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Three Dimensional Accounting - Chiralkine Redux

by ChrisCook Sun Dec 29th, 2013 at 01:50:44 PM EST

I think that the previous Chiralkine Accounting thread which I kicked off back in April must have generated more comments, heat and acrimony than almost any in ET's history.

But I thought then, and continue to think, that Martin Hay is on to something important, and I promised at some point to post my own thinking on the subject.

I've been pondering the discussion and assimilating Martin's work ever since within my own analysis and world view, and I understand from him that he and his collaborators gained a great deal from the ET experience.

My instinct was that the problem was that Martin's foundational assumptions were mistaken as to the basis of our modern financial system, and this instinct was reinforced by the discussion that took place.

A seasonal update from Martin today gave rise to an 'Aha!' moment when the penny dropped and I was finally able to pull my thoughts together, as follows. This is the responsible extract from Martin's e-mail.

I have realised that if you "resolve" account balances into right and left components, then you can in effect keep a complete history of all currency created, exchanged and redeemed by a person in just a left and a right balance.


This is a long extract from my response to Martin.

The penny finally dropped just now with your reference  to resolving currency account balances into Left and Right handed. While credit is necessarily involved, it is not widely understood, but currency is not actually necessary to create and clear what I term people-based credit, of which more below.

Tally sticks represented One Dimensional accounting; double entry book-keeping represents Two Dimensional accounting, and what you have identified as Three Dimensional accounting represents an advance on the existing approaches to Triple Entry Book-keeping taken by Todd Boyle, Ian Grigg and Satoshi of Bitcoin fame.

In order to create a coherent 3-Dimensional accounting system, it is important to correctly describe what exactly the units of account represent; in what context; and the relationship between Value, Credit and Currency.

Value
Value is not definable, or rather it is definable only in relative terms by reference to a standard unit of measure for Value or 'Unit of Account'.

There are many types of Value, of which only one - Energy - is tangible, and in my analysis there are two other intangible/immaterial sources of value (aka in economic-speak, factors of production): Location (3D Space) and Intellect (Subjective Knowhow and Objective Knowledge) which have a use value over time (which I term utility) which may be priced by reference to a unit of energy as a standard unit of measure for Value.

The key issue in a monetary/fiscal system is, what does the Unit of Account actually represent?

In my analysis, the conventional fiat currency Unit of Account symbols: £, $ or € - represent a negative - because bank promissory notes in the modern monetary system do not represent claims over positive Value (as they did in the days of free banking and Real Bills), but rather a claim over a claim over Value asserted ex nihilo by a credit intermediary aka a bank.

The misrepresentation at the Dark Heart of modern money is the creation of a false positive from a double negative, and the reality is that the $, £ and € unit actually represents a negative value.

Bitcoin and its wave of clones more or less represent a nullity (although some argue that Bitcoin represents a net drain of energy). These coins represent claims over past energy production (Proof of Work), rather than future energy production (Promise of Work). Since the work expended in producing the coin was for the account of the Issuer, then it represents no more value to the coin holder than would (say) a Mars Bar receipt compared to a Mars Bar voucher.

But I digress down a topical byway.

I think we are agreed that a unit of energy represents a positive. I believe that the move to the 'least energy cost' principle which I advocate for energy policy, based upon Denmark's pioneering approach, may be spread virally by using an energy unit of account; creating energy currencies of different types; and using 'energy loans' denominated in energy to invest in renewable energy (Mega Watts) and the lowest hanging fruit - Nega Therms and Nega Barrels of carbon fuel savings.

Credit and Currency
Credit may be defined as a promise by an issuer to provide Value in exchange at a future - uncertain - point in time.

Currency may be defined as an object which is generally acceptable in exchange for Value, and historically has been both a physical object and a credit object/instrument . As such it is a hybrid which has both an intrinsic value in terms of use over time (utility) and an exchange value. The difference between the exchange value and the use value is known as seigniorage.

As stated above, there are three types of value which are relevant to the use of a unit of energy as a metric:

Energy - in static (material) and dynamic (immaterial) forms;

Location - which is immaterial 3-Dimensional Space;

Intellect - in subjective form (knowhow and everything else between our ears); and objective form (data patterns or representations in material or immaterial forms).

People-based Credit
The Value created by people over time (aka Labour) may be de-constructed into two types:

Energy - which is unqualified Labour or 'Manpower'; and

Intellect -  the subjective value which qualifies Labour: this dies with us, but includes knowhow, knowledge, skills, contacts, experience, intuition and much else.

There are other people-based types of Value such as spiritual and emotional value which are measurable with metrics other than energy, but that is another story.

When people issue credit (promissory notes or Real Bills) it is based upon their individual or collective (eg within a corporate constitution/protocol) capacity to provide goods and services in the future.

Now, as I point out here:

The Community is the Currency

such credit is created directly on a Peer to Peer basis by reference to a standard unit of measure for value (unit of account) and may be settled in one of two ways:

Chain Settlement - existing open P2P obligations eg A to B; B to C; C to D; and D to A are settled by the identification and generation of a chain A>B>C>D>A. This credit clearing requires a combination of a framework of trust and a technical/messaging platform which when combined constitute a Clearing Union.

Currency Settlement - other asset-based (Peer to Asset) credit instruments acceptable to the holder of the promissory note are presented in payment and accepted to settle the obligation.

The point I am getting to is that your two Left and Right Handed pairs represent undated people-based credit.....but not currency.  Pricing of undated people-based creditary claims over Value is purely subjective - often involving emotional and even spiritual considerations....some might say irrational albeit not in the accepted mathematical sense.

Currency
In my analysis, the use of location over time and the use of energy over time are locally and generally valuable in exchange respectively, and this makes them both good candidates for currency. Indeed, fiat currencies are largely land-backed, but deficit/debt based.

However, these currencies, being based upon Commons, will in my view be issued by a custodian holding productive assets in common, and they represent a positive with no negative.

Here, I believe, the four Chiralkine objective/rational? number pairs represent the four possible states of 'ownership' of units of asset-based currency which are positives without a negative:

(0,0) neither mine nor yours;
(1,0) mine not yours
(0,1) yours not mine
(1,1) both mine and yours

Both (0,0) and (1,1) represent Zero - ie in logical terms neither/nor & both/and

Conclusion
System users don't need to know how the sausage is made, and chiralkine accounting must be put into effect in a way that is invisible to the user.  This requires the consensual protocols/framework agreements - I call them the Guarantee Society (people-based credit) and Capital Partnership (asset-based credit) which share risk and reward - which frame the mechanisms of credit creation, exchange and settlement of both people-based credits and asset-based currencies.

These are the consensual protocols which I have been developing for a decade, while the necessary generic credit 'prepay'/promissory instrument is a close relation to Ian Grigg's Ricardian Contract.

I envisage for people-based credit mobile phone personal operating systems/payment devices, which generate encrypted promissory notes Bitcoin style. For asset based credit/currency I think we will see local 'energy treasuries' which broadcast encrypted promissory notes as energy dividends and land dividends.


Display:
Yes but - this is all irrelevant if the point of money isn't to account for stuff, but to manage social status.

Now - are you seriously going to argue that social status is irrelevant to economics? Or that the whole point of something like capitalism isn't to organise society on the basis of economic apartheid, in which winners win as big as they can no matter what the cost to the losers?

As I said in the original thread - it doesn't matter which beans you count, or how you count them, if the real object of the game isn't to count beans at all.

Now, I expect you'll post the usual reply stating (without proof) that you believe that energy accounting and peer to peer will Change Everything.

But maybe they won't. How will encrypted promissory notes keep the Tories and Tory-Lites out of Westminster?

Show me a system of objective strategic planning in which irrational considerations of status and snobbery are replaced by rational and effective social strategy and development and I'll accept you have a point.

Until then - no.

And that won't happen any time soon, because the basis of any accounting system isn't rational planning, or rational risk management, or rational anything at all - it's pretending that you understand the world because you can count to three, or four, depending.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Mon Dec 30th, 2013 at 12:20:54 PM EST
Nowhere have I said that the monetary and accounting relationship is anything more than one side of the finance capital coin.

The other side is the Property relationship, which is where credit based directly - Peer to Asset - upon the use over time of productive assets comes in.

I can demonstrate that the use of prepay funding of productive assets - which pre-dates modern  finance capital - not only out-competes conventional debt-based funding, but is emerging in use because it works when no other funding will.

So frankly, I don't give a stuff about social status. The steering wheel came off in the hands of the elites in October 2008; the debt-based financial system is terminally fucked; and a new one is rapidly emerging if you care to look beyond these shores.

Ideology-based politics is pretty much over: in the future the Policy will create the Party.

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

by ChrisCook (cojockathotmaildotcom) on Mon Dec 30th, 2013 at 12:54:05 PM EST
[ Parent ]
I don't give a stuff about social status
At your peril: you are joining a long tradition of mainstream economists who ignored or excised power politics from their economic analysis.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Mon Dec 30th, 2013 at 01:37:31 PM EST
[ Parent ]
Worse, it is in a long tradition of mainstream economists who eliminated those awkward things called "people" from their economic analysis.

She believed in nothing; only her skepticism kept her from being an atheist. -- Jean-Paul Sartre
by ATinNM on Mon Dec 30th, 2013 at 02:00:03 PM EST
[ Parent ]
Really?

Mainstream economists assume that it is only people who are 'productive'.

This ideological assumption, which they share with Marxists, is extremely convenient for them because it justifies leaving Land and Capital untaxed.

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

by ChrisCook (cojockathotmaildotcom) on Mon Dec 30th, 2013 at 04:00:48 PM EST
[ Parent ]
Yes, really.

Marginalists don't do "people." They do "agents," which in some ways may superficially resemble, but in very fundamental ways do not behave like, people.

Also, what Migeru said.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Mon Dec 30th, 2013 at 04:25:16 PM EST
[ Parent ]
Sorry Jake, but an anthropocentric assumption is based - implicitly - upon people.

As for 'agents' marginalists assume intermediated markets.

In a directly connected market there need be no intermediaries; no agents; and no principal/agency problem.

The necessary protocols are simple, and pre-date modern finance capital. Likewise the necessary prepay credit instrument.

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

by ChrisCook (cojockathotmaildotcom) on Tue Dec 31st, 2013 at 06:26:46 AM EST
[ Parent ]
This Time It's Different :-)

Direct instantaneous connectivity is changing everything, particularly via the use of mobile devices such as phones and tablets.

The ability to exercise power is draining away as control over knowledge and knowhow - which is not rivalrous, and is growing exponentially - evades the grasp of those who have historically been able to exercise power over rivalrous land/location and physical capital.

This connectivity will IMHO come to enable what Marx in his early works (he later recanted in the face of State control of the means of production) called the Abolition of Labour, and the Abolition of Property and the Abolition of the State which flows from it.

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

by ChrisCook (cojockathotmaildotcom) on Mon Dec 30th, 2013 at 03:40:31 PM EST
[ Parent ]
Which must be why Google, Apple, and Amazon keep getting smaller and smaller as start-ups out-compete them.

Oh, wait.

Look - idealism is nice and fine, but you have never, ever provided a single shred of evidence that your ideas can have the effects you claim they will.

We all know that non-competitive economics is possible. It happens regularly enough in a few select places - usually ones populated by jolly nice and well-meaning middle-class people who have never had to steal food to stay alive or deal with organised violence.

As soon as you try to generalise that niceness to the culture as a whole, you have to deal in some useful way with entrenched disparities of information, insider trading, market manipulations, resource monopolisation, outright corruption, and a worrying fondness in some circles for war porn and torture.

And you think encrypted mobile doodads are going to fix this? Or Bitcoins? Or energy units you can't trade for energy?

Please do carry on not giving a stuff about status. It simply proves that you're utterly out of your depth politically and historically.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Mon Dec 30th, 2013 at 05:25:10 PM EST
[ Parent ]
My ideas? There's nothing new under the sun.

I'm simply observing what's going on out there, particularly in the developing world,and researching exactly what it was which pre-dated modern finance capital and updating that for application today.

But I don't just talk about it, TBG.

I'm doing it through action-based research on the ground, with community projects - over years - and at macro level advising ten Near East countries on strategic energy policy based on Danish 'least energy cost' principles.

I've now been to Iran seven times,and will be there again twice more - and will be seeing ministers and the Central Bank - in the next three months in respect of energy loan financing and funding.

Also, replacing current inflationary subsidies paid in Rials with a distribution of an energy dividend of prepay energy credits direct to the population using existing mobile doodads - ie an application that works in the here and now - and their existing banking Shetab banking system.

Google, Amazon and Apple will all have to evolve: the age of dinosaurs is over.

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

by ChrisCook (cojockathotmaildotcom) on Tue Dec 31st, 2013 at 05:25:57 AM EST
[ Parent ]
I've got a bit of a cold so I might have missed it, but I am not sure I see the added utility (to your system, tallies and all) of this chiralkine acounting. Is it the automatic resolution of outstanding chains of credit/debt? Are settling those chains without chiralkine acounting a problem in your system?

Sweden's finest (and perhaps only) collaborative, leftist e-newspaper Synapze.se
by A swedish kind of death on Mon Dec 30th, 2013 at 02:30:37 PM EST
From my perspective of Three Dimensional Accounting (Martin and I are attempting to reconcile my perspective with his vision of Chiralkine accounting as I write)there may be several outcomes.

Firstly, individuals will at no point give up control of value transfer to a third party, trusted or otherwise.

ie the power is with the individuals.

Secondly, there is no debt in such a system.

Thirdly, there are no rent-seeking or power-seeking intermediaries in a 3D system.

Chain settlement may or may not be facilitated by 3D accounting, but it is certainly also possible without it.

Fourthly, it is possible, I think, to hard wire security into the architecture in interesting ways, including the use of geo-location.

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

by ChrisCook (cojockathotmaildotcom) on Mon Dec 30th, 2013 at 03:52:02 PM EST
[ Parent ]
Firstly, individuals will at no point give up control of value transfer to a third party, trusted or otherwise.

So if I buy a house from a seller, the transaction isn't monitored or overseen? How does that work, exactly?

I presume (at best) you're assuming there's some kind of automated, unhackable, infinitely flexible and instant transaction processing infrastructure.

Good luck building that. (See also Bitcoin thefts, the Dogecoin scam, etc.)

Secondly, there is no debt in such a system.

There may be no financial credit - i.e. assent for a transaction made by an individual of superior social status on behalf of an individual of inferior social status, which places some obligation on the latter to benefit the former.

It was clear from Martin's scheme there were certainly social obligations.

Thirdly, there are no rent-seeking or power-seeking intermediaries in a 3D system.

So you're going to eliminate them by fiat? I'll ask again - if I happen to run a corporation that provides employment, what prevents me from defining contract terms that benefit me at the expense of my employees/sub-contractors?

by ThatBritGuy (thatbritguy (at) googlemail.com) on Mon Dec 30th, 2013 at 05:36:06 PM EST
[ Parent ]
What we are discussing here is essentially an Apache money server which will be completely invisible to the user, but will securely (I believe that is possible) put him in control.

The bigger picture - the context for this core of generic electronic value transfer - is the physical world and the performance of physical contracts

Naturally there will be a raft of value added services in this field, and yes, housing is a great example of where such services will be provided around a new financing and funding model within what must necessarily be a different enterprise model.

That's where the risk and revenue-sharing protocols come in - which is where the social implications are addressed - and these must be tested in action, which is extremely time consuming. Land-based prototype projects take years, as I know well.

Financial intermediaries will not be eliminated by fiat, but because it is in their interests to evolve to service provision for the simple reason that the requirement for financial capital is then limited to that necessary for operating costs.

That transition to service provision has been visible for over a decade, but was galvanised by the collapse in 2008. Banks have since shifted market risk to 'inflation hedging' customers through a new generation of Index Funds and Exchange Traded Funds which were invested in everything but fiat currency and debt.

That wave is now over, as people have realised that hyper-inflation is a chimera when 99% of people are increasingly illiquid, insolvent or both and that automation and austerity will make a bad situation worse.

We have also seen intermediaries shifting credit risk to customers through P2P finance and funding.

Hello Zopa; Hello crowdfunding, and so on.

The adjacent possible, which brings these two together is the Peer to Peer credit, and Peer to Asset investment I not only have long advocated, but observe emerging.

For instance the Chinese just entered into a multi-billion crude oil prepay deal with Rosneft, who were unable to borrow to fund the purchase of TNK/BP.

As for your nasty corporation, what has held back co-operatives of staff from out-competing them is the absence of funding. Prepay financing (working capital) and funding (fixed capital) solves that problem, and I believe we will see a wave of employee co-operative buy-outs using such financing and funding.

For example, I'm currently working on an employee buyout for Grangemouth refinery (which the Chinese co-owners wish to exit, and almost certainly Ineos do too).

The Petroineos pension fund would plug the existing £200m pension deficit through owning the physical asset and renting it back (a deal similar to exactly what many other commercial firms are now doing to plug pension deficits) while the feedstock will come on credit terms from the same supplier who supplied Grangemouth with crude oil for 60 years.

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

by ChrisCook (cojockathotmaildotcom) on Tue Dec 31st, 2013 at 05:58:48 AM EST
[ Parent ]
What we are discussing here is essentially an Apache money server which will be completely invisible to the user, but will securely (I believe that is possible) put him in control.
Phew, at least you're not proposing to use Windows servers...

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Tue Dec 31st, 2013 at 06:06:46 AM EST
[ Parent ]
We need to talk about TED | Benjamin Bratton | Comment is free | theguardian.com
E and economics

A better 'E' in TED would stand for economics, and the need for, yes imagining and designing, different systems of valuation, exchange, accounting of transaction externalities, financing of coordinated planning, etc. Because states plus markets, states versus markets, these are insufficient models, and our conversation is stuck in Cold War gear.

Worse is when economics is debated like metaphysics, as if the reality of a system is merely a bad example of the ideal.

Communism in theory is an egalitarian utopia.

Actually existing communism meant ecological devastation, government spying, crappy cars and gulags.

Capitalism in theory is rocket ships, nanomedicine, and Bono saving Africa.

Actually existing capitalism means Walmart jobs, McMansions, people living in the sewers under Las Vegas, Ryan Seacrest ... plus - ecological devastation, government spying, crappy public transportation and for-profit prisons.

Our options for change range from basically what we have plus a little more Hayek, to what we have plus a little more Keynes. Why?

The most recent centuries have seen extraordinary accomplishments in improving quality of life. The paradox is that the system we have now -whatever you want to call it - is in the short term what makes the amazing new technologies possible, but in the long run it is also what suppresses their full flowering. Another economic architecture is prerequisite.

this discussion has valence as an affirmation we can do better planning than the current systems permit, it's a holy grail that may not be found for centuries, and Chris' ideas feel like steps towards that elusive goal.

i do agree with tbg that it's characterial issues that stay our progress, more than technical or ideational.

but if we could persuade people to forego the childish need to be 'the king of the castle', 'cock on the dungheap' etc, then we probably would be on the thresh-hold of dispensing with debt altogether.

and if we were that mature we could make any socio-political system work too...

so depending on some super-encrypted currency substitute, whether energy credits or bitcoins, seems like tinkering with the transmission when the engine is missing, it can't hurt to imagine and counterparry, but till we go upriver to the reason all systems are corruptible and will be gamed by the usual suspects.

(... as we contemplate the Great Idea of an unified europe being turned to dogshit before our eyes).

sociopaths need to be indentified (and treated as early as possible) or all our fascination with what form our trust-tokens will take is pretty darn moot.

no disrespect to any here, it's a grand quest, a fun game and the present systems sure need radical reform. i am glad there are the chris' and martins ideating, and equally glad for the scepticism that points out the weak points in the concepts.

if the gold standard was like the 'cosmic constant' whose existence einstein was fooled by, then we need a new theory that will explain the strange attractors and gravities in our financial superstructures.

maybe the money=storehouse of value/particle will co-exist with money=wave of compressed energy.

maybe a perfect system will always elude us, and the best we can do is make it as hard to game as possible. i suspect it will be as tricky as teaching young people not wanting to show off in the same jejune ways their ancestors did, status seeking really deserves ridicule.

hard to uproot, but worth trying as the journey there is always more than just about the arrival...

'The history of public debt is full of irony. It rarely follows our ideas of order and justice.' Thomas Piketty

by melo (melometa4(at)gmail.com) on Mon Dec 30th, 2013 at 07:16:50 PM EST
The BBC publishes an interesting feature.

I ask one of the islanders what would happen if someone was to steal a coconut.

"I'd fill a wheel barrow [with coconuts] and take it round," he tells me. "They're obviously desperate but too proud to ask for one."

by ThatBritGuy (thatbritguy (at) googlemail.com) on Mon Dec 30th, 2013 at 08:37:30 PM EST
[ Parent ]
ta for the link, great read.

'The history of public debt is full of irony. It rarely follows our ideas of order and justice.' Thomas Piketty
by melo (melometa4(at)gmail.com) on Tue Dec 31st, 2013 at 06:17:54 AM EST
[ Parent ]
I think that a combination of gift economy and Star Trek economy of abundance is the end game, and we have a long way to go to reach it.

