[p2p-research] [Open Manufacturing] Re: [ox-en] "Trading at Cost" with joule tokens

[marc fawzi]

A commenter (Andy) asked a question about pricing a social service that they
provide to the community (given as an example)

*Question:*

This model is truly fascinating. If I understand this correctly, goods and
services are valued according to the energy required to produce them. Is
there a way to assign social value to a service, based perhaps on the energy
a service might save a system, or based on how a community assigns and
weights certain social values? For example, I run a community-based crisis
team that saves a great deal of money in preventing ER visits for kids with
behavioral problems (inner-city schools tend to call 911 when a child acts
up). There is a great demand by schools and families for such services;
however, I can't really quantify how much money I save the system, or how
the societal value of helping a family in crisis (e.g. what is the value of
facilitating better well-being for a child and family? How does one approach
such a question?).

*Answer:*

An important aspect of this model is that pricing (or costing) is based on
the median cost of energy for producing and delivering a given good or
service. It is not based on the subjective value of the good or service.

In order to determine the amount of energy that goes into producing a song
or some service (e.g. social services) that is not normally quantifiable in
terms of joules, we have to orient our mind to think differently. For
example, let's say an artist spends 4 months on a beautiful tropical island
making an album. The cost of that album, not its subjective value, is the
sum of the median _costs_ of energy involved in transporting the artist to
the island, keeping him sheltered and cool (in temperature), keeping fed,
keeping him entertained, etc. It's admittedly hard to perform such
accounting since no models have been built for energy use in various
situations. In today's world, everything is priced subjectively, i.e. based
on subjective value, using relatively valued currency. To start pricing
things in terms of the cost of energy it takes to produce and deliver them
will require the development of energy costing models for many goods and
services, including air travel, housing, prepared food, manufactured food,
livestock, apples, potatoes, wheat, milk, etc, but once the energy costing
models are developed for the basic needs (e.g. food, transportation, various
production processes under entertainment, etc.) the process of estimation
(through software) can then become a realistic objective.

It's the intent of this author to develop such energy costing models as part
of the game/simulation project (see: Collaboration.)
~~

Below are excerpted sections from R1.54.1
http://p2pfoundation.net/P2P_Energy_Economy that put the "trading at cost
with joule tokens" into context:


*Joule Tokens*

We (and everything else that's functioning) have a continuous cost of energy
(see: Thermoeconomics.) Even if we were to get our energy from
super-efficient fusion technology we will still need energy to maintain
(short-term) and upgrade (long term) the technology, and while that energy
can come from the super-efficient reactor itself, for the lifetime of the
reactor, we still need to move that energy, from the reactor to the farmer
who makes the food for the scientists who then perform the maintenance and
upgrades for the reactor. It's the flow of energy that has to be ensured, on
efficient basis, between all nodes within the economy, and the idea of
tokenizing a universal form of energy (i.e. electricity), as we have done in
this model (see: P2P Energy Bank) allows us to enable the flow of this
energy from one node to another alongside the flow of goods and services. In
other words, the fusion reactor's maintenance and upgrades are paid for with
tokenized energy, which the maintenance crew and the fusion scientists can
exchange with the farmer for food, and which the farmer can redeem for
actual energy to power production on the farm or trade for other goods and
services, use to purchase more land, etc.

The issue not discussed often is how to enable an optimum distribution of
energy throughout the economy so that we may maximize sustainable economic
growth. This model enables an optimum distribution of energy throughout the
economy along two paths: 1) tokenized electric energy flows (or energy as
currency) that is used for purchasing goods, services, and assets, and 2)
non-tokenized electric energy flows (i.e. electric current rather than
currency tokens) that is used for powering stuff, including food production.
The idea of this model is to enable an optimum distribution of energy (in
both the tokenized and non-tokenized form) to enable maximum sustainable
economic growth.

The case for using renewable, clean energy, e.g. fusion, solar, wind,
bio-fuel, as opposed to fission reactors or coal etc is two fold:

1. Renewable energy is abundant which means that it can be accessed and
harnessed by everyone. Having said this, it's important to note that
sustainable abundance comes from a regulated whole not unregulated
individuals (see: P2P Energy Management.) 2. Minimal cost to environment.

When it comes to the choice of energy units, the Joule is an international
unit that is widely used as the basis for all other types of energy units,
per the following:

1 joule is approximately equal to:

  * 6.2415 ×1018 eV (electronvolts)
  * 0.2390 cal (calorie) (small calories, lower case c)
  * 2.3901 ×10−4 kilocalorie, Calories (food energy, upper case C)
  * 9.4782 ×10−4 BTU (British thermal unit)
  * 0.7376 ft·lbf (foot-pound force)
  * 23.7 ft·pdl (foot poundals)
  * 2.7778 ×10−7 kilowatt hour
  * 2.7778 ×10−4 watt hour
  * 9.8692 ×10−3 litre-atmosphere

Example of units defined in terms of their joule equivalent:

