[GiftEconomy] Moving from Transactional to Gift-based Markets

[fran k]

Hi. Many thanks for that. :) frank

On Thu, 14 Oct 2010 10:29 BST Dante-Gabryell Monson wrote:

>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.”*