Special Characteristics [of a monetary system] Needed to Avoid Economic
Collapse

 



Our crisis has a physical component and an imaginary component. The physical
component comes from limitations in the quantities of land, water,
consumable energy, and the environment itself. The ecological footprint of
the human race exceeds the carrying capacity of Earth. The imaginary
component is instability in the monetary system caused by excessive debt and
excessive monetary inequality. To ameliorate the physical crisis we must
eliminate the imaginary one. I do not mean that indebtedness, poverty, and
wealth are imaginary; but, rather, that we can eliminate all three with the
application of our imaginations without affecting the physical universe.
Stabilizing our population and reducing our ecological footprint will
ultimately have a desirable effect upon the universe.

Regardless of what the people want, the owners of the country want to retain
their positions of power, privilege, and wealth. Naturally, they despise the
idea of government control of the economy and the means of production;
however, when a crisis arises that they cannot handle, they readily accede
to crisis socialism to save them. During World War II, without adopting
socialism completely, they allowed rationing, wage and price control, and
management of vital industries by government employees even if they were
paid only one dollar per year.

To respond appropriately to resource and environmental limits, we need to
establish crisis socialism. However, to eliminate debt, we need to repudiate
the US dollar; and, to eliminate inequality, we need to pay everyone the
same even if no work can be found for them to replace the inessential work
from which they were furloughed to reduce our consumption of fossil fuels
and our ecological footprint. After all, the requirement that every citizen
does useful work to get paid and the requirement that the pay should be
commensurate with the value of the work are completely imaginary. The idea
that everyone should be allowed to get as much money as he can is completely
wrong. (One of the reasons Dematerialism is right and everything else is
wrong is that any society in which it is possible for one person to acquire
more wealth than another is doomed.)

    

On Designing a Community Currency

Thomas L Wayburn, PhD

This is a draft – nay, a draft of a draft.  – Herman Melville, Moby Dick

To walk in money through the night crowd, protected by money, lulled by money, dulled by money, the crowd itself a money, the breath money, no least single object anywhere that is not money, money, money everywhere and still not enough, and then no money, or a little money or less money or more money, but money, always money, and if you have money or you don’t have money it is the money that counts and money makes money, but what makes money make money?  – Henry Miller, Tropic of Capricorn

Economic Value

Introduction

The best monetary system is no monetary system at all.  However, for people who insist upon retaining the mean-spirited notion of tit for tat, every economic good or service must be assigned a value to ensure that no one gets more than anyone else and no one gets a free ride.  Probably, though, until people learn to identify economic success with minimal consumption of valuable resources, it will be necessary to place a value on economic goods and services, if for no other reason, to enable economic actors to evaluate their own success in minimizing consumption.

Replacement paragraph for the above:  One of the principal reasons for replacing the current national monetary systems is that money is created by banks when they lend more than the sum total of the money deposited with them.  This money cannot be repaid unless the economy grows, that is, the total cash value of sales and purchases is greater this year than it was last year regardless of the quantity of real wealth such as food, clothing, housing, energy represented by each unit of currency.  The total amount of currency must increase continuously; and, each unit of currency can be divorced completely from physical wealth.  We wish to replace this currency, which represents only a number in a computer somewhere and not anything tangible with a currency based upon measurable quantities of real physical wealth.

If there were one physical quantity, such as emergy (with an M), that could be used to measure all physical wealth – in particular, all wealth necessary to sustain human life on this planet – we would do well to base our new currency upon it.  We cannot do this at the present time for two reasons: (i) the emergy values of many items have not been established nor is there any on-going effort to establish them or even to determine how they should be established and (ii) temporarily the government will need to issue un-backed scrip with which to pay the workers it chooses to do the necessary work to convert the United States from a consumerist economic parasite to a sustainable self-supporting nation that can be relied upon to help its neighbors if it can.  The workers can use the scrip to purchase goods and services that formerly were paid for with USDs.  Hopefully, in time, the economy will be a net producer of real wealth and the new fiat currency will be redeemed with currency described below.  Clearly, among the necessary jobs will be the production of sufficient energy, food, and health care to sustain citizens who obey the new sustainability laws.  I need to explain “sustainability laws” and to show that enough workers will be available for essential occupations after the new government furloughs workers who serve the market currently but produce nothing that we actually need to live.  In “Energy in a Natural Economy”, I analyzed the Bureau of Labor Statistics data from one the last years in which the United States produced almost everything it consumed and much more.  We should now try to establish a small list of fundamental economic entities in terms of which all economic goods and services can be evaluated.

Currently, provided we use Howard Odum’s concept of emergy to as great an extent as possible, we can evaluate every economic good or service terms of land [1], water, energy, and time [2].   Therefore, we could design a new rational monetary system with four types of currency: 

(1)    Emergy certificates that would pay for almost all economic goods and services in terms of energy properly weighted by transformities to account for the cost of conversion to a useful form

(2)    Water certificates to pay for fresh water as it is found in Nature – as opposed to desalinated sea water

(3)    Land certificates to pay a rent for all land use based upon ecological characteristics to be described later.  (Clearly, not all land has equal value.) 

(4)    Certificates to pay for the time spent by workers at essential jobs.  The government may not issue these any faster than they are needed to pay workers; so, they are not fiat currency in the sense that the USD is. 

