[p2p-research] excellent contribution on flow money by Martien van Steenbergen

[Martien van Steenbergen]

Hi Ryan,

On 21 May 2009, at 04:24 , Ryan Lanham wrote:

> Martien,
>
> 1. Please let me know if you still have mail problems.  I don't  
> think I sorted them out.

Still doesn't work. I've changed my subcription address back to the  
one I'm using now. Tried to cut down on spam by creating unique  
receiver addresses on mailing lists and like this. Didn't work :-(

Typed in an elaborate response to yours the other day. Lost it  
completely by a Select-All & Paste action that replaced it by just 4  
lines from the paste buffer, and then sent it off to the p2p list.  
Poof. Gone in a cloud of orange smoke.

So, here I go again.

First of all, I've read the other replies as well, but prefer to  
answer Ryan's first. May reply to those of others as well, but later.

> 2. I think your system involves a pricing fallacy.  It is that  
> prices of goods and services can be accurately valued.  They  
> cannot.  We don't know what your blog is worth or what an hour's  
> work building a wall is worth.  That's because we don't know what  
> demand is for those things.  Much as I would love for something like  
> this to work, it won't.
>
> Here is why:
>
> A. Money is a dynamic system.

So true. A healthy system should be in dynamic balance, driven by a  
creative tensions that pull it into the chaotic as well as the ordered  
direction, but when wandering off too far, it gets pulled back to the  
dynamic balance.

> The reasons people "own" money is that we store consumption until  
> when it is advantageous.

Yes, that is one of the most useful traits of money: it abstracts  
trade from time and space. That is, you don't have to trade 3 chickens  
for a ham at the exact time and place, you can sell your chicks and  
buy something else from someone else at some place and some time.  
Let's keep that trait.

At the same time, let's design a system that removes the feature that  
one can own money. Why? Because then no one can hoard it and as a  
result we don't need any expensive uncontrollable constructs to keep  
money flowing.

Money then simply becomes a distributed (p2p) reputation system. Money  
then represents the effort (or energy) you have put into delivering a  
product or service.

> If I offered you a feast immediately after you had a large meal, it  
> is nearly worthless to you.  But tomorrow, you may want that feast  
> very much.  The makers of feasts count on their own skill at  
> calculated just how many feasts will be wanted today or tomorrow.

So true. A bottle of water at noon when you're all alone in the desert  
is probably much more valuable than the same bottle sitting on the  
shelf with 500 others in the supermarket around the corner.

So the value of something is (extremely) context dependent. Another  
example would be some ointment treatment, for pigs, say. You can buy  
it by the barrel, for just €10/kg. The identical ointment can be used  
to treat the rash on your baby's skin, yet a 50g tube sells for €10 at  
your local drugstore. A 20-fold increase in price (€200/kg) , but  
you're happy to buy it, since it's for your newborn child.

Every time you buy something you either implicitly or explicitly  
evaluate its price, checking if you are able and willing to pay the  
price for the value delivered.

You can always compare two similar, yet distinctive, offerings. You  
can always feel and rationalize which one is ‘closer to you’,  
resonates more with you. Even, or in particular, for very subjective  
thing like a painting or music this is true. You can always personally  
value these offerings: are you willing and able to pay the price to  
obtain this product or service. That is, are you willing and able to  
deliver a contribution to the community at large at some time in the  
future that matches (compensates) your receiving this product/value  
now. In other words, can you afford this? Can you repay this over time  
(or have you maybe already done so in the past)?

This begs the question of how much an hour of effort (energy) is worth  
and if a difference between one hour from the janitor or the  
orthodontist can be justified. If one hour from tha janitor is worth  
€10, say, then is €60 for the orthodontist justified? Is there a fair  
or human maximum to the ratio between two valuations? That is, while  
the janitor makes something between €15k and €20k annually, the CEO of  
the bank he works for makes €1M annually. Can this 50x be justified?

To my opinion, differences in hourly valuation can be justified and  
should be limited.

All this implies that marktplaces still will work. People will still  
compete to deliver an excellent price/value. They will strive to  
excell in what they do, honing their talents and living their  
passions. In our current monetary system, people have become slaves.  
Are you working for the money, or is the money working for you? Many  
are compelled to work and do things that do not match their talents  
and passions, just to pay the bill. A unprecedented form of global  
slavery. Yet, we all seem eager to keep playing this game, designed by  
a set of smart, yet unwise, economists.

> B. A pure measurement system would always look at fairness from the  
> point of view of a centralized plan.

Is this true? Can you be absolutely sure that this (centralized plan)  
is true?

How does Google's PageRank work? And what about Ebay's solution to the  
prisoner's dilemma? Is reputation measured by a centralized plan?  
Well, centralized implementation maybe, but not a centralized  
judgement. There is a set of centralized game rules that players must  
follow in order to play at all. These game rules foster decentralized,  
autonomous behaviour and implement, tmo, a distributed reputation  
system (although centrally hosted).

>   That cannot work because it will not satify point A above.  That  
> is, there can be no standard set of "scales" nor any standard  
> "centimeters."

In the Google and Ebay and many other systems, the scales or  
centimeters emerge from actual use and behaviour, and it satifies  
point A above.

