From: Billy Brown (bbrown@transcient.com)
Date: Thu Mar 09 2000 - 11:10:43 MST
Paul Hughes wrote:
> Is it possible to design a non-linear software program complex enough to
match
> buyers and sellers so efficiently that currency, virtual or otherwise, is
never
> needed?
Unless the use of currency entails some large disadvantage, the answer
should continue to be no despite any improvements in technology. Why?
Because the same technology can be used to increase the efficiency of
money-based transactions, and money is inherently more efficient (that O(n)
vs O(n^2) thing is a killer).
> Lets say you want to sell your VW. Finally a guy contacts you who has 20
> bushels of wheat. You don't need the wheat, but you know a guy in Texas
who
> does, and he happens to have a new software program that another contact
of
> yours wants.
Exactly how is this better than an online sale using money? The
computational requirements are much larger, the probability of there being a
possible chain of trades is not especially high, it takes a lot more work on
the part of the participants, and it is almost impossible for any
participant to know what he should be able to get out of any particular
trade.
This last point is an especially big problem for such systems. There may be
a few thousand sales of VWs in any given year, but the odds of any of them
being traded for wheat are just about zero. The number of possible trades
of dissimilar goods is so large that you will never accumulate a meaningful
history on any particular type of exchange, which means no one can tell what
their goods are worth. The only way around this is to use some item as a
common intermediary step - in which case you've just re-invented money.
> And didn't I just hear that Ford and Daimer-Chrysler are setting up
> something like this with all of their sub-contractors?
Online, yes. Barter, no. They use money, as will most sensible people.
> Assuming such a system could be designed, could it not escape the tax
system
> entirely? After all when was the first time you paid taxes on an item at
a
> garage sale?
You don't pay taxes on garage sale items because they are an insignificant
portion of your activities. Businesses can not escape taxation by
obfuscation - the government knows they exist, knows where their employees
live, and is capable of coercing them into keeping detailed records of their
activities. The same would be true, to a lesser extent, of individuals who
make a living on the system.
I'm sure your system would make it more practical than it is now for people
to avoid taxation, but the fact that you want to use barter isn't what makes
the difference. The advantage comes from the fact that you are using
electronic, global commerce. You could do the same thing with money, and
the legal and practical effects would be the same.
Billy Brown
bbrown@transcient.com
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