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Exactly. That was Gesell's thinking.

But it only deals with getting positive balances moving - it doesn't handle the problems that can occur on the debit side (which aren't mentioned in the example of course).

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Mon Nov 16th, 2009 at 06:52:57 AM EST
[ Parent ]
What is the penalty for default in the Baby Sitting Coop, and how does the Coop accumulate a stock of baby hours to face default?

En un viejo país ineficiente, algo así como España entre dos guerras civiles, poseer una casa y poca hacienda y memoria ninguna. -- Gil de Biedma
by Migeru (migeru at eurotrib dot com) on Mon Nov 16th, 2009 at 06:56:10 AM EST
[ Parent ]
A levy on both positive and negative Baby Hour balances goes into the Pool.

To the extent that there are no default events, the Pool is available for distribution to members, which results in a distribution from those with above average use of the Baby Pool mutual member guarantee to those with below average use.

The key default event is that someone leaves the pool leaving a negative balance behind. The resulting loss would be met by the Pool, thereby reducing the distribution to members, and if the Pool is inadequate to cover the loss then the event would require an additional levy on member balances as well.

Also, if a member fails to perform -eg cops out at the last minute, then another member could fill in, and be credited - in addition to the usual Baby Hours - with additional bonus Baby Hours which would be debited to the other member's account as a penalty.

There would probably need to be limits on balances as well. A Baby Pool operator would manage the agreed Pool policies, and could be credited with Baby Hours in return, from the Pool.

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Mon Nov 16th, 2009 at 08:20:30 AM EST
[ Parent ]
That doesn't really solve the default problem.

In a zero-sum LETS scheme, if a single member leaves the scheme, it has no real impact. Other members can still trade. Members may feel ripped off because they've donated services to someone who hasn't reciprocated, but unless the defaulter was offering something exceptionally useful - which is unlikely, if they had a negative balance - no one individual is significantly inconvenienced. The scheme only suffers as a whole if enough members leave to affect its collective viability - which isn't a default issue.

In your scheme, other members become less able to trade after a default. I don't think that counts as a win - for the obvious reason that limiting trade is inherently bad, and for the less obvious moral reason that remaining members are being punished for someone else's actions.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Mon Nov 16th, 2009 at 08:58:27 AM EST
[ Parent ]
ThatBritGuy:
In your scheme, other members become less able to trade after a default.

The default affects the existing 'stock' of Baby Hours and means - if the Pool is inadequate - that those with positive balances have smaller balances, while those with negative balances now have greater negative balances. It affects the ability of members to create new Baby Hour credits after the default only insofar as a member's debit balance gets nearer his limit.

The members of the scheme all share the default costs caused by a rogue member. I wouldn't really characterise that as punishment, though. I would call it solidarity, or maybe a form of mutual insurance. Naturally it is necessary to set limits in relation to positive and negative balances.....that is a quasi - Monetary Authority policy question for the membership.

Those members who run relatively low or zero balances receive a dividend via the Pool from those other members who are using the mutual guarantee, and which is essentially a payment in respect of their share in the Baby Pool mutual guarantee.

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Mon Nov 16th, 2009 at 10:42:48 AM EST
[ Parent ]
It still looks likes an accountant's solution, not a real world one.

The key question - does using money, scrip, or some other form of accounting make it easier or harder to find a baby sitter when you need one?

The original experiment proves that money is the problem, it does not solve the problem. Money is not a solution - and making the accounting more baroque in an attempt to compel participants to behave in the required way is not any more of a solution.

Notice what you're doing here - you're attempting to impose, or at least design, a system of exchange which forces a desired social result.

This is no different in principle to fiat banking, which uses financial engineering for political ends.

Note also that in other cultures with other rules the problem is already solved. And that in this culture a non-monetary solution - such as better communication between participants - is more likely to work than pseudo-finance.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Mon Nov 16th, 2009 at 12:17:17 PM EST
[ Parent ]
It is an accounting solution because a monetary system is an accounting system. The Swiss WIR is a case in point, and there is nothing 'imposed' about that. Swiss SMEs have used that system as 'consenting adults' since 1934 when the banking system failed them.