However, my intuition is that we will do so, and a lot sooner than may be thought possible.

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

by ChrisCook (cojockathotmaildotcom) on Tue Dec 31st, 2013 at 06:21:38 AM EST
[ Parent ]
Economy of abundance? Not sure the abundance assumption would be useful for long.
by das monde on Tue Dec 31st, 2013 at 06:35:15 AM EST
[ Parent ]
Knowledge & knowhow are infinitely abundant: renewable energy is as near infinite as makes no difference.

Bringing the two together is the key.

One of the Big Trades of the 21st century - I call it the Transition Trade - will IMHO be intellectual value traded for the value of carbon fuel savings and renewable energy

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

by ChrisCook (cojockathotmaildotcom) on Tue Dec 31st, 2013 at 08:28:20 AM EST
[ Parent ]
Knowledge & knowhow are infinitely abundant

What?

This is not a TED talk. You can't just make grand-sounding evangelical statements and assume everyone is going to clap, because awesome.

In the real world, knowledge and knowhow are extremely limited. They may - up to a point - be becoming less limited.

But there are still:

  1. A lot of things we don't know how to do.
  2. A lot of things that may be physically impossible.
  3. A lot of knowledge that's either too difficult to access for most of the population, or too difficult to use because it requires unusually rare cognitive skills and/or experience.
  4. A lot of political and financial relationships hidden for political reasons.

So your statement is just plain factually wrong.

It doesn't even make sense. Knowledge is infinitely abundant, but we're still going to use energy units to trade around it? Huh?

by ThatBritGuy (thatbritguy (at) googlemail.com) on Tue Dec 31st, 2013 at 09:12:04 AM EST
[ Parent ]
Oh - and just to add - the Palmerston economy works because it's locally abundant, in that modest local needs are largely satisfied by a self-contained ecosystem and there's no Engine of Growth pushing for greater consumption.

But even there, they seem to have over-fished to the point where they're going to be in trouble soon.

Yes, of course, we'd all like a Star Trek economy. Unfortunately the thing about Star Trek is that it's fiction, not fact.

(And even there the economy only got to that point because of an incredibly destructive war, followed by alien intervention. Not because someone changed the accounting conventions.)

by ThatBritGuy (thatbritguy (at) googlemail.com) on Tue Dec 31st, 2013 at 09:18:02 AM EST
[ Parent ]
Yes, of course, we'd all like a Star Trek economy. Unfortunately the thing about Star Trek is that it's fiction, not fact.
3D printing seems promising, though. But it will be captured by those with legacy political/economic power for their own purposes. Creating artificial scarcity is the easiest way for those in power to preserve their power.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Tue Dec 31st, 2013 at 09:22:03 AM EST
[ Parent ]
There's a big difference between abundance and distribution; and between limitation and lack of access.

1/ So connectivity enables us to learn.

2/ I don't disagree, but I don't think I was saying anything to the contrary.

3/ It was ever thus. But previously inaccessible knowledge can now reach an infinitely greater audience, while those with great skills are now able to connect directly with each other in a way they never could before.

4/ Which are emerging blinking into the light because of....errr....connectivity. Cf Assange, Snowden and a gazillion whistle-blowers.

Are you saying that collaboratively developed intellectual value - which is not just about scientific development but extends to performing arts, media, design - is not growing and spreading exponentially?

If so, I have the rights to Linux and Wikipedia to sell you.

Trade around knowledge? Not quite.

For a transitional period, I see the need for an energy unit of account as a standard unit of measure for exchange of knowledge and knowhow for other value - in particular the value of carbon fuel saved, and renewable energy.

In the long term we will hopefully cease to keep score at all, but in the short and medium term I think we will transition to such an economy of abundance via least energy cost policies.

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

by ChrisCook (cojockathotmaildotcom) on Tue Dec 31st, 2013 at 11:56:25 AM EST
[ Parent ]
I see the need for an energy unit of account
If it is just a unit of account and it is not intended that one energy unit of account be exchangeable for one physical energy unit, why does it need to be an energy unit?

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Tue Dec 31st, 2013 at 12:35:04 PM EST
[ Parent ]
If reduced energy flows necessarily imply reduced economic metabolism, energy is the ultimate currency. Or should we not be close to thermodynamic tendencies?
by das monde on Wed Jan 1st, 2014 at 02:42:32 AM EST
[ Parent ]
Every time Chris Cook is pressed on this point he denies that his energy units are a commodity currency (as "everyone knows" commodity currencies are deflationary, can be hoarded, etc).

But then he oscillates between the arguments that

  1. the "energy unit is a unit of account, not a unit of energy"
  2. we want money units to be denominated in energy in order to do physical energy accounting

which I find contradictory.

Either your unit of account is not a physical unit of energy (in which case, why not call the unit of account 'widget'?) or the unit of account is redeemable for a physical unit of energy in which case it's commodity money.

If it's commodity money, I fail to see how issuing 'energy credits' is avoids the problems of hoarding, cornering and overissue.

If it's not commodity money, denominating money in energy just obfuscates, in the same way that the fact that one pound of sterling silver is not worth one pound sterling makes no sense unless the pound sterling is fiat currency. If the pound sterling is commodity currency, the real economy becomes subject to the vagaries of the stock of physical silver, which is rather a problem.

There is something to be said about accounting in thermodynamic (Gibbs') free energy, but I am yet to see a cogent explanation of how the following issues are resolved or why they are red herrings:

  1. if energy producers can issue pre-pay energy certificates that circulate as money, what prevents them from issuing more certificates than energy can possibly be produced with their resource base?
  2. hoarding of energy credits could stop the economic by starving it of the money to mobilize energy which would otherwise be available


A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Wed Jan 1st, 2014 at 05:24:18 AM EST
[ Parent ]
A unit of account is a standard unit of measure for value.

A metre is a standard unit of measure for length.

A kilogramme is a standard unit of measure for weight.

Can you ever run out of such units? No.

They are benchmark units by reference to which you judge relative value, length and weight respectively.

An energy unit of account will be an absolute unit of energy (ignoring the type of energy) in an amount relevant to everyday experience. So in the same way you don't measure your home's dimensions in angstrom units or light years, you need an amount of energy as a standard unit which is relevant to everyday experience.

The energy equivalent of 10 kilo watt hours of electricity is one such amount.

The energy equivalent of 1 litre of n-Octane combusted at 20 degrees C has been proposed by someone else in the context of a carbon currency. Or there's the energy equivalent of 1 MMbtu of heat. These are all absolute amounts of energy on a human scale.

The efficiency of generation (which determines the relationship between chemical, heat and electricity)  and distribution; the relative position of producers (issuers) of each type, and of consumers, are all factors which affect energy prices, whatever unit of account it is denominated in.

The point being that the different possible types of energy-based currencies (and any other currencies or credits) are distinct from an abstract energy (+ve) or debt (-ve) standard unit of measure against which they are priced.

At the moment we denominate energy prices in a negative unit of account (eg $, € and £) and the application of 'least $ cost' principles and modern finance capital has negative consequences.

The Danes, on the other hand, have for 40 years now been applying 'least carbon fuel cost' policies which have had - and continue to have - positive consequences.

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

by ChrisCook (cojockathotmaildotcom) on Wed Jan 1st, 2014 at 07:51:55 AM EST
[ Parent ]
At the moment we denominate energy prices in a negative unit of account (eg $, € and £) and the application of 'least $ cost' principles and modern finance capital has negative consequences.

The Danes, on the other hand, have for 40 years now been applying 'least carbon fuel cost' policies which have had - and continue to have - positive consequences.

The Danes have been applying "least carbon cost" policies with what you call a "deficit-based" currency. So the logical link between currency and policy does not follow from your example.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Wed Jan 1st, 2014 at 08:12:46 AM EST
[ Parent ]
The link is not necessarily between currency and policy: it is between unit of account and policy. ie the difference between the outcomes of 'least DK cost' policy and 'least energy cost' policy.

The Danes determined to mobilise public investment behind their urgent need for energy security post 1973 oil shock.

They were able to do so because the public sector was institutionally capable - at local level (possibly because of a fiscal base of land value at the time) - to finance and fund renewables and heat infrastructure.

They did not have to resort to the private sector - unless you regard co-ops receiving public guarantees as private - who would of course only fund only 'least DK cost' investment.

Energy currency is essentially an outcome of the energy prepay funding enterprise model. I believe that the use of energy loans for renewables, but more importantly, for heat infrastructure (where we have begun feasibility work on a prototype CHP/heat grid where I live) will enable the necessary investment to be long term funded (development financing could take a variety of forms) in an optimal way.

A local energy currency will merely be an outcome of the model.

If the model works for this site, then there are 20,000 more similar sites in the UK where gas supply is adjacent to neighbourhood sub-stations. In rural areas you are looking at reducing consumption of heating oil and calor gas and using renewables such as Anaerobic Digestion and biomass.


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

by ChrisCook (cojockathotmaildotcom) on Wed Jan 1st, 2014 at 09:36:06 AM EST
[ Parent ]
The link is not necessarily between currency and policy: it is between unit of account and policy. ie the difference between the outcomes of 'least DK cost' policy and 'least energy cost' policy.

The Danes determined to mobilise public investment behind their urgent need for energy security post 1973 oil shock.

They were able to do so because the public sector was institutionally capable - at local level (possibly because of a fiscal base of land value at the time) - to finance and fund renewables and heat infrastructure.

They did not have to resort to the private sector - unless you regard co-ops receiving public guarantees as private - who would of course only fund only 'least DK cost' investment.

And so the Danes were able to achieve the 'least-energy-cost' policy objective without using a monetary energy unit of account. So this is incorrect:
Energy currency is essentially an outcome of the energy prepay funding enterprise model.
It was not an outcome of the Danish experience, is my point.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Wed Jan 1st, 2014 at 09:45:41 AM EST
[ Parent ]
I think Chris is saying that a local energy currency - in addition presumably to the national fiat currency - is a possible (not necessary) outcome of the energy prepay funding enterprise model.

And then in turn

ChrisCook:

the use of energy loans for renewables, but more importantly, for heat infrastructure (where we have begun feasibility work on a prototype CHP/heat grid where I live) will enable the necessary investment to be long term funded (development financing could take a variety of forms) in an optimal way.


Sweden's finest (and perhaps only) collaborative, leftist e-newspaper Synapze.se
by A swedish kind of death on Thu Jan 2nd, 2014 at 06:58:08 AM EST
[ Parent ]
So you denominate your currency in kWh. Fair enough.

Is one kWh of currency redeemable for 1kWh of energy? If not, what is gained by denominating the currency in kWh?

Is the money price of 1kWh of energy necessarily 1 kWh? If not, what is gained by denominating the currency in kWh?

If you calculate that one project with an energy cost of 10kWh has a money price of 1000 and another project with an energy cost of 1kWh has a money price of 10,000... what is gained by having calling the money unit "kWh"? Isn't the optimal policy for the sovereign to issue 10,000 in new fiat currency units to pay for the project with the lower (1kWh) energy cost? What would be gained by denominating this sovereign-issued fiat currency in energy units?

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman

by Migeru (migeru at eurotrib dot com) on Wed Jan 1st, 2014 at 08:19:26 AM EST
[ Parent ]
You have to look at the whole system.

An electricity and/or heat producer will have a cost - denominated in a unit of account - of production of electricity & heat and any prepay electricity and heat unit issuance will reflect this cost. There is then the cost of delivery of energy to the customer.

It is the customer who will be returning the unit against supply received, and it is the customer who is the buyer of last resort of prepay units. Investors know that customers will always buy units if the price of units falls below the market price of electricity supply in the retail market.

It is the use of energy loans - loans denominated in energy - which will completely change the funding of renewables (which are hampered by selling production at crap wholesale prices) and, above all, of the funding of energy savings.

The beauty of energy loans is the absence of compound interest - which cuts funding costs - and the liquidity of prepay for investors.

An energy loan (as opposed to the current £ loan) approach to the UK Green Deal investment scheme in energy efficiency would see investors buy prepay MMbtu of gas or KwH of electricity at the market price or at a discount.

The resulting 'energy pool' fund of £ would then be applied to build energy saving infrastructure (eg Danish style local CHP & heat grid/storage) and energy loans would be made to the properties, not the owners.

The property occupiers then buy back pre-pay units of gas or electricity from the pool/fund at the market price,and this just shows up as another entry in their gas or electricity utility bill. They can afford to do this because the investment will have reduced their energy requirement all things being equal.

The outcome is:

(a) no compound interest (which kills most projects); and

(b) unless they save energy they won't save fiat currency.

The current failed (completely disastrous) Green Deal model sees consumers saving money, but not (Jevon's Paradox) necessarily saving energy.

I don't see sovereigns issuing energy currency unless the State owns all production.  

Having said that, there are some interesting policy options for the ECB if they were to gradually fix the € against an energy standard. For instance, the ECB could announce that it is cancelling and converting all its > €289bn of 'Bin Laden' €500 notes into virtual energy currency.

It could simply facilitate the investment of all this unspendable money, using energy loans, in:

(a)funding by re-financing interest-bearing € loans on existing renewable energy projects;

(b) financing new renewable energy projects;

(c)investment in the really low-hanging fruit of energy efficiency.

Holders of the notes could then return them up to a cut-off date and claim their energy € units. A haircut/amnesty - depending on the degree of criminality of origin - could be applied.

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

by ChrisCook (cojockathotmaildotcom) on Wed Jan 1st, 2014 at 09:17:18 AM EST
[ Parent ]
You are not answering my questions.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Wed Jan 1st, 2014 at 09:22:28 AM EST
[ Parent ]
Ok.

So you denominate your currency in kW. Fair enough.
Is one kWh of currency redeemable for 1kWh of energy? If not, what is gained by denominating the currency in kWh?

No. I denominate exchange in kwh energy equivalent. A currency is the value I exchange goods for, not the value I exchange goods by. There is all the difference in the world, but it's not easy to grok.

One unit of electricity currency issued by a producer would be returnable in payment for 1 kilowatt hour of electricity supplied by that producer to a consumer, probably many miles away. Redeemable implies the holder can insist upon supply, but supply is independent of payment.

Is the money price of 1kWh of energy necessarily 1 kWh? If not, what is gained by denominating the currency in kWh?

I'm not sure what you mean by money price? No money is involved here although you could regard a unit of acciunt and a unit of currency as two different aspects or elements of money as a relationship. A unit of energy currency is being exchanged for other value (or claims over value) by reference to the energy unit of account.

If the exchange is against units of fiat currency then the fiat currency will vary by reference to the energy standard unit of account.

If you calculate that one project with an energy cost of 10kWh has a money price of 1000 and another project with an energy cost of 1kWh has a money price of 10,000... what is gained by having calling the money unit "kWh"? Isn't the optimal policy for the sovereign to issue 10,000 in new fiat currency units to pay for the project with the lower (1kWh) energy cost? What would be gained by denominating this sovereign-issued fiat currency in energy units?

You would appraise any proposal against least energy cost over time criteria and least £ cost over time criteria.

You would then need to obtain the necessary financing for development and funding for operation either as an energy loan from investors or in £ as debt/equity or whatever from investors and/or credit intermediaries, whether public=State or private.

In the former case you use energy loans of prepay energy credits, which no Treasury or Bank (central or private) credit intermediary can issue because they are not energy producers.

In the latter case, sure, interest bearing finance and funding can be created in the normal way.

But the point is that energy loans wipe the floor with interest-bearing loans in every case because no money is being paid for the use of money.


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

by ChrisCook (cojockathotmaildotcom) on Wed Jan 1st, 2014 at 10:19:42 AM EST
[ Parent ]
One unit of electricity currency issued by a producer would be returnable in payment for 1 kilowatt hour of electricity supplied by that producer to a consumer, probably many miles away. Redeemable implies the holder can insist upon supply, but supply is independent of payment.
Is the money price of 1kWh of energy necessarily 1 kWh? If not, what is gained by denominating the currency in kWh?
I'm not sure what you mean by money price?
I mean: if I want to use 1kWh of energy, and I want to pay in cash, how much cash do I need? Do I have the choice of paying in cash or paying with a pre-paid energy certificate of 1kWh denomination?

What, then, do you think it means to ask "what is the price of 1kWh of energy?".

No money is involved here although you could regard a unit of acciunt and a unit of currency as two different aspects or elements of money as a relationship. A unit of energy currency is being exchanged for other value (or claims over value) by reference to the energy unit of account.
Can I use one unit of energy currency in exchange for delivery of two units of physical energy? Or for 1.1 units?

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Wed Jan 1st, 2014 at 10:31:37 AM EST
[ Parent ]
You have to look at the whole system.
<sigh> I am looking at the whole system. That's where my questions come from.

Suppose that you want to finance the construction of additional productive capacity, which will result in, say, 1 MWh of total energy production over the life of the infrastructure.

Suppose that you finance this by issuing prepay 900 units redeemable for 1 kWh of physical energy each, that is, 90% of the total foreseeable energy production.

Suppose after some time, 30% of the total lifetime energy production has been generated and sold, half of which has been paid in cash and half has been purchased by redeeming prepaid units. This means there is 75% of total production in outstanding energy units, and there is 70% of the total energy still to be produced and purchased. This means that now 5% of the outstanding energy units will expire unredeemed. This is why I ask

Suppose you issue prepay credits for 100% of your foreseeable future production. Does that mean you are then unable to accept cash in payment for energy delivered?
Because even if, as you concede
Energy currency issuance has to be managed of course in order to resolve the issues you raise.
for instance, even if you address
if energy producers can issue pre-pay energy certificates that circulate as money, what prevents them from issuing more certificates than energy can possibly be produced with their resource base?
by limiting the number of possible units issued, my example in this comment shows that you also need to restrict the saleability of energy for cash.

So, please, stop insinuating I have not "looked at the whole picture". I'm asking simple questions, detailing definite examples. The least I have the right to expect from you is straight answers. If you don't deliver, you don't get to insinuate I'm being uncivil or unconstructive as you have done.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman

by Migeru (migeru at eurotrib dot com) on Wed Jan 1st, 2014 at 09:39:47 AM EST
[ Parent ]
Any energy producer with a wasting asset will need to manage issuance of units and their exchange for other value, including cash, while units remain outstanding

This requires a suitable regulatory framework including management and a clear agreement.

Clearly I misunderstood the point of your question.

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

by ChrisCook (cojockathotmaildotcom) on Wed Jan 1st, 2014 at 10:28:12 AM EST
[ Parent ]
So the answer to
Suppose you issue prepay credits for 100% of your foreseeable future production. Does that mean you are then unable to accept cash in payment for energy delivered?
is yes?

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Wed Jan 1st, 2014 at 10:33:27 AM EST
[ Parent ]
And there's the man with the gun.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Wed Jan 1st, 2014 at 10:43:34 AM EST
[ Parent ]
Firing blanks. :-)

"The future is already here -- it's just not very evenly distributed" William Gibson
by ChrisCook (cojockathotmaildotcom) on Wed Jan 1st, 2014 at 10:47:52 AM EST
[ Parent ]
That's what you want to believe.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Wed Jan 1st, 2014 at 05:16:49 PM EST
[ Parent ]
You will be able to accept cash in payment.

But it does mean you will - subject to the rues of the scheme - have to buy prepay units from the pool with that cash.

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

by ChrisCook (cojockathotmaildotcom) on Wed Jan 1st, 2014 at 10:47:17 AM EST
[ Parent ]
you will - subject to the rues of the scheme - have to buy prepay units from the pool
And then hoarding and cornering the market for energy units become a problem, contra your
As for hoarding of prepay credits, this is not an issue provided it is transparent, because undated prepay credits give no right to demand delivery (as do dated futures contracts). The hoarder gains no economic benefit from doing this, other than protecting his capital against inflation relative to energy prices.
in response to my
If it's commodity money, I fail to see how issuing 'energy credits' [] avoids the problems of hoarding, cornering and overissue.

...

hoarding of energy credits could stop the economic by starving it of the money to mobilize energy which would otherwise be available.



A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Wed Jan 1st, 2014 at 10:58:00 AM EST
[ Parent ]
Your premise was that 100% of future production is pre-sold, but that's not actually possible using energy prepay units because the future production is not known.

The model we are using in Scotland is for the land-owner to receive an agreed proportion of the flow of production - if there is any. If possible, and at least one turbine manufacturer has gone down this road, we would also allocate a proportion of production to them in exchange for maintenance etc.

This then leaves a balance of an unknown - but relatively certain - future pool of production available for prepay investment.

Investors would be unlikely to buy units issued above a certain %age of those technically available, because of the uncertainties, and in any case, one of the roles of a manager would be to set and police appropriate limits and would apply a haircut.

Holders of prepay credits can either return them against their own use, or sell them to a consumer for use, but the rate of return is limited, literally, to the rate of production, which may be higher or lower than expected.

