Felix Stalder on Wed, 16 Jan 2002 01:27:01 +0100 (CET) |
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[Nettime-bold] Open Source and Open Money |
[This discussion, which in many ways is a continuation of the "Fading Altruism of Open Source" thread here on nettime, took place somewhere in between nettime and Stefan Merten's oekonux list. In fact, it was Stefan who sent a reference to the orginal thread to oekonux, but kept Kermit, Keith and myself on the cc, so that we would still participate. Jaromil has forwarded the Graham Seaman's first reply. Below are three more. Felix] + From: Kermit Snelson <ksnelson@subjectivity.com> + From: Keith Hart <HART_KEITH@compuserve.com> + From: Felix Stalder <felix@openflows.org> From: Kermit Snelson <ksnelson@subjectivity.com> Date: Mon, 14 Jan 2002 22:30:40 -0800 I believe that terms like "altruism" and "opportunity cost" don't provide much insight into why people develop open source or free software. Lancashire, who bases his analysis on such ideas, overlooks the fact that computer programming is not only an occupation but also a hobby and sport, particularly for those who are good at it. The obvious fact that people will do it without being paid no more "poses a serious challenge to traditional political economy" than does bird-watching or basketball. So the interesting economic question about open source development isn't why some people do it for free. Instead, I propose that we consider instead what kind of contractual instruments, other than those that impose legal monopolies, are capable of creating sustainable economies. Recasting the discussion in these terms can also make it clearer why the "open money" issue is related to the "open source" and "free software" discussions. After all, both currency and software license agreements are contractual instruments, and the issue before us is whether such instruments can enable a sustainable economy without resorting to the restrictive monopolies of central banking and copyright, respectively. I'll start out by stating my own understanding of how an "open money" system would work and how it compares with the "open source" paradigm. As will quickly become obvious, I'm very ignorant on the first subject (and only a little less ignorant on the second) and hope that my inevitable errors will lure Keith Hart and Felix Stalder, our experts, into the discussion to correct me. :) When you sell something in exchange for (say) a USD100 currency note, you have given up ownership of a real asset in exchange for a claim against the Federal Reserve. In other words, you have essentially "loaned" money to the US government. That USD100 note is carried on the Federal Reserve's balance sheet as a liability, usually collateralized by the equivalent amount in US government securities. To maintain the market value of the note you hold, the Federal Reserve must limit the amount of such liabilities with respect to the underlying performance of the US economy. It does this by buying and selling US government securities on the open market, changing the interest rate it charges to its member banks, and varying the reserve requirements that it imposes on them. In contrast, there is no central bank in an "open money" system. When you sell something in exchange for 100 "dollars" on such a system, you essentially grant an interest-free loan to the community of LETS users in general. There is no limit placed on any single user's indebtedness; each member acts as her own Federal Reserve Board, deciding for herself the liability she feels she may responsibly incur to the LETS community based on her own ability to sell items back to it. Naturally, there are many possible problems with such a system. What happens, for instance, if people establish accounts on a LETS system, "buy" expensive items, and then leave without ever having sold anything themselves? Essentially, they've stolen from the community. If too many people do this, the system will collapse. Or what if everybody on the system is selling aromatherapy and no one is selling legal services? If there is a unbalanced distribution of products or services on offer, the system won't work. As with any central bank currency, the health of an "open" currency depends entirely on the economy and behavior of the community that adopts it. A similar situation applies to free software. If the GPL instrument is to serve as the basis of something more than a hobby economy, it must provide a way to compensate those who can't afford to give their time away. The compensation theory of the GPL seems to be (according to the FSF web site) that it forces software to be paid for in software. In other words, if A writes a program that uses B's GPLed code, then B gets to use A's program as compensation. This assumes, of course, that A has no workable, non-GPL alternative to B's code, and that A's program is equally valuable to B. In other words, the abilities and needs of the community have to be balanced in a rather exquisite way if the community is to be self-sustaining. Therefore, it seems to me that asking whether "open source" and "open money" contractual instruments can support a viable economy simply restates two very old political questions. Namely, is this exquisite balance achievable simply by letting human beings do exactly as they please, or is the thumb of coercion (e.g., copyright and central banking) required on the scale? And if the latter, whose thumb? And who will control it? Kermit Snelson From: Keith Hart <HART_KEITH@compuserve.com> Date: Tue, 15 Jan 2002 05:30:34 -0500 Kermit, I am very grateful for the clarity of your post on open money and open source, especially for seeking to return the argument to basic political and legal theory, as in: >what kind of contractual instruments, other than those that impose legal monopolies, are capable of creating sustainable economies.