The simple solutions I am proposing - and I submit they ARE an order of magnitude simpler than the smoke and mirrors of central banking, QE, CDS, CDOs and the like - are consensual as well. I confess that it genuinely surprises me that you consider a Clearing Union approach 'baroque' in comparison, although it is more complex than a gift economy, I grant you.

No one has to use partnership-based agreements, whether for risk sharing of mutual credit - as in the illustration above - or in revenue or production sharing agreements relating to productive assets.

ThatBritGuy:

This is no different in principle to fiat banking, which uses financial engineering for political ends.

There is all the difference in the world between this consensual model and the fiat banking which administratively confers value upon something which is its antithesis - a claim over value issued ex nihilo. The value in the above model is whatever the parties consensually agree - no more and no less.

In some cultures trust exists and does not have to be supplemented, and in due course I hope that we will transition to such a gift economy. It seems to me from your apparent antagonism to any sort of rules basis for exchange, that this is your hope as well.

I have seen such a transition occur (I am on the board of Letslink UK) in LETS groups where the participants ceased to keep score and simply continued exchanges among themelves without accounting for transactions. On the face of it these were 'failed' LETS groups, but the truth is that they were in fact a complete social success.

In the meantime, I see such consensual agreements as a route for the transition away from the toxic financial system which is essentially imposed upon us by the current banking and other monopolies.

ie we have to get 'there' from here, and if you have an alternative proposal to achieve this transition, then I genuinely look forward to hearing about it.

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Mon Nov 16th, 2009 at 01:38:34 PM EST
[ Parent ]
ChrisCook:
I confess that it genuinely surprises me that you consider a Clearing Union approach 'baroque' in comparison, although it is more complex than a gift economy, I grant you.

In this example I'm finding it hard to imagine people checking their depreciating, loss-adjusted, baby-bank balances for suitable credits before picking up the phone.

Any scheme which needs a spreadsheet to decide whether or not someone can afford a babysitter is baroque, surely?

ChrisCook:

In some cultures trust exists and does not have to be supplemented, and in due course I hope that we will transition to such a gift economy. It seems to me from your apparent antagonism to any sort of rules basis for exchange, that this is your hope as well.

This is THE central issue here. In trust cultures, money is not necessary, and creates more problems than it solves.

In predatory cultures, money exists to facilitate predation - not to improve the common good, or increase trust and mutual benefit.

I'm not sure if we will transition to a gift economy, because for me, the existence of predation is the single most important political problem in all of history.

Given that finance has always been one of the primary tools of predation, second only to military force, I'm not yet convinced that any of your schemes address the problem honestly.

It's at this point you usually say that peer to peer finance routes around predators and makes them redundant. But I've yet to see any evidence of this happening, or any suggestions how this might put - for example - Goldman Sachs, Russian oligarchs, or oil speculators out of business.

I'm not surprised that LETS schemes create trust cultures - I'd certainly hope they would, and they'd be resilient enough to deal with the odd individual who acts with bad faith.

But there's a difference between that level of interchange, and what's usually called business, where predatory bad faith, attempted dominance of markets, customers and competitors, and assymetrical power relationships are all key features, not aberrations.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Mon Nov 16th, 2009 at 10:07:07 PM EST
[ Parent ]
ThatBritGuy:

In this example I'm finding it hard to imagine people checking their depreciating, loss-adjusted, baby-bank balances for suitable credits before picking up the phone.

Any scheme which needs a spreadsheet to decide whether or not someone can afford a babysitter is baroque, surely?

The scheme in the example has just the same issue does it not? A balance is a balance. Every system other than a gift economy needs a spreadsheet. What has changed is the rules that apply to balances, and (possibly) the behaviour that follows the change in the rules.

At the moment the rules/protocols that comprise the legal and financial structure or enterprise model we use are such that sociopathic behaviour - 'profit maximisation', limited liability, fixed returns and compounding interest - which is hard-wired into the system. Most people are brainwashed by the dominant narrative and simply internalise any discomfort they may have, even if they think about it at all.

I believe that the collaborative model I observe emerging is doing so because, like any emergent phenomenon,'it works'. In a partnership-based model it is in people's interests to co-operate rather than to compete etc etc.

I am sure rafts of academic studies have been done on this, but for my own part I am happier co-operating and being open than to do otherwise, and so the solutions I identify 'go with the grain' for me at least.

