[GiftEconomy] Moving from Transactional to Gift-based Markets

[Dante-Gabryell Monson]

very interesting !


http://blog.p2pfoundation.net/beyond-alternative-currencies-towards-asymmetric-account-systems-for-gift-based-markets/2010/10/13?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed:+P2pFoundation+(P2P+Foundation)


Beyond alternative currencies: towards asymmetric account systems for
gift-based markets<http://blog.p2pfoundation.net/beyond-alternative-currencies-towards-asymmetric-account-systems-for-gift-based-markets/2010/10/13>
[image: photo of Michel Bauwens]

Michel Bauwens
13th October 2010


I am finding myself increasingly surprised and dismayed at proponents of
alternative currency who propose and promote systems that fundamentally
offer very little change from our current system. In most cases these
“alternatives” are simply non-governmental versions of the same
transactional-scarcity model. The majority of innovation occurring currently
is in inherently abundant informational goods and there is an intrinsic
incompatibility between scarce transactional currency and abundant goods.
This creates a ripe opportunity for a new model of value accounting that is
itself abundance based.

Great series by Gregory Rader in a posterous
blog<http://onthespiral.com/pages/about-me-rxCDk> in
which he makes some great points and a fundamental critique of many
alternative currencies, especially those that belief a demurrage-based
design will solve all problems:

(though I feel it’s better to more carefully distinguish between
transactional markets, recicprocal gift economies, and non-reciprocal
commons contributions, the following introduces very insightful distinctions
regarding money and non-money mechanisms, for dealing respectively with
logics of scarcity vs. abundance)

*1. First Argument: We are Moving from Transactional to Gift-based Markets*

“Greg” on three reasons why the evolution towards gift-based, instead of
transactional, markets is
inevitable<http://onthespiral.com/why-the-gift-economy-will-grow-unnoticed>
:

*“A shift in productive activity towards reciprocal or gift based markets is
inevitable:*
*

Expanded Freedom/Self-Direction:

“When discussing the “free market” we often overlook the restrictions built
into the transactional model. Yet, a transactional market is by its nature a
contractual market. Once a contractual relationship is entered into, both
parties are obligated to follow through. This restricts the freedom of all
parties and leads to inefficiency in the form of negotiation before the fact
and potential litigation after the fact. This potential for conflict also
creates the need for legal standards that restrict the scope of individual
freedom further.

Gift markets avoid litigiousness by eliminating contractual obligations
altogether. In a gift market, producers seeks potential reward rather than
contracted compensation. Market participants sacrifice guaranteed
compensation for the freedom to contribute however they wish and the ability
to reach a much wider audience. Psychological research and empirical
observation both evince the fact that once basic needs are met, the ability
to pursue intrinsic goals is more motivating than additional (monetary)
compensation. To the extent that this is true, productive effort will be
drawn away from transactional activity and towards platforms based on
reciprocal voluntary gifting.

Simplicity:

The previous point implies that participation in gift economies is simple.
Rules and laws are replaced with looser social conventions. Barriers to
entry are eliminated. Meritocracy is facilitated because value can be
provided without prior agreement on compensation, providing new entrants the
opportunity to demonstrate value without accessing gatekeepers. Friction is
reduced at the cost of increased uncertainty, however uncertainty is more
easily coped with as reduced friction allows for increased experimentation
and entrepreneurialism. This simplicity enables efficient redeployment of
effort from the transactional market to the gift market.

Lack of Competition from Incumbent Currencies:

The transactional markets are wedded to traditional state-issued currencies.
Efforts to innovate on the transactional model will be hamstrung by the need
to convert people away from traditional currencies. On the other hand, gift
markets are ripe for innovation because there are no incumbents. Social
capital has to date gone largely unmeasured and the demand for a compatible
accounting system is apparent. Innovation in this area will meet little
push-back from traditional incumbent players as most will fail to recognize
abundance based accounting systems as currency per se. This ability to
innovate without resistance will continue to increase the appeal of these
markets.
*

*These three characteristics will increasingly attract new participants into
informational gift economies and draw productive effort away from
transactional markets.”*

*2. Second Argument: Therefore, we need Asymmetric Accounting systems to
uncover non-reciprocal value creation*

Greg <http://onthespiral.com/my-story-about-the-future-of-money-asymmetri>:

*“I want to introduce the term “asymmetric accounting” to describe systems
that record and track the provision of value rather than the volume of money
transacted. Asymmetric accounting mechanisms are congruous with the reality
that freely given advice or knowledge can be just as valuable as purchased
knowledge. Such systems would not require a market price in order to
recognize value creation and provision. In taking this broader view,
asymmetric accounting reconciles our economic notions with the reality that
value exists independent of whether its recipient is obligated or able to
provide equal compensation.”*

Citing<http://alanrosenblith.blogspot.com/2010/09/currency-design-possibilities.html>
 *Alan Rosenblith*:

*“What’s most important about this new mode of production is that it is NOT
about the quid-pro-quo, something-for-something social contract. The primary
motivation for participation is intrinsic rather than extrinsic. Therefore,
in the most fundamental way, this new currency will NOT be based on the
quid-pro-quo social contract. This is difficult for us to conceive of since
all modern money is based on the assumption that producers of value should
be incentivized with rewards as determined by the market. Even most
alternative money substitutes simply recapitulate this basic pattern. The
logic of the quid-pro-quo market goes something like this “I’ll provide my
service at $50/hour but not $30/hour, and if you can afford it, you are
worthy of my time.”*
**

*Instead, these new currencies will be about making it easy to find the
right place to put one’s own efforts based not on extrinsic reward, but on
intrinsic value. In other words, where will my efforts be the most
fulfilling to me and most in harmony with my community? This is about right
placement, and about being in economic communication with people all around
the globe.”*