There is no point in investors hoarding credits because this simply gives a faster return to other investors relative to them, and runs the risk that they will not be able to return all their units.

Consumers will always buy prepay credits if the unit price is less than the physical market price in whatever unit of account they use.

If investors want to liquidate their units urgently, then they will need to sell their units to investors & consumers at the lowest price, and any loss they incur in doing so will accrue to those who are more patient who will return their units faster than they otherwise would have.

In practice, there would always be a cash (or something) surplus available, which could be distributed, or possibly invested as a 'sinking fund' for re-powering the turbine once its design life is up.

In addition to this, there is the possibility of a full partnership arrangement with a manufacturer so that he, too (or rather his funders) receive a return in energy.

Also the question of financing the development of the turbine, with the possibility of issuing and selling rights to units at a discount reflecting the risks at that stage.

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

by ChrisCook (cojockathotmaildotcom) on Wed Jan 1st, 2014 at 02:56:21 PM EST
[ Parent ]
But that is not units denominated in energy - it's just a complex equity position.

That doesn't even fulfill the absolute minimum requirement (Misean regression) for an actively circulating medium of exchange. Nevermind the (stricter) requirements for being "money."

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Wed Jan 1st, 2014 at 03:58:44 PM EST
[ Parent ]
But Prepay IS equity, and not complex equity either, but the form of equity that pre-dates all others.

Undated Stock (prepay) existed long before 'Divine Right of Capital' Shares of 'common stock' in Joint Stock Companies came along.

Prepay in relation to a single project would be pretty illiquid, but if local people were able to present prepay credits in payment for their electricity bill, I think you'd find they become generally acceptable as currency.

I envisage that projects would link up and accept each others' credits within a P& I style managed Energy Clearing Union framework.

Mises? Don't know and don't want to know: you obviously have more patience than me.

But creation and circulation of value is where people-based credit (Real Bills) comes in, and asset-based currency arising from prepay is not strictly necessary to settle that, although it would add liquidity.

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

by ChrisCook (cojockathotmaildotcom) on Wed Jan 1st, 2014 at 10:24:26 PM EST
[ Parent ]
Mises? Don't know and don't want to know: you obviously have more patience than me.
Obviously.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Thu Jan 2nd, 2014 at 03:41:24 AM EST
[ Parent ]
Prepay in relation to a single project would be pretty illiquid, but if local people were able to present prepay credits in payment for their electricity bill, I think you'd find they become generally acceptable as currency.

You're confusing stocks and flows.

The only way you can use an equity stake to pay for anything in any reliable manner is if it entitles you to a flow of stuff. Otherwise you have to hold to maturity before you can trade it for stuff without being at the mercy of speculative noise.

But if your units entitle you to a flow of electricity, then trading will be purely speculative in nature, since you only have reason to sell if you no longer believe that the share of electricity you get justifies the market price, or if your position gets closed out. Purely speculative trades are not sufficient to underpin a stable currency for general circulation.

You can rely on speculative trading to underpin a local currency (see, e.g. Bitcoin). At least for a while. But then you don't get to make grandiose claims about televising the monetary revolution.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Thu Jan 2nd, 2014 at 04:19:33 AM EST
[ Parent ]
You're assuming it's either stock or flow, in the same way that for the last 300 years finance capital has been about either (absolute, infinite ) 'equity' or (absolute, finite) debt.

Prepay is both stock and flow, and it pre-dates conventional finance capital.

I don't lightly say Prepay makes equity, debt and derivatives redundant, and I used to design financial energy instruments and markets for a living.

Existing intermediated electricity markets (all of them) are a public menace, while electricity derivatives (all of them) make a bad situation worse.

I said so at the outset of this market in the UK,and was ignored: I remember telling Nordpool not to go there when their derivative trading still took place on a white board, and was again ignored.

The UK electricity market is a completely toxic mess and IMHO a dis-intermediated spot market connecting producers directly to consumers - with financing/funding via prepay - is the solution.

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

by ChrisCook (cojockathotmaildotcom) on Thu Jan 2nd, 2014 at 06:13:05 PM EST
[ Parent ]
You're assuming it's either stock or flow,

I'm saying you need to be explicit about whether your instrument entitles me to a particular number of kWh (a stock) which I can redeem over time, or to a share of the kWh which happen to be produced at any particular time (a flow). You don't get to hop-skip-jump between selling me a share of production when you fund the project and redeeming a kWh certificate when you deliver the juice.

Forget all the disintermediation and peer-to-peer shit until after you've defined what it is I'm actually buying when I buy one of your units. In terms that an untutored high school student can understand. You don't get to talk market structure before you even have a consistent definition of the product you're trying to peddle.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Thu Jan 2nd, 2014 at 08:57:55 PM EST
[ Parent ]
Your premise was that 100% of future production is pre-sold, but that's not actually possible using energy prepay units because the future production is not known
I was careful on this point, my actual premise was
Suppose you issue prepay credits for 100% of your foreseeable future production.
The model we are using in Scotland is for the land-owner to receive an agreed proportion of the flow of production
Sure, but then I can sell issue certificates as fractions of the flow of production, not as fractions of the stock produced over the lifetime of the plant. And that means I can sell 100% of the flow of production.
Investors would be unlikely to buy units issued above a certain %age of those technically available, because of the uncertainties, and in any case, one of the roles of a manager would be to set and police appropriate limits and would apply a haircut.
No matter. I also had an example in which I did not sell 100% of future production, but 90%. The example works for any given percentage you care to set as that which is reasonable for investors to want to sell. My example was
Suppose that you finance this by issuing prepay 900 units redeemable for 1 kWh of physical energy each, that is, 90% of the total foreseeable energy production.

Suppose after some time, 30% of the total lifetime energy production has been generated and sold, half of which has been paid in cash and half has been purchased by redeeming prepaid units. This means there is 75% of total production in outstanding energy units, and there is 70% of the total energy still to be produced and purchased. This means that now 5% of the outstanding energy units will expire unredeemed.

There is no need to assume an intent to hoard, or an intent to overuse, for this outcome to arise. This is why you conceded
Any energy producer with a wasting asset will need to manage issuance of units and their exchange for other value, including cash, while units remain outstanding
and, further, that if there are more units outstanding than foreseeable production (an outcome that will obtain regardless of ill intent if enough users pay in cash), then
You will be able to accept cash in payment.
If cash is legal tender, you not ony will be able but you will be required to accept cah in payment. This is unfortunate, because
you will - subject to the rues of the scheme - have to buy prepay units from the pool with that cash
which immediately leads to the possibility of hoarding and market-cornering against the producer, as I pointed out. It is then not true that
There is no point in investors hoarding credits because this simply gives a faster return to other investors relative to them, and runs the risk that they will not be able to return all their units.
Wait, now you have reversed yourself. There is a risk buyers of prepay units won't be able to return them if enough production is paid for with cash - which means there is a problem of overselling of units relative to production.

So I see the potential for market instabilities developing in the assets you're proposing, and also that you have not decided whether you want to regulate the outstanding amount of units relative to foreseeable future production, or you want to leave that unregulated and attach a big "caveat emptor" to the energy units: producers are free to sell their production forward and then sell it again on the spot market for cash.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman

by Migeru (migeru at eurotrib dot com) on Wed Jan 1st, 2014 at 05:16:29 PM EST
[ Parent ]
There is a risk buyers of prepay units won't be able to return them if enough production is paid for with cash - which means there is a problem of overselling of units relative to production.

If buyers obtain energy supply from the unit issuer then they can always present credits in payment for their physical supply. If not, then they sell them to consumers who will always buy credits at the best price below the cash market price for credits and return them to take the arbitrage profit.

Gresham's Law reversed: Good currency drives out Bad.

So I see the potential for market instabilities developing in the assets you're proposing, and also that you have not decided whether you want to regulate the outstanding amount of units relative to foreseeable future production, or you want to leave that unregulated and attach a big "caveat emptor" to the energy units: producers are free to sell their production forward and then sell it again on the spot market for cash.

Units outstanding must be both transparent in number and subject to management/quality control/regulation by a service provider in accordance with agreed standards.

But note that this is a 'Peer to Peer', if not 'Peer to Asset', market.

Energy producers have an interest in stable high prices: energy consumers have an interest in stable low prices. For intermediaries stability is death, and if it does not exist they will go out of their way to cause it.

Prepay connects producers directly to consumers. There is no role for wholesale or retail intermediaries in this market.

The spot market price will vary during the day by reference to a unit of account in accordance with whoever is the least cost provider based upon that unit of account. Producers will enter into supply agreements directly with retail customers, who will pay using cash, prepay credits or both.

It depends on the retail billing interval as to how many auctions for prepay credits there will be at which consumers will bid - probably collectively through the manager with the gains shared - for the cheapest credits on offer to use to pay their bills.

There will be bilateral trading in credits for the rest of the time, but there could also be periodic auctions.

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

by ChrisCook (cojockathotmaildotcom) on Wed Jan 1st, 2014 at 10:10:33 PM EST
[ Parent ]
The spot market price will vary during the day by reference to a unit of account in accordance with whoever is the least cost provider based upon that unit of account. Producers will enter into supply agreements directly with retail customers, who will pay using cash, prepay credits or both.
You really have no idea how an electric power transmission grid operates, do you?

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Thu Jan 2nd, 2014 at 03:52:57 AM EST
[ Parent ]
I understand perfectly well how it works, and more to the point I understand perfectly well how it could and hopefully will work within a non-toxic market.

The point is that the combination of prepay and dis-intermediation will completely change the market operation and the economics. The merit order under least £ cost is not the same as the merit order under least energy cost.

Most retail customers have no interest in the spot price at all and would enter into monthly or quarterly supply agreements and tariffs as now, with the difference being that they may acquire prepay credits as an investment/inflation hedge.

The bigger the user the more likely they will participate actively.

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

by ChrisCook (cojockathotmaildotcom) on Thu Jan 2nd, 2014 at 06:29:56 PM EST
[ Parent ]
It depends on the retail billing interval as to how many auctions for prepay credits there will be at which consumers will bid - probably collectively through the manager with the gains shared - for the cheapest credits on offer to use to pay their bills.
As an energy user I have better things to do with my time than play at several electricity price auctions per day. The monopolistic public utility model is superior.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Thu Jan 2nd, 2014 at 03:54:38 AM EST
[ Parent ]
There is a risk buyers of prepay units won't be able to return them if enough production is paid for with cash - which means there is a problem of overselling of units relative to production.
If buyers obtain energy supply from the unit issuer then they can always present credits in payment for their physical supply. If not, then they sell them to consumers who will always buy credits at the best price below the cash market price for credits and return them to take the arbitrage profit.

Gresham's Law reversed: Good currency drives out Bad.

So I see the potential for market instabilities developing in the assets you're proposing, and also that you have not decided whether you want to regulate the outstanding amount of units relative to foreseeable future production, or you want to leave that unregulated and attach a big "caveat emptor" to the energy units: producers are free to sell their production forward and then sell it again on the spot market for cash.
Units outstanding must be both transparent in number and subject to management/quality control/regulation by a service provider in accordance with agreed standards.
Okay, so suppose you issue x% of your foreseeable future production as units and those get bought by a long-term investor that does not intend to liquidate the units early.

Meanwhile, people are buying energy with cash.

At some point, the amount of foreseeable energy production left comes "dangerously close" to the x% energy units outstanding. The management/qualityc contron/regulation kicks by the service provider kicks in. Then a retail consumer comes, intending to buy energy with cash. Do you, as producer:

  • tell them you only accept payment in units, so can they please go buy a unit from an investor before buying their energy?
  • take their cash, and then be forced by the regulator to go buy a unit back from an investor?
  • embed a call option into the energy units, allowing you to accept cash fromthe customer and then force an investor to sell you back one of their units?


A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Thu Jan 2nd, 2014 at 04:02:21 AM EST
[ Parent ]
Consumers will always buy prepay credits if the unit price is less than the physical market price in whatever unit of account they use.
This implies that the market price, even if the unit of account used is the energy unit, will deviate from 1:1.

In other words, suppose the "unit of account" is the kWh. Then, you are explicitly allowing for the possibility that prepay credits (say, for delivery of 1 kWh) may have a unit price (in kWh) which can be less than the physical market price (in kWh).

So the kWh price of a 1 kWh prepay credit need not be the same as the kWh price of 1kWh in the physical market. I suppose, neither of the two kWh prices need to be 1kWh. What, then, is the point of using the kWh as the monetary unit of account for prices?

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman

by Migeru (migeru at eurotrib dot com) on Wed Jan 1st, 2014 at 05:25:36 PM EST
[ Parent ]
The unit of account is the energy equivalent of 10 KwH. Which is also the energy equivalent of x MMbtu of heat or the energy equivalent of y litres of n-octane at 20C yada yada yada.

All units of energy supply and units of energy currency - whatever their type - will vary in price by reference to an absolute unit of energy because they depend upon supply and demand over time and subjective decisions as to value.

Electrical energy is power delivered over time. An energy unit of account does not involve time.

The point of using an energy standard unit of measure for value is that least energy cost policies will save the planet, with precisely the opposite effect to the least $ cost policies which are killing it.

It really is that simple.

Least energy cost policies are based on energy accounting, which in turn is based upon an absolute energy unit of account.

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

by ChrisCook (cojockathotmaildotcom) on Wed Jan 1st, 2014 at 09:20:59 PM EST
[ Parent ]
All units of energy supply and units of energy currency - whatever their type - will vary in price by reference to an absolute unit of energy because they depend upon supply and demand over time and subjective decisions as to value.
So there energy price of energy currency is not stable over time, and you still have not explained why it is a good thing that currency is denominated in energy when its denomination has no relation to the amount of energy it can be exchanged for.

Just call the currency unit the 'widget'. It's less confusing.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman

by Migeru (migeru at eurotrib dot com) on Thu Jan 2nd, 2014 at 03:44:25 AM EST
[ Parent ]
No currency is stable over time other than a dead one.

But it is possible to develop a monetary system which tends to stability, as opposed to tending to instability.

Marc Gauvin has done some mathematically based work in relation to this. You are a better judge of his work than I am.

He and I differ only in relation to our basic assumptions.

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

by ChrisCook (cojockathotmaildotcom) on Thu Jan 2nd, 2014 at 06:38:38 PM EST
[ Parent ]
It's not currency denomination, but the denomination of exchange, which may or may not be on credit terms, and may or may not involve currency.

The outcome of $, € and £ accounting and $, € and £ economics is negative in every sense. The Danes have shown over the past 40 years - albeit implicitly - that energy accounting leads to positive results.

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

by ChrisCook (cojockathotmaildotcom) on Thu Jan 2nd, 2014 at 06:43:36 PM EST
[ Parent ]
It is the use of energy loans - loans denominated in energy - which will completely change the funding of renewables (which are hampered by selling production at crap wholesale prices) and, above all, of the funding of energy savings.

The beauty of energy loans is the absence of compound interest - which cuts funding costs - and the liquidity of prepay for investors.

I don't see this. You're not going to cut the funding costs in energy of energy investment.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Wed Jan 1st, 2014 at 10:11:58 AM EST
[ Parent ]
The cost of energy is zero with renewables (eg solar, hydro, wind) and energy efficiency, however you denominate it.

Using prepay to sell forward - within a partnership framework - the intrinsic value of energy savings or renewables out-competes conventional financing and funding. This is because it minimises economic rents arising from compound interest, profit maximisation and any other rent-seeking.

Funding costs are minimised however you denominate them.

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

by ChrisCook (cojockathotmaildotcom) on Wed Jan 1st, 2014 at 10:42:35 AM EST
[ Parent ]
The cost of energy is zero with renewables (eg solar, hydro, wind) and energy efficiency, however you denominate it.
The energy cost of building and maintaining the plant is not zero.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Wed Jan 1st, 2014 at 10:45:09 AM EST
[ Parent ]
Of course.

Which is why a proportion of production is allocated to maintenance, replacement and so on by the managing partner.

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

by ChrisCook (cojockathotmaildotcom) on Wed Jan 1st, 2014 at 10:50:47 AM EST
[ Parent ]
I will admit straight out of the gate that I am not the sharpest tool in the drawer, but I'm still trying to figure out the need to denominate.  Whatever we denominate in simply becomes the currency peg, with all the resulting drawbacks.  If it's to put some limit on the quantity of currency, first how do we know what limit to apply, and second why bother?  If available energy is the real constraint, that's there whether or not we denominate.
by rifek on Sat Jan 4th, 2014 at 01:28:38 PM EST
[ Parent ]
Energy currency issuance has to be managed of course in order to resolve the issues you raise.

The solution is in my view an energy clearing union using an architecture not dissimilar to the mutual risk sharing Protection & Indemnity (P&I) Club model which has been managed for 135 years by the same firm, Thomas Miller.

Firstly, issuance by energy producers of prepay units would necessarily be transparent - sunshine being the best disinfectant, so all issuance would be visible to clearing union members.

Secondly, one or more service providers would manage the system, and supervise issuance pursuant to agreed clearing union standards.

Thirdly, producers would accept each other's units subject to a mutual guarantee P & I agreement, and a manager would supervise the accounting system and deal with non-performance issues.

Finally, I think we will see the business model of generators and distributors change from intermediation to service provision and partnership agreements. This is because of a carbon-fuelled generator sells electricity prepay units to investors, he will have problems if fuel prices rise beyond his control.

But as I have said many times, it is in fact in the interests of financial and trading intermediaries to do just this because it minimises their need for increasingly scarce and expensive finance capital.

As for hoarding of prepay credits, this is not an issue provided it is transparent, because undated prepay credits give no right to demand delivery (as do dated futures contracts). The hoarder gains no economic benefit from doing this, other than protecting his capital against inflation relative to energy prices.

However, the existence of a 'dark inventory' of opaque prepay credits misleads the market as to the true position in respect of what energy is available for sale. It creates a two-tier market of asymmetric information as between those aware of the prepay contracts and the rest.

Enron defrauded investors and creditors in this way by using opaque 3-way prepay contracts, while BP/Goldman Sachs and above all, the Saudis via JP Morgan, have used crude oil prepay contracts and muppet investor money on a cosmic scale to support oil prices over almost 10 years - with a six month hiatus in 2008.

Prepay is now visibly going mainstream in the wholesale market: for instance, Rosneft are using prepay on a massive scale to fund their buyout of TNK/BP.

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

by ChrisCook (cojockathotmaildotcom) on Wed Jan 1st, 2014 at 08:24:35 AM EST
[ Parent ]
Suppose you issue prepay credits for 100% of your foreseeable future production. Does that mean you are then unable to accept cash in payment for energy delivered?

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Wed Jan 1st, 2014 at 08:29:08 AM EST
[ Parent ]
For my context, I first refer to the reply to Jake immediately below.

Sure, money can cause (and escalate) scarcity problems most immediately. But scarcity of physical resources is a realistic possibility as well. When physical resources are scarce, how much can money help or add to hurt? We do not know much about that at all - because the industrial revolution was happening under constant expansion of various resources.

The current pity economy might have purely monetary reasons. We can still expand physical resources, we just need to solve finances in a human way. But... limits of physical resources were anticipated precisely around this time. We might solve monetary problems in smart ways, but would that solve limits and hoarding of physical resources?! Your two questions just have very different meaning in the worlds with different proximity to physical scarcity.

by das monde on Wed Jan 1st, 2014 at 08:36:41 AM EST
[ Parent ]
It is precisely for the economics of scarcity that you absolutely need to decouple your unit of account and standard of deferred payment (i.e. your money) from any physical resource whatever. Because nominal cash flows must grow without bound in order to prevent default cascades.

The physical economy obviously cannot expand exponentially.

The cash flows within that economy have to (nominally) expand exponentially, or the entire network of mutual obligations that binds industrial society together falls apart. Messily and, more to the point, painfully.

Money can therefore not be tied to any real value whatever. Full stop, end of story, curtain, exit stage right.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Wed Jan 1st, 2014 at 10:36:52 AM EST
[ Parent ]
The economics of scarcity has always been self-serving bollocks.

Use of energy over time is always valuable in use no matter what its exchange value may happen to be.

Vastly increasing low cost energy production would not cause inflation: it would simply - if the fruits were equitably spread (which is where the difficulties of rivalrous factors of production come in) - make everyone richer in the intrinsic value of energy.

But I keep coming back to the point that a unit of account is not the same thing as a unit of currency. Both are elements of a monetary system.

Your point is valid about the undesirability of currency being tied to real value.

Currency issuance, clearing and returns/redemption always need to be carefully managed by professionals with a stake in the outcome and supervised by a monetary authority.

A standard unit of measure for value or unit of account is a concept independent of the value priced against it.

It just is what it is, but with the difference that an absolute unit of energy is - as far as I know - the only absolute positive relevant to everyday experience.

Adopting an energy standard, and using least energy cost policies, is the only way IMHO to achieve economic growth while reducing demands on real world resources.

If you can think of another, be my guest.

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

by ChrisCook (cojockathotmaildotcom) on Wed Jan 1st, 2014 at 11:14:37 AM EST
[ Parent ]
A standard unit of measure for value or unit of account is a concept independent of the value priced against it.