It is my thesis that Ethical is in fact Optimal, and that we will find that those who do not use a collaborative enterprise model will be at a disadvantage to those who do. There's only one way of proving that this is the case, and that's by testing the thesis in practice, which is what I am doing. It seems to me that a great many other people are testing alternatives too, now that the conventional model is breaking down :-)

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Tue Nov 17th, 2009 at 05:08:17 AM EST
[ Parent ]
The conventional model is an emergent phenomenon.
by Colman (colman at eurotrib.com) on Tue Nov 17th, 2009 at 05:44:41 AM EST
[ Parent ]
Correct.

And the conventional model is fucked.

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Tue Nov 17th, 2009 at 08:51:32 AM EST
[ Parent ]
But 'it works'?
by Colman (colman at eurotrib.com) on Tue Nov 17th, 2009 at 09:35:37 AM EST
[ Parent ]
Really?

"The future is already here -- it's just not very evenly distributed" William Gibson
by ChrisCook (cojockathotmaildotcom) on Tue Nov 17th, 2009 at 10:11:58 AM EST
[ Parent ]
like any emergent phenomenon,'it works'
by Colman (colman at eurotrib.com) on Tue Nov 17th, 2009 at 10:19:11 AM EST
[ Parent ]
It doesn't do what you want it to, but it's still there...

En un viejo país ineficiente, algo así como España entre dos guerras civiles, poseer una casa y poca hacienda y memoria ninguna. -- Gil de Biedma
by Migeru (migeru at eurotrib dot com) on Tue Nov 17th, 2009 at 10:28:57 AM EST
[ Parent ]
Emergence is a dynamic process: as is decomposition.

The reason collaborative models are emerging IMHO is that the conventional model - which is 'emerged' rather than 'emergent' - has ceased to work.

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Tue Nov 17th, 2009 at 10:33:22 AM EST
[ Parent ]
ChrisCook:
The scheme in the example has just the same issue does it not? A balance is a balance. Every system other than a gift economy needs a spreadsheet. What has changed is the rules that apply to balances, and (possibly) the behaviour that follows the change in the rules.

It depends on who has to have the spreedsheet. By issuing physical tokens with a staable value, the users has a very easy way of estimating their holdings. Someone (the cashier/the bank) probably has a spreedsheet to avoid counterfeiting. (And that informational disbalance allows financial tricks and thus theft.)

But a system that demands a spreedsheet per user for the user to understand the value of his or her assets is probably to complex for baby-sitting. The value of time spent understanding the system does not appear proportional to what is won. The idea that everyone can hold perfect information is another of those ideas that give a cover for tricks. Information costs time to acquire and if it does not appear to give an equal amount of time back it will not be acquired.

Sweden's finest (and perhaps only) collaborative, leftist e-newspaper Synapze.se

by A swedish kind of death on Tue Nov 17th, 2009 at 08:26:20 AM EST
[ Parent ]
A swedish kind of death:
But a system that demands a spreedsheet per user for the user to understand the value of his or her assets is probably to complex for baby-sitting. The value of time spent understanding the system does not appear proportional to what is won.

That's not what is proposed. A user would see an available balance on his mobile rather than on a piece of paper.

That's it.

He doesn't need to see how the sausage is made: but he could have more confidence that the sausage is edible.

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Tue Nov 17th, 2009 at 08:51:02 AM EST
[ Parent ]
No  but what's proposed is a system where people 'can't afford' a baby sitter, even though there may be other people sitting at home doing nothing, who would be willing if asked.

What does the system add that (say) a simple needs/can/will online message board doesn't?

It's not security, because people can still default or abuse the system. It's not increased accessibility, because that can be done in other ways. It's not maximal resource utilisation, as above.

What's the benefit?

by ThatBritGuy (thatbritguy (at) googlemail.com) on Tue Nov 17th, 2009 at 12:04:13 PM EST
[ Parent ]
ThatBritGuy:
No  but what's proposed is a system where people 'can't afford' a baby sitter, even though there may be other people sitting at home doing nothing, who would be willing if asked.

I'm not sure where you get that from?

Any member can get a baby sitter from the group any time simply by finding someone willing to baby sit and then issuing a Baby Hour credit to them afterwards. If the Baby Sit service user has a credit balance it's reduced by x Baby Hours or, if not, their balance goes x Baby Hours further into debit. This is fine, provided they are within their 'guarantee limit' - ie they haven't piled up an excessive debit balance by not doing at least some baby sitting.

