Hacking Paul Graham’s Vision of the Future with Hypercatallaxian Economics

Paul Graham’s latest essay entitled The Refragmentation has been knocking around the Internet the last few days. My real job has been consuming much of my time lately and this has affected my ability to add more thoughts on my Democratic Hypercallaxian ideas. Despite my lack of writing, I have been doing a lot of thinking and this start of 2016 seems like a good time to put some of these thoughts down. Paul’s essay is a great jumping off point as it seems relevant and seems to conjure up a lot of discussion.

The basics

For those unfamiliar with the hypercatallaxian economy, the basics involve a new social contract where we all enter into an agreement to track our resources on a public ledger(blockchain) in a way that allows us to retroactively reward those that contribute to economically successful systems. If I buy something from your store then I will get a reward in the future if your store continues to do well. This is accomplished via a decay rate on cash that is passed back through the ledger at a consistent rate. This leads to low-interest rates, a reduction in risk, and helps establish a merit-based safety net comparable to a basic income. Read more at catallax.info.

The worker / employer loss of loyalty

Paul highlights how the employers of the 20th century ended up in bed with the unions due to their short term advantage of having more to gain in the capital production market than to lose in the labor market. Apparently this has now dried up. In addition, individuals have realized they can get the best price by going out on their own and now have the tools to do so.

Paul sees this as a situation where you have one or the other. This stems from a reality where once labor has produced what you need you no longer need labor unless you need to produce more. In our hypercatallaxian world, we have a different reality. When employers pay their cash to Labor they receive a potential future dividend if that employee continues to be successful in the future. This dividend only pays out if the employee is productive in the future. It is in an employer's best interest to make sure the employee stays educated and healthy.

“Employee” may not be the best term. As Paul mentions, one can get the best price by working for oneself. This paradigm applies to contractors as well. In general, this reality leads to a co-operative reality where more people are working as named agents with skin in the game.

In the end, we end up with a set of capital producers who have a loyalty to their labor that is demanded by their shareholders. In our simulated models, there is the ability for capital producers to end up completely compensated for their cash outlays over time, but only if their past labor thrives.

Zero sum games

Paul mentions some generating wealth via zero-sum games. He kind of glosses over this, but I think this is where a lot of discontent comes from. Very few people are mad a the guy who gets wealthy curing a disease or producing a life changing technology. Hypercatallaxian economics attempts to address these games by reducing the desire to play them.

Under our current reality, I can play the stock market and generate a million dollars by luck + some skill(or maybe fraud). What have I accomplished on a world scale? I’ve moved some numbers around from one account to another. I’ve provided some liquidity. I’ve ‘won.’ But someone else lost. No new real capital was produced.

I can now sit on my million dollars for as long as I would like and my only threat is uncontrolled inflation.

In a hypercatallaxian world I can play the same game, but the following repercussions are involved:

• My million dollars starts to decay immediately, and at a consistent rate so that I can plan for it. I can move the resource to where it can do the most good as quickly as possible.
• The person who has ‘lost’ now owns a bit of my future production. While they have lost for the moment, if I turn the 1 million into 1 billion, they can still win.
• I need to have had a good reason to play this game. Simply procuring the cash and sitting on it isn’t an option. Cash for cash’s sake is not as attractive. What is attractive is the production of real capital. With rock-bottom interest rates it is likely that I could procure this cash in a less risky manner.

Technology -> Inequality

I do not disagree with Paul’s main point that technology as a lever of production leads to increased economic(social) inequality. We certainly don’t want to stifle tech just for the case of equality. We’ve tried that a couple of times and we know that Communism is a failure and that Socialism tends to fail in the long run. But we cannot also have accelerating inequality…unless… the bottom scale of that inequality is rising at a rate in which we feel that ‘things are getting better.’ That is what happened in America in the 20th century and what is beginning to lag now.

How does a hypercatallaxian economy address this?

• We leave the market in place. Capitalism has proved its point that it is at least better than most of what has come before.
• We place a burden on those that win. Use your winnings to produce real capital or it will go back to those that provided it in the first place.
• Consumers share in successes in a similar way that capitalists do now. In fact, in a hypercatallaxian economy, consumers can almost replace capital markets in many instances. I want a Tesla, but I don’t buy one in a capitalist society because I need to make sure that I have the cash available in the future to feed my family. But if buying a Tesla also produced future dividends based on how successful Tesla ended up being in the future, I might take on this much-reduced risk. As a result, Tesla has way more pre-orders and needs to raise less in the capital markets.
• Of course the tech has to deliver. If Tesla ends up a bust what happens? We can either let Tesla attempt to pivot and use what it has learned to start over, or it can fail and we can fold the blockchain to connect all of those that paid in to all of those that Tesla paid out too. If somewhere along the line of those pay out toos is successful, I still get part of benefit I expected. Risk is reduced.

In the end, more tech is explored, more is allowed to fail gracefully, and finally, the rising tide raises all boats.

The Social / Economic (false)dichotomy

One of Paul’s consistent themes is playing the economic and the social against each other and looking at how they move together. In my opinion this is like telling people that it is amazing that the sun is coming up and it is getting brighter….and then ….oh look…now it is going down and it is getting darker. They must be related!

The economic is social. Or rather the economics we see are the values of the society we live in. When society values something we see economic movement toward that thing being valued. Of course they move together.

To draw a straight line, if society continues to fragment, our economy will break down. We have an intellectual moral responsibility to help preserve our society while also moving forward and creating great change. Of course we can blow the old rigorous society away, but not without also blowing away its economy! We should not do that, and we don’t have to. We can both adapt existing institutions and build new ones around them.

This is more Pirsigian than hypercatallaxian, but hypercatallaxian economics does attempt to help address this. We build in a timer to each institution that is created. There is more of an advantage to participating in an institution at year 1 than year 100. By year 100 the institution must achieve an extraordinary growth rate to service its previous contributors or risk being supplanted by a new institution that has taken the old’s DNA and improved upon it.

Moral Imperative

Finally, I feel like Paul’s use of the word ‘fragmentation’ leads to a negative conclusion that is worse than need be. I