What is the point of denominating a monetary instrument in kWh if a monetary instrument of face value 1 kWh is not redeemable for precisely 1 kWh of physical energy?

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman

by Migeru (migeru at eurotrib dot com) on Wed Jan 1st, 2014 at 12:01:42 PM EST
[ Parent ]
Adopting an energy standard, and using least energy cost policies, is the only way IMHO to achieve economic growth while reducing demands on real world resources.

If you can think of another, be my guest.

Using least.energy.cost policies, financed by sovereign issue of fiat money denominated in totally arbitrary units.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Wed Jan 1st, 2014 at 12:11:08 PM EST
[ Parent ]
Least energy cost involves accounting in energy, not accounting in arbitrary units.

Unless fiat currency is denominated in energy you will get distortions generated by fiscal and monetary policy.

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

by ChrisCook (cojockathotmaildotcom) on Wed Jan 1st, 2014 at 01:42:11 PM EST
[ Parent ]
The point of fiscal policy is to maintain full employment and to set economic incentives.

The point of monetary policy is to accommodate fiscal policy and assist financial stability.

Accounting in energy is for engineering design. If you decide you want a certain level of energy use, fiscal policy should be set to enable it.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman

by Migeru (migeru at eurotrib dot com) on Wed Jan 1st, 2014 at 04:56:53 PM EST
[ Parent ]
Use of energy over time is always valuable in use no matter what its exchange value may happen to be.
And that is precisely why energy value in use must not be the standard of monetary value in exchange.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Wed Jan 1st, 2014 at 12:12:38 PM EST
[ Parent ]
Ok.

What do you think is the difference between least energy cost and least € cost?

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

by ChrisCook (cojockathotmaildotcom) on Wed Jan 1st, 2014 at 01:29:57 PM EST
[ Parent ]
Least energy cost is an engineering constraint. Least Euro cost is a political constraint.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Wed Jan 1st, 2014 at 01:32:34 PM EST
[ Parent ]
Both involve accounting do they not?

"The future is already here -- it's just not very evenly distributed" William Gibson
by ChrisCook (cojockathotmaildotcom) on Wed Jan 1st, 2014 at 01:43:27 PM EST
[ Parent ]
I thought the word accounting was used exclusively for business and book-keeping and such?

With some experience of both, I would say that counting least energy cost and book-keeping has very different approaches. One is an attempt to model energy costs in the actual world, where the limits is set by how complex the model can be and still be workable and the other is working within a model that has been decided for you and innovation is limited to what you can get away with.

So even if the same word can be used in english, it is not the same in practise.

But does this mean that what you are suggesting is not a unit of account for book-keeping purposes, but a standrad measure for engineering purposes?

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

by A swedish kind of death on Thu Jan 2nd, 2014 at 07:40:56 AM EST
[ Parent ]
If money has to be so transparently inflationary, it looses the wealth holder function. The wealthy can deal with that in several ways: take over control of the money; corrupt the governments; ditch the money for really valuable assets (say, resources). Not only money policy has to be robustly public, but resource policy (and perhaps ownership) would have to be public as well. And what that resource policy should be? How it is to keep the most social course, with what enforcement?

My broad point is that economy of physical abundance (as enjoyed by the industrial revolution) and economy of actual scarcity of key resources are two very different animals. Any abstract accounting scheme should first answer the question: which economy it is addressing?

by das monde on Wed Jan 1st, 2014 at 09:09:21 PM EST
[ Parent ]
Inflation is financially stabilizing.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Thu Jan 2nd, 2014 at 03:45:24 AM EST
[ Parent ]
If money has to be so transparently inflationary, it looses the wealth holder function.

That is a commonly held misconception.

Money does not need to be a perfect store of purchasing power in order to serve its function as store of value. It merely has to be sufficiently superior to the next-best alternative. And in this determination, one must consider the full cost picture - including the hassle of trading in and out of your alternative store of value every time you want to make a purchase.

Money doesn't stop being a viable store of wealth for the sort of time frames where money should be used to store wealth until the rate of inflation goes some way north of ten per cent per year. You can easily maintain a healthy 6 % rate of inflation and not notice any ill effects.

Money should not be used to store wealth on an intergenerational time scale. If you do not intend to exercise your claims to enjoyment for two decades, then it is perfectly fair that society insists that you must invest them in productive affairs, or be penalized to the tune of three quarters of your initial purchasing power.

The wealthy can deal with that in several ways: take over control of the money; corrupt the governments; ditch the money for really valuable assets (say, resources). Not only money policy has to be robustly public, but resource policy (and perhaps ownership) would have to be public as well. And what that resource policy should be? How it is to keep the most social course, with what enforcement?

Politics is hard. A macroeconomic strategy that actually works will be resisted by incumbent interests. Macroeconomic planning involves more than just the bottom line of the appropriations bills.

Who'da thunk?

My broad point is that economy of physical abundance (as enjoyed by the industrial revolution) and economy of actual scarcity of key resources are two very different animals. Any abstract accounting scheme should first answer the question: which economy it is addressing?

No, from the point of view of designing an accounting system there is no difference between plenty and scarcity. Because accounting is entirely about who holds the power. And power is always a zero-sum game, under resource plenty and under resource scarcity. So resource availability is a complete red herring.

More to the point, an accounting system must be robust against both contingencies, for the same reason your constitution should be.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Thu Jan 2nd, 2014 at 04:34:42 AM EST
[ Parent ]
If we are talking about scarce resources, a good alternative to money (for wealth storage) is already there - those same resources. Too bad for the condition of being superior to the next-best alternative.

Politics is easily very one-sided now. The political world is not really looking at harmonious co-existence problems at all.

I disagree about this:

Because accounting is entirely about who holds the power. And power is always a zero-sum game, under resource plenty and under resource scarcity.
With plenty resources and economic growth, there is a lot of room for everyone getting positive returns. When resources are scarce, that is when real power games (and pain) start.
by das monde on Thu Jan 2nd, 2014 at 08:22:30 AM EST
[ Parent ]
If we are talking about scarce resources, a good alternative to money (for wealth storage) is already there - those same resources. Too bad for the condition of being superior to the next-best alternative.

Not for time scales of < 12 months.

And for time scales of > 12 months, I want people to store their wealth in not-money.

That is not a bug. That is a feature.

With plenty resources and economic growth, there is a lot of room for everyone getting positive returns.

Except in the colonies. The good old days were pretty fucking horrible, most of the horror show was just hidden away in hot, humid countries where people look funny and don't speak your language.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Thu Jan 2nd, 2014 at 10:56:17 AM EST
[ Parent ]
I did not talk how the potential for widespread positive returns plays out in actuality. Most participants usually get marginal pittance of positive returns - that's classical economy. But even that is way much better than pricking the growth bubble.

Two things about colonies. They would take any Cargo, and pre-colonial times is not even an idyllic legend there. Secondly, post-colonial (or even post-apartheid) financial regimes are just as ruthless as colonialism (though less physically so).

by das monde on Thu Jan 2nd, 2014 at 07:06:56 PM EST
[ Parent ]
That is my point you are making for me:

The problem is first and foremost political. It may be that the technical solutions available are inadequate. But we do not know this, because for political reasons they have not been attempted. And presuming that the available solutions are inadequate empowers the political opposition to those solutions.

Which you do not want to do, because even if the solutions are inadequate to solving the problem (which we do not yet have any reason to believe), they remain fully adequate to mitigate the problem. Which we should be doing.

There is a certain strain of pseudo-environmentalist bullshit which adheres to a gospel of Salvation through Asceticism: That we must cast aside the base temptations of industrial society and regress to a more spiritually connected pre-industrial state of nature. This is not only an irrational view, it is a downright immoral one.

To suggest that we should just give up and go quietly into a long night of pre-industrial squalor is such a base betrayal of the human condition that I find myself incapable of adequately conveying my disgust for it through any syntactically valid English sentence.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Thu Jan 2nd, 2014 at 09:18:27 PM EST
[ Parent ]
Civilization joys have a price tag, especially for periferies. They often pay quit a lot for cargos, even if they have no timely clue for regrets. The layest housing bubbles asked many to risk and pay dearly, in particular. At some stage, a walk away from latest civilization offers may be rational and moral - as a real show, who produces value, in a symmetric (and just) retort to the theme of Rand's "Atlas shrugged".
by das monde on Fri Jan 3rd, 2014 at 01:07:45 PM EST
[ Parent ]
Refusing the joys of civilization also has a price tag. Specifically, a probability well in excess of 50 % that you will not be among the surviving members of the species, and in excess of 50 % probability that you will not live to be 50 years old even if you are one of the lucky ones from the first part of the sentence.

To put it bluntly, in pure mortality terms, even the British empire - which is just about the most evil thing to walk the Earth since Caligula - probably did not do much more harm than it did good.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Fri Jan 3rd, 2014 at 08:44:15 PM EST
[ Parent ]
Hmmm. I guess, life expectancy of animals in zoo cages is markedly higher than in wildlife
by das monde on Sat Jan 4th, 2014 at 06:31:09 AM EST
[ Parent ]
Indeed, and most people will happily make that trade as well in order to escape the "state of nature." So if you are hitching your environmentalist wagon to some naive flower child idea of freedom through deep connection with nature...

... then you will lose. Hard. And deservedly.

Because nature sucks, and most people are acutely aware of this.

Environmental concerns are pretty simple and compelling when you get right down to brass tacks: Don't shit in your drinking water, don't eat your seed grain, don't kill off your fish stocks. Simple, obvious, commonsense advice. It does not need to be, and does not benefit from being, wrapped in neo-Luddite rhetoric or New Age nature-worship.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Sat Jan 4th, 2014 at 06:47:17 AM EST
[ Parent ]
The song is not about hunter-gathering environmentalism, my friend. When resources to run the zoo will start running short indeed, the sight won't be pretty. Some will make the least dependant choices in advance, despite massive conditioning to follow approved "human nature".
by das monde on Sat Jan 4th, 2014 at 11:48:57 AM EST
[ Parent ]
But power != positive returns.

Power is collected and hoarded because it can be, entirely for its own sake.

Resources can be made less scarce through innovation and intelligent reality-based planning.

Power is always rationed, and extremely scarce, pretty much by definition.

The next true revolution will be the dissolution of today's pseudo-aristocracies, and their replacement by rational planning - in the practical, adult sense, with power distributed on the basis of competence, social responsibility, and creative insight, not on baboon logic, as it is today.

But it's a long road from here to there, not least because so much of the population has absolutely no idea how power really works, or how little of it they have.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Thu Jan 2nd, 2014 at 11:20:08 AM EST
[ Parent ]
Power is exerted by pre-empting other people.

This is the point of hoarding and hard money: to deny resources to others.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman

by Migeru (migeru at eurotrib dot com) on Thu Jan 2nd, 2014 at 11:24:32 AM EST
[ Parent ]
What I suggest is to stop thinking in absolutes. There is no power in thinking, that there is the best "end game" accounting, the best way to survive, get surpluses or exercise power, that these things are not evolving.

How much do classical Darwinian principle apply to the increasingly poluted and diminishing biosphere? Or to the radioactive North Pacific, in particular?

Gathering power just for power's sake is child's play compared to the power motivation at the historical moment when the unprecedented industrial revolution is hitting resource limits. Baboon logic is then possibly the best one we got, as it evolved always in touch with survivability limits. No surprise that we see working of power more clearly now.

by das monde on Thu Jan 2nd, 2014 at 06:55:57 PM EST
[ Parent ]
If reduced energy flows necessarily imply reduced economic metabolism, energy is the ultimate currency. Or should we not be close to thermodynamic tendencies?

Let me answer your question with a question:

What is the social function of money?

Money, after all, is a social institution, not a law of nature. So why keep it around? What does it do for us?

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Wed Jan 1st, 2014 at 06:48:37 AM EST
[ Parent ]
Your question touches my deepest suspicions, so let me be intellectually impolite a little.

When subjects of overpopulation, resource scarcity are brought up, a reasonable retort is that historically, population waves closely follow economic pressures. That is rather undeniable. What this means is that economic/financial pressures have more immediate and powerful effect than long-term demographic threats. Direct anthropogenic overshots are rare - or they are well masked by economic turmoil. Apparently economic cycles are sensitive enough to prevent an overshot before it really kicks in. But there is other possibility (either unique for the current state, or not). Certain elites may foresee the overshot drama, and (for whatever reasons) they perceive that the best way to resolve it (for themselves, foremost) is to employ covertly the more immediate economic/monetary pressures.

In effect, money is a substitute for energy in the more immediate social-economic cycle. If humanity were to deal with bare ecological overshot, energy would be the ultimate currency as I say. But if there is indeed that kind of perceptive elite, they would be interested to obscure the substitute relation between energy and money, and to downplay the role of energy.

Or consider this way. Mr Humanism and Dr Overpopulation walk into a bar. What would they agree upon? That the most humane method to control overshot population is a global economic depression, no?

by das monde on Wed Jan 1st, 2014 at 08:18:09 AM EST
[ Parent ]
In reality, "economic pressures" are being used to argue that "we can't afford" a transition to a more energy-efficient economy. Would this be solved by energy accounting?
At present, monetary austerity is being used as an argument for environmental business as usual ("we cannot afford the investment needed to transition to a green energy economy"). This is a conceptual mistake of mixing resource austerity with money austerity, but if you believe money should map resources, you can't break the link between money austerity and resource austerity. The fact is that MMT through "functional finance" provides a way to justify that yes, we do (if only we have the political will) have the money to mobilize the resources necessary for the massive investment involved in a wholesale transition to a green energy future. This is akin to Keynes' quip that
Thus we are so sensible, have schooled ourselves to so close a semblance of prudent financiers, taking careful thought before we add to the `financial' burdens of posterity by building them houses to live in, that we have no such easy escape from the sufferings of unemployment.
We may in fact paraphrase Keynes: "Thus we are so sensible taking careful thought before we add to the financial burdens of posterity by building them windfarms to power their society, that we have no escape from the sufferings of environmental destruction".
(quoting myself)

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Wed Jan 1st, 2014 at 08:24:00 AM EST
[ Parent ]
A more energy-efficient economy (plus development of renewable resources) might be satisfactorily possible - even to my conjectured "perceptive elites". But that is not certain, I have to say.

First of all, exponential utilization growth will catch linear (or limited) resource growth any time. You know that question: Bacteria doubles every day in a pool; when the pool will be half-utilized? The answer is: One day before it is fully utilized.

A big efficiency effort might allow the civilization growth to several times larger volume - but that will take a limited time, and we would be against growth limits soon anyway. That would be very unsatisfactory to "perceptive elites". After all, they do not just want to survive for much longer periods of time. They want to survive in style. Their perception that efficiency and renewables should be avoided or obstructed for now would have some rationale.

by das monde on Wed Jan 1st, 2014 at 08:50:24 AM EST
[ Parent ]
Your argument is muddled. You seem to be arguing on one hand that the power elites will want a commodity currency, because that is the easiest way to catastrophically impoverish (note: You do not need to kill people to make their resource footprint go away) surplus population. And on the other hand that we should make commodity accounting explicit in order to... what exactly?

I know, and Migeru knows, and everybody who has been awake and paying attention at any point over the last two fucking centuries knows that commodity money is the easiest way to catastrophically impoverish surplus population.

This is why we do not want commodity money.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Wed Jan 1st, 2014 at 10:59:22 AM EST
[ Parent ]
Energy accounting is not commodity accounting.

"The future is already here -- it's just not very evenly distributed" William Gibson
by ChrisCook (cojockathotmaildotcom) on Wed Jan 1st, 2014 at 11:15:49 AM EST
[ Parent ]
Don't call it "commodity", call it "specie".

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Wed Jan 1st, 2014 at 12:02:42 PM EST
[ Parent ]
Same applies.

An absolute unit of energy is not an object or thing. It is a concept.

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

by ChrisCook (cojockathotmaildotcom) on Wed Jan 1st, 2014 at 12:19:52 PM EST
[ Parent ]
An instrument denominated with reference to a definite multiple of the absolute unit of energy is a thing.

An amount of energy equal measurable as a definite multiple of the absolute unit of energy is also a thing.

Is there a definite relation between the two things? In particular, is there a relationship between the two things, in exchange?

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman

by Migeru (migeru at eurotrib dot com) on Wed Jan 1st, 2014 at 12:25:17 PM EST
[ Parent ]
I'm not sure if I quite understand you here, and will re-state in my terms.

A prepay credit instrument returnable in payment for 1 kilo watt hour of electricity will have a value in exchange by reference to a unit of account.

It is a thing.

A measured physical supply of electricity over time also has a value in exchange by reference to a unit of account.

It is also a thing.

Both of these things/objects - one physical and manifested in one form or another, the other financial, and essentially imaginary -  will vary independently in exchange by reference to a unit of account.

The question is what does that unit of account represent?

In my view a € represents either a negative value (if created by banks when creating debt) or a nullity, if simply created and issued by the ECB.

A unit of energy, on the other hand, appears to me to represent a positive value.


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

by ChrisCook (cojockathotmaildotcom) on Wed Jan 1st, 2014 at 02:07:22 PM EST
[ Parent ]
The question is what does that unit of account represent?

The will and ability of society to enforce claims at some future date. In extremis, the will and ability of men with weapons to inflict extreme discomfort upon somebody because he does not perform his obligations to some other member of society.

That is what a unit of account always represents, because that is what makes it the unit of account.

And that is why you have not understood your accounting system unless you can tell me where the man with the gun is.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Wed Jan 1st, 2014 at 04:04:59 PM EST
[ Parent ]
And that is why there's no reason why the unit of account needs to be something "real" like a kilowatt-hour rather than something imaginary like a Euro.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Wed Jan 1st, 2014 at 04:45:10 PM EST
[ Parent ]
My claim is stronger than that.

My claim is that no currency is ever actually denominated in specie. While you are, of course, permitted to pretend that you are denominating your currency in specie, the reality is that all currency is denominated in organized violence.

A "silver dollar" is precisely as imaginary a denomination as a "US dollar." Because what makes the silver dollar a currency denomination, rather than merely a lump of mostly inert metal, is the social organization backing its use as unit of account and standard of deferred payment.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Wed Jan 1st, 2014 at 05:51:25 PM EST
[ Parent ]
I'd suggest the balance is between faith on one hand - money is worth more when you believe in its future use value - and violence on the other.

Hyper-inflation happens when a culture loses faith in the future value of its own currency. Deflation happens when a culture loses faith in its future, period.

It's possible to profit from both, but - unless you're directly involved in engineering hyper-inflation or deflation - that's largely incidental to the main point.

Ultimately certain individuals become rich because they are prepared to use more or less overt forms of violence - which doesn't have to be physical, but can be - against other members of their own culture.

This includes gaming any system that make an assumption of fair play.

Which is why changing the units of anything is such a politically nonsensical notion. You have to solve the problem of violence first.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Wed Jan 1st, 2014 at 07:12:44 PM EST
[ Parent ]
The unit of account is not the kilo watt hour, which is power over time, but its energy equivalent.

The € could be fixed against such an energy standard  unit tomorrow and everything would change but nothing would change. The € would cease to be imaginary and would take on very clear meaning, as the whole process of credit creation and investment changes.

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

by ChrisCook (cojockathotmaildotcom) on Wed Jan 1st, 2014 at 10:41:21 PM EST
[ Parent ]
The unit of account is not the kilo watt hour, which is power over time, but its energy equivalent.
The kWh is a unit of energy. The kW is a unit of power. The kWh is not power over time, but power times time.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Thu Jan 2nd, 2014 at 03:39:14 AM EST
[ Parent ]
Agreed.

When I say 'over' I do not mean 'divided by': 'times' will do nicely.

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

by ChrisCook (cojockathotmaildotcom) on Thu Jan 2nd, 2014 at 06:48:37 PM EST
[ Parent ]
A prepay credit instrument returnable in payment for 1 kilo watt hour of electricity will have a value in exchange by reference to a unit of account.
What if the unit of account is the kilo watt hour? Does the value in exhange necessarily have to equal 1 kilo watt hour?

If not, what is gained by using the kilo watt hout as the unit of account for value-in-exchange?

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman

by Migeru (migeru at eurotrib dot com) on Wed Jan 1st, 2014 at 04:44:02 PM EST
[ Parent ]
As stated elsewhere, the energy equivalent of a kilo watt hour is an absolute amount of energy.

The physical supply of energy takes place as power delivered over time to a particular location.

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

by ChrisCook (cojockathotmaildotcom) on Wed Jan 1st, 2014 at 10:32:03 PM EST
[ Parent ]
the energy equivalent of a kilo watt hour is an absolute amount of energy
is the "absolute amount of energy" different from a kilo watt hour?

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Thu Jan 2nd, 2014 at 03:47:42 AM EST
[ Parent ]
It is an absolute unit: a concept like a metre or kilogramme.

It is dissociated from the type of measurable energy - such as electricity - in respect of which it may be a standard unit of measure.

