The translation is here
The translation is here
As Robin pointed out, Makerfox uses monetary units for measuring value. When it comes to the fairness issues in the sharing / collaborative economies, “the trouble isn’t money”. Or markets, as basic ideas. However, the trouble is facilitated by aspects of how our money and market systems are designed. Let me elaborate by deconstructing our notion of money and how and why the different aspects are used or not used in Makerfox:
There is a similar case with debt: debt is a credit relationship that can be transferred to a different creditor without needing the consent of the debitor. That makes debt problematic and destructive, because it abstracts away from the original social, trust etc. relationship. Having the numeraire itself is not the problem. For this reason, there are credits in Makerfox (the value transfer function uses them), but they are always P2P credit, not debt, and also without any interest.
A third major case that I see is charging for knowledge reproduction: it lowers total welfare if we do. Knowledge reproduction has zero marginal cost (on the Internet at least), so if we can fund for knowledge creation in a stewardship model, the total welfare is larger. That’s why on Makerfox, one cannot sell IP, but one can crowdfund open source / open content projects.
It became a bit lengthy. But I liked to sort my thoughts on the topic, haven’t summarized it like this ever before. Thanks for providing an opportunity in this discussion
If a community is going to adopt a alternate system of value exchange, my feeling is they should be able to understand it, but ideally also contribute to the design process. That seems like the best way to sooth the ethical concerns.
Makerfox is a ready made solution, and obviously has a deep conceptual framework for its design choices, but there is still the issue of communicating those choices with a wider audience. When you unpick money as you have above it becomes really hard to get to grips with it.
I can imagine a board game that allows you to experiment with different kinds of monetary systems, so you can get a visceral grip of how they work. Just like the lesson you learn from Monopoly as a kid: the banker always wins.
I think this intersection of a communication design, economics and software could be really interesting.
Once heard of such a game once … ah here it is …
It’s called the “Trading Floor” game. A card game, designed by Sybille Saint Girons and Matthew Slater in 2012. (Matthew Slater is the brain behind the CommunityForge software for managing mutual credit currencies.) Their game is designed to make participants “feel” the difference between value exchange systems, as you intended.
And their “Round 1 Swapping variation” version can be modified to allow circular and even network bartering, though the latter will be a challenge for the brains If it works though, it would be awesome for doing Makerfox presentations. Hmm, now you got me on an idea … I might have the first occasion where to use this. But where do I get 10 people to test it
There might be something appropriate for a presentation in a market chocolates that people have different preferences for, I guess you’d have to choose one flavour or another item as the ‘money’.
Could be short and fun. You can eat the chocolates at the end.
Where markets don’t dare tread
@jimmytidey, I like your style.
As an economist, however apostate I may be, I would like to throw in a couple of road signs to help this thread steer its way around concepts like markets and its failures. It is important to recognize that not every institution that presides over exchanges is a market. Typically, a market entails three things:
It has been noted time and again by economists (at least since William Lloyd’s 1833 article on overgrazing) that markets can have sub-optimal equilibria. This tends to happen when the collective good is at stake – environmental goods are exhibit A. The standard response of the economics profession to this is to invoke market failure: the reason why the market does not produce an efficient equilibrium is that there is some good being exchanged at zero price – for example clean air, or a 1% increase in lung cancer rates, or the survival of an animal species. Stick a price tag on that good (or those goods) and then the price signals will incorporate the whole correct information. This, in turn, will allow the participants in the market to make the correct decisions, and the market equilibrium will be Pareto efficient once more.
I have tentatively believed that, as I participated in the “green economy” movement in the 1980s. We busied ourselves with ecotaxes and ecosubsidies and environmental liabilities coupled with Superfund-style instruments. Three decades on – and despite massive academic and policy support (example: the World Bank’s Global Environmental Facility, a body so effective you have probably never heard of it), we have not much to show for those efforts. Conclusion: correcting for market failures does not work, let’s move on.