  * 1 thermochemical calorie = 4.184 J
  * 1 International Table calorie = 4.1868 J
  * 1 watt hour = 3600 J
  * 1 kilowatt hour = 3.6 ×106 J (or 3.6 MJ)
  * 1 ton TNT exploding = 4.184 GJ

What is tokenized in units of, e.g. 10,000, joules, by the currency defined
under this model, is the amount of energy sold for its absolute equivalent
in joule tokens (i.e. exchanged) by a peer with energy surplus to P2P Bank
(after conversion loss,) i.e. the amount of energy from that peer that makes
it to P2P Bank's short-term inventory, which is then resold within a short
time, e.g. 24 hours, for the same absolute equivalent in joule tokens (i.e.
exchanged) to a peer with energy deficit. In other words, the energy flow
from peer to peer (after conversion loss), i.e. spent energy, is what is
tokenized, not the stored/potential energy since stored energy may or may
not have any value, i.e. has a subjective value, depending on the chance
that it will get used.

The cost of holding a 24-hour inventory, is assumed to be zero above the
cost of maintenance and upgrades, which are shared by the physical users
(e.g. hospital, school, factory, household, etc.) based on how much they use
the Common Grid.

*Price Registry*

The existing currency, e.g. US dollar, euro, yen, etc, is based on a model
that permits the emergence of manipulative/controlling power, which the
model defined here (as a whole) is designed to unravel. In other words, it
doesn't help (and it may hurt) to direct money to a socially, ecologically,
and environmentally intelligent producer of good and services who is also
maintaining manipulative/controlling power through the existing monetary
system, which permits such behavior.

For example, a product that is priced using the existing currency may cost
$1.00 (US Dollar) to produce but may be sold by its producer for $0.50 with
the purpose of killing off competition, i.e. dumping below cost. And once a
market player has the market to themselves (i.e. once they control the
market for a given product) they can increase prices significantly above
cost, thus creating artificial scarcity and gaining power over the consumer.
While there can be more than one player that can afford to play this game,
the very fact that they'd need an existing disposable revenue stream to
support such behavior tells us that this kind of dynamic is intended to
concentrate power in the hands of those who are willing and able to play the
game. In other words, the existing international currency (e.g. US dollar,
euro, yen, etc) is designed (based on an antiquated model) to allow
manipulative/controlling power to emerge.

In contrast, with the currency defined under this model, i.e. the virtual
joule tokens, there is no such thing as individuals setting a price for
goods and services. That is because every good and service is priced based
on the median in energy it takes to produce and deliver it to the consumer.
This works by having each producer submit the energy cost for their
product/service to some Price Registry, which are verifiable by all peers,
and taking the median for, e.g., all apples.) So an apple will cost 1/5
joule token (assuming joule token = 10,000 joules) if the median cost in
energy for producing and delivering an apply to the consumer is 2,000
joules. If there is an ice storm that reduces an apple producer's output the
producer will sell less apples at the same price, not a higher price, i.e.
the producer absorbs all losses. So in order for producers to minimize their
losses, they must adopt a model of sustainable abundance in their
production, which involves using renewable energy and renewable resources as
well as a predictive inventory to match supply to demand to eliminate loss
to themselves due to over-production.

This fixed-price model for goods and services is possible because all
transactions for goods and services that are traded using joule tokens,
which are, namely, non-scarce goods and services (i.e. those can be produced
in a sustainably abundant way,) are done via a P2P browser (see: Model's
Context,) where the price of a good or service is accessible through the
Price Registry.

To put things into context, using a specific example, let's assume there are
3,000 small-scale apple growers in a given community and they all use
demand-matched, predictive inventory, so they never produce more than is in
demand.

Those 3,000 apple growers submit their energy cost estimates for growing an
apple to the Price Registry, using an easy to understand (multiple choice)
calculation method, e.g. do they hand pick or machine pick the apples, do
they carry the apples to market on donkey or by truck, how costly is their
irrigation method, etc. The estimation software is built into the P2P
browser and includes update-able 'energy cost models' for all goods and
services that can be produced and delivered in a sustainably abundant way.

The median of all cost submissions (by those 3,000 apple growers) becomes
the "cost" for apples in the Price Registry. We can work out the detailed
model for collective price setting (based on such software-aided cost
submissions) that's realistic as well as practical, and it can include peer
auditing and updates (e.g. update the model for pricing apples with reduced
cost factors when the production of apples becomes generally more
efficient.)

The key thing here is that the joule tokens have an absolute value in energy
(spent) whereas the existing currency does not. Therefore, we have something
different here and it's possible through the use of simple statistics to
figure out how collective price setting would work.

This is what we will test during the simulation.

If a given peer spends 500MJ making something that they would like to give
to the world then they better get that 500MJ back somehow or they will
eventually starve (and the most efficient way is through direct exchange.)
If they're paid back 600MJ or 350MJ then they will have an idea if they're
producing the thing efficiently or inefficiently.

In this way, the use of joule tokens promotes (or direct money into) more
and more efficiency, not more and more scarcity (as with the existing
currency.)

