The Need for New Theories of Money

It seems we will have quite a few open money items this week, so I asked for some special contributions.

Ryan Lanham sent the following editorial:

“Economics might be summed up as the field that studies allocation of resources. It might also be seen as a the field that studies the nature and flow of moneys, or as a field that considers human behaviors in relationship to happiness and resource allocation.

Remarkably, there is no good definition of the field’s proper focal points or boundaries. It is, as the literary theorists have taught us to say, increasingly contested. While that contest is very much in the “periphery of discourse” (more academic argot), the periphery is warming up through an increasingly buzz in various social networks, not least of which is our little P2P world here at the P2P Foundation, thanks largely to Michel’s catholic interests and sponsorship of discussion on these topics.

Economics, for now, has one dominant school (scarcity-based market theory) and a set of heterodox sects such as Marxism, post-scarcity economics, so-called post-autistic schools (which are typically closely linked to the dominant domain) and other far-flung ideas that are trying to earn a seat at the table…often while acting as if “the table” is absurd. Some I read here (on the P2P Foundation blog and in its research lists) frankly strike me as laughably naive, but I am losing my hubris in the face of technology futurism, economic crises and the advances of social media technologies.

Legitimacy as measured by academic appointments largely falls on very conventional market theories with surprisingly few exceptions; it used to be radical at the University of Chicago to be a behavioral economist! Even post-Keynesian writers are fairly rare in the academy–at least the academy that anyone seriously considers. It’s a Monetarist World (of money) that followed a long string of Nobelists from the Chicago School one must see as conventionally dominant…but also as increasingly decaying. Those people, and their relatively close quibblers, tend to rule our big banks and our economies in general though some, like Timothy Geithner in the US (the Treasury Secretary), have remarkably little formal economic training of any sort, and are problematic to classify as to theirs schools of thought much beyond the dreaded left wing epithet of almost no rational meaning–“neoliberal” or even worse, “market bureaucrat.” Such shouting doesn’t seem to help.

Now, as core newspapers and universities decline and economic crises erode institutional legitimacy of mainstream thinking in economics, one can almost smell the ripeness for new radical (and I don’t mean the term in the leftest sense so much as the disruptive sense) theories of money and business. The P2P movement is square in the middle of such lines of thinking. It is so much in the middle of such thinking that I often worry that I’ll tarnish my own minimal credibility by association with some of the heterodoxy. Clearly cranks exist, and most of the ideas are patently crap. But I’ve gotten over that egoism largely by realizing that something meaningful is afoot, and that Austrians, Behaviorists, monetarists, Marxists and Keynesians are not the whole family of legitimate thinkers. Something(s) else is emerging.

In short, we need new theories. I hope those harboring truly radical concepts start to bring them forward for real critical review. We are entering a transforming age and the very survival of our species (the times demand that sort of seeming hyperbole) may depend on new approaches to how we allocate stuff and how we judge our happiness and wealth. Bring it on. We need new and even outrageous ideas. We need tests and alternative currencies and new ways tried first by greeny hippies in Germany and neo-Fabians and Utopians in France. We need small nation currency experiments and micro-credit enterprises to innovate and allow for serious consideration of alternative models for both near and long-term consideration. We need Grameen dollars, twollers and everything else anyone can think of. We need ideas. P2P is the right space for these ideas to be treated with respectful encouragement and an occasional twinge of skepticism. Bring them on.’

3 Comments The Need for New Theories of Money

  1. AvatarDan

    Thanks for asking

    The Ingenesist Project has published a series of articles called the Next Economic Paradigm:

    In short, human knowledge is formatted as a financial instrument using social media as the operating system. Human knowledge becomes tangible outside the construct of Wall Street and inside communities. Factors of production are social capital, creative capital, and intellectual capital. Information, knowledge, and innovation are mathematical derivatives in an algorithm that defines a business method for generating value. A knowledge inventory samples knowledge assets on a bell curve for diverse communities. A percentile search engine returns the probability that combinations of knowledge assets can execute specific business objectives. Where innovation is predictable, cash flow is predictable. Where cash flows are predictable, they can be combined in diversified packets to investors. In effect, the innovation bond will become an innovation backed currency that replaces the dollar, a debt backed currency. Innovation will reflect social priorities rather than Wall Street priorities.

    Please don’t flame me until you’ve read the articles. Again, thanks for asking.

  2. AvatarMichel Bauwens

    Very interesting project. If you want to present it to our blog, you’re welcome to write a formal blog entry (or even a series). As this week is open money week, your particular take on currency would be especially welcome at this time.


  3. AvatarBuddha

    It’s funny I woke up thinking about this very subject this morning and after a few searches found this post. I’ve had a series of discussions with a very conservative and very bright friend of mine about money and economics. He is very classical. I tend towards more progressive thinking, but I am a bit of a hybrid.

    I’ve begun to think of money as a “virtual system”. I have not seen anyone discuss it as such. I come from a systems engineering/administration background and I tend to look at everything as system, from human interaction to money to knowledge and psychology.

    My friend keeps saying the system will come crumbling down around us, that the US will fail, that we will not be able to recover and that we have not paid for our sins. He may very well be right. Except it feels as if something different is afoot. And my question is, why hasn’t it happened yet? He often points to “market manipulation” as if some invisible hand and a bunch of plutocrats can actually just move the markets however they feel. I think if they were that smart they wouldn’t have let it fail in the first place. I have my doubts that anyone is smart enough to create widescale manipulation. There are too many factors, too many invisible threads. The butterfly starts a typhoon in China as the saying goes? So what is happening.

    My theory is still undeveloped, but I am beginning to think of money as virtual and quantum. Our perception changes money. Our view of money changes money. Of course there are concrete underlying factors in economics, like production and supply and demand. But I am beginning to think they are not the whole story. They are like a cluster of commodity hardware that super computers run on. They are not the supercomputer. The software on top of them is the supercomputer. Many, many pieces of the underlying hardware can fail and yet the system keeps running. Of course, all the hardware can not fail, but tons of it can wink out of existence and the computer keeps running, if at a reduced rate. On top of this hardware can be a series of virtual machines that act as if they are real hardware, when in fact, they are not. They only appear that way to a user. I am beginning to think that money acts this way as well.

    Why do we look at consumer sentiment? Because how the consumer feels is how he acts. Perception is reality, in many ways. How we see money effects how it works, how it flows, how it changes.

    Money can be manipulated changed by our thinking and feelings about it. You can’t wish for more money and get it, but you can decided to spend or hold on to it based on how you feel the world around you is behaving. The markets act this way as well. There is nothing rational about them at all. Bears kept asking, why is the market rising. Simple. People wanted it to. They looked at their money dwindling and said, well stocks were once here, they are now way down here, they must be undervalued. Whether they are or not is totally irrelevant. The perceived them as undervalued and thus they were.

    And since we are based on a service economy, 80% or so, how we feel directly effects what happens. If I feel the economy is getting better and my future looks bright, I go to restaurants and have a cleaning lady. If not, I cut back. In older times, where everything was based on food and production, any shortfalls were real, rather than perceived. If I did not have enough steel, I was in trouble. If there was a drought, we were in trouble. Now the food supply is so highly tuned and the production supply so highly tuned that it can switch on and off like a light, at will. It is no longer the thing that drives us down. Our machines tend to our food and make sure they are watered perfectly, etc. But in a service economy perception matters more and hence money becomes quantum. How I feel directly effects how many restaurants close their doors or add more chairs.

    Anyway, I am still working this out, but these are my first posts on the subject. More to follow, here or elsewhere.


Leave A Comment

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.