> C. Money is already a p2p system in the way in spends.

Agree.

> It's just not a p2p system in the way money is created.

Agree.

> My recommendation to the micro-currency crowd is to focus on money  
> creation--how does money come into the system.

Ah well, this is were it gets interesting, at least to me.

How about this: suppose money is created exactly at the time and place  
of the transaction.

If you go to the dentist for a root canal treatment, and the dentist  
charges you €50, say, your account gets debeted and the dentist  
credited. The money is created at exactly that time and place. A  
measurement system of mutual credit. (Love to see the digital  
infrastruncture that supports this in a true peer-to-peer fashion, as  
opposed to centralized).

This way, you will always have the exact amount of money, no more, no  
less. No scarcity, and no abundance of money. Just like centimeters.

Zero sum, yes. That is the monetary system itself is zero sum, but  
open your eyes and observe that each and every transaction actually  
creates something of value for someone else, or there would be no  
transaction in the first place. If you take everything into account,  
it is definitely non-zero sum. It is a world of creation, creativity,  
unfolding, embellishing.

Using money to reward something of value creates two opposing streams.  
The product or service flows in one direction, the money in the other.  
It is akin to the current in an electrical system: electrons and  
‘holes’ also flow in opposite directions. One also designs and build  
an electrical system so that its currents and temporal storage of  
electrons (capacitor, battery) most effectively and elegantly support  
the goals of that system, e.g. amplifying audio signals a thousandfold  
with negligible distortion.

With our current technological digital infrastructure (a.k.a. the  
internet), it is almost trivial to implement. In fact, our current  
banking systems already provide the secure infrastructure to make this  
a reality. It is not a matter of technical issues, it is a political  
issue. It is an issue of willpower, guts and leadership.

Of course, you still need to move within the limits of your dynamic  
trustwidth, your growing benefit of the doubt. Every time your  
contribution to the communities that you're in matches the value you  
received from the community—you are in balance when you touch zero— 
your trustwidth increases, while decreasing over a period of inactivity.

No more need for hierarchically centralized banks. No more need for  
overpaid officers to regulate and administer the delicate balance of  
the amount of money needed, or the interest rate. Just like you don't  
need expensive superfluous institutions to regulate the amount of  
centimers in the world, let alone interest on centimeters.

This turning the dials and gauges of the money amount and interest is  
an extremely delicate process indeed. Consider two mobile phones in  
the same room, one calling the other. Make the connection and put them  
both on loudspeaker. Now slowly move them closer to each other, the  
microphone of one juxtaposed to the speaker of the other. At some  
point you will start hearing an echo, and a high pitched tone as a  
result from the self-reinforcing feedback loop just created. The echo  
is due to the delay of signals through the phone system.

Now, move the phones closer, and the sounds almost become unbearable.  
Move them farther away from each other, and the sound fades away.  
There is a subtle, fragile area somewhere in the middle where you can  
delicately control the volume of the sound. But it is a small and  
sensitive range indeed. Now imagine we have zillions of these kind of  
feedback loops with unpredictable delays and amplification, and you  
are out of control. Simply because they are only self-reinforcing  
feedback loops. There is no dampening, no immune system. Our current  
scarcity-based compound positive interest money systems works  
likewise. And you and me and our planet are paying the price.

As a reference, I invite you to read Places to Intervene in a System  
from Donella Meadows. We need a new paradigm, new goals, and a set of  
matching self-organising, self-healing ‘game’ rules that facilitate  
and catalyse it, and in that order. A system that minimizes the need  
to turn dials and toggle buttons.

I challenge the P2P Foundation (and myself, of course) able to come up  
with just these things.

> Most of the research focus now on this list is on trying to create  
> infinite consumption or infinite earning machines.  These are like  
> perpetual motion machines and will not work.

I agree that perpetual motion machines will not work. However, the  
monetary system is just part of a larger whole. If you limit your view  
to just the monetary system, your view is, well, limited. The monetary  
system should act like oil or water. It lubricates trade and makes the  
energy flow to create (non-financial) wealth for human kind as well as  
for the planet as a whole.

The infinity is not in the earnings or consumption. These kind of  
systems will eventually self-destruct, commit suicide. The inifinity  
is in the diversity, variation, creativity, (non-financial) wealth, as  
it unfolds and embellishes itself into pure self-expression. Ever  
increasing layers of s-curve-like unfoldings.

> The dynamics of supply and demand are very difficult to challenge  
> without coercion.  People simply want to make their own decisions  
> when they wish to make them.  If you allow those things, then the  
> question becomes one of price.

Hmmm... complex adaptive systems can be designed so that they foster  
dynamic balances between supply and demand with an exalted society and  
prosperous nature as spin-off. Let's design and adopt systems that  
support this, and omit some design failures from the past.

> Price is inherently tied to the supply of money as well as demand.

The outlined system of mutual credit still supports personal  
evaluation and decision-making, as explained above.

> It isn't about measuring production where money is interesting, but  
> in measuring the nature of where money comes from in the first place.

Money comes from our mind in the first place. We wrote the game rules.  
We can change them.

Succes en plezier,

Martien.

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