[p2p-research] "Trading at Cost" with joule tokens

[marc fawzi]

fyi, debate on "trading at cost" continues....

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Nathan,

CCing other lists on this because the debate was started on all those lists.
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<<

> "I may think apple trees are wonderful, because I enjoy the taste of
> apples. I enjoy the taste of apples because I had them at an early age. It
> reminds me of home. I enjoy what the content of  "apple" (texture, taste,
> smell) when I am in a state of wanting one. I like apples because they were
> at the store for uber cheap. I may have one every day 'normally', more when
> depressed or less when otherwise." This concludes: value is subjective
>
>>

That is only the case because you're used to demand and supply being out of
whack, i.e. artificially or circumstantially scarce or over-produced.

In contrast, the cost in energy in producing something is only relative to
the efficiency by which energy is used to produce the thing.

Let me explain the (reworded) 1st proposition of the model which relates to
trading at cost:

*"1. Enable the pricing of goods and services (that can be made on
sustainably abundant basis, i.e. where supply is always matched to demand)
at the median cost in energy it takes to produce and deliver them based on
average predicted sale volume for the given good or service submitted by all
producers, where such cost is only relative to the efficiency by which
energy is used to produce and deliver the given good or service. In other
words, enable trading at cost, while directing money into increased
efficiency of production rather than into higher prices as what happens when
cost (of circumstantially or artificially scarce goods and services) is
relative to demand and supply."*

The only reason you would pay more for an apple is because the price for
apples today is driven by demand and supply. There is NO reason that it
should continue to when apples can be produced on sustainably abundant
basis, i.e. when supply always matches demand. You may ask how supply can
always match demand but that's what supply chain management systems have
been capable of doing for at least 60 years now, if not longer.

In other words, wherever you have demand higher than supply or supply higher
than demand for a given thing the price of that thing is driven by
artificial/circumstantial scarcity or over-production, respectively.

When demand and supply are matched their effect on price is canceled out.
There is NO reason why apples couldn't be sold equitably at the cost in
energy it takes to produce and deliver them if everyone who wants an apple
can get an apple by simply giving back to the producer energy in the amount
of the cost in energy it takes to make an apple.

You and everyone, myself included obviously, have been living in an economy
where demand and supply are NEVER matched and this imbalance between 'want'
and 'have' causes the price of things stuck on that seesaw to go up and down
due to changes in demand:supply ratio.

I've updated the Joule Tokens section to clarify some of the confusions:

"It's important to note that the cost in energy used for producing and
delivering a product is not the same as the energy content of the product.
Confusing the two is common but not helpful. In the P2P browser, which used
by all peers for all transactions within the P2P Energy Economy, the price
in joule tokens for a given good or service is set collectively by the
producers of that good or service, using cost estimation software with
built-in energy costing models, so such confusion will not affect trade,
i.e. prices are calculated by software based on estimates submitted by
producers using estimation software with built-in energy costing models,
which is part of the P2P browser used for trading.

The following helps to explain the merit of joule tokens and why/how they
enable trading things (that can be produced and delivered in a sustainably
abundant way, i.e. where supply always matches demand) at the cost in energy
it takes to produce and deliver those things:

The joule tokens are generated based on spent energy where the supply of
energy is matched to the demand for energy, i.e. anyone who wants energy can
have it for the cost of generating that energy. Given the value of joule
tokens is always redeemable for the same value in electricity (e.g. 1 joule
token = 10,000), if an apple costs 1000 joules to produce and deliver today
and 500 joules to produce and deliver in 10 years then a consumer can buy 10
apples for 1 joule token today and 20 apples for the same amount after 10
years (due to technological progress that boosts the efficiency of producing
apples,) so the price for apples only gets lower and lower, never higher,
over time, i.e. joule tokens can buy more and more because the efficiency in
producing apples keeps getting higher and higher. By contrast, the existing
currency (e.g. US dollar, euro, yen, etc) has a value that is relative to
demand and supply (of the currency), and given that it's not backed by
something (e.g. gold) its value changes (goes up and down, not just up as
with the joule tokens) not only due to changes in demand:supply ratio (for
the currency) but also due to other factors like trade deficit, national
debt, and currency speculation that is based on those factors. In other
words, if the existing currency was backed by gold it would only change in
value based on supply/demand (of the currency) not all those other factors
but regardless it would still changes in value, both up and down. If the
supply for the existing currency was matched to demand for the existing
currency, then everyone who needs money should be able to get it at the cost
of energy it takes to produce and deliver the money. But that's not the case
because the existing currency derives its value, in great part, from its
scarcity, not from its utility, as is the case with joule tokens.

When it comes to 'circumstantially scarce' things, e.g. land, gold, real
estate, etc, the virtual joule token, as a currency, does not apply because
scarce things induce competition for limited resources, which means that
scarce things are priced based on the fact that demand is much higher than
supply, i.e. their value is driven, in a great part, by their scarcity,
which makes them compatible with the existing currency, where the value of
currency is relative and derived, in great part, from its scarcity, and
incompatible with the currency defined under this model, where the value of
the currency is measured in joules of spent energy (i.e. the flow of
electricity from peers with surplus to peers with deficit) that can be
recouped for things that can be made on abundant basis (i.e. where supply is
always matched to demand) in the ratio of 1:1 in currency to cost in energy
for producing and delivering the given thing. It's the exchange of currency
for goods on energy cost basis that enables the sustainable abundance of the
things in question (e.g. energy, goods, services, ideas, music, etc.)