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

by ChrisCook (cojockathotmaildotcom) on Thu Jan 2nd, 2014 at 06:52:46 PM EST
[ Parent ]
I do not think that the main issue of the Great depression of the 1930s was commodity-backed currency. The current situation since 2008 is certainly not related to commodity currencies (as there are none). The main driver of big crises is financial bubbles leading to massive debt overhangs. That is not easy to resolve quickly with any financial regime, as Japan showed. The secondary issue is where the power balance (to resolve unrealistic debt) shifts. It looks like creditors learned well how to control this power balance for the ongoing crisis. We have series of Quantitative Easings impoverishing populations like no commodity money ever did.

I do not equate "perceptive elites" with power elites. Many power elites are left to act ignorantly. I do imagine some practical intellectuals (like neocons, Brzezinskis, Kissingers) being concerned about overpopulation and eager to resolve it privately with least dud power holders. "Energy=money" (in certain regimes) could be their cognitive conclusion; what they would do with it is entirely different matter.
 

by das monde on Wed Jan 1st, 2014 at 09:35:29 PM EST
[ Parent ]
Financial crises are caused by debt overhangs, and they turn into depressions by deflationary monetary and fiscal policies.

The 1930s crisis turned into a depression because of the gold standard and the countries that exited the gold standard earlier recovered earlier. The current crisis is turning into a depression because the Euro is being managed as if it were not a fiat currency.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman

by Migeru (migeru at eurotrib dot com) on Thu Jan 2nd, 2014 at 03:50:10 AM EST
[ Parent ]
What is a debt overhang until a bubble bursts? Nothing is officially hanging then.

Not only euro, but dollar, yuan, even yen and what not are performing "harder" than gold standard. I am in Japan now for a few weeks. Particularly, I can compare Fukuoka now and what it was 10 years ago (where I lived for 3 years). There are nice (though not overwhelming) expansions or renovations: the Hakata train station, Canal City, a central park. But there is more blight as well. Neon lights on the Nakasu river and in the airport area are less plentiful, with empty spots. Less food stalls to shrines for New Year traditions. Nightlife less lively, dirty entertainment outlets far less sprawling. Abenomics does not match the lost decade, clearly.

by das monde on Thu Jan 2nd, 2014 at 08:09:34 AM EST
[ Parent ]
What is a debt overhang until a bubble bursts? Nothing is officially hanging then.
But a bubble bursting does not need to turn into a depression, unless monetary and fiscal policy make matters worse.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Thu Jan 2nd, 2014 at 08:16:17 AM EST
[ Parent ]
If a bubble leads to massive debt overhangs, how other factors make a difference?
by das monde on Thu Jan 2nd, 2014 at 08:26:35 AM EST
[ Parent ]
Can we take this to another diary?

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Thu Jan 2nd, 2014 at 09:03:47 AM EST
[ Parent ]
Sure. I am on a move though.
by das monde on Thu Jan 2nd, 2014 at 09:24:29 AM EST
[ Parent ]
I do not equate "perceptive elites" with power elites. Many power elites are left to act ignorantly. I do imagine some practical intellectuals (like neocons, Brzezinskis, Kissingers) being concerned about overpopulation and eager to resolve it privately with least dud power holders. "Energy=money" (in certain regimes) could be their cognitive conclusion; what they would do with it is entirely different matter.

Yes of course the smart members of the power elite wants a commodity currency. Smart members of the power elite have been in favor of commodity currencies since before the industrial economy really took off.

This is because commodity currencies inherently favor incumbent interests.

How does this make commodity currencies a good thing?

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Thu Jan 2nd, 2014 at 04:40:16 AM EST
[ Parent ]
The real issue is not what choice is a good thing. The questions are: Who enacts choices? Why our sort of progressive choices have no impact in this world? Is there more behind than meets the eye?
by das monde on Thu Jan 2nd, 2014 at 07:40:53 AM EST
[ Parent ]
And so the real domain of discussion is politics, not engineering or accounting.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Thu Jan 2nd, 2014 at 07:45:33 AM EST
[ Parent ]
If some preparations for resource scarcity started a while ago, we have very novel, tough politics already.
by das monde on Thu Jan 2nd, 2014 at 08:30:03 AM EST
[ Parent ]
If the human population overshoots hard enough to default to a commodity currency by necessity rather than by choice, then it has overshot hard enough that it will not retain a monetary contract economy. In that case, what it uses for currency will not greatly matter, because currency will serve only a very limited social function.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Wed Jan 1st, 2014 at 11:01:18 AM EST
[ Parent ]
das monde:
Apparently economic cycles are sensitive enough to prevent an overshot before it really kicks in.

Depends on what you mean with economic cycles. Number of children have in agricultural societies been mostly dependent on proportion of women married, age of marriage for women (or start of reproductive sex if you want to be explicit about it) and customs that lead to shorter or longer postpartum anovulatory period (mainly longer or shorter periods of breastfeeding). These are not very responsive to short-term cycles. Proportion of married and age of marriage has in many cultures been connected to getting a plot of land, which means gradually increased age of marriage as land becomes scarcer.

Looking at Europe's pre-industrial history there are series of increasing populations that leads to marginal land being used. This is assumed to have led to less well-fed population, that then easier succumbs to the next round of famine or plague. So there you also have an economic factor.

Europe's industrial history has been marked by exporting population pressure, either by sending colonists out or bringing resources here at the cost of starvation in other populations.

Then comes the curios period when birth controls, better health and increased power for women has led to decreased number of children.

(So far Livi-Bacci, A concise history of world population)

das monde:

Or consider this way. Mr Humanism and Dr Overpopulation walk into a bar. What would they agree upon? That the most humane method to control overshot population is a global economic depression, no?

No, not if the good Dr's academic credentials are any good anyway.

This is the standard model of population development in this curious phase:

Death rates goes down, the birth rates. Total population increase is mostly dependent on how long time there is between death rates starting to go down and birth rates following.

In phase 4 and 5, women has few children. Economic hardships can move up the age at which those are born, but does not appear to alter their numbers. So you get a slight decrease in population (due to longer generations).

In phase two and three economic hardship can undermine both health and women's position. As women tends to be in a weaker position they are likely to lose their jobs first, making them more dependent and more likely to have many children.

Economic depression is also likely to mean less, not more, spent on health. And health is
important

Some trends in waterborne bacterial infant mortality are also disturbing in countries like Malawi, Sudan and Nigeria; for example, progress in the DTM clearly arrested and reversed between 1975 and 2005.[29]

So economic depression is likely to make the transition time, and thus total population increase higher in the stage two and three areas, and that is really where the increase is happening.

What Mr Humanism and Dr Overpopulation should agree upon is making the transition time as short as possible by taking every effort to provide women in stage two and three areas every possibility to support themselves and doing interesting stuff outside of the household. Which translates (by way of realising that it means providing the same for men) into full employment policies.

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

by A swedish kind of death on Thu Jan 2nd, 2014 at 09:09:57 AM EST
[ Parent ]
Most interesting is history of population (and economy) changes in dense, developed countries like Great Britain, the Low Lands.

As for the curious period with decreasing birth rate: I imagine it will be fine-tuned if we would ever need more effect. Dating obstacles (such as women not settling for "nice guys") could be humanely played with as well.

Women joining workforce did not really increase income of working families, presumably because that move largely coincided with the wages stagnation and increasing financial risks since the 80s.

by das monde on Thu Jan 2nd, 2014 at 09:50:30 AM EST
[ Parent ]
If it is just a unit of account and it is not intended that one energy unit of account be exchangeable for one physical energy unit, why does it need to be an energy unit?

This is the nub of our mutual difference in understanding.

A unit of account is not an object exchangeable for anything.

It is a concept like a metre or kilogramme: it is a standard unit of measure for value. It is a benchmark against which exchanges of value may be priced.

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

by ChrisCook (cojockathotmaildotcom) on Wed Jan 1st, 2014 at 11:27:35 AM EST
[ Parent ]
I am with Chris on this.

A means of exchange couples the steps of production of people for common purpose. The products of these steps need to be accorded a value. The means of exchange does not need to be a carrier for that value. With the right accounting system, there is no need to imagine any value carrier particle travelling from one person to another. There are correlated accounting changes: a kind of exchange interaction.

by martinahay on Wed Jan 1st, 2014 at 11:47:14 AM EST
[ Parent ]
Oh FFS.
If [the energy unit] is just a unit of account and it is not intended that [an instrument of denomination equal to] one energy unit of account be exchangeable for [a] physical energy [amount equal to one energy] unit, why does [the unit of account] need to be an energy unit?
Better?

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Wed Jan 1st, 2014 at 11:58:53 AM EST
[ Parent ]
No need to respond to that. My bad.

In answer to your question, everything tangible - material and immaterial - is composed of energy, and value judgements in respect of the relative value of use  over time of two other key sources of value - location, and intellect - may be made by reference to an absolute unit of energy.

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

by ChrisCook (cojockathotmaildotcom) on Wed Jan 1st, 2014 at 12:18:01 PM EST
[ Parent ]
That does not answer my question.

My question is whether denominating a legal instrument by an energy amount entails that the instrument so denominated is redeemable for a physical energy amount equal to the face value of the instrument.

If yes, you run into the problems of overissue, hoarding and market cornering.

If not, then what is the point of denominating legal instruments with reference to energy units?

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman

by Migeru (migeru at eurotrib dot com) on Wed Jan 1st, 2014 at 12:22:55 PM EST
[ Parent ]
The problems of hoarding, etc. arise, because of a belief that "value" is transmitted through a legal instrument acting as a carrier particle. There is no need to invoke such a carrier particle.
by martinahay on Wed Jan 1st, 2014 at 12:30:32 PM EST
[ Parent ]
And here we see a demonstration of the difference between syntactically and semantically valid sentence structures.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Wed Jan 1st, 2014 at 01:05:25 PM EST
[ Parent ]
Are you saying that collaboratively developed intellectual value - which is not just about scientific development but extends to performing arts, media, design - is not growing and spreading exponentially?

Yes, I am. You're confusing ease of access with innovation.

Ease of access has certainly increased exponentially. Actual innovation continues to be rare and remarkable.

One of the defining features of the open source movement is that instead of inventing completely new stuff, people keep solving the same problems over and over. Sometimes the new solutions are better than the old ones. But even then they're refinements at best, not new ideas.

Linux is based on an operating system from the 1960s. There have been major innovations in operating system design since then, but most of them have been ignored by the open source community.

This is equally true in the arts, where you get a PhD for following the New Scholasticism and quoting what's been written by approved authorities using pre-approved forms of expression, not by having creative ideas of your own.

The process of accreditation and approval has become far more important than the process of creating real cultural and social value.

Meanwhile scientific development has been corrupted and slowed by the need to perform and whore for donor approval to gain funding. (And most of the real talent in physics is working for Wall St anyway.)

In a reality-based world, it would be self-evident that renewables are a good idea, and we'd already have them.

Clearly, we don't.

So... you underestimate the entropic influence of hierarchies of power and privilege, and their infallible ability to prevent the spread of useful knowledge, to limit its creation, and to destroy it after it has been created.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Thu Jan 2nd, 2014 at 11:43:18 AM EST
[ Parent ]
There's so much good stuff in that comment, TBG. Can you make it a diary?

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Thu Jan 2nd, 2014 at 11:45:02 AM EST
[ Parent ]
Kudos. Damn good comment which deserves its own discussion as Mig says.

"The future is already here -- it's just not very evenly distributed" William Gibson
by ChrisCook (cojockathotmaildotcom) on Thu Jan 2nd, 2014 at 06:55:31 PM EST
[ Parent ]
ChrisCook:
Knowledge & knowhow are infinitely abundant

well they could be, now more than ever, but the information age is still in swaddling clothes.

another 50 years and you'll be right, the potential is staring us in the face.

'The history of public debt is full of irony. It rarely follows our ideas of order and justice.' Thomas Piketty

by melo (melometa4(at)gmail.com) on Tue Dec 31st, 2013 at 10:35:48 AM EST
[ Parent ]
Chris, you know I'd like to see this all happen, but I spent 30 years in politics.  There are people who own governments, banks, and guns who are determined to keep these apart.  I see blood.
by rifek on Tue Dec 31st, 2013 at 04:53:53 PM EST
[ Parent ]
The flip side of constructive knowledge is... knowledge how to simulate, manipulate persisting, progressive developments and their perception. That knowledge is potentially infinite as well. We might actually need to pray that knowledge (in general) is somehow physically limited. Just look at NSA...
by das monde on Wed Jan 1st, 2014 at 09:08:12 AM EST
[ Parent ]
Tally sticks represented One Dimensional accounting; double entry book-keeping represents Two Dimensional accounting, and what you have identified as Three Dimensional accounting represents an advance on the existing approaches to Triple Entry Book-keeping taken by Todd Boyle, Ian Grigg and Satoshi of Bitcoin fame.
Just so we know what we're talking about:

Grigg's triple-entry accounting refers to the three entries of a signed receipt: the payer, the receiver, and the signer.

So, does that mean that the equivalent of a cash-flow statement in 3-entry accounting is:

  • cash in
  • cash out
  • cash signed
???

Henke's triple-entry accounting is much less clear: it refers to something called "momentum accounting", attributed to a certain Yuji and which I can't figure out from Henke's writing (or from Wikipedia) for that matter.

In any case, macroeconomic analysis hasn't even fully come to terms with double-entry accounting yet, so even from that point of view it's unclear to me what triple-entry would achieve. It answers questions that economics cannot even pose yet because it's not done assimilating double-entry accounting. For evidence, see Dirk Bezemer's 'No one saw this coming' - or did they? (Vox, 30 September 2009)

In Bezemer (2009), I document the models that got it right. The important question for economists is - how did they do it? What is the underlying model?

While there is obviously a diversity of approaches, one important strand of thinking is an accounting of financial stocks (debt and wealth) and flows (of credit, interest, profit and wages), as well as explicit analysis of both the real economy and the financial sector (including property).

The most detailed of these models, which has also been used to construct public projections and analyses, are "Flow of Funds" models of the US developed by Wynne Godley and associates at the Levy Economics Institute. These may serve as pars pro toto for the class of "Flow of Funds" models of real-financial interactions (e.g. also Werner, 1997; Graziani, 2003; Hudson, 2006; Keen, 2009). A simplified (closed-economy) representation in Godley (1999) consists of stocks and flows of a number of asset classes between four sectors (explicitly separating out the financial sector), with their properties and interrelations represented in over 60 equations (Table 1; see Godley 1999 for all symbols).

Table 1. The flow of funds in matrix representation

Source: Godley (1999:395)

That this is double-entry can be seen from the fact that each row contains +X and -X as cash flows of different sectors.

"Flow of Funds" as an economic statistics concept dates from the 1950s, and its consequences are only now starting to become appreciated (though they are central to James Tobin's 1981 Nobel Lecture Money and Finance in the Macro-Economic Process).

So, my "simple" questions to Chris Cook are:

  1. What does the signing of receipts add to the flow-of-funds? What does it add to balance sheets?
  2. What does signing receipts entail? How must a receipt signatory manage their collection of signed receipts?


A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Tue Dec 31st, 2013 at 05:51:07 AM EST
We're not looking at triple entry accounting here - so your questions do not really apply.

Conventional economics is going to get left in the dust, and good riddance.

We are looking at value flow and value accounting, and in my view we will be seeing the emergence of energy economics, based upon least energy cost, rather than least $ cost policies.

Here I think we will require what I have seen described as confidence accounting, which is the degree of confidence that there will be a particular flow of value or production eg of energy.

There is no default here, because there is no (dated) debt. The risk taken by an investor in prepay credits is firstly performance risk; the risk that there will be no flow against which the credits may be returned, and secondly that there will be no buyer if he wants to sell (liquidity risk).  

The first risk is addressed by the fact that the more affordable the 'rental' payment the more likely it is to be paid. Of course, zero rental is infinitely likely to be paid.

The second risk is addressed by the fact that even if a financial buyer may not be available, a consumer will always buy if the prepay credit is below the physical market price.

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

by ChrisCook (cojockathotmaildotcom) on Tue Dec 31st, 2013 at 06:16:23 AM EST
[ Parent ]
We're not looking at triple entry accounting here - so your questions do not really apply.
What, then, is three-dimensional accounting? I'm not getting it from your diary.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Tue Dec 31st, 2013 at 07:13:05 AM EST
[ Parent ]
It's essentially Chiralkine Accounting but from a different perspective.

I'm happy to set out my own tentative thoughts and develop them here. I don't know all (or maybe any) of the answers and I'm very much feeling my way here quite intuitively.

This is not addressed at you, Migeru, but I will not put up with anyone on this list who does not engage respectfully, without snark, and in a constructive spirit of a common interest in finding an optimal and open value transfer solution.

The creation of such a value transfer system - which may or may not be 'Utopian' to quote resident snarkists -  is one of the things which motivates me.

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

by ChrisCook (cojockathotmaildotcom) on Tue Dec 31st, 2013 at 08:43:56 AM EST
[ Parent ]
I'm still not seeing an straight answer to a straight question.

If double-entry accounting is two-dimensional (not clear why, BTW), how is chiralkine accounting three-dimensional? Where is the three? What are the dimensions?

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman

by Migeru (migeru at eurotrib dot com) on Tue Dec 31st, 2013 at 09:19:47 AM EST
[ Parent ]
There are no straight answers, only perspectives, and I shall give you mine. Do not expect mathematical precision on terms; do expect analogy; and please do your best to be patient and civil.

The tally stick was a single entry instrument, and the stock portion was issued as a receipt (memorandum tally) or IOU (loan tally) by a subject individual to a counter-party.

Double entry book-keeping extended to a second dimension - the counter-party - and to recorded entitlements based upon conflicting absolute property rights of infinite (eg equity/freehold) and temporary (eg debt/leasehold) duration.

Property and Money/Credit are both treated in the existing paradigm as accounting objects. The unit of account in a modern monetary system has come to represent a credit object based upon bank debt, and although it is purports to be a positive, in reality it represents a claim over value asserted ex nihilo, and hence a negative value.

2-D double entry book-keeping does not accommodate property rights or instruments of indefinite duration. Examples of these include currency; prepay; overdrafts; tenancy at will; evergreen leases and so on.

The third dimension as I envisage it is the relationship between subject and object.

Both triple entry book-keeping and Martin's Chiralkine approach attempt, but fail for different reasons to address this dimension accurately, I believe.

Triple Entry identifies the need for a third record but fails because it does not accommodate the difference between both/and & neither/nor as states.

Martin correctly diagnoses this issue of aspects of zero  - that is a very important insight -  but he does not IMHO address the problem that conventional absolute property rights are incapable of reflecting reality, and his units represent both Property and (positive) Credit/Money as objects.

My conception of Three Dimensional Accounting is as follows:

Unit of Account - an absolute unit of energy (which has nothing whatever to do with any energy currencies which may come to be priced against it)

Four pairs of digits record rights over future value denominated in energy.

(0,0) - Not mine: not yours
(1,0) - Mine: not yours
(0,1) - Not mine: yours
(1,1) - Both mine and yours

Two further pairs of digits record promises to provide - at a future point in time - value denominated in energy. These are analogous to Martin's Left and Right hand pairs - which he refers to as recording currency objects.

It is these people-based pairs which introduce the time/credit element, and what I call 'open' capital.

The subjective pricing of transfers of energy value, and the creation, exchange and cancellation of credits/promises take into account the value of different types of energy (material and immaterial) and the relative location of the issuer and the receiver.

Pricing also reflect the relative value of the two immaterial sources of value (aka factors of production) which are in my analysis the value of the use of location over time, and the value of the use of intellect over time.

Imaginative and creative use of intellect, and the optimal use of space (not to mention transcending space through communication) will both tend to save energy and lead to least energy cost (as opposed to least $, $ or € cost) solutions.

A question I pose, is whether these two L/R pairs might in some sense represent imaginary numbers?

I think I'll take a breather here, but happy to discuss.

Perhaps the best way to proceed further is through worked examples. I hate detail and process, so that might take some time.

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

by ChrisCook (cojockathotmaildotcom) on Tue Dec 31st, 2013 at 11:22:29 AM EST
[ Parent ]
please do your best to be patient and civil
I have been extremely patient with your ideas for several years, but I refuse to be insulted by your suggestion that I might not be.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Tue Dec 31st, 2013 at 12:04:50 PM EST
[ Parent ]
WTF? :-)

"The future is already here -- it's just not very evenly distributed" William Gibson
by ChrisCook (cojockathotmaildotcom) on Wed Jan 1st, 2014 at 11:21:35 AM EST
[ Parent ]
The tally stick was a single entry instrument, and the stock portion was issued as a receipt (memorandum tally) or IOU (loan tally) by a subject individual to a counter-party.
If the tally stick involves two counterparties, why is it "single-entry"?

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Tue Dec 31st, 2013 at 12:31:13 PM EST
[ Parent ]
Because it is originated by one of them, not both.

Double entry book-keeping involves counter-parties maintaining accounts independently of each other.

