In my view, the disintermediating logic of P2P markets takes us to a networked and decentralised “Market 3.0” from our currently unsustainable and failing complex, hierarchical and centralised “Market 2.0”. In my view, this transition will take place within partnership framework protocols, and will see value (“money’s worth”) exchanged by reference to Money as an abstract Value Unit, rather than in exchange for money as an interest-bearing toxic Credit Object.

Within a partnership, there is no profit and loss, and no requirement for double entry booking keeping either, which gives way to shared transaction and title repositories.

The outcome is a market, but a market without rentier profits: without intermediaries, but with service providers.

I believe that the current system of Capitalism was an emergent phenomenon: no-one planned it the way it is, but those in power took decisions and ensured legislation and financial structures invariably in their own self interest which led to the current unsustainable and moribund financial system even now in its death throes.

But this collapse will be different, because a permanent cure presents itself courtesy of .

I think that the use of partnership tools as such as LLC’s and LLP’s is increasing exponentially, quite simply because they work.

That is why I am optimistic that Capitalism 2.0 will be hoist by its own petard. In the face of the “Co-operative Advantage” – freedom from paying returns to “rentiers” – conventional capital will be unable to “compete” and will wither on the vine.

But then again, as an optimist I only ever get unpleasant surprises…

Best Regards

Chris Cook

Michel, after reading the article I think your own dismissal of markets as “not optimal” taints or twists what Ackerman is saying, which is that policy and mainstream economic discussion seem to completely ignore the last few decades of (real) evolution in economic thought.

In particular, he says:

“Although academic research in economics has moved beyond this simple picture in several respects, the newer and subtler approaches have not yet had much influence on non-academic life.”

It sure hasn’t. In fact, the psychologist (and Nobel laureate of economics) Daniel Kahneman has attempted to spread the word about behavioral economics for at least a decade, and no one wants to hear it! Ackerman is talking about experimental and behavioral economics, mechanism design theory, and so on.

There are different sorts of markets, and the effectiveness of humans at being “rational,” and those markets being pareto optimal, varies according to the type of market. According to Vernon Smith, there are roughly 3 “classes” of markets when it comes to how well market theory holds.

In personal exchanges, people do well. This is within or better than market theory predicts.

In prodution and consumption markets–ones that flow–markets generally work well. In these cases:
– consumers are daily or regularly enjoying the value of what they buy
– producers regularly incurring cost
– ability to converge with theory varies by institution

In asset and capital markets, the theory does not do well because of inherent uncertainty.

Now this is not to say that information asymmetry is not a HUGE deal, because it is, or that behavioral economics and the biases people have are not a HUGE deal, because they are. In many instances, markets are the best thing we have, but the market is a general model. The question is the variables, as created by our governments, and the permutations they create within market models. Have we ignored externalities like the environment? Have we ignored all the various incarnations of the agency problem in our institutions? Yes.

I know everyone’s kicking around “the market” right now, but seriously, as Kevin suggests, the financial market and its built-in privileges for a wealthy few are a systemic failure of mammoth proportions that doesn’t have a lot do with how the theory of markets actually works.

The present crisis is piggybacked on so many different kinds of pervasive statism that it’s hard to imagine it happening otherwise. Most fundamentally, capitalism’s chronic tendency toward overaccumulation and underconsumption is at the root of the crisis. It derives from the maldistribution caused by state-enforced privilege, resulting in artificially high returns on land and capital and artificially low returns on labor. Corporate capitalism exacerbated the problem, with government promoting centralization of the economy in the hands of a few overbuilt cartels that could not dispose, at cartel prices, of their output at full capacity. The Sloan model of industrial production, for almost a century, has focused on large-batch production to minimize unit costs, without regard to demand–and then finding some way to make people buy the shit, even if they have to go in hock to do it. Financialization is only the latest Walden Bello listed among the expedients for soaking up surplus capital in a world that’s saturated with it. And there was no market for securitized debt, because it was too risky–until the assorted Freddies and Fannies started guaranteeing it. Really, this is about as much a failure of the “free market” as Krupp and I.G. Farben.