The good news is that our human ingenuity combined with the pressures of a
growing population are pushing us to eliminate the circumstances of scarcity
in many areas. A good first example is scarcity in content, including
software, music, videos, news and information in general, which has been
eliminated by the Internet, but such abundance still needs to be made
sustainable, e.g. using this model, i.e. making sure content creators recoup
spent energy (the energy used in making and delivering their good or
service) thus eliminating the 'starving artist' syndrome, where artists give
so much energy because they want to create and share with others but do not
receive much energy in return, which causes them to starve in the long
term.) A second example is scarcity in energy, which is being eliminated by
the emergence of renewable energy as a primary source of energy, and where
the abundance of renewable energy is supported on sustainable basis by this
model."

I also updated the Price Registry (now called Cost Registry) to explain even
more clearly how pricing at cost would work:

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 today's world, everything is priced subjectively, i.e. based on
subjective value, that's driven in great part by artificial or
circumstantial scarcity, using relatively valued currency, where the value
of the currency itself is driven in great part by its artificial scarcity.
So 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.

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 (which is also based on the volume of their production) to a
Cost Registry, which is open and verifiable by peers, and calculating the
median for the given good or service of the same type. So an apple will cost
1/5 joule token (assuming joule token = 10,000 joules) if the median costs
in energy for producing and delivering an apply to the consumer add up to
2,000 joules.

Since volume of sales affects the cost of energy for producing and
delivering the product the energy costing models used by the estimation
software should assume an average volume of production based on all
predicted sale volumes (within the community) from all the producers of a
given good or service, as reported by their predictive inventory management
system, which sits along with the estimation software in the P2P browser
used for trading, which is how consumers access the Cost Registry-calculated
price for goods and services.

If there happens to be an ice storm that reduces an apple producer's output
the producer will sell less apples at the same price, not a higher price, so
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 them using renewable energy and renewable
resources in conjunction with a predictive inventory to match supply to
demand to eliminate loss to due to over-production.

If a given peer spends 500MJ making something that they would like to give
to the world then they should be able 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.)

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, based on
average predicted sale volume for the given good or service, 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
non-physical good or service, such as a song or some social service, that is
not normally quantifiable in terms of energy spent, 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 a music 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 him fed, keeping him entertained, etc. In this case, the artist
needs to recoup the cost in energy for producing and delivering the album,
per the various energy costing models involved (e.g. air travel, food,
shelter, entertainment, etc), some of which may contain nested energy
costing models (e.g. entertainment.) The energy costing model for producing
and [digitally] delivering a music album assumes a volume of sales equal to
the average predicted sales (within the community) for all artists of the
same genre (in the same community) as reported by their predictive inventory
management system, which is part of the same P2P browser used for trading.

It's important consideration for producers to match their production of
goods and services to predicted demand, so as not to suffer losses due to
over-estimating demand, especially since losses cannot be recouped from the
consumer, i.e. by dumping excess at lower-than-cost and thus killing off
competition then forcing all apple producer to raise prices the next season
to recoup the loss. In other words, over-estimating demand is a problem that
the producer must solve without punishing the consumer.

When it comes to 'circumstantially scarce' things, e.g. land, gold, real
estate, etc, the virtual joule token, as a currency, does not apply because
scarce things induce competition for limited resources, which means that
scarce things are priced based on the fact that demand is much higher than
supply, i.e. their value is driven, in a great part, by their scarcity,
which makes them compatible with the existing currency, where the value of
currency is relative and derived, in great part, from its scarcity, and
incompatible with the currency defined under this model, where the value of
the currency is measured in joules of spent energy (i.e. the flow of
electricity from peers with surplus to peers with deficit) that can be
recouped for things that can be made on abundant basis (i.e. where supply is
always matched to demand) in the ratio of 1:1 in currency to cost in energy
for producing and delivering the given thing. It's the exchange of currency
for goods on energy cost basis that enables the sustainable abundance of the
things in question (e.g. energy, goods, services, ideas, music, etc.)

The good news is that our human ingenuity combined with the pressures of a
growing population are pushing us to eliminate the circumstances of scarcity
in many areas. A good first example is scarcity in content, including
software, music, videos, news and information in general, which has been
eliminated by the Internet, but such abundance still needs to be made
sustainable, e.g. using this model, i.e. making sure content creators recoup
spent energy (the energy used in making and delivering their good or
service) thus eliminating the 'starving artist' syndrome, where artists give
so much energy because they want to create and share with others but do not
receive much energy in return, which causes them to starve in the long
term.) A second example is scarcity in energy, which is being eliminated by
the emergence of renewable energy as a primary source of energy, and where
the abundance of renewable energy is supported on sustainable basis by this
model.
~~~

If after reading the above, there is still confusion or issues then please
don't hesitate to point them out.

The full updated model is at: http://p2pfoundation.net/P2P_Energy_Economy

Marc
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