Before we do so, it might be worth pausing for a moment to wonder why. I don’t know why, but reading David Graeber left me with the suspicion that many institutions that organize exchanges are not markets not because they don’t meet my condition number 3 (the price signal does not carry complete and true information about all parties’ preferences), but because it does they do not meet my condition number 2 (the exchange is not free from violence/coercion). In the case of the global environment, it is hard not to see that the richest people and, to a lesser degree, the richest countries, seem to draw benefits from a situation that is globally disadvantageous.
So, I see stewardship as a way not to correct for market failures, but to sidestep them. Stewardship is a non-market way to go about producing and allocating things. It is non-market because it does not use the market decision-making algorithm: it makes decisions with heuristics, or rules of thumbs. To clarify:
Are the decision making rules consistent with stewardship also economically efficient? No way. But that’s not the point: stewardship is about resilience and durability, not efficiency. The Glass-Steagall Act came under attack from investment banks during the Clinton era because it was inefficient; but inefficiency was a feature of Glass-Steagall, not a bug. Every time you become more efficient, you make yourself more vulnerable to Black Swan events. Nassim Taleb argues that standard economics does not understand risk, and treats all risks are predictable. If it stopped doing that, the whole standard economics edifice would fall down, and the goal of efficiency would have to be replaced by a black-swan-risk minimization one. I think he has a very serious point here.
I had to build a pretty long case here (apologies!) but this is why I think that yes, it makes tons of sense to think about markets when you design systems for stewardship, but mostly to stay away from anything that looks like a market. If it needs stewardship, typically it means that markets do not produce it; and correcting for market failures is a fine idea that, to my knowledge, has never worked to solve any problem of substance.
Hurray, we are not a market
A thoughtful piece, making it apparent you are on vacation Late night “lesser” thoughts from me:
What I learned from it for the Makerfox platform is: it is not a market. Which is kind of a relief. It is not, because there is a coercive element: the Makerfox himself (algorithms that decide which of the alternatively possible deals to execute).
As you noted, it is futile to try correcting a market failure with more inclusive pricing. I guess it is futile because most of the price corrections need coercion to be implemented (like air pollution rights), and our political system with its entangled elites is incapable of deciding to do all this and to enforce all this.
However, since we can’t have perfect markets anyway, we could also try to fix the worst market failures with “good” transaction coercion. This is how it could be done in a large-scale network barter economy, resulting in a semi-planned economy. The price signal is still there, but only used to indicate subjective preferences and subjectively measured efforts. It is no longer the only decision parameter for market clearing, rather one of many. In the case of Makerfox, we have at least the following: (1) income = expenses for all users in a barter deal (obviously; the basic condition), (2) commission credit level of users, (3) percentage of commission payments from total turnover (max. 30%), (4) being frugal with “liquid items” like worktime and donations, as they are needed to plug holes in future deals, (5) minimizing percentage of cash money and added barter-value donation contributions in instant deals, because we want to replace the need for money as much as possible. We could incorporate more parameters to work against perceived market failures, such as: (6) favoring order alternatives that go to small businesses, (7) charging an additional commission for sales of certain environmentally damaging products, then forwarding it to a project that tidies up.
In a voluntary network economy plaform, we obviously can’t instantiate any rules we want, as people would leave and build their own platform. But there is a lot of space for bending the rules and transactions in a way that people do not consciously notice (since network barter transactions are unpredictable anyway).
Just like I argued above for monetary functions, I think market price is not “all bad” in a stewardship context: one can take some aspects and build a better system from it. It will not be a market, but offer some of the affordances of a market that “direct action” stewardship models lack and often need direly. Like indirect contributions, compensation mechanisms for contributions of detached third parties, compensatio mechanisms for “load balancing” between direct contributors etc…
There be dragons
Matt, be careful: that way lies madness. “One can take some aspects [of market price] and build a better system from it” is exactly what the environmental economists of the 1980s and 1990s thought. The risk is that people spend lots of time and energy fussing with shadow prices and the like, and nothing gets done meanwhile
And by the way, I would definitely call the Makerfox a market. Many real-world markets incorporate price signals as indicating “subjective preference”; in financial markets, you can place a bid of the kind “I am willing to buy 1000 IBM shares at price X or lower”. If no one is selling at that price, the transaction simply does not happen. And who controls? A software agent. Not so different from the Makerfox. Also, by coercion Graeber means “goons who will break your head” or worse, not technical constraints. For example, you could argue there is a “market for environmental quality” in the Niger Delta, with local people taking relatively well paid Shell jobs as compensation for living in a polluted environment; but you would be wrong, because of Ken Saro-Wiwa and others who dissented and were murdered. Exchange, definitely. Market, no.