The government needs to establish the conversion factors so that workers can pay for economic goods.  It remains to be seen whether or not the natural conversion factors can be used:  The yearly rental of one square meter of land might be the maximum collectable available energy (Gibbs availability) that falls on that one square meter in one year averaged over whatever period of time is deemed appropriate but multiplied by a factor that is proportional to the nutritional content of the soil with 1.0 applied to virgin soil with an optimal mix of soil nutriments as determined canonically.  However, land and water emergies cannot be assigned independently but in connection with the solution of a matching problem and with appropriate transformities in the sense of Odum computed according to Wayburn.  This sounds complicated; nevertheless, it is expected to entail only negligible energy costs.

 

(5)    These may appear in an infinity of combinations and, thus, cannot be represented on coins or paper bills.  However, nowadays, economic transactions are recorded by computers; and, therefore, each may be assigned a unique ordered pair if necessary.  Undoubtedly, an optimal number of decimal places or significant figures will be chosen by the community.

Land

We may assume, then, that every economic actor* in a community has been assigned a portion of contiguous land of equal value excluding the most desirable locations of all – normally coast lines, river banks, the best scenic outlooks, and the best locations for intensive energy collection, which will be retained by the community as part of the commons.  In many cases, this common land will be made available to economic enterprises owned in equal shares by their own workers according to the maxim that every worker should own his own tools – or, as stated in the ancient Hebrew rabbinical writings, a carpenter without tools is not a carpenter.  No person may control land upon which he (or she [3]) does not live or labor.  The land upon which men and women labor is held in common by all of the workers who labor upon that simply-connected (not disjoint) piece of land.

* Dependent children are not economic actors.

 

Energy

 

Energy* is the most important fundamental economic quantity.  It should be the basis of every currency.  It is the life’s blood of every economy.  Howard T. Odum is famous for the following words: 

 

Real wealth is food, fuel, water, wood for houses, fiber for clothes, raw minerals, electricity, information, …

 

·        A country is wealthy that has more of this real stuff used per person.

 

·        Money is only paid to people and is not proportional to real wealth.

 

·        Prices and costs are inverse to real wealth.

 

·        When resources are abundant, standard of living is high, but prices low.

 

·        When resources are scarce, prices are high, more money goes to bring resources, a few people get rich, but the net contribution to prosperity is small.

 

·        Real wealth is mostly the work of nature and has to be evaluated with a scientific ... measure, emergy.

 

Therefore, to place a value on an economic good or service, the first quantity to be assigned is the emergy (with an M) or embodied energy**.

 

* In this essay, and in the rest of my writing, the term energy refers always to either Gibbs availability or Helmholtz availability depending upon context.  Please see http://www.dematerialism.net/Chapter%202.html#_Definitions.  This is not a frivolous personal definition.  To go about referring to energy consumption is barbarous and technically wrong! 

 

** See http://dematerialism.net/onemergy.htm.

 

 

Time

The only time a person has is the time of his life.  Clearly, every person’s life is equally valuable to himself.  Until a thousand years have passed after an individual has died, there is no valid way to evaluate his contribution to the community.  Therefore, every person’s time must be assigned the same value, namely, one hour per hour since time is fundamental and cannot be evaluated in terms of anything else, least of all money.

But, it is said, “Some people spend many years in engineering school, medical school, apprenticed to a tailor, etc. preparing to render useful services to the community.  Clearly, the time of such people’s life when they render such services to the community must be compensated at a higher rate than the time of unskilled laborers with no preparation.”  This can be finessed in the following way:  Time spent learning a skill must be compensated at the same rate as it will be compensated when they are rendering service to the community.  Thus, if a person spends 1000 hours* in classrooms being instructed in the great art of engineering with an average of nine other people, he will have earned 900 hours that he can use to support himself and others until he is able to contribute time practicing engineering.  (Each student contributes 100 hours to the time spent by the professor.)  In addition, he will spend about 2000 hours studying alone.  This too represents earned time with which he can buy books each of which carries a price tag composed of the emergy and the time that went into its construction by the author and the book binder to name only two.

* The number 1000 is chosen for convenience in writing this essay not as a reflection of the actual time needed to learn engineering.

 

Conclusions

For now, suffice it to say that I will present this essay to a Yahoo group where the topic of community currencies is discussed and to a few friends for comments.  This is a first draft – nay, a draft of a draft.

Houston, Texas

January 4, 2007

Notes

1. Since the vast majority of all primary energy comes from the Sun, energy can almost be related to land area and the yearly average rate of insolation.

2. It occurs to me that we might not wish to compute the energy equivalent of the amount of fresh water degraded in an economic activity, in which case water will be represented by an additional component of the value vector.

3.  4. In this essay, the pronoun ‘he’ shall be understood in the sense of ‘he or she’; therefore, that awkward construct will not appear again.

5.  In this essay, and in the rest of my writing, the term energy refers always to either Gibbs availability or Helmholtz availability depending upon context.  Please see http://www.dematerialism.net/Chapter%202.html#_Definitions.

6.  The number 1000 is chosen for convenience in writing this essay not as a reflection of the actual time needed to learn engineering.