Thursday, May 31, 2015. In the Circus of the Cabaret Sauvage, David de Ugarte interviewed Juan Urrutia during the OuiShareFest 2015. A rare and rich document explaining the foundations of a 20 years effort to create an Economics of Abundance.

¿What did happen in the nineties? How a distinguished professor of Economics, well known academic writer, got involved in communitarianism and started trying to build a New Economic Theory of the transition towards a society of abundance.

Las Indias and I were bound to come together around the issue of communitarianism. Yes I was a professor of Economics (completely orthodox) but I could not forget

• May 68 in Europe and USA
• Frankfurtian ideas (Marcuse)
• Specific kind of psychology centered on Fritz Pearls¨Gestalt Therapy

And some young people around (members of las Indias today), a bunch of hackers indeed, showed me that something called ICT (Information and Communication Technology) could give rise to a new way of economic thinking called at the time «New Economy».

This New Economy developes around two important ideas:

• abundance is possible
• networking is crucial

The Great Recession forgot about the dotcom firms and it is only now that they (the hackers) and I (the old professor) can face the intellectual challenge of building up a new basic model of the workings of the economy build upon, not the I, but the «WE».

But it has to be done unless we are ready to accept to be lost in transition.

Identitarian communities and abundance

But in the course of your research you found this «we» is not every possible «we», but a very particular «we» called «identitarian community», product of the modelization of networking. So, in order to be clear, everybody has an intuitive concept of «networking» but… what really networking is from the point of view of formal economic analysis and how does it produce identitarian communities?

We call networking the formation of networks of persons through a process that can be modelled as an evolutionary game among them. The game is played among all pairs of persons formed at random and connected in the network at a given moment, a network that as time goes on increases the number of connections.

The interaction generates «memes» (social habits) that change as the network becomes more and more dense (or closed knit). In the limit this evolutionary game generates an equilibrium called evolutionary stable stategy in which the “memes” attained cannot be changed by mutants.

The corresponding society is what we call an identitarian community.

Both in practice and in economic modeling the distinctive culture of identitarian communities is fraternity, and old philosophical subject from Epicurus to the French revolution and so on. How does fraternity change the game, how does social results become subverted by the kind of fraternity an identitarian community produces?

Fraternity is in its foundations the pleasure of being together as it was already defined by the epicurean concept of «friendship», which in turn sustains mutual trust and credible commitments. And in such a society scarcity is overcome, abundance is possible.

• Based on changes of costs
  • Transaction costs disappear because of mutual trust
  • There are increasing returns from the demand side. For example the «net effect» also called the «Mathew effect» produces these increasing returns becase “those who have will get more”
  • The economies of scope increase their importance
• But also based on “rent dissipation”. Monopolies have disapeared because nobody gains anything threatening to leave the identitarian community because this threat is not credible since the equilibrium is mutant’s proof: perfect competition has been reached.

Revolution

«Rent Dissipation» is the main concept of your 2003’s book «Capitalism to come», the book in which you defined by first time the possibility of a sharing economy. But little time before you also published a brochure I would like to refer to now. It became very relevant those days because newspapers, specially conservative newspapers, said you cooked in that book the theory for the mobs against the government that followed the march eleventh alqaedas’s attacks. To me the relevant thing of the economic models you worked there is to show how «revolution» happens inside an identitarian community and how it is related to network architecture.

Yes, the identitarian community is always threatened by revolution which is possible or not depending on:

• The threshold of rebellion: the number of other members of the network who would support the change, something I need to know for eventually changing my behavior myself.
• The epistemic condition, i.e. who knows what.
• The density of the network.

And this creates a paradox:

• Classify communities in conservative (high) or progressive (small) according to its threshold of rebellion.
• Resulting that in the conservative societies the revolution is easier the less dense is the structure.

An example could be the UK a collection of conservative and isolated overlapping communities in which nobody has sufficient knowledge about the threshold of rebllion of others.

Consumption and producction

So, you modeled how networks and communitarianism defined the horizon of abundance, then in detailed mechanisms of how it tend to happen as rent dissipation, and then you researched social network dynamics explaining revolution in networked behavior. Finally your work in las Indias focused in the creation of «new basic economic model» upon all those pieces…

For our desired new basic model there are two fundamental pieces: consumption and production.

• On consumption. I know no theory of consumption based on WE and not on I. I only know first approximations like Marx’s Communist paradise, or Marcuse’s 68 ideas in California or, indeed the way of life in the Esalem Institute in Big Sur.So, we in las Indias work hard in formalizing the notion of the “good life”.
• On production. We already know, in the context of abundance, of the Mathew effect and related economies of scales and economies of scope. But we have to take into account
  • Strategies: two well known strategies became impossible:
    • to take a possition.
    • to establish an standard
  • Rules of management. Two are selfdefeating:
    • conservation of clients.
    • education of workers. In fact distinctions between workers and clients disappear.

Commons

In the Economics’s and Philosophical tradition, abundance is the opposite to the mere existence of merchandises. Is it possible even to imagine a path towards abundance based exclusively in market dynamics? Markets interchange merchandises and money, so… And on the other hand, markets offer universal solution that probably no other tool different of them could offer…

After Information and Communication Technologies in the New Economy the percentage of non tangible goods has increased heavily. And most intangibles are commons ( communal goods) characterized by non-rivalry and more or less exhaustibility.

Therefore, in our effort To rebuild the Economy, commons are a very important piece, although we cannot forget markets.

There are however no obvious and universal solution to the problem of common goods. All solutions are ad-hoc and local. Some are good solutions and some are bad.

Today’s examples of local bad solutions on commons:

• Intellectual property laws are examples of local solutions which are already known as bad solutions
• knoledge in general and how to finance it
• Ranking of scientist or universities according to sociometrics distort incentives.

Politics

Well, then if you accept commons as a key piece of the path towards abundance, you will agree this way cannot be only an economic or cultural path, it has to be necessary a political path too which has to produce a change in political institutions and relationships

Yes, our basic model cannot be isolated from politics. The Sharing Economy generalization has to be diverse because of the local nature of identitarian communities making the whole. The political form we in las Indias cherish is confederation which preserves diversity. In a confederation there is no ultimate authority. But it is better to accept it than to try to bould one artificially. Remember the Central Bank Syndrome:

• the only agent which cannot be forced to honor its promises.
• Unless its promises are based in the common language and correspond to idiosincratic memes.
• If we accept diversity
  • optimality might not be reached
  • but survival is maximized (as in Biology) under limited rationality and suboptimizing
  • Stochasticity is therefor implanted and his stochasticity lead to an unique equilibrium.