< and > is this exquisite balance achievable simply by letting human beings do exactly as they please, or is the thumb of coercion (e.g., copyright and central banking) required on the scale? And if the latter, whose thumb? And who will control it?< I would add that there is a substantial amount of writing about open money available on the web. See www.openmoney.org for a comprehensive and recent compilation of educational sources. As for how LETS systems function, your instant diagnosis goes to what most people would see as the core of the issue: >Naturally, there are many possible problems with such a system. What happens, for instance, if people establish accounts on a LETS system, "buy" expensive items, and then leave without ever having sold anything themselves? Essentially, they've stolen from the community. If too many people do this, the system will collapse. Or what if everybody on the system is selling aromatherapy and no one is selling legal services? If there is a unbalanced distribution of products or services on offer, the system won't work. As with any central bank currency, the health of an "open" currency depends entirely on the economy and behavior of the community that adopts it.< But -- there has to be a but -- effective answers to these questions require some understanding of how community currencies have evolved in the last two decades. One big problem lies in our general inability to think outside the box of national currency systems. These are, as you point out, central bank monopolies encouraging citizens to perceive of 'the economy' as singular and in important respects self-sufficient. When people try to set up some alternative, they often unconsciously mimic the dominant model, setting up a single, self-sufficient closed circuit, with a central register, its own currency and usually a committee of leaders to run it. Members are individuals trading goods and services in parallel with the national economy of which they are of course also members. Soon enough such organizations run up against problems of size, quality of service, high transaction costs, inadequate division of labour and so on. Some LETS systems have persisted for a considerable length of time, but many also fail in the short run, as often as not because of a weak conceptualisation of the mechanics of community currencies. One handicap of such systems is that the participants are sometimes motivated to replicate 19th century utopian communities, wanting nothing to do with conventional commerce, perhaps reverting to a labour theory of value in their standard measure. There is even a Victorian charitable arm of the movement, bringing subsidised succour to the poor by this means. Many circuits run on paper scrip like national money. The key intellectual and practical breakthrough consists in thinking of community currencies as plural rather than singular. Individuals may belong routinely to as many circuits as they already have credit cards and other plastic instruments at their disposal. In the latest phase, smart cards can carry up to fifteen currencies, reflecting each person's interests and pattern of association. Just as important, if LETS systems are to allow people to carry out their daily tasks without spending all their time in exchange transactions, they much be fast, cheap and effective. This means integrating them with normal commerce to a variable degree. Businesses and non-profit organizations can be and are members of LETS communities. If they sell more than they buy within the circuit, they can give purchasing power to deserving causes or to employees as a bonus. Loyalty loops to particular firms can be built separately into the system. Members who feel that their interests diverge from those of others can set up a sub-circuit of their own. Prices can easily be calculated in a mixture of national and community currencies, with only the latter element being registered. It is difficult in this shorthand way to convey the possibilities to people who have spent their lives adapting to conventional money as inevitably the only game in town. Each community is free to design its own rules. In many cases, the moral, political or ecological purposes of the circuit may make fine calculation of economic benefits to individuals less pressing. The question of 'free riders' is a problem that every economist brings up (their lives depend on it). Some communities may insist on positive balances only (no overdrafts) or limit negative balances to a certain amount. Most allow new