In the Economy App developer team, we yesterday had a lively discussion about its economic properties on system scale. We seem to not fully understand the system we’re building here Maybe we can gather some more insights in a discussion starting from these draft thoughts:
- Basic property: no scarceness of medium of exchange. In our money-based capitalist system, money is expensive because of interest: it's only handed out if you can promise to bring back more, in the short term. That is, it's only handed out for activities that produce short-term high ROI. While there's a lot of activities that would create ROI on the long term – creating forests, for example. But they take 100 years to grow, and then deliver a "meager" ROI of 1% per year. Now the diminishing economic growth rates, decade after decade, indicate that we hit a limit of short term ROI options (after we've burnt through most of our natural resources, that is ...). A quick "solution" was the virtualization of economy into financial products, creating much of the current mess. In barter however, there's no interest, and also no scarcity of the exchange medium itself. If a deal can happen depends only on peoples offers and demands, not on the added consideration if somebody has cash or credit available to spend. Given that this money scarcity affects esp. the unemployed, barter trade should help here the most: they can start to be economically active again.
- Making "gain" is possible. Multi-party barter does not exclude gain: you can set prices according to market dynamics, which allows to set prices of offered goods higher than the efforts you need for producing them, or letting them produce. Which means, because you barter 1:1 in value, that you have some incoming "surplus" effort: your gain, which you can use for whatever you like. Meaningful or nonsense. In this sense, Economy App does not eliminate capitalism; which can be seen as an advantage for its voluntary adoption. We will see that it does away with significant problems of capitalism nonetheless.
Labor in high demand. In current money-based capitalism, there's a striking internal contradiction: to make more gain, businesses try to employ less people; individually, this makes sense, but on system level this leads to large-scale unemployment in coexistence with an economy that can nonetheless produce everything for everybody; but, because of unemployment, far from everybody is able to buy this stuff, limiting the growth or even causing the demise of business.
In barter economy however it’s different: in the example of “making gain” above, the seller has to provide demand for products and services of the same value as the products he wants to sell, or no deal will happen. Which provides compensated work to those interested to buy a product from them.
- Big business can still exist. Because of scale effects, industrial scale production is said to be more efficient, which means making lower prices. So it can still exist in barter economy, but it can no longer use a limited individual economic perspective of "just wanting to sell for money" without caring where people's money will come from after they replaced more and more workers with machines. Because there's no money as intermediary storage for value (and, more importantly, no interest based money investment opportunities as self-multiplying storage for value), they have to invest their gain into products and services of others completely and simultaneous to making that gain. A barter deal economy thus should always "go round", not being affected by boom-and-bust cycles.
- But price of labor increases. I'm quite sure that it does, because the demand for labor increases to 100% of the value of products and services provided. When demand increases and supply stays the same, price increases. But I can't find the exact meachnism how this would happen in this specific case. In effect though, it should be a liberation of workers from the wage dumping present in late-industrial societies.
Now I’d like to more clearly understand the economics of this system. Better terms, clearer thoughts, connecting to economic concepts …