Ok then let’s call it an intentionally imperfect market
I am warned … dragons. But I can’t help hacking things Not trying the impossible like the environmental economists though. Just a market where price is not the only decision criterion, rather price and reciprocity (and some minor other things).
In the Graeber example, you have positive coercion (to enter into a transaction). In Makerfox, you have negative coercion (you don’t get the transaction even though you have the “money” and the other party is willing to sell). Btw, that’s also why there is no single “market price” in Makerfox: due to the requirement for making alternative orders, different people need to pay different amounts for the same commodity, as required to make things fit into barter trades. I see coercion wherever there are more factors deciding over transactions than simple presence of offer and demand and an agreed-on price. Sure, I see Graeber’s point as negative coercion is quite weak, it does not prevent people from leaving the market and joing a non-coerced one. However, they will only do so if the coercion costs them more than the opportunity costs to access or found the new market. That opens the space where the Makerfox can nudge people around.
This is not enough manoeuvring space to take over a lot of stewardship tasks (except if a state would make network barter obligatory, but would that be beneficial?). So we do not even try. In Makerfox, trading is for physical personal goods and services, but donating is for everything with collective benefits, including everything open source and digital. (Means, it will not be possible to sell software or any other artificially scarce goods on Makerfox, but one can make them into moneyless crowdfunding campaigns there.) If you can use something without pay, you also should pay for it without a transactional connection to use rights. It’s just that stewardship-by-donating schemes don’t work well if they first require chasing after a scarce resource (money). It could work much better if one can donate time, stuff etc… We’ll have to see.
Which brings me to a more important point that was probably implied but not expressed in this discussion: while I agree that the commons should be stewarded, it’s also true that all practical stewarding involves trading. Whenever handling money (or barter value) for a stewardship project, there is market interaction. Whether you accept donations, buy in professional services from an external consultant or rent an excavator to fill back in the Vake Park hole. Commons projects obviously profit from this.
Personal conclusion: Don’t trade the Commons. Trade to build the Commons.
Time is also scarce
All looks good. Minor point: stewardship-by-donating in time is not conceptually different from stewardship-by-donating in money. Both time and money are scarce resources, as you of all people can testify .
With all the comments, one thing that keeps coming through is that the conceptual framework of markets is very handy way of pulling these ideas apart - even if, like @alberto, you think the solution is in the opposite direction.
As @rmchase points out that markets are tarred with the same brush as other phenomena, such as inequality, which they are not synonymous with.
Perhaps that’s no surprise, given the comments with @matthias about how involuted things can become.
I keep on thinking that the communication design meta-problem might be a really interesting way to shift the conversation forward. Is there a game, visual tool, a physical computer, a prop that might help?
Specifically on Alberto’s points…
I think that you are right that you have to think beyond the normal model of market. In my example, a market where the price is zero for elderly people, and debts only have to be roughly paid back in the very long run. You might want to say this is no longer a market by definition, but I think you are still getting useful work out of the market concept – which is really what I’m driving at, I think it’s a very fair point that I may be stretching things a bit far.
This is a ‘semi-market’ designed so that a person using the horribly named ‘utility maximising’ algorithm will also be acting to satisfy other goals, such as the heuristics given.
I’m also not sure it matches exactly everyone’s idea of stewardship, but it can encompass many kinds of socially beneficial collective activity. For me, the fact that normal markets don’t produce things that need stewardship, doesn’t mean this loser definition can’t produce those goods.