Greg continues:

*“How would this accounting be accomplished? The challenge is to devise
non-invasive mechanisms of value recognition. “Non-invasive” implies that
these mechanisms should not create the expectation of reciprocation.
Consider for example – How do you react when someone approaches you with a
“free” offer at the entrance of a store or on a crowded commercial street?
If you are anything like me, you quickly avoid these overtures altogether.
You realize that the offer is not really free, that there is an implied
expectation. Even if the initial token is free, the goal is to create an
implicit obligation.*
*

When money is our only accounting system and transactions are the only
ubiquitous means of reciprocation, we are condemned to this state of
affairs. We avoid generosity in order to avoid the obligation to
reciprocate. Internet social platforms create new possibilities. Anyone can
hit a Like button, or subscribe to a blog, or amplify a message. These
actions record the recognition of value without requiring any exchange of
scarce currency. Over time, accumulated statistics begin to delineate who
has provided value in the past and who is likely to provide value in the
future. These first experiments with social media will develop eventually
into comprehensive tools that record the creation and provision of value in
many forms.

These tools will reframe our notions of for-profit and non-profit, enabling
more subtle distinctions that better describe new business models. The
coarse distinction between for-profit and non-profit is only necessary when
our notions of value preclude non-monetary value. “For-profit” becomes a
misnomer when many businesses dedicate funds to charitable ventures while
many others simply fail to generate monetary returns. Ultimately what we
mean by “for-profit” is: Seeking symmetric exchange. Seeking to be
compensated to a degree commensurate with the value of the products or
services delivered and the costs of their production. When the monetary
system assumes that all exchange is transactional and symmetric, then a new
category, “non-profit”, is required for ventures that don’t fit this
description. But, these distinctions are not as clear as legal distinctions
would lead us to believe. Some ventures truly seek symmetric compensation
while other ventures, to varying degrees, disproportionately benefit some
stakeholders over others: Google is a for-profit corporation funded by
investment and ongoing revenue, yet stills outputs far more value to users
than it will ever gain in revenue (monetary input) Government institutions
are non-profit yet, in many cases, deliver far less value in output than is
allocated to them as monetary input Volunteer organizations generally
consume very little monetary input and yet often create significant value as
output Current accounting methods treat $1 million of Google employee salary
as equal to $1 million of public employee salary, irrespective of the value
produced by these disparate endeavors. Furthermore, volunteer organizations,
to the extent that they avoid monetary transactions, are accounted for as if
they provides no economic value at all.
*

*Asymmetric mechanisms will remedy these anomalies, providing a more subtle
and granular interpretation of value. As they become more comprehensive, our
economic notions will become more consistent with reality and our markets,
broadly conceived, will better encourage value creation in all its disparate
forms.”*

*3. Third Argument: Demurrage-based currencies cannot solve this shift
towards abundance logic*

*Greg:*

Key thesis<http://onthespiral.com/the-role-of-interest-in-future-monetary-syste>
by
“Greg”: Interest exists because of the underlying conditions of scarcity,
not just from monetary design:

*1.*

*“Interest is the price paid for the use of borrowed money. Money itself
does not pay interest…this is money functioning as stored of value, value
lent by one party and borrowed by another that can be exchanged for
productive assets. The need for borrowing implies scarcity. Therefore we can
infer that interest is truly the price paid for accelerated access to scarce
resources. Like all prices, an interest rate is a market signal that enables
efficient allocation of these scarce resources – in this case resources
being allocated through time, between consumption and investment. This
analysis implies two preconditions for the existence of interest:*
*

* Scarce resources

* Varying temporal preferences for consumption

Critically, these preconditions refer not only to the monetary system but to
the constituents of the economy itself – its productive capabilities and the
psychology of its participants. A monetary regime intended to eliminate
interest would have to resolve at least one of these conditions in the
economy itself.”

2.

“This (demurrage) proposal only addresses the currency system without
resolving the economic conditions that lead to interest. It seeks to
“design” currency without reference to the characteristics of the underlying
market it must serve as a proxy for. Whereas the gift economy creates
compatibility with new types of abundant value creation, demurrage currency
emulates a world of scarce resources – becoming more scarce (depreciating)
over time.

Given that our current monetary system exhibits behavior quite similar to
proposed dumurrage currencies, we can speculate as to whether such a system
would in fact provide a “disincentive against hoarding money.” What we
observe currently is that people do avoid hoarding cash…but instead of
circulating that money they transfer (hoard) their savings into investments
– assets that serve a productive function and appreciate over time. The net
result is that inflation (demurrage) does nothing to discourage the
accumulation of wealth, which is presumably the true goal of demurrage
proponents.

What does this mean for interest in future monetary systems? Interest will
persist so long as scarce resources persist and market participants endeavor
to shift their consumption of those resources through time. Interest will
diminish in importance to the degree that productive abundance facilitates a
shift away from transactional currency altogether.”

3.

“The examples used by Rushkoff and others like him all come from societies
where financial investments are not available. These are societies where
there are only two choices – consumption or saving. In modern society we
have a third option – investment…and investment provides a financial return
because it uses scarce resources in the present to produce more scarce
resources in the future.
*

*Once securitized investment enters the equation the demurrage logic breaks
down. A market participant who previously had to choose between consumption
or depreciating savings, now chooses between consumption, depreciating
savings or appreciating investments. This choice simply shifts hoarding in
currency to hoarding in investment products. This is exactly what we
experience today, inflation (depreciating currency) does not lead to
accelerating consumption; instead it leads to investment in inflation
protected assets.”*
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