets into incredible contortions trying to explain ...
stuff. Like:
> Example:
(something about the Fed, snipped... :)
> -----------------------------------------------------------------
> Here are some comments I made to the Serval project recently.
> I'd love to get some feedback on them.
>
> Hopefully, the ideas I'm tossing around are of wide enough
> applicability to merit general interest and/or or an
> informed& corrective critique
> -----------------------------------------------------------------
>
>
> Serval already has at least three commodities with universal value,
> and native non-speculative demand: bandwidth, latency, and priority.
> Using these in combination with a system of reputation and credit as
> a "commodity currency" makes a lot more sense than dragging in a
> collectible currency.
These commodities represent potential values but not currency.
Organising money is a dance of demand factors, because of the
paradoxical law of highly demanded but not importantly demanded.
The process of creation of a new money is the circus trick of creating
something of high enough demand to be valuable, but not valuable for
anything else but being a money.
If you look at *successful* new monies (PayPal, SL, WoW, etc), they are
generally organised this way: the big online community starts an
accounting mechanism called "money" which is traded for dollars. It
then prices all its goods in the money.
Extension of Fiat, perhaps.
> Assuming nodes in a Serval mesh are free to associate in different
> virtual communities of reputation (as humans do in real life),
> all a community needs to do is restrict mesh access ("the commons")
> in ways it sees fit to discourage behavior it dislikes, or grant
> special credit for positive actions (eg: donating bandwidth,
> particularly in times of shortage). It seems as though you could
> even model the policies of Serval "community" as an autonomous
> System (AS) on the Internet, and then go on to think about
> communities honoring each other's credits with bandwidth, latency,
> and priority as parameters like a AS-AS forex.
Right, forex is a good way to think of it. Everyone has a basked of
commodities and they need to trade them.
Fast forward through the evolution of society since the invention of the
individual trader and we come up with this result:
*a currency will emerge to eliminate the need to barter the
commodities*.
It will however not be one of the commodities per se, as they are too
valuable to waste on mere exchange.
(snipped ... drifting outside econ)
iang, hth
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