A Commons Economy
The mechanics of the financial and monetary systems dominate economic thinking. Gross Domestic Product or the cost of buying and selling goods and services measures wealth. Value equates to price, and money can earn more money simply by existing. Today the transfer of money and its derivatives is thousands of time more than the transfer of value of goods and services. Money is the measure of wealth, and it isn't easy to equate non-monetary benefits with cash.
The result is a system that values the production of money as much as the production of goods and services. It means an increase in money does not always match an increase in goods and services. The system works, but it is expensive to operate and it is plagued by endemic inflation of asset values and money.
Worse, the current financial and monetary systems lead to unnecessary consumption and waste, degradation of the environment, unnecessary conflicts between people, disparities in wealth distribution, economic booms and busts, and economic uncertainty.
The system structural problem is that some money earns more money without an equivalent production of goods and services. Two ways the current financial system addresses the problem are:
- Regulations to ensure the creation of money comes with an equivalent production of goods and services.
- Operating the financial system so that the transfer of money is matched by an equivalent value of goods and services.
The current system uses both methods but has a poor match between the increase in money and the extra production of goods and services. The poor match occurs because there is no direct link between the production of extra money and the increase in goods and services. The money system can be thought of as a regulated commons with flawed regulations.
Humans have created economic systems that work without the need for any money, and we can learn from these systems how to match money with an increase in goods and services. These systems are regulated commons. Money versions of regulated commons that improve money systems are mutual credit and local currency unions and other systems without usury. These improved systems have the characteristic that money does not generate more money over time. Any extra money comes into existence as and when it is needed.
Modern communications and computing technologies make it possible to create better-regulated commons with existing money systems, and these improved regulated commons cost little to operate at scale.
Money as a Regulated Commons
Any asset can be a commons. An asset is something that has value in and of itself, or it can produce goods and services that people will purchase. Money is an asset that we use to buy goods and services, or we would like to invest and get a return on investment. We can get a return on investment by getting more money, or we can get more goods and services for the same amount of money. Getting more goods and services for the same amount of money gives investors a return on investment and improves the regulation of money.
How can we do this? Today we transfer assets through the concept of ownership. We buy an asset, and we are entitled to the goods and services the asset produces. What if we did not own the asset, but a local community owned the asset? What if investors were able to buy the goods and services the asset produces at a discount? Would this reduce the cost of goods and services in which we invest? Would investing increase the local money supply with an equivalent increase in goods and services? The answer to all these questions is yes.
Well regulated local money commons change the dynamics of the financial system. The operation remains much the same but the objectives and outcomes change. Instead of investing to receive more money, we invest to receive lower-priced goods and services. The right to invest becomes more important than having money to invest. It changes the dynamics and power structure in economics because investors get fixed returns while consumers take on the financial benefits and risks of future returns from the assets. It makes it difficult for investors to extract wealth from a local community without giving a fair return.
Prepower is an example of a regulated commons. The distributed algorithm described here outlines the regulations for the commons.
An outline of the regulated commons to provide affordable housing is described here.