People are not animals to be fed to lay their eggs or produce milk. People
need a sense of fairness and appreciation for their work and individual
creativity.

If Jill (from the above-stated example) puts her energy into making her
production more efficient then that's creativity (or work) to be rewarded
with the margin in energy she saves that she gets back from the difference
in her cost and the collectively set price for apples.

Furthermore, if Jill puts her energy into growing the type of apples that is
most in demand (i.e. feature selection) then she's to be rewarded with
higher volume of sale. However, the volume of sales also depends on Jill's
Lender Credits, so she can't be very creative but stingy.

This model (the whole model) pushes the producer to be conscious about
energy usage (even if energy can be sustainably produced in abundance, their
is a cost in energy to energy production that can be put to other use) and
it also pushes the producer to be creative (to generate higher demand) as
well as generous (see: Lender and Borrower Credits.)

So, as we can see, the use of joule tokens to exchange things without
starving and in an efficient way, i.e. Jill gives her apple to the consumers
and gets back in energy what she put in, while also being rewarded for her
work and creativity (or individual choices), makes a whole lot of sense
compared to using the existing scarcity-enforcing currency, where Jill would
have to price her product based on demand (thus raising prices for what's in
demand and creating relative artificial scarcity) and she can't recoup her
investment in more efficient production against other producers who produce
the same product less efficiently.

For goods and services that are new (e.g. new inventions, new product
categories, etc) the existing scarcity-enforcing currency (e.g. US dollar,
euro, yen, etc) will be used until those goods and services become more
common (not to be confused with sustainably abundant) at which point the
energy cost estimation software will be updated with energy cost models for
those goods and services and the producers of those goods and services will
be asked to use the software to submit their energy cost estimates, which
are then used to calculate and set the price based on the median of
estimated energy costs for producing and delivering the given good or
service.

An important aspect of this model is that pricing (or costing) is based on
the median cost of energy for producing and delivering a given good or
service. It is not based on the subjective value of the good or service.

In order to determine the amount of energy that goes into producing a song
or some service that is not normally quantifiable in terms of joules, we
have to orient our mind to think differently. For example, an artist spends
4 months on a beautiful tropical island making an album. The cost of that
album, not its subjective value, is the sum of the median costs of energy
involved in transporting the artist to the island, keeping him sheltered and
cool (in temperature), keeping fed, keeping him entertained, etc. It's
admittedly hard to perform such accounting since no models have been built
for energy use in various situations. In today's world, everything is priced
subjectively, i.e. based on subjective value, using relatively valued
currency. To start pricing things in terms of the cost of energy it takes to
produce and deliver them will require the development of energy costing
models for many things, but once the models are developed, the process of
estimation (through software) can become a realistic objective.

It's the intent of this author to develop such energy costing models as part
of the game/simulation project (see: Collaboration.)

*Toward an Abundance Economy*

The existing currency (e.g. US dollar, euro, yen, etc) is part of the model
that has let scarcity persist and grow. By its tendency to direct more and
more money into scarce resources (due to ability for sellers to set
arbitrarily high prices in response to demand for such scarce resources)
rather than directing more and more money into solving the circumstances
that cause scarcity, e.g. lowering the total cost of energy needed to
produce and deliver something, and by deriving its value from its scarcity
rather than from its utility, the existing currency is fully complicit in
the enforcement of scarcity.

As for the argument that says that money is a tool and it depends on how you
use it, the existing currency is a dumb tool so it creates a tendency in the
user to use it in a dumb way.

Having said that, the existing currency and the model of scarcity it
enforces will not disappear over night.

For example, a farm land or a piece of real estate should, under the model
defined here, always be worth the net energy it generates in joule tokens
over the lease term. So the land would be owned by all (or the community)
and leased to different physical users (e.g. hospital, school, factory,
household, etc.) However, forcing community ownership of all land in order
to enable a community leasing model for land is not possible since any peer
can purchase land right outside the community border and build a major
shopping mall. This model is not about building an isolated community. If
it's to work it must work with (or in spite of) the scarcity based model
that, conceptually speaking, exists at a layer below it.

Thus, it is expected that some peers will want to gain in
manipulative/controlling power through the acquisition of things that are
scare, e.g. gold, land, real estate, famous art pieces, etc, which will
happen using the existing currency since it allows arbitrary price setting
by individual peers whereas the currency defined under this model does (see:
Price Registry.)

It is expected that 'circumstantially scarce' goods (e.g. out of season
fruit) and services (e.g. vanity services, legal services, creative
services) and assets (e.g. land) will continue to be priced using the
existing scarcity-enforcing currency (e.g. US dollar, euro, yen, etc), which
causes the emergence of manipulative/controlling power (due to competition
for scarce resources) in those scarcity driven markets. However, this
problem is not fully resolvable by this model. It is hoped that the
circumstances that cause scarcity are eliminated, one by one, by
technological progress.

In this sense, the currency defined under this model, i.e. the programmable
virtual joule token, can be viewed as a complementary currency whose purpose
is to train society to move toward an abundance-based model of existence.
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