ThatBritGuy:

What does the system add that (say) a simple needs/can/will online message board doesn't?

It's not security, because people can still default or abuse the system.

The system does indeed add security because the system 'Pool' of Baby Hours shares the costs of defaults - eg when a member leaves with a big debit balance - across the members collectively. I set out elsewhere on the thread how that works. People being people, defaults will happen, but I think that the system proposed above is superior to the conventional one in sharing the risk without unnecessary rentier profits.

If people abuse the system then after a while they'll find no counter-parties willing to baby sit for them, or have them to baby sit as the case may be. Someone I know who runs commercial barter systems told me how one of his members complained he couldn't find any counterparties willing to deal with him. My colleague pointed out to him that this may have had something to do with the way he fulfilled transactions, because no-one else had the same problem.  

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Tue Nov 17th, 2009 at 12:35:02 PM EST
[ Parent ]
ChrisCook:
This is fine, provided they are within their 'guarantee limit' - ie they haven't piled up an excessive debit balance by not doing at least some baby sitting.

That's where I'm getting that from.

The obvious - to me, anyway - flaw in your system is that when someone defaults, everyone else's balances shrinks, potentially pushing them into a situation where they can't afford to 'pay' for a baby sitter.

ChrisCook:

If people abuse the system then after a while they'll find no counter-parties willing to baby sit for them, or have them to baby sit as the case may be.

So why not just create an hours balance on the message board? It doesn't need a spreadsheet, just some basic adding up. Even monthly accounts for paper scrip would do - as long as you tell people not to hoard it.

People can see who's freeloading, and act accordingly, in one of those rare economic situations where there's a chance they may actually behave like rational actors.

Of course, some people may still choose to baby sit for freeloaders, perhaps because they're bored, they enjoy it, it's no real hassle if the freeloaders are willing to drop off and pick up, or for some other social reason.

That's impossible with your system - at least beyond a certain point.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Tue Nov 17th, 2009 at 01:08:09 PM EST
[ Parent ]
ThatBritGuy:
The obvious - to me, anyway - flaw in your system is that when someone defaults, everyone else's balances shrinks,

Not so.

The balance in the "Pool" (owned in Common) should absorb any loss. What this means is that there may then be a reduced Baby Hour dividend (referred to upthread) to members for a while as the Pool rebuilds.

ThatBritGuy:

So why not just create an hours balance on the message board? It doesn't need a spreadsheet, just some basic adding up. Even monthly accounts for paper scrip would do - as long as you tell people not to hoard it.

Such a registry and transparency is exactly what I advocate for the oil market and of course, also in this case.

ThatBritGuy:

Of course, some people may still choose to baby sit for freeloaders, perhaps because they're bored, they enjoy it, it's no real hassle if the freeloaders are willing to drop off and pick up, or for some other social reason.

That's impossible with your system - at least beyond a certain point.

That is not the case. There is no reason why there should not be 'over the counter' dealings between members which are not settled in Baby Hours within the system: it's a matter of choice.

Babysitting may be done gratis or maybe in exchange for something else entirely in both cases without troubling the system at all. Or even both inside and outside the system eg by settlement in Baby Hours plus a couple of beers....

There is no exclusivity to the system: it's a complementary currency. You appear to be assuming restrictions which may be customary in a conventional system but which are not the case here.

Btw thanks for keeping going on this TBG - there is no better way of testing a model than addressing the issues raised.

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Tue Nov 17th, 2009 at 02:22:26 PM EST
[ Parent ]
If someone is leaving the pool "indebted" (with no realistic possibility to sit out), he/she will be asked to compensate in some way. The Capitol Hill Baby-Sitting Co-op participants were lawyers and other high fruits of Washington, you know.

The scrip/coupon system is an attractive alternative to direct accounting because of no need of checking balances and spreadsheets. So "baroqueness" is a factor in the co-op design. How is your system an improvement on simple bookkeeping?

Isn't it harder to imagine a baby-sitting recession or inflation in a simple bookkeeping system? It is funny then how introduction of "mediator" paper coupons changes behavior of participants.