When I thought of market failure in this loser concept of market, I wasn’t mainly thinking of externalities. I was thinking of imperfect information - people simply don’t know what can be supplied by this type of market. I can think of lots of occasions where market failure because of imperfect information has been improved - for example the warnings on cigarettes. I can also think of lots of times where the non-existence of a market has been improved by the introduction of a market, the classic example being the comparison between North and South Korea, or on a smaller scale water trading.
With Taleb’s thoughts on fragility, I guess you might think the natural ‘wiggle room’ afforded by the semi-market might offer a hedge against a black swan, but really I’m not sure his ideas apply to small local markets? The international finance system might be driven to become a tightly-coupled, complex disaster zone by efficiency, but is the same true of trying to efficiently allocate time slots for the town hall meeting room?
I have the Graeber book sitting on my self - hopefully will get to it soon. This is probably a conversation for another day, but I think the idea of coercion is very weird, since I can’t imagine a truly uncoerced person. I’m not sure what to make of that though.
Spanner in the engine
Of course, Jimmy, you could “hedge” by introducing limitations and qualifications. And people do: for example, my country, Italy, disposes entirely of market pricing in health care services, replacing the price vector with a national health service. Of course, this automatically means you get market failure. The old geezer next door gets his umpteenth CAT, that he does not really need and is just for his peace of mind) way before a sixteen-year old with a worrying symptom, simply because he has plenty of time to master the (non-market) system of queues and reservations. In a market system, the geezer would probably be willing to pay a lower price than the youngster, and the latter would get served sooner. But at the system level, this simple, common sense argument for a market for health care services produces dysfunctions all over the place: the number are in, and we know now that national health services are more cost-effective than market-based systems. And I am not even going into fairness issues. As a British person, you might want to consider rail service privatization as another story that was propelled by market failure considerations.
So: why bother using markets if you need to break them to protect yourself against the worst of the consequences? Some markets work really really well – for example, the markets for professional services. I say: use them when they work, don’t use them at all when they don’t. But I recommend you do not try to hack them - they have this nasty habit of outsmarting us and biting us in the ass.
When is a market not a market?
I imagine a spectrum. On one end you have AirBnB, super efficient, scales massively, and makes use of an under utilised resource, but is motivated by the incentive of monopoly profits, and is ethically ambiguous.
On the other of that spectrum, we have the purely altruistic notion of just giving stuff away, casseroleclub.com facilitates such an exchange. In this case, we cannot question the motivation - it’s a beautiful scheme - but we can see that it’s going to be hard to fund and sustain. I’m not sure I can think of anything like this at scale.
The middle ground is a system that keeps a rough account of exchanges, so that people can agree some fairness norm is being observed. This will facilitate the pooling of effort to achieve common goals. Whether this is strictly a market or not is a matter of definition - and separate to the question of whether such a system is a good idea or not.
For me, the word market has no ethical connotations, for others it seems it does, so perhaps a better word can be found. But I do feel that systems which dogmatically reject any notation of reciprocal exchange are defying a kind of economic gravity, and will only work in very limited situations.
@alberto I think your argument that markets are binary, either perfect and socially beneficial or dysfunctional and beyond redemption, is a bit extreme. Firstly, no markets are strictly perfect, yet in many circumstances they seem to work well. Secondly, the specific case of the ‘failure’ of the project to internalise environmental externalities does not generalise. I’m not talking about internalising negative externalities, or systems that face the same political backdrop as that project, or any scenario related to national provision of healthcare . Really, I think all large scale economic problems including multinationals and governments are a different question, and all attempts to correct markets could be ruined by politics, but the same can be said of any innovation or policy.
As a point of interest, many people think that Singapore does a good job of using a modified market, in this case in health care, to provide a highly functional system, but I think whether you believe that is irrelevant to whether small-scale local almost-markets to coordinate activity can work.
Rail in the UK is a wonderful example. People hated it when it was publicly owned, they hate now it’s privately owned. I don’t think there is any rule of thumb answer for what to do with a natural monopoly.