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

by ChrisCook (cojockathotmaildotcom) on Wed Jan 1st, 2014 at 11:20:21 AM EST
[ Parent ]
Double entry book-keeping involves counter-parties maintaining accounts independently of each other.
??? One counterparty can maintain double-entry books regardless of whether the other counterparty does, too.

And tallies are necessarily originated by two counterparties, because one counterparty receives one half and the other receives the other half, to represent a transaction in which both take part, and both need to be present to receive it.

A tally is, in fact, a receipt. Actually, two complementary copies of the receipt.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman

by Migeru (migeru at eurotrib dot com) on Wed Jan 1st, 2014 at 12:07:32 PM EST
[ Parent ]
A split tally stick is much more than a complementary pair of receipts. It is a differential operator. It breaks symmetry.
by martinahay on Wed Jan 1st, 2014 at 12:15:54 PM EST
[ Parent ]
Perhaps a better way of expressing it is to say that double entry book-keeping involves entering both your own position and your counter-party's position.

So you keep a creditor's ledger record of accounts payable, and a debtor's ledger of accounts receivable.

Tallies were accounting records of two kinds, which recorded two different legal relationships.

Firstly, proof of value received in the past: that was known as a memorandum tally. A receipt in two parts as you say.

Secondly, a promise to provide value in the future. This was the loan tally, representing an account receivable (stock) or account payable (counter-stock)

The issuer of the loan tally would issue the stock portion which represented an excess over value received from the counterparty who is essentially entering into a prepay transaction.

From the perspective of the investor it was a discount, and the 'rate of return' received was literally the rate at which the tally stock could be returned over time for cancellation against value received, such as the king's protection etc etc

So the phrase 'tax return' related to the accounting event at which the stock was physically returned to be matched and cancelled against the counter-stock.

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

by ChrisCook (cojockathotmaildotcom) on Wed Jan 1st, 2014 at 03:23:18 PM EST
[ Parent ]
Perhaps a better way of expressing it is to say that double entry book-keeping involves entering both your own position and your counter-party's position.

So you keep a creditor's ledger record of accounts payable, and a debtor's ledger of accounts receivable.

You don't keep your counterparties' positions, that's not what accounting is for.

You keep your own positions. You can keep your own creditor position separate from your own debtor position. You can also segregate this into accounts, by counterparty, so you keep your own creditor and debtor positions vis-a-vis each counterparty.

But you don't keep your counterparty's positions because you cannot assume you know your counterparty's positions vis-a-vis third parties.

I feel like Groucho now.



A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman

by Migeru (migeru at eurotrib dot com) on Wed Jan 1st, 2014 at 04:54:34 PM EST
[ Parent ]
You keep your view of his position, and he keeps his view of your position.

Correct - they are not linked as they should be, which is the whole point of triple entry book-keeping, this post, and pretty much the entirety of my work for the last 15 years or so.

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

by ChrisCook (cojockathotmaildotcom) on Thu Jan 2nd, 2014 at 07:00:17 PM EST
[ Parent ]
the whole point of triple entry book-keeping, this post, and pretty much the entirety of my work
Well, you'll have to excuse me for assuming
We're not looking at triple entry accounting here


A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Thu Jan 2nd, 2014 at 07:12:50 PM EST
[ Parent ]
Correct. I omitted to re-state that fact.

My bad :-)

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

by ChrisCook (cojockathotmaildotcom) on Fri Jan 3rd, 2014 at 03:55:40 PM EST
[ Parent ]
Well, I'm still at a loss.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Fri Jan 3rd, 2014 at 05:26:17 PM EST
[ Parent ]
Chiralkine accounting maintains a record of the relative trading positions of all members of an exchange. It achieves this through utilising three mirror opposite pairs of states that are changed in a correlated manner as if R and L units are exchanged between them. Trade is handled in cycles in which two people each buy and sell things of equal value, as if they had bartered. The pair member who starts out as "seller" first receives unspent "credit" - unspent R units, which he gives up in return for spent "debt" - spent L units, which, when the counterparty is also ready, become redeemed "credits". The "buyer" starts out with "debt" - L units, which he gives up in return for spent "credit" - R units which, when the counterparty is ready, become redeemed "debts". So, when the R and L units are exchanged, they become different beasts. A person who receives an R unit in return for an L unit cannot spend it again. To understand what is going on, please look at our updated website and see how the changes in account entries in chiralkine accounts are symmetry changes in order 4. The whole system works like tally sticks, but there is much more to it.
by martinahay on Thu Jan 2nd, 2014 at 03:17:07 PM EST
[ Parent ]
This is not addressed at you, Migeru, but I will not put up with anyone on this list who does not engage respectfully, without snark, and in a constructive spirit of a common interest in finding an optimal and open value transfer solution.
Fair enough, but this should not be an excuse for wooly thinking. I'm not asking for mathematical precision, but for intelligibility.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Tue Dec 31st, 2013 at 12:38:30 PM EST
[ Parent ]
Tone policing to deflect questions is not acceptable behaviour.
by Colman (colman at eurotrib.com) on Tue Dec 31st, 2013 at 04:03:34 PM EST
[ Parent ]
Correct.

I've never deflected a question in my life, although I've misunderstood a few, and got some wrong.

But while I enjoy humour I don't like snark and aggression.

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

by ChrisCook (cojockathotmaildotcom) on Wed Jan 1st, 2014 at 11:31:42 AM EST
[ Parent ]
I have updated our website: www.chiralkine.com with my current best understanding about how what I call chiralkine numbers can be understood in terms of the symmetry properties of chiral tetrahedral molecules. I have tried to relate this to how ordered pairs are used in place of the signed integers and as the basis for double entry bookkeeping. I have also added a section on how I think a new voting system might be developed based on these numbers. There are many different ways in which you might try to build a system using these numbers, depending on what meanings you assign to them. I see them as providing a basis for a system (states and transformations) for the creation, exchange and redemption of property rights. I would very much like to find a way to map the six states in what I call a chiralkine system, and the pairwise way in which they transform, to Chris' vision.
by martinahay on Tue Dec 31st, 2013 at 12:41:49 PM EST
Where in this system is the man with the gun?

(There's always a man with a gun somewhere in your economic system. If you don't include him in your model, it just means he gets to do whatever the fuck he wants. Because he's the man with the gun.)

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Tue Dec 31st, 2013 at 09:59:33 PM EST
Guns are so Last Century, Jake.

If there's no conflict there's no need for guns, is there?

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

by ChrisCook (cojockathotmaildotcom) on Wed Jan 1st, 2014 at 11:35:07 AM EST
[ Parent ]
Guns are so last century that the first thing that people built with newly created metal 3D printers was... a gun.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Wed Jan 1st, 2014 at 12:08:22 PM EST
[ Parent ]
If there is no potential for conflict, then accounting is a pointless exercise.

So: Where in your accounting system is the man with the gun?

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Wed Jan 1st, 2014 at 01:08:53 PM EST
[ Parent ]
People may consensually agree on an enterprise to a common purpose and keep track of value flows from that enterprise by accounting for it.

In a consensual agreement, the sanction is to walk away from the agreement - after all possible dispute resolution, naturally - and the person who is not abiding by it.

Tell me again why the gun is necessary?

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

by ChrisCook (cojockathotmaildotcom) on Wed Jan 1st, 2014 at 03:46:01 PM EST
[ Parent ]
The gun is necessary because contract enforcement by shunning is a Libertarian fairie tale.

A dumb enough Libertarian fairie tale that not even the Chicago school is willing to touch it - you have to go clear out to the Hayekian sects to find people who still believe it.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Wed Jan 1st, 2014 at 04:09:21 PM EST
[ Parent ]
But for that matter, any boycott that actually works is indistinguishable from a loaded gun. If your refuse to sell someone food and he starves, then he's just as dead as if you'd put a bullet through his head. So I don't buy the nice philosophical distinctions people build up between the two - dead is dead.

People who believe that exclusion from society's support system is a non-violent, non-coercive deterrent need to go make sure their last reality check didn't bounce.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Wed Jan 1st, 2014 at 04:13:48 PM EST
[ Parent ]
There's also the ugly fact of slavery.  People who can't defend themselves, and who aren't defended by the legal and social apparatus of a complex society, end up as slaves.
by Zwackus on Wed Jan 8th, 2014 at 04:09:22 AM EST
[ Parent ]
The term 3D accounting is not quite right. The number system is more accurately defined as order 4. When you think of 3D, you think of three axes x, y and z intersecting at a singular zero. A point in space is represented by three numbers in order: (x, y, z). Each of these numbers can be positive, negative or zero. This is actually order 3. Each of the four elements of a chiralkine number can be 1 or not 1 (0). There is no singular zero nor any negative number. There are no intersecting axes. The system never allows you to start out with two numbers and reduce them down to a single zero as you can when you add +1 to -1: every operation changes two numbers into two other numbers.

Please see:  http://chiralkine.com/system/chirality-and-the-chiralkine-numbers/

This page also explains what I mean by resolving balances into left and right balances.

by martinahay on Wed Jan 1st, 2014 at 07:46:00 AM EST
Hello, Martin.

For what you are about to receive....:-)

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

by ChrisCook (cojockathotmaildotcom) on Wed Jan 1st, 2014 at 11:33:12 AM EST
[ Parent ]
what if there were a tech breakthrough that made energy out of something cheaper than wind/solar arrays?

wouldn't this devalue the worth of the kilowatt-'monetary' units?

(just in case there is something to the CTs that speculate such systems are invented, but the patents have been bought up and put in cold storage.)

or would everyone just start doing their energy production like people are 'mining' bitcoins now? that wouldn't cause inflation as long as people kept dreaming up ways of using it to keep pace with the increased amounts of 'units' produced like beer in a basement brewery, right?

if theses questions are too dumb to even try to answer, please ignore... i'll just continue lurking and learning on these abstract economics threads, and maybe one day the questions i have will be worth responding to!

'The history of public debt is full of irony. It rarely follows our ideas of order and justice.' Thomas Piketty

by melo (melometa4(at)gmail.com) on Wed Jan 1st, 2014 at 11:49:58 AM EST
You're not the first to ask that, and the logic of economics of scarcity would imply a devaluation.

But in my view all that will happen is that the pie gets bigger and society gets wealthier, because energy is intrinsically valuable.

If you have enough energy there is very little you cannot do in material terms through conversion and use of energy in one form or another.

So everyone gets their own energy treasury, or a share in one, which is the precise opposite of the energy drain represented by Bitcoin.

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

by ChrisCook (cojockathotmaildotcom) on Wed Jan 1st, 2014 at 02:17:34 PM EST
[ Parent ]
melo:
wouldn't this devalue the worth of the kilowatt-'monetary' units?

It would devalue their trade value, but not their use value. If I want to trade my kWh's for other goods and services (or political favors), then they would be worth less. I can still use them for powering my computer though. Just like not riding a bubble (housing, stock, bitcoin) does not erode the use value of the stuff you have, but it will erode your social position and political power compared to those that too ride the bubble (until it crashes, that is).

melo:

or would everyone just start doing their energy production like people are 'mining' bitcoins now? that wouldn't cause inflation as long as people kept dreaming up ways of using it to keep pace with the increased amounts of 'units' produced like beer in a basement brewery, right?

It would cause interesting situations. In Germany couple of years ago, electricity prices were temporarily negative, energy companies was paying users to use electricity because it was cheaper then decreasing production. If you then have a currency denominated in kWh interesting things could happen. But I think it depends on wheter or not it actually is a commodity currency or not, which is precisly what most of the discussion here has been about anyway.

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

by A swedish kind of death on Thu Jan 2nd, 2014 at 09:39:57 AM EST
[ Parent ]
Well - there seems to be some confusion about whether this hypothetical kW, or kWh, or whatever it is, unit, is actually redeemable for actual energy in actual circumstances.

My understanding is that the only reason there's some nominal relationship to something experiential, like energy, is so the units are perceived to have some value. It's pure rhetoric, in other words - because if you create a currency out of thin air without the backing of a state and/or bank, no one is going to have faith in it.

As I keep saying, and Chris keeps ignoring, this kind of thing is entirely faith based.

Energy has a nominal use value - unlike, gold, say, which is only really useful for plating things that need to conduct and making teeth and jewellery.

But belief in that value is entirely about the triumph of faith over fear for the future.

Economics will make no fucking sense at all while this kind of nonsense continues. Concepts like risk, reward for risk, and all of the other banking/lending bullshit need to be taken out and shot before we can have useful rational planning which isn't based on someone paying tribute to someone else in return for giving their assent for some activity or other.

And SillyMoney™ in energy units, Dogecoins, Bubas, Dollars, or whatever, are all just variations on the same problem.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Thu Jan 2nd, 2014 at 11:35:06 AM EST
[ Parent ]
perfectly illustrates all this: The Internet Is Trying To Save Dogecoin -- And It's Working (Dec. 30, 2013)
On Christmas Day, someone hacked into two of the largest Dogecoin wallet sites and stole 30 million units of the digital currency.

It was a huge blow to a community that prides itself on its lack of rapaciousness. Dogecoin is mostly used to "tip" people on the Internet for performing favors or good deeds. At least two animal shelter groups, one in Florid and one in Spain, also accept the currency.

That same generosity has now produced an incredible attempt to restore faith in Dogecoin's integrity by raising money to compensate people who'd lost funds.

You pride yourself for your lack of rapaciousness, and you get ripped off by crackers. Meanwhile, Bitcoin which is a product of true libertarian insanity, becomes the currency of choice for the rapacious on Silk Road, and the mining of it is wasting insane amounts of actual electricity and computing power.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Thu Jan 2nd, 2014 at 11:43:40 AM EST
[ Parent ]
ThatBritGuy:
Concepts like risk, reward for risk, and all of the other banking/lending bullshit need to be taken out and shot before we can have useful rational planning which isn't based on someone paying tribute to someone else in return for giving their assent for some activity or other.

 you realise you have just removed the main reason to get out of bed in the morning for 40% of the 'economy'?

i do not say it like it's a Bad Thing! ;0)

as the N dakota example shows, you don't need a new currency or banking system or mint, you just need traditional banking run probitiously (probically?), with probity anyway.

you just need a way to keep the spivs and shysters out!

'The history of public debt is full of irony. It rarely follows our ideas of order and justice.' Thomas Piketty

by melo (melometa4(at)gmail.com) on Thu Jan 2nd, 2014 at 12:10:43 PM EST
[ Parent ]
Only 40%?

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Thu Jan 2nd, 2014 at 01:16:54 PM EST
[ Parent ]
yeah, rapidly pulled out of nether fundament...

i should be an economist, (accent on 'mist')!

'The history of public debt is full of irony. It rarely follows our ideas of order and justice.' Thomas Piketty

by melo (melometa4(at)gmail.com) on Fri Jan 3rd, 2014 at 05:44:37 AM EST
[ Parent ]
Hang on TBG.

Faith is subjective: utility - in terms of use value over time - is objective, albeit subjectively priced.

Energy economics makes faith, ideology and the rest irrelevant.

You simply cannot argue with energy numbers.  Least energy cost is not a matter of opinion or belief. It is a matter of Physics. (if you believe in Physics)

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

by ChrisCook (cojockathotmaildotcom) on Thu Jan 2nd, 2014 at 07:05:46 PM EST
[ Parent ]
Huh? If you tie your energy units to prepay, buyers are simply gambling against future prices.

If - as you keep claiming isn't true - you're trading in actual, useful, static metered quanta of electricity that you can boil a kettle with, then all you've done is created a new kind of futures market for the public, with all the usual vulnerabilities to irrational exuberance/panic and the creation of perceived value through hard-sell.

If that's so, you seem to believe 1kWh of energy has some kind of objective, static monetary value - or even a reliable, quantifiable, static use value.

Both of those suggestions are clearly wrong, for reasons that should be obvious. Energy is useful stuff, but it doesn't take much imagination to realise that it's a lot more useful - i.e. valuable - in some contexts and delivery forms than others.

Of course, a lot of people may think those suggestions aren't wrong at all - which is why this is a rhetorical exercise in persuasion, not a scientific one.

If you're not trading in actual, useful, real energy, then I have no idea what your plan is - and it probably doesn't matter, because it's unlikely to make sense anyway.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Fri Jan 3rd, 2014 at 12:15:18 AM EST
[ Parent ]
Energy is useful stuff, but it doesn't take much imagination to realise that it's a lot more useful - i.e. valuable - in some contexts and delivery forms than others.

Indeed it is as I have agreed and stated many times.. So electricity prepay credits; carbon fuel prepay credits, and heat prepay credits etc etc  will all vary and be priced against a unit of account whether or not they become generally acceptable in exchange (ie a currency).

Indeed, they already are routinely priced against a unit o account, but that abstract €, $ or £ units symbolise a nullity at best (€s printed by the ECB) and a negative (debt created by banks) at worst.

What we are talking about here is the need for energy accounting and the need for an energy unit of account for all exchange, whether of the intrinsic value in use of energy or any other value.

There is a difference between:

(a) Supply of power over time which comprised a Kilo Watt Hour of electricity, and

(b) Absolute unit of energy equivalent to 1 Kilowatt Hour, which also happens to equate to the energy equivalent of x Mmbtu of heat or the energy equivalent  of y litres of a particular grade of carbon fuel.

An absolute unit of energy is stable in the same way a metre or kilogramme is stable.

But that does not mean that energy currencies will be stable, because they will always vary relative to each other by reference to whatever unit of account is used.

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

by ChrisCook (cojockathotmaildotcom) on Fri Jan 3rd, 2014 at 04:18:32 PM EST
[ Parent ]
You have still not adequately described what "1 unit" entitles me to.

Does it entitle me to 1 kWh? To a fraction of the gross turnover of the issuing project? To a fraction of the net profits of the issuing project? To 1 kWh per day? To a fraction of the issuing project's daily generation? In the latter two cases, how long can I save up the kWh I do not actually draw on the day they are generated, and under what terms?

These questions are not mere technical niceties which can be hashed out after we buy the scheme you're selling. They're fundamental to how it's actually going to work (or not, as the case may be).

So you need to answer those questions. In detail. In English that an untutored high school student can understand.

And if you have actually sat down and thought your system through rigorously, then answering those questions should not be difficult.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Fri Jan 3rd, 2014 at 04:31:55 PM EST
[ Parent ]
I am surprised a prepay instrument has to be explained to such a sophisticate.

It is probably the simplest and earliest financial instrument in existence, but it is understandable that in the current financial environment people tend to look for complexity that is not there.

I am an electricity generator. You are an investor.

You pay me (say) £1.00 now in exchange for a prepay instrument/unit/credit/voucher which you may present in payment for (say) 10 Kilo Watt Hours of the electricity which I supply.

You may or may not be a customer of mine.

If you are also a customer, then you are simply paying forward and locking in a price, but with the option to sell to someone else for whatever reason.

If not, then in order to generate a profit or loss you will sell either to an investor, if there is one to be found, or to a customer of mine at a price which will enable that customer to generate a profit upon returning it in exchange for supply.

A customer will buy a 10 KwH prepay unit at the best price available below his tariff, and he will always buy at a discount either for immediate return, or - if the discount is sufficient - for deferred return.

He may even buy at or above the tariff rate if he thinks the tariff will rise. ie as a hedge.

Do you think an untutored high school student will understand? I just explained it in those terms to two young Norwegians as they play Monopoly and they understood it.

As an investor your motive may be to make a transaction profit - which makes you an evil speculator - or possibly to avoid a loss because you think the £ will go down the toilet relative to energy - which makes you an inflation hedger.

It does not matter a toss which you are because the prepay unit price is completely divorced from physical supply.

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

by ChrisCook (cojockathotmaildotcom) on Sat Jan 4th, 2014 at 06:07:44 PM EST
[ Parent ]
If you cull the 'investors' from this scheme and replace them all with 'customers' - you know, those people who actually use electricity, instead of trying to screw people over for the sake of a quick profit - you could be onto something.

But since any scheme that has loose-cannon investors is liable to the horrors Mig described - hoarding, bubbles, hard-sell and profiteering, collusion, corruption, and those are just the ones we can see (q.v. Enron, etc) - you still haven't explained why this scheme is an improvement for customers.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Sat Jan 4th, 2014 at 06:38:39 PM EST
[ Parent ]
I am surprised a prepay instrument has to be explained to such a sophisticate.
And I am surprised that somebody who bills himself as a former head of compliance of a commodities exchange does not see any possibility for mischief in the sorts of markets under discussion.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Sat Jan 4th, 2014 at 07:02:15 PM EST
[ Parent ]
How can you possibly say that?

I have written reams about the toxic effect of prepay instruments when used opaquely and without regulatory supervision in an intermediated market.

But if used transparently within a dis-intermediated market and with professional management then they will IMHO completely change the game.

I intend to prove it.

So long and thanks for all the fish. I am definitively outta here.

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

by ChrisCook (cojockathotmaildotcom) on Sat Jan 4th, 2014 at 07:17:27 PM EST
[ Parent ]
thanks for dropping by Chris, i find these threads fascinating to say the least...

it occurs to me that anyone can have blind spots, and  migeru, jake and tbg could be actually helping you to see them, if there are any.

