[CHALLENGE] Create 'money' for a circular economy

business-models

#1

Money as we know it is just one form of organizing exchange between people on a non-personal basis. It is also only one way to assess value of the goods/ services/ energy exchanged. There are many alternative currencies and other ideas on how to organize exchange and make it fair.

Our current money system is designed for a linear economy. For the Circular Economy we will need a currency (or various ones) that does not streamline our circular processes into financial efficiency and profit maximazation in the same way. So the question is: How can we do that?

What would such a ‘money’ look like? How is it organized and how is value allocated in an Open Source system? How can we issue and control this currency in an Open Source way? How can ‘money’ be circular and support a Circular Economy?

Related topics and projects:

Please add others you find…

The following is in no way complete, comprehensive or well phrased, it’s just a draft:

Forms of organizing exchange:

  • social interaction networks (giving entitles the giver to be reciprocated, the reciever accrues social ‘debt’ that is monitored by the peer group, too much debt leading to no more receiving until the ‘debt’ is paid. This is the ‘primitive’ way of small communities of the pre-monetized era.)
  • units of limited non-degrading ressources (e.g. land, precious metals, rare shells… This kind of money was used in ancient cultures, e.g. Roman coins)
  • promises of future value (originally a paper that promised the giver that it can be exchanged for a specific amount of real goods/ rare ressources at a later point. This type of money was invented in the mercantile era. You’ll find such a promise printed on the English Pound. Many local currencies are also based on this principle with the main difference that they are not valid outside the local area.)
  • debt (very simply put: debt money is created by giving loans to finance the production of goods that are then sold to repay the debt and in theory annull the money created. This is the kind of money we mostly use today, only the money can never be fully anulled as the debtor needs to also pay interest on the loan and thus remains in debt indefinitely.)
  • time (units of human lifetime that are incorporated in each item/ service, e.g. one hour of hair-cutting in exchange for one hour of building a piece of furniture or watering the carrots. This is used in many barter circles. However the more fair you want to be, e.g. in representing the time invested in learning the skill you offer as well as the actual time spent on giving it, the more impossible it becomes to calculate the time value of a service)

Forms of assessing value (exchange rate between currency units and goods/ service/ energy units):

  • ideal supply-demand negotiation (the ideal market model where suppliers and buyers negotiate the exchange rate freely based on full knowledge of the quality of the good/ service offered compared to other goods/ services on offer. However this ideal market does not exist in reality for lack of transparancy and/ or the time to be fully informed about all aspects in the negitation)
  • capitalist supply-demand negotiation (the supplier sets a price according to his assessment of the amount the buyer will be willing to pay. The latter can be manipulated by making the good/ service more desirable through marketing. The actual costs of production and the quality of the good/ service are not directly related to the price, neither are the costs to the environment and society as a whole that the supplier managed to externalize)

This topic was initiated by a chat of @transitionmaike with @lesmoore


#2

This topic is a wiki. Feel free to edit the text above.


#3

Hi,

Here’s my idea for a circular money that is ‘backed’ by the Property and Promises needed to create a future Product.

This money is strange in that it has an associated Constitution with these requirements:

1. Product is the Investor's return.

Investors are actually just consumers prepaying for future products. These investors receive real co-ownership in the land and tools needed to create those products and accept the products themselves as the natural return on those investments.

Each co-owner of the property is the legal owner of a portion of the product in that same amount.

This means there is no sale and no purchase because, just as the owner of a single Apple tree owns all the Apples, each co-owner of an orchard under these terms is the owner of that same percentage of the fruit.

The group must still account for the amount each co-owner receives, so the number of transactions is the same; and the settings, such as a grocery store, a restaurant, a theater, a bus or taxi, etc. can look very similar, but each co-owner will actually just be collecting a product they already own. To reiterate, the group must use proper accounting to protect themselves against someone who might try to collect more product than they really own.

This eliminates* profit within that group in a natural way and thereby reduces the usual drive toward scarcity.

(*) Except when selling surplus. See #3

2. Promises are a Worker's Investment.

Workers receive property when they commit to work in the future. This kind of investment differs from those who invest money, to protect other investors in case the job is not getting done.

This changes the purpose of work from a confused social necessity back to the natural desire to eliminate drudgery while assuring those who apply skills gain the property they need to live.

This is done by exchanging commitments of future work before production begins.

Workers slowly gain real, debt-free property ownership as they fulfill promises.

This property must vest incrementally, on a work-to-own basis, both to insure the worker gains ownership in the property represented by the amount of work completed, and to protect the group in case the worker refuses to keep his commitments.

Vested property ownership can be used to ‘insure’ the Worker as an offer of value back to the rest of the group when the worker is attempting a possibly destructive job (such as operating a tractor).

During the startup phase, workers must also be granted immediate access to all the food, shelter, sanitation, clothing needed to live onsite.

3. Profit is the Payer's Investment.

Each co-owner may always keep all of the product they own, even if others believe it is ‘surplus’.

No co-owner is ever required to declare any of his product as ‘surplus’.

If a co-owner chooses to sell some product, he may charge any amount, but must treat some part of the profits as the payer’s investment.

This means the current owners are required to buy more land and tools, etc., on behalf of the paying customer, causing these latecoming overpayers to slowly gain the ownership they need for the future production of that very same product. Eventually everyone will have enough property ownership in the production of their basic needs to guarantee they receive those goods and services under thier direct, local governance, at the real cost of that production.

This changes the purpose of growth from a confused social necessity back to the natural desire to help latecomers gain the property they pay for.

We allow the market to set the price, but then ‘reflect’ some amount of profit back to the person who paid it - by investing on their behalf, with that property eventually vesting fully to the payer, causing growth to be continuously distributed to those who pay for it.

4. Secession is an inalienable right.

Under constraint of realistic divisibility, subgroups must be allowed to split from the majority, allowing arbitrary-sized cells to form and wield their own localized governance.


#4

Do you know Sardex? It is not exactly an alternative currency, but rather a commercial credit circuit, created by some guys in Sardegna (Italy), and exported in other italian regions.
Here’s an explanation about how it works, provided by Financial Times (full article here):

To understand how Sardex works, you have to abandon much of what you may think you know about money. There is no bank that prints Sardex notes; no algorithm that generates Sardex digital coins. Instead, it functions as a system of mutual credit: each firm begins at zero, earning the digital currency — equivalent to but non-exchangeable with the euro — as it offers goods or services to others in the network. Companies may go into debt but only up to a certain limit, determined by what they can offer the other participating firms. Crucially, there is no interest on Sardex; it functions purely as a means of exchange. “[In the circuit] you have a debtor who does not see their debt increase but finds creditors who want to spend,” Gabriele told me. “This should be a natural part of the market.”

The crucial point is that only Sardinia-based companies can use Sardex: that’s how they encourage local economy. Of course, as I told, the Sardex system can be “exported” in other regions, and infact that’s exactly what happened: it is called Tibex in Lazio.