Markets and ethics
Uh… no. Jimmy, an element seems to be missing from your analysis: what it is we are trying to exchange. This is not a matter of taste or ideology. We have established markets work really well for private goods with no externalities – say, potatoes. Not much debate there. However, they don’t work as well for collective goods, or private goods with externalities – say, clean air or the continued existence of the Welsh language. More debate here, but I am hoping the “Einstein test” (only a fool keeps doing the same thing expecting different results) is enough to at least agree that in practice markets that do not work on their own cannot be made to work.
There are other two interesting things that I think merit consideration:
A poor economist’s and cooperative worker’s point of view
Yes of course. I did not read Graeber, but while documenting «Phyles: From Nations to Networks» I worked a lot on Greif’s famous paper on judeo-magrebi merchants in the Mediterranean sea around year 1000: mechanics and conclussions were similar to those you quoted.
I have no doubt about the «real markets’» ethical effects you reclaim neither. In my life’s experience, in a country where class divide is strong, subtle and ever present, «semi-markets» as well as institutional controlled provisions, were always, at the end of the day, exclusive and unfair, only those «well functioning markets» were equitable. I don’t mean I reject your arguments on market mechanism limits. I agree with them. I just want to say that, at a first view, I don’t tend to trust «semi-market» and state provision more that anything what seems to be a market. There is something comfortable about markets to me: they don’t reward your social origins or your family names.
But there are also good ethical news about markets this days. Under today’s conditions (erosion of intellectual property, globalization of SMEs, reduction of the optimum industrial scale, etc.) market rents tend to dissipate (that is why big business tend to capture rents through cronyism and tailored regulation). As we can observe in many businesses under the «Direct Economy Model» (most of the industrial products you can find in Kickstarter -ie: Studio Neat) firms become little more than signatures, because products are quickly low cost copied and the authors have to improve themselves, create a new innovation and try again… So, if you want to have innovation rents, you will have to create continuously new innovations, because they are more and more temporary. If you don’t you will be very near to a commodity market with very few margins, and ever decreasing prices… what is socially great but you will have just the «normal» reward in competitive markets where equilibrium price tends to zero: the opportunity cost (ie: BQ).
So, «Direct Economy Markets» incentive moral behaviour for rent-seekers (to be perpetually innovative) while make social results tend to abundance…
Trying to summarise fairly
I didn’t mean for the last post to have one para in big - just seemed to get formatted that way.
Love the ‘Selling out’ piece, I think that gets at some of the psychological aspects of the market.
So my understanding of the landscape is as follows, I think this is useful but I don’t want to parody anyone:
We could hold the view that all markets are ethically bad - I guess any advocate of a command economy believes this. Neither Alberto or I take this view, instead believing that it depends what is being sold in the market.
We could the view that all markets are ethically good. I’m not sure anyone takes that view, or that any society has functioned in this way.
Instead Alberto and I take the view that whether a market is a socially desirable depends on what is being bought and sold. Neither of us support a free market in human lives or panda pelts (I’m assuming), but we do support a free market for potatoes.
Alberto believes that any market for a good with externalities, positive or negative, cannot function well, and therefore a wholly different model is required is these circumstances. The evidence of failures to reduce environmental externalities from economic activity supports this, as does evidence from health care systems around the world. Experience shows that, in practise, attempts to correct these markets are doomed.
I’m thinking about the specific case of sharing small amounts of surplus time or resources within a localised community. Tracking who puts in and takes out would allow an exchange mechanism with some of the features of a market - whether it has that name or not - and that could enhance the sustainability of that model. Specifically, by reducing reliance on altruism. I think the possibility of correcting market failures is an open question, and in any case I’m not convinced you can generalise from national healthcare provision or global pollution to the local scale in question. If this is the case market heuristics are still a valuable part of the mix when exploring systems of local exchange.
It comes down to your judgement about the nature of existing market failures are the transferability of those lessons to other circumstances, which is discussed above.
Addis sounds exciting!
And think we can add the support of @lasindias for most of the arguments I tried to put forward here, though David is better read than I.
Gotta ask Vinay
@hexayurt, what do you think of this game (see comment above) for your upcoming Makerfox presentation? Plus a network barter variant of course.