As any administrative instrument, introduction and control of "wonderful" measures could be managed to do some good for a baby-sitting society, and could be managed to make things more horrible than necessary :-]

by das monde on Tue Nov 17th, 2009 at 02:19:11 AM EST
[ Parent ]
das monde:
The scrip/coupon system is an attractive alternative to direct accounting because of no need of checking balances and spreadsheets. So "baroqueness" is a factor in the co-op design. How is your system an improvement on simple bookkeeping?

Book-keeping is book-keeping: you currently either use cash (scrip) or banks. I agree that scrip is attractive in its simplicity, but it is open to counterfeiting etc. and still has to be issued (how and by whom?) and accounted for. Once it's out there its out there. It does nothing to stop the free-rider problem of people issuing scrip, building up debit balances, and doing no babysitting themselves.

Key problems for the lack of scalability of LETS schemes are firstly the absence of a framework of trust. LETS schemes only work with people who know each other, and indeed they are a great way of enabling people to get to know each other and to build trust. Experience is that around 60 members is probably optimal and 150 members is probably the maximum before a LETS scheme either fragments or implodes.

The second problem is that LETS administration - which covers not just accounting but also communication of 'needs and wants', social events etc - is paper based and burdensome. It often relies upon goodwill - which eventually runs out - or upon systems allocating LETS credits to the managers, which typically builds up unsustainably large balances for them which then silt up the system.

That is why there are numerous fragmented initiatives to automate administration and communication - but all of them rely upon volunteers to develop. If automated - and it is simply a matter of the application of an algorithm to balances - the system I advocate would work just as well as any other.

The outcome would essentially be electronic scrip sitting in your mobile phone, and such systems already exist. I could imagine a Babysitting scheme where participants maintain balances on their mobiles periodically updated (the periodic levy and dividend) by Admin through a tweet-style broadcast.

Members could send out 'request for bids' also via tweets when they need a baby sitter......indeed, it's probably already been done many times. They would then transfer Baby Hours bilaterally by text when they come home.

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Tue Nov 17th, 2009 at 05:46:53 AM EST
[ Parent ]
Ah, you had already covered my point upthreads. An automatic system then.

It does make the bookkeeping and reading your assets easy enough (as long as you can remember the password and the server does not break down). It moves the risk of counterfeiting from user or cashier to the hacker or the system administrator, but with reasonable precautions (like using open source) should work as well or better from the users perspective.

Sweden's finest (and perhaps only) collaborative, leftist e-newspaper Synapze.se

by A swedish kind of death on Tue Nov 17th, 2009 at 08:32:00 AM EST
[ Parent ]
I think that with a small closed community as in the example then password and security are not a huge issue, and could be minimimal in view of the major amount of trust already built in.

No third party is going to hack in in search of Baby Hours which they would have no use for.

It's a bit different for dollars....errr...wait......?

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Tue Nov 17th, 2009 at 08:59:56 AM EST
[ Parent ]
Isn't it harder to imagine a baby-sitting recession or inflation in a simple bookkeeping system? It is funny then how introduction of "mediator" paper coupons changes behavior of participants.

It seems obvious that changing from a bookkeeping noticeboard to something that "looks like money" would change behaviour. In fact, it seems so obvious that it should have already been studied...

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Wed Nov 18th, 2009 at 06:12:59 PM EST
[ Parent ]
But money neutrality is an axiom of neoclassical economics so...

En un viejo país ineficiente, algo así como España entre dos guerras civiles, poseer una casa y poca hacienda y memoria ninguna. -- Gil de Biedma
by Migeru (migeru at eurotrib dot com) on Wed Nov 18th, 2009 at 06:18:31 PM EST
[ Parent ]
So neoclassical economics is a crock of shit.

But we knew that already, didn't we?

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Wed Nov 18th, 2009 at 08:07:33 PM EST
[ Parent ]
But it only deals with getting positive balances moving - it doesn't handle the problems that can occur on the debit side (which aren't mentioned in the example of course).

If participants are obliged to return 20 coupons at departure, falling below those 20 coupons is effectually a negative balance.

If the coupons are depreciating at some rate, you can go into the negative balance just by doing nothing. You can go deeper into "debt", but there is a floor. Wouldn't that be useful and somehow fair "debt" system?

by das monde on Wed Nov 18th, 2009 at 04:49:02 AM EST
[ Parent ]

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