Market Economies lead to lower-cost goods by having many suppliers and many buyers all competing for sales. Buyers choose the lowest cost of goods while sellers try to produce goods that cost less than their competitors. Value is the price buyers will pay. Economic efficiency is the ratio of the value of goods divided by the cost of providing them. The idea is simple, quickly understood and modelled.
Market Economics extrapolates this idea and assumes that turning anything into a market will make it economically efficient. To turn something into an economic market, we monetise it. We do this by making the thing into something that a person can buy, sell or rent. With this approach, we can monetise anything. For example, things that copy without destroying the original become possessions via copyright, patents and trade secrets. Other things in society that anyone can use, like land or air or water, become possessions via property rights set by an authority able to enforce the rights.
There is another way of operating an economy. Instead of competing we can share according to a set of agreed rules. Sharing is inbuilt into human social behaviour and is called commoning. We use the approach with goods we hold in Common. We use it all the time in small groups of family and friends in our everyday life. With modern technology and communications, we can scale commoning and use it for any economic activity.
Commoning does not destroy markets in goods. Instead, it makes markets efficient and reduces market failure. It stops the domination of price in market decisions and allows participants to include factors for which there is no price.
Cash is a Commons
Cash is a store of value, a means of exchange of value and a unit of account. With these properties, cash is a commons who all can use freely. This does not mean cash is free but its use is free. Exchanging money does not change its value and we do not pay anyone to use it as it is supplied by and controlled by the issuer. It is available to all for the exchange of goods, as a store of value, and as a unit of account.
Cash becomes property when we change it into a financial product and allow it to increase in value with time. When we do this we can buy, sell and rent money. With these characteristics, money becomes a property and no longer a commons. As property, we distribute it through financial markets. Money treated this way is enclosed.
Financial markets take many forms. All forms increase the value of money with time. Methods include interest, dividends, capital gains, insurance, and various financial derivatives. The cost of operating the financial markets is the increase in the value of money with time. The totality of financial markets is the financial system.
To operate the financial system as a commons, we need to remove the need for money markets while giving lenders a return on their investment and while keeping the use of money free.
We do this by lenders of money getting their money back as goods of the same value. They get a return on their loans with more goods when there is a time delay in receiving the goods. We do it by using the money within a closed system as though it were cash.
The exchanges of more goods for the same amount of money makes the commons financial system more economically efficient than the conventional financial system. It is economically efficient because it needs less money to produce the same amount of goods and services. Markets in products remain much the same, but the markets tend to be long-lasting relationship markets of groups of customers. Money retains all its useful properties of value, stability and fungibility.
How does a Money Commons Operate?
Most Money Commons are small, local, and restricted to a single product. Buyers and Sellers know each other and enter into a community of relationships. Any entity can be both a buyer and a seller and are autonomous and equal.
The community formed becomes a single entity that enters into relationships with other entities to create separate communities. The structure is fractal. Entities are members of many intersecting communities where information transmission is between them and their communities. Transfer of money between communities is via individuals where the whole community can be an entity.
Control is distributed. Money is distributed. Information is distributed. Mapping the structure shows networks that look like networks of cells that make up living creatures.
Most economic systems operate like a machine. An economic system based on a money commons is like a living organism such as a fish or a tree or a human. Money commons are able to adjust themselves to changes in the external environment.
Within a money commons, money is cash. It has no time value. Buyers and Sellers use cash. Investors get a return on investment by getting more goods for the same amount of cash.
As the environment is unpredictable a money commons is indeterminant. However, a money commons is homeostatic meaning it adjusts itself to deal with changes to its environment. Homeostatic systems are stable, survive, and take less effort to maintain and operate.
A money commons embraces uncertainty, assumes it will happen and has mechanisms to adapt to uncertainty. Connecting money commons creates a low-cost economic system by removing the need for financial markets.