members to buy without selling first and some allow unlimited negative balances. The money is supplied by any member whenever they go negative. If they default on their commitment, they lose reputation and perhaps more. It all depends on the kind of community and its size. Most LETS systems have been local so far, but the possibility of virtual communities of exchange is made palpable by recent technological developments. It is all a matter of learning which methods work best for particular situations. This also should be stressed, that community currencies are a means of political education, showing people how conventional money works, how other kinds of money operate, and providing lessons in direct democracy. Open money has yet to take advantage of the crowds that are now routinely brought together by the internet. A system of national domain names is being established and the software for multiple-currency cross platforms is almost ready. There is no reason why, in an expanded community currency network, the banks should not handle many transactions, as long as it is at a fair price. Clearly, the vision I am presenting here is not anti-capitalist in the usual way. Open money is not a scarce commodity, it has no price (interest) and cannot be hoarded or used as capital. My colleagues and I believe that markets and money can be developed on non-capitalist principles, initially as part of capitalist commerce, not independently of it. This inevitably sets us at odds with those who believe that any taint of exchange or money is as good as selling out to capitalism. Even so we have been inspired by the example of the Free Software movement and consider that open money is one way towards democratising access to money itself. It would be wonderful if money, which has long been the source of exclusive private property, might one day be a commons to which all of us have free access to make our own. Keith From: Felix Stalder <felix@openflows.org> Date: Tue, 15 Jan 2002 14:46:18 -0500 As usual, I enjoyed reading Kermit's post and agree with most of Keith Hart's ideas, but I see some real difficulties, conceptual and practical, with their realization. First, the main agreement is that open money and national money is complementary, in the same way that open and closed source software are complementary. If Stallman and Thorvalds had demanded to abandon all proprietary code before we could begin to use open source software, nothing would ever have happened. If we demand a leap from the old to the new, only few people will follow (for very good reasons, I must say). But the main issue is see concerns the question of trust. I agree with the Keith that there must be multiple LETS systems, because their main advantage is that they can be highly flexible and adapted to their community's specific needs and characteristics. However, that compounds the problem of trust and reputation management. If I'm member of a lot of LETS communities, defaulting in one is less of an issue than if I'm only member in this one. Peer pressure and incentives are strongest when the community comprises many aspects of a member's life, which is the case in local communities, but much less the case in virtual ones. In order to trade reputation between communities, there must be some kind of reputation super structure, similar to the way certificate authorities are envisioned in PKI systems, or Moody's rates corporate debt. Cash solves the reputation problem elegantly, by transferring the trust from the person to the token. Credit cards solve the problem horribly with an incredible invasive global authenticating infrastructure which is queried virtually every time one uses the card. I cannot but imagine this reputation trading between LETS communtities as incredibly privacy invasive. How you behave in different LETS communities tells even more about you than how you spend your national currency. I remember that during a side conversation at the Wizard of OS conference last year in Berlin, Keith not being particularly concerned about the probleme of privacy invasion, saying something, if I recall correctly, that a true global citizen must be responsible and accountable for his/her actions. This reminds me of the argument that if you got nothing to hide, then you do not have to worry about surveillance. Then there is the practical argument. Keith and Michael Linton seem to put much hope into smart cards and their ability to process multiple currencies efficiently. Sure chip catds can do this, technically. But, the economic of smart cards are so prohibitive that introducing them will be restricted to organizations that can afford incredibly high up-front costs, hoping to recoup these costs by later selling "real estate" on the chip. I don't see, for merely practical reasons, how LETS systems would get access to that pricey real estate. That might change over time when smart cards are widely available and issuing another yet another one is a minor project, but I would not bet on that happening anytime soon. Felix _______________________________________________ Nettime-bold mailing list Nettime-bold@nettime.org http://amsterdam.nettime.org/cgi-bin/mailman/listinfo/nettime-bold