As you told me once 'Just Fucking Do It' and all the folks who take you to task now will be happy you did.

i don't understand 3/4 of the subject matter, but it seems to me you have not been wasting your time in all the places you're advising and it's cool to see you on the kaiser report, so my energy-units are betting on your way to prevail eventually, once everything else has failed.

you're just ahead of your time... the transition is going to be the sticky part.

i do have some cog-diss about whether regular money would work just as well if finance structured as-is were not so greedy and corrupt, and worry that your system may not exclude the usual suspects as hermetically as could be desired, but it seems like a step forward from what we have right now, a mess as unholy as any in history.

come back again soon and we'll have another proper-length thread!

the chiralkine accounting thingy.... i can't say exactly why due to ignorance, but i think it may be a blind alley. one abstraction too far... it certainly doesn't clarify your position to put it mildly. maybe it could be be an add-on once you have road-tested your model more in the real world.

g'luck!

'The history of public debt is full of irony. It rarely follows our ideas of order and justice.' Thomas Piketty

by melo (melometa4(at)gmail.com) on Sat Jan 4th, 2014 at 09:57:00 PM EST
[ Parent ]
You pay me (say) £1.00 now in exchange for a prepay instrument/unit/credit/voucher which you may present in payment for (say) 10 Kilo Watt Hours of the electricity which I supply.

That's not a complete specification, because it does not specify what seniority my claim has.

Are you required to sell to unit-holders so long as you have capacity?
You may wish to not take units for your power if your OpEx exceed the market price of units, or if you want to conserve a limited fuel reserve (e.g. water-in-dam) for later opportunities or obligations. Is this permitted?

Do the unit-holders hold right of first refusal?
It may be that you are able to sell more than you are able to produce. Are you then required to dispatch to unit holders first, or can you sell as much as you want for cash and only then distribute the remainder to unit-holders?

What if unit-holding customers want to buy more than your current production?
Do they pay a cash premium on top of their unit? Or do the units come with strike and expiration dates to ensure that this cannot realistically happen?

And regardless of the answers to the above, this is not a viable currency, any more than the gold standard is. The answers to the above questions merely determine whether it is a viable, non-toxic instrument to employ in the context of a modern monetary economy.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Sat Jan 4th, 2014 at 07:12:50 PM EST
[ Parent ]
What part of 'prepayment' do you not understand? It's credit. Time to pay or to perform.

Unit holders have no, repeat no, rights other than to present prepay credits them in payment for supply, if there is any.

Imagine a Mars bar token which you can exchange for a Mars bar when you present it at the shop... if they have any.

That's prepay.

Capiche?

You are looking for complexity that is not there.

As for currency, if a nations' generators agree to accept each others' prepay credits within an energy clearing union agreement then of course it's a currency.

Because most people, I submit, would be inclined to accept in exchange a credit unit with which he knows he can pay his utility bill.

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

by ChrisCook (cojockathotmaildotcom) on Sat Jan 4th, 2014 at 07:33:45 PM EST
[ Parent ]
The part that's a little hard to understand is prepayment for supply if there is any.

Usually, if people prepay for supply and there is none they consider themselves scammed.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman

by Migeru (migeru at eurotrib dot com) on Sat Jan 4th, 2014 at 07:43:49 PM EST
[ Parent ]
most people, I submit, would be inclined to accept in exchange a credit unit with which he knows he can pay his utility bill
If there is any supply.

But people will prefer a credit unit with which they can pay any bill, especially if there isn't any supply of the utility they originally intended to use the credit unit for.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman

by Migeru (migeru at eurotrib dot com) on Sat Jan 4th, 2014 at 07:51:25 PM EST
[ Parent ]
Imagine a Mars bar token which you can exchange for a Mars bar when you present it at the shop... if they have any.

... and want to sell them to me.

My problem with buying one of your units is that I don't see how your system prevents you from selling your full production for money, leaving the pre-payers holding an empty bag. Since the pre-pay token does not actually entitle me to a transaction, only to use it in payment should a transaction actually take place. Some sort of mechanism to make that not-happen really has to be specified up front.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Sat Jan 4th, 2014 at 08:01:54 PM EST
[ Parent ]
My problem with buying one of your units is that I don't see how your system prevents you from selling your full production for money, leaving the pre-payers holding an empty bag. Since the pre-pay token does not actually entitle me to a transaction, only to use it in payment should a transaction actually take place. Some sort of mechanism to make that not-happen really has to be specified up front.
Apparently not:
Any cash which is paid by consumers, you keep, cackling at how dumb the speculators who hoarded units could be.


A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Sat Jan 4th, 2014 at 08:07:00 PM EST
[ Parent ]
Jake, Please do not tell your granny how to suck eggs.

Mutual guarantee of obligations managed by a service provider has been around since time immemorial.

This one has been managing shipping risks for 135 years.

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

by ChrisCook (cojockathotmaildotcom) on Sat Jan 4th, 2014 at 08:09:13 PM EST
[ Parent ]
Mutual guarantee of obligations managed by a service provider has been around since time immemorial.
That doesn't mean it's foul-proof.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Sat Jan 4th, 2014 at 08:14:25 PM EST
[ Parent ]
I am an electricity generator. You are an investor.

You pay me (say) 1.00 now in exchange for a prepay instrument/unit/credit/voucher which you may present in payment for (say) 10 Kilo Watt Hours of the electricity which I supply.

You may or may not be a customer of mine.

If you are also a customer, then you are simply paying forward and locking in a price, but with the option to sell to someone else for whatever reason.

And therein lies the rub. What if investors buy up a lot of units and then withhold them in the middle of the winter, until people are willing to pay through the nose for a unit?

Suppose there are as many units outstanding as foreseeable future production. Do you...?

allow people to buy production with cash
In that case, units purchased by long-term investors become worthless, or at least are worth much less than otherwise. This means they will be willing to pay less for the units at issue, and the producer will raise less money by issuing units that one would otherwise expect. Alternatively, the market for units may be limited in volume because of reduced investor demand, but again producers will raise less money from units;
force the producer to buy back outstanding units if they exceed the foreseeable future production
Since the producer is a forced buyer, they're at the mercy of market-cornerning and price gauging by investors. Producers will not want to enter into such funding agreements - or maybe they will, as draconian covenants are also attached to corporate debt issues and the corporates don't baulk at them, being happy to lower their funding costs by signing their soul over to the devil
force the investors to sell units back to the producer at a pre-agreed price
This is an "embedded call option" in the units, and lowers their price, lowering the fundraising capacity of a unit issuer accordingly. This is probably the best option, however, especially in terms of transparency and potential for mischief against producers or consumers.
You have so far avoided this example except to argue by assertion that these are all mirages and complications that _just are not there_. At best you have hidden behind an assertion that "of course there will be a regulator or service provided that will oversee the whole system". That is not good enough.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Sat Jan 4th, 2014 at 07:24:51 PM EST
[ Parent ]
Prepay has nothing whatever to do with physical supply.

Generators do not buy credits - they accept credits in payment for energy supplied and then they cancel them.

What if investors buy up a lot of units and then withhold them in the middle of the winter, until people are willing to pay through the nose for a unit?

It doesn't matter a toss, because customers will simply pay cash for electricity supplied. Why pay through the nose for prepay units?

Consumers will only prepay at a price which is less than the retail tariff price or - if they wish to hedge - suitably below the price they expect retail prices to reach, and of course bearing in mind their expected physical use.

Suppose there are as many units outstanding as foreseeable future production. Do you?.....

You continue to supply electricity in accordance with your physical supply agreements.

You accept all units which are presented in payment. You can't not accept them, because if you insist on cash you lose in court.

Any cash which is paid by consumers, you keep, cackling at how dumb the speculators who hoarded units could be.

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

by ChrisCook (cojockathotmaildotcom) on Sat Jan 4th, 2014 at 07:56:46 PM EST
[ Parent ]
Any cash which is paid by consumers, you keep, cackling at how dumb the speculators who hoarded units could be.
There is no reason for "investors" to buy units, then.

The only reason this sort of thing works for electricity markets is that electricity users are not in direct connection with producers: they are necessarily intermediated by grid operators. So grid operators may have an interest in prepaying from producers, but then they can gouge consumers (not because of the prepay units, it's just that the prepay units don't preclude gouging).

Customers can protect themselves from gouging by buying prepay units themselves. But this only works if the grid operator is required to accept units issued by the producer in payment for electricity.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman

by Migeru (migeru at eurotrib dot com) on Sat Jan 4th, 2014 at 08:12:35 PM EST
[ Parent ]
The only solution is to completely re-architect the market along the lines I have been advocating for years.

I said getting on for 20 years ago that intermediated power markets would not work and they have been a disaster for the public and the environment and a goldmine for the middlemen. The current UK Electricity Market Reform is a complex and completely useless policy disaster that will inevitably fail at vast cost.

In the meantime I'm working on introducing an architecture and instruments which I believe will work, in the Caspian region, where I am advising the ECO group of ten nations on strategic energy policy.

Based on 'least carbon fuel cost' principles, naturally.

Mind you the Norwegians have got in already with the Nordpool snake-oil.

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

by ChrisCook (cojockathotmaildotcom) on Sat Jan 4th, 2014 at 08:46:54 PM EST
[ Parent ]
Wait, wait. Now you're assuming an entire, stable market structure of physical supply agreements external to your unit system.

This is news to me, and seems counterproductive if your objective is to disintermediate the market and turn your units into a local currency.

It also seems to me that those external supply agreements will have to be locked in for your entire project lifetime before you start issuing units, or you'll have merely punted the problem down the road a bit. That being the case, why not build the terms of the supply agreements into the units?

It almost sounds as if you want to split the financing and operation of a project into two totally independent entities. Which is categorically impossible, because the financing is an important political control function for operations, and operations is the collateral for the financing.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Sat Jan 4th, 2014 at 08:22:27 PM EST
[ Parent ]
Wait, wait. Now you're assuming an entire, stable market structure of physical supply agreements external to your unit system.

This is news to me, and seems counterproductive if your objective is to disintermediate the market and turn your units into a local currency.

This is looking more and more like Andris Piebalgs' buying electricity at the supermarket...
Many people ask me what the internal energy market is about. Actually it does look like a very technical issue only suitable for engineers. It is technical indeed, but for final consumers, the opening of the energy market would mean that you can choose your electricity in the same way as you chose your potatoes. In other words, that there is a wide choice and your decision is based in your particular preferences. Wouldn't it be good that you can buy your kilowatt hours in the same supermarket that you buy your milk or your clothes?


A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Sat Jan 4th, 2014 at 08:34:41 PM EST
[ Parent ]
Well, Kilowatt Cards and Happy Watts are going down this road.

Maybe Tesco could sell them? <joking>

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

by ChrisCook (cojockathotmaildotcom) on Sat Jan 4th, 2014 at 08:56:25 PM EST
[ Parent ]
It's completely possible to have parallel financing and operating agreements.

Just not financing as we know it, Jake, or the conventional toxic legal vehicles and agreements.

Collateral gives way to co-ownership.

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

by ChrisCook (cojockathotmaildotcom) on Sat Jan 4th, 2014 at 09:00:18 PM EST
[ Parent ]
There is a fourth option, which is to have the units come with an expiration date. This avoids the problems of hoarding and market-cornering, but will of course reduce their selling price just like embedding a call option does. Effectively it embeds a forward European call option with strike 0, vesting at some future date and expiring in the indefinite future, where your suggestion embeds a spot European call option with strike equal to purchasing price (plus some margin) expiring in the indefinite future.

Which of the two is superior in terms of funding may depend on market conditions at issue, but intuitively I think yours would be a cheaper hedge for the issuer.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Sat Jan 4th, 2014 at 08:10:33 PM EST
[ Parent ]
Trust your intuition, Jake ;-)

"The future is already here -- it's just not very evenly distributed" William Gibson
by ChrisCook (cojockathotmaildotcom) on Sat Jan 4th, 2014 at 09:01:49 PM EST
[ Parent ]
But the fact that 1kWh of energy has some vague scientific aura (for accountants and business people) is a marketing issue, not a scientific issue.

So you denominate your currency in kWh. So what? You might as well denominate it in units of Kanye Awesome.

Unless you're planning to guarantee a redemption figure of 1kWh of energy for each nominal unit - and clearly you're not - you've simply replaced the words at end of the 'I promise to pay the bearer on demand...' sentence with one fiction instead of another.

In the same way I'm not going to get a pound of sterling silver from the bank for my Pound Sterling, I'm not going to get 1kWh of energy either, because apparently the exchangeable energy content depends on 'market sentiment', and all of that crap.

It occurs to me that after five years, or however long it's been, you still don't understand why this is a problem.

Worse, there's a big practical difference between the energy content of 1kWh (whatever that is in Joules - I'm too lazy to work it out) supplied as electricity, or gas, or steam, or petrol, or horsepower with actual horses.

The actual useful work output of those different forms of energy supply is drastically different because of thermodynamic efficiency issues.

This is basic physics, and you seem unaware of it.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Fri Jan 3rd, 2014 at 05:24:19 PM EST
[ Parent ]
Faith is subjective: utility - in terms of use value over time - is objective, albeit subjectively priced.
That Utility is subjective was well known by Jeremy Bentham 200 years ago and he was the better philosopher.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Sat Jan 4th, 2014 at 10:21:40 AM EST
[ Parent ]
thanks askod.

A swedish kind of death:

It would devalue their trade value, but not their use value.

correct me if i am wrong, but this is the nub of why it's so hard to grok, imo. the rentier class needs to middleman trade more than create usefulness. usury over utility.

the good news is that energy is more fungible than any other as we all need and use it. you can't eat it, true, but you can sure use it to help growing food. you can pay workers with gold but sooner or later it will run out. the sun, not so much.

it seems therefore more real than gold.

were it to happen as chris is punting it, wouldn't this 'currency' then be not terribly desirable for hoarders/speculators? you can't hoard energy unless you have huge batteries. leaving aside the probability of it supplanting the current models, (a socio-political problem), suppose by some miracle it could jump that hurdle, then where would the weak points be? where would the regulators be trained to ferret to see folks were playing fair? where's the weakest link in the chain?

what i get between chris' lines is that transparency and p2p self-policing would keep the playing field level, so regulation wouldn't be (so?) necessary.

excuse me chris if i have misunderstood.

if rampant speculation were disincentivised this would be another huge plus, if it could be baked right into the cake.

as rifek averred this kind of system will ruffle all kinds of expensive feathers, so pessimistically speaking there is probably no way it would be adopted unless the current political/economic systems crumble. hard to see how another crash would not decapitate the system entirely, seeing as we never really recovered from the 70's oil shock, let alone these last 5 years.

optimistically, some new system will arise out of the old one's ashes, and this seems like a good discussion to have pro-actively.

'The history of public debt is full of irony. It rarely follows our ideas of order and justice.' Thomas Piketty

by melo (melometa4(at)gmail.com) on Thu Jan 2nd, 2014 at 12:02:39 PM EST
[ Parent ]
melo:
wouldn't this 'currency' then be not terribly desirable for hoarders/speculators?

I think that like gold money being great for gold mine owners, energy currency can be great for power plant owners.

melo:

you can't hoard energy unless you have huge batteries

But you can hoard by not bringing it to the markets. Coal, gas and nuclear can be turned off, and even if we ignore those, hydro power or pumped storage can be turned on and off at will - indeed that is what is great about them. And you can also manipulate the energy markets, remember Enron and the engineered Californian energy crisis. Now make everything else priced in kWh's and you add another layer of complexity to be used by market manipulators.

In fact, we need not go to the extremes. Yearly variation in energy prices would cause enough problems of their own. In spring and summer, the hydro dams in Sweden gets filled. Sometimes so full that they need to dump water, then kWh's are cheap in terms of other stuff. In winter the storages run down, sometimes so much that despite crossborder links, old oil power plants needs to be taken online. Then kWh's are pricy. Hate to be a shop owner if prices are going to go up and down like that, hate to be a shopper even more if my recollection of what is pricy and what is cheap is going to be worthless.

I don't think energy currency is useful. I do however think that prepay is useful for building renewable energy (and other investments), to the extent of estimated future use. Pay to invest now, get electricity for your usage over the years. I think that is different then pay now and get electricity to speculate with over the years. And I think that difference should be reflected in tax codes, promoting buying for your own use over speculation (how commonly owned wind should be taxed is an ongoing and imo important question in Sweden).

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

by A swedish kind of death on Thu Jan 2nd, 2014 at 01:52:47 PM EST
[ Parent ]
And this all makes perfect sense. Get people to invest in energy infrastructure, lock in prices to lock out speculators, and everyone wins - except the speculators.

(And possibly the customers, if prices subsequently drop because of an energy glut. But don't tell them that, unless you also want to explain Net Present Value.)

But this is obvious, surely? (Except to speculators, who will hate it.)

It doesn't need any special energy units that go 'ting' when the sunlight strikes them in just the right way - it just needs PR and organisation, with good lawyers to draw up the contracts, and good engineers to build it all.

Problem is, I think Chris is suggesting that anyone can trade in pre-pay energy certificates - which seems to me a very good way to let the speculators back in again.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Fri Jan 3rd, 2014 at 12:23:08 AM EST
[ Parent ]
So let's say I want to invest in energy infrastructure.  

What can I expect from the investment you are proposing? Do I get a return? If so, what is it?

Can I then sell my investment? And how could you stop me, selling the economic interest anyway?

If I make a profit (which is what I expected would happen) doesn't that make me a successful speculator?

 

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

by ChrisCook (cojockathotmaildotcom) on Fri Jan 3rd, 2014 at 04:30:51 PM EST
[ Parent ]
Can I then sell my investment? And how could you stop me, selling the economic interest anyway?

This is where the man with the gun comes into the picture. In this case, the man with the gun is the tax man: Tax-favor primary market investment over secondary market speculation. That's not terribly difficult to do, and greatly discourages divestment, which in turn encourages people to buy the asset in order for their own use or to hold to maturity, rather than for speculative purposes.

It's possible that this is not a desirable thing to do, but it is a perfectly possible thing to do.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Fri Jan 3rd, 2014 at 04:35:53 PM EST
[ Parent ]
JakeS:
Tax-favor primary market investment over secondary market speculation.

logical, rational, (relatively) stabilising, intelligent policy.

JakeS:

That's not terribly difficult to do

do you have any idea how many of the pointiest of well-paid heads are spending all their waking energy scheming and plotting to ensure that this never happens? (rhetorical Q)

more mental processing than goes into NASA and the CERN project combined, i expect!

JakeS:

greatly discourages divestment

brings it down to non-febrile levels, perhaps? less market churn, less bubbles, less butter for our overlords?

JakeS:

It's possible that this is not a desirable thing to do

depends on your point of view, surely? which side of the bread is getting buttered...

i can't see any downside from here, where is the snake in that grass? (trotskyism, eutopianism,?!?)

'The history of public debt is full of irony. It rarely follows our ideas of order and justice.' Thomas Piketty

by melo (melometa4(at)gmail.com) on Fri Jan 3rd, 2014 at 08:00:24 PM EST
[ Parent ]
The catch is what Keynes said in Mig's quote below: If you limit investment to only the people who are going to actually use the capital that investment supplies, you are going to miss out on capital formation that would have otherwise made sense.

It may be that that is a cost worth bearing for the sake of shutting down the casino. Or it may be that it is not. The answer to that question will depend partly on one's political inclination, and partly on a non-trivial technical analysis of the market in question.

Political inclinations I provide for free, but non-trivial technical analysis I insist on getting paid for.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Fri Jan 3rd, 2014 at 08:33:01 PM EST
[ Parent ]
So let's say I want to invest in energy infrastructure.
I'll give you two Keynes quotes:
When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done
And
The spectacle of modern investment markets has sometimes moved me towards the conclusion that to make the purchase of an investment permanent and indissoluble, like marriage, except y reason of death or other grave cause, might be a useful remedy for our contemporary evils. For this would force the investor to direct his mind to the long-term prospects and to those only. But a little consideration of this expedient brings us up against a dilemma, and shows us how the liquidity of investment markets ovten facilitates, though it sometimes impedes, the course of new investment. For the fact that each individual investor flatters himself that his commitment is 'liquid' (though this cannot be true of all investors collectively) callms his nerves  and makes him much more willing to run a risk. If individual purchases of investments were rendered illiquid, this might seriously impede new investment, so long as alternative ways in which to hold his savings are availale to the individual. This is the dilemma. So long as it is open to the individual to employ his wealth in hoarding or lending money, the alternative of purchasing actual capital assets cannot be rendered sufficiently attractive (especially to the man who does not manage the capital assets and know very little about them), except by organising markets wherein these assets can be easily realised for money.
This is why policy need not pay too much attention to the incentives for private investment. Say you want to invest in energy infrastructure. Fine. But what should concern policy is how much energy infrastructure investment should happen in the aggregate, and fiscal and monetary policy should be tailored to that, regardless of whether that helps of hurts "savers", "rentiers" or "speculators".

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Fri Jan 3rd, 2014 at 05:38:53 PM EST
[ Parent ]
well the gentlemen must have their little flutter, mustn't they?
 i remember back in the 60's when bookies had a flashily dubious reputation. betting has become more banally institutionalised since then and now bankers have become the new bookies, (with quieter dress sense).

'The history of public debt is full of irony. It rarely follows our ideas of order and justice.' Thomas Piketty
by melo (melometa4(at)gmail.com) on Fri Jan 3rd, 2014 at 08:06:31 PM EST
[ Parent ]
Neither of us remembers the 1920s. Unfortunately, everyone who could remember them is dead. That's why we're in the current mess.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Sat Jan 4th, 2014 at 10:20:22 AM EST
[ Parent ]
That is how history lessons are employed.
by das monde on Sat Jan 4th, 2014 at 11:52:17 AM EST
[ Parent ]
You would get a guaranteed x amount of energy for a fixed cost of y over a time t, which would (probably) be cheaper for you and more secure than it would be without the scheme.

Given that governments and energy policy are run by mad people, security of supply and low cost are attractive and reasonably risk free.

Of course it's possible aliens will land and give everyone the secret of free energy, in which case you'll lose out. But that probably isn't an outcome worth losing any sleep over. (Martin Hay may disagree.)

No, you would not be able to trade it, although for practical reasons a community scheme might have to limit the secure supply to specific properties, in which case you could 'trade' by including some of the value in the market price of the property if you sell it.

No, it does not make you a speculator, because you're buying something physical, not using something physical as a flimsy pretext for gambling.

If you're someone like Jerome you can play the tribute and persuasion game, and take a cut for persuading all the interested parties that the scheme makes sense to everyone involved.

You're then getting into 'funding' as aristocratic/executive assent and/or sanity checking for a scheme - which is all funding ever is anyway. But that's about as speculative as something like this should be.

If everyone is a Person of Clue they will do at least basic due diligence to make sure they're not screwing anyone, and not getting screwed.

I understand there are a number of these schemes already, and they seem to work well.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Fri Jan 3rd, 2014 at 05:41:06 PM EST
[ Parent ]
'funding' as aristocratic/executive assent and/or sanity checking for a scheme


A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Fri Jan 3rd, 2014 at 05:44:11 PM EST
[ Parent ]
In order for an alien to reach this planet and disarm the men with the guns, he needs sufficient intellectual energy loaded in his spaceship to enable him to reach escape velocity.

To reach escape velocity, this debate needs to accept the discipline imposed by mapping the features of the asserted system to an accounting method.

by martinahay on Sat Jan 4th, 2014 at 03:32:04 AM EST
[ Parent ]
What Chris has asserted is that my interpretation of how a chiralkine accounting method can be used as a basis for exchange is incorrect. He is asserting that there is a better interpretation.

In this debate, I have confined my comments to the accounting method. This method is explained with much greater clarity on our website than it was when my ideas about its interpretation that were on trial in the last debate. People who think they understood the method the first time are still kindly requested to look again.

I do not see how you can have full possession and control of a system until you can represent all its states and their transformations in 1s and 0s. Until you can do this, you do not have a testable hypothesis.

Like double entry accounting, a chiralkine accounting method is represented in ordered 1s and 0s. There are no negative numbers. Double entry accounting is in order 2. Chiralkine accounting is in order 4, like spacetime.

by martinahay on Sat Jan 4th, 2014 at 04:18:51 AM EST
[ Parent ]
intellectual energy loaded in his spaceship to enable him to reach escape velocity
Escape velocity does not depend on intellectual energy, whatever the fuck that is.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Sat Jan 4th, 2014 at 10:03:30 AM EST
[ Parent ]
were it to happen as chris is punting it, wouldn't this 'currency' then be not terribly desirable for hoarders/speculators? you can't hoard energy unless you have huge batteries. leaving aside the probability of it supplanting the current models, (a socio-political problem), suppose by some miracle it could jump that hurdle, then where would the weak points be? where would the regulators be trained to ferret to see folks were playing fair? where's the weakest link in the chain?
As far as I can tell, Chris has admitted that it is possible that there would be as many prepay energy units oustanding as foreseeable future energy production, at which point people would no longer be free to buy energy with cash, free to keep that cash, or free to not liquidate the energy units until later, or some combination of the three.

That is, energy itself may not be hoardable (itself a statement dependent on technology) but Chris' energy units do open themselves to overissue, hoarding or market cornering, or some combination of the three.

And, since denying others access to resources is one of the preferred ways to acquire and apply political power, preay energy units are an ideal platform for sociopaths.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman

by Migeru (migeru at eurotrib dot com) on Fri Jan 3rd, 2014 at 05:34:26 PM EST
[ Parent ]
Migeru:
prepay energy units are an ideal platform for sociopaths.

well isn't any macro gambling system? think macau on steroids.

as for denying others access to resources, yes well until we evolve to some exalted state of sharing trust that we do away with property completely, that comes with the territory, (literally).

those with 'legal right' to property (backed up with Jake's 'man with the gun') will always have some advantage over those without.

while i am not sufficently delusional to expect mankind to attain angelhood and share everything equally, i would settle for a system that didn't extinguish all that is local and characteristic in favour of a gaudy, poisonous globalism that widens socioeconomic differences and commodifies all concept of the Commons.

and that's the attractive whiff coming off of chris' proposals, the hunch that by tying values to something as fungible, eternal and ubiquitous as energy instead of lumpier things like gold or 'securities' one could create a more classless society with the wealth growing the more sun and wind goes online and spreading outwards rather than always getting sucked back in to centres.

of course it could end up like 'black mirror' where all citizens earn their daily bread by pedalling stationary bicycles feeding the grid, earning their 'credits'...

'The history of public debt is full of irony. It rarely follows our ideas of order and justice.' Thomas Piketty

by melo (melometa4(at)gmail.com) on Fri Jan 3rd, 2014 at 08:23:55 PM EST
[ Parent ]
prepay energy units are an ideal platform for sociopaths.
well isn't any macro gambling system? think macau on steroids.
well that's not how Chris is promoting prepay energy units. And he has failed to convinced a friendly sceptic audience of the nontoxicity of his invention.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Sat Jan 4th, 2014 at 10:18:46 AM EST
[ Parent ]
Well, Mig, I've had a couple of last goes to dispel the misunderstandings.

It seems to me that our friendly sceptics have been looking with typically forensic diligence for complexity and catches which are simply not there.

But heigh ho.

The proof of the pudding is in the eating, and the fact is that an energy currency is a possible retail market outcome of the incredibly simple means of funding which is breaking out all over the place in wholesale markets now that conventional financing and funding are terminally fucked.

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

by ChrisCook (cojockathotmaildotcom) on Sat Jan 4th, 2014 at 06:51:02 PM EST
[ Parent ]
Local currencies are also springing up all over the place.

This is not a good sign. It is a sign that the governments which were supposed to do macroeconomic planning have absconded from their duties so profoundly and for so long a period of time that civil society has begun to adapt to the absence of central macroeconomic planning.

Which is Very, Very Bad. Potentially civilization-threateningly Bad.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Sat Jan 4th, 2014 at 06:58:20 PM EST
[ Parent ]
Well, Mig, I've had a couple of last goes to dispel the misunderstandings.

It seems to me that our friendly sceptics have been looking with typically forensic diligence for complexity and catches which are simply not there.

But heigh ho.

You've cleared the linguistic misunderstandings.

What's left is a substantive disagreement, not a misunderstanding.

The disagreement stems from the fact that your narrative is investor-centric or, at the very least, you feel compelled to pander to "investors". In so doing, you are leaving the systems you're describing open to mischief, IMHO. Your opinion, obviously, is that this is not the case. But this is no longer a misunderstanding.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman

by Migeru (migeru at eurotrib dot com) on Sat Jan 4th, 2014 at 07:07:04 PM EST
[ Parent ]
This sounds like some kind of ghastly frankenstein hybrid of a futures contract and share issue with no guaranteed delivery.

Let's keep this really simple.

I buy a 1kWh unit. I keep it for a while. Am I guaranteed 1kWh of actual electricity if I decide to redeem it?

Yes or no?

If yes, what's to stop me buying all the available units from as many sources as I can afford if I think electricity is going to be more expensive in the future, and reselling them on the market after prices go up - possibly because I've helped create artificial scarcity, Enron-style?

If no, why - apart from speculation - would I pay money for something that doesn't do what it says on the tin?

by ThatBritGuy (thatbritguy (at) googlemail.com) on Sat Jan 4th, 2014 at 07:28:29 PM EST
[ Parent ]
As I explained just now to Jake, prepay instruments are completely detached from supply and cannot affect the physical market price of the underlying.

Over-issue and lack of performance (ie poor or no generation) are the biggest risks but are only a financial risk. Transparency of unit issue and professional management/quality control are both necessary, but there's nothing new about those requirements for financial instruments.

Hoarding of units may be a bad move on an investor's part, because at constant energy prices his interests lie in returning the units against production as rapidly as possible (which is where the expression 'rate of return' came from, of course, in respect of sovereign tax prepay credit instruments aka 'stock').

If investors hoard, then the generator receives the cash surplus over and above his pre-paid production earlier than he had planned and expected.

So he will have more cash now than he expected (and a faster rate of return), but he may not make as much cash in respect of future production if the price rises in future. If that's a problem he can always put his cash to work in further energy loans on other projects.

The risks to the unit hoarder are firstly, that he is unable to return his units against production, or sell them, before generation ceases, and secondly, that the unit price falls.

Market cornering? Buying up all the units in issue has no effect on the physical market price, and it does not matter(other than administratively) to the generator whether a million unit holders or a single unit holder who present units in payment for supply.

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

by ChrisCook (cojockathotmaildotcom) on Sat Jan 4th, 2014 at 06:40:28 PM EST
[ Parent ]
constant energy prices

Which are where?

by ThatBritGuy (thatbritguy (at) googlemail.com) on Sat Jan 4th, 2014 at 06:45:04 PM EST
[ Parent ]
Retail tariffs are not particularly volatile, but that's not the point.

The point is that there is no incentive to hold prepay units unless you think the price will go or remain above the price which you paid for them

Many retail customers are quite happy to make judgements now on future energy prices, and the Big Six offer price fixes to accommodate them. More than 3m customers already do pre-pay, and they generally get the worst rates.

That's the wonder of our current intermediated market.

I believe that a combination of mutualisation; dis-intermediation and prepay will change the game, and that it is in fact in the financial interests of the intermediaries themselves to adopt this model

But then I'm just a naive Utopian.

See you guys later. Or maybe not.

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

by ChrisCook (cojockathotmaildotcom) on Sat Jan 4th, 2014 at 07:03:59 PM EST
[ Parent ]
Point of information - most pre-pay customers are on pre-pay because they're considered a bad credit risk and not suitable for direct debit, not because they want low prices.

Clearly if you want low prices pre-pay isn't a good way to get them. (Some kind of buying co-op with wholesale leverage would be far more effective, especially if it negotiated with the energy suppliers directly.)

But that just emphasises the extent to which pricing is political, and how in this case the suppliers are the ones with the gun.

They collude as an oligopoly. Their real customers are upper management (first) and shareholders (second.) Customers are a resource to be exploited.

Price competition is non-existent, and individual customers have very limited ability to choose tariffs - specifically they can choose to lock in a price for a fixed term, at the cost of some extra cash up front.

A buying co-op combined with pre-pay might have the clout to lower prices. But that would be a political move, and doesn't need any change in accounting.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Sat Jan 4th, 2014 at 07:35:48 PM EST
[ Parent ]
Markets intermediated by profit maximisers are and always have been the problem, TBG.

I have been saying that on ET since Day One.

But the interesting thing about the dis-intermediated market structure and direct 'peer to asset' instruments we are discussing here is that it is in the interests of intermediaries to adopt them because they minimise the need for finance capital.

That is precisely the reason why these structures and instruments are emerging in use.

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

by ChrisCook (cojockathotmaildotcom) on Sat Jan 4th, 2014 at 08:03:28 PM EST
[ Parent ]
But what's disintermediated about a system that sells individual energy units to speculators, with a few left over for consumers if they're somehow in the loop?

A disintermediated system would sell energy directly from producers to consumers. End of.

A disintermediated system that has units floating around is not disintermediated - the units are the mediation.

You seem more interested in the fact that these units can be traded than in the fact that consumers may be able to buy them and use them for electricity.

And you still haven't answered the question - does a 1kWh unit guarantee delivery of 1kWh of electricity on demand? Yes, or no?

by ThatBritGuy (thatbritguy (at) googlemail.com) on Sat Jan 4th, 2014 at 11:57:38 PM EST
[ Parent ]
Can finance without trust issues exist?
by das monde on Sun Jan 5th, 2014 at 08:15:55 AM EST
[ Parent ]
The point of everything we're discussing in this thread is to try to pre-empt and mitigate inevitable conflicts of interests. If there were no possibility for future disagreements there would be no need for accounting, contracts, and regulations. And you set up resolution mechanisms in advance in order to avoid a law-of-the-jungle approach to resolving differences.

But in la-la-land interests are or can always be aligned, and there are no issues of trust. At least among decent people, because the indecent ones are kept out by nontoxic social structures. Etc.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman

by Migeru (migeru at eurotrib dot com) on Sun Jan 5th, 2014 at 08:43:33 AM EST
[ Parent ]
But even if interests are perfectly aligned, not all agreements about future can be fulfilled by every participant. (Especially when total resources are tight, funny that.) No accounting helps to resolve that drastic conflict: a debtor cannot pay it all, the creditor will not budge.
by das monde on Sun Jan 5th, 2014 at 02:19:17 PM EST
[ Parent ]
I don't think it's about aligned interests - it's about a primary focus on trading real goods and services, or a primary focus on speculation and profit which uses real goods and services for financial leverage.

Remember, money is not a thing. There is no finite supply of money, so in theory debts can be cancelled and forgiven at any time, and there's no financial reason why any project that has an obvious social benefit shouldn't be funded.

Deciding whether or not do pursue a debt depends on face and status, not on logic. (At least, not in extremis.)

Face, in the financial sense, is limited. If you gain, typically someone else loses.

The real conflict is between zero-sum finance which concentrates on playing games with clear winners and losers, and over-unity accounting, where as many people win as possible.

Zero-sum finance is essential aristocratic. It's a hang-over from the days of monarchy when personal majesty was bankable and could be enforced by violence.

Cooperative over-unity finance has barely been tried yet. It can't be tried until the Man with a Gun problem is solved. (No relation to free-energy over-unity 'theories' obviously, because it's clear that cooperation really does have obvious social benefits, and is probably more productive and efficient overall than Hobbesian competition.)

The scheme Chris is discussing attempts to solve the problem by:

  1. Pretending it isn't a problem, because Chris doesn't give a crap about politics.
  2. Claiming magic will solve it, because peer to peer disintermediated buzzword storm blah.

Neither of those is credible.

It's a good scheme for investors and producers. Apparently it's not impossible to sell the same unit of real electricity to multiple buyers, which is hardly a bad thing for either producers or speculators. (Maybe not so much for consumers, however.)

by ThatBritGuy (thatbritguy (at) googlemail.com) on Sun Jan 5th, 2014 at 02:47:12 PM EST
[ Parent ]
This is what inflation does for you.

There will always be some defaults in the system, but with adequate inflation you avoid having the entire edifice collapse from massive cascades where each default triggers two more.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Sun Jan 5th, 2014 at 02:47:37 PM EST
[ Parent ]
But even if interests are perfectly aligned, not all agreements about future can be fulfilled by every participant.
And precisely because of this you need to pay a little more attention to noncompliance and default than Chris appears to (in his marketing pitches at least).

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Sun Jan 5th, 2014 at 03:42:58 PM EST
[ Parent ]
In a conventional monetary system, a person's trading account relative to other members of a trading exchange can be on one of three states: credit, debt and balance. Accounts represented in double entry bookkeeping can be reduced to these three states, because in the number pair system used (debit, credit), (1, 1) is deemed to be the same as (0, 0) - balance: debits cancel credits.

In a chiralkine accounting system, each of the three states is resolved into two forms. The three states of a monetary system are deemed to be one hand, and the other three states the other hand. The resolution turns what appears to be a flat representation of everyone's trading positions in the exchange into what appears to be a 3D or chiral representation. It is like putting on 3D glasses.

In a monetary system, a person in a state of credit or debt can return to a state of balance independent of another with whom an original credit/debt pair (currency) was created. When a person buys a house under a mortgage, a credit/debt pair is created. The accounts of the buyer and seller can return to balance independently.

In chiralkine accounting, the accounts of the buyer and seller cannot return to balance independently. The originators of a credit/debt pair cannot return to balance until both have "spent" their respective credit and debt units. The "seller" and "buyer" each cycle through three states back to a "balance" that remembers the original state (redeemed credit or redeemed debt). It is as if the "buyer's" and "seller's" accounts are enantiomers: mirror opposites.

I suspect that chiralkine accounting will enable emerging bubbles to be spotted much more quickly than double entry bookkeeping, and possibly enable them to be controlled. This will require testing. I think bubbles are chiral phenomena, like tornadoes, cyclones and spiral galaxies.

by martinahay on Fri Jan 3rd, 2014 at 04:17:08 AM EST
I think that the previous Chiralkine Accounting thread which I kicked off back in April must have generated more comments, heat and acrimony than almost any in ET's history.
ET is like Oslo, it heats itself by burning rubbish.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Sat Jan 4th, 2014 at 10:16:13 AM EST
by martinahay on Sat Jan 4th, 2014 at 10:31:48 AM EST
[ Parent ]
http://math.ucr.edu/home/baez/crackpot.html

Friends come and go. Enemies accumulate.
by JakeS (JangoSierra 'at' gmail 'dot' com) on Sat Jan 4th, 2014 at 11:05:13 AM EST
[ Parent ]
In light of the discussion I had to check how it is regulated where O2 - wind electricity cooperative exists.

The pitch is simple enough, pay upfront 6 700 SEK (about 750 euros today) that is invested in wind power and get to buy 1 000 kWh to at production price (about 30-40% of standard price). You can buy more then once and it is recommended to aim at 80-90% of estimated consumption.

What do the consumer get?

The right to buy up to the specified amount per year. No right to transfer your right to consumtion.

Can you get the money back?

Yes, you can leave and are then entitled not to your initial investment but its current value (if the coop has lost money, it will be less, if they have made money it will be more).

What does the producer get?

Financing without traditional interest costs.

What happens with the remainding 10-20%? What happens if the wind does not blow or to many enters at the same time (wind has a ramp-up time)?

Looking at the contract, the coop acts as a electricity retailer, and the remainder is re-sold to you at purchase cost (Nordpool) plus two öre (so about 0.2 eurocents) per kWh. As an electricity retailer it is regulated as all other retailers by law and overseen by the energy authority, the details of which I don't really know. Hopefully better then California's. But anyway the coop is mandated to deliver in accordance to the deal.

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

by A swedish kind of death on Sun Jan 5th, 2014 at 04:05:50 PM EST
That requires it to be tax-favored, right? The middleman doesn't take a 200 % markup in your grid does he? In the Danish grid, the tax man takes a 100-150 % markup, and the middleman then takes a 20-something % markup on top of that (which comes to around 200 % markup in total).

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Sun Jan 5th, 2014 at 07:21:11 PM EST
[ Parent ]
I have to check.

Hm, ok. Can't find anything indicate lower tax at o2.se, lets check numbers.

First, my estimate of 30-40% was low, or well it depends on an average price which I don't really have, I just have the lowest price for multi-year fixed consumer price I myself have been able to find at different times, and also I misread O2's page. So forget that number.

Second, the grid owner charges a fee for transmission. That is a seperate bill per kWh, and hard to change (except by lowering your consumption). It is regulated and iirc should be around 20% of total cost. I have not included it here.

Third, prices right now are really low (rainy summer, very warm winter, and most reactors up and running), but if we compare with that:

O2: 20 öre/kWh + electricity certificate fee (unspecified) + electricity tax (unspecified) + sales tax (unspecified) = 66 öre/kWh

Checking elskling.se for new consumer deals, they are right now between 80-90 öre/kWh (an extreme low in my experience) with electricity tax at 29,30 öre/kWh and 25% sales tax. If I plug that into O2's price I get 3,5 öre/kWh in certificate fee. Hm, I think that looks reasonable, so no tax relief. A more normal price is in my experience 100-130 öre/kWh.

Checking the wind cooperative tax debate, it centers around if wind coops should or should not be taxed on the difference between the price they deliver to their members and 'market price'. The tax authority made an law interpretation in the fall of 2011 that wind cooperatives should be taxed on that difference, and the governing coalition is apparently happy with that, because from what I can find it is just the opposition that tries to debate it.

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

by A swedish kind of death on Mon Jan 6th, 2014 at 10:22:52 AM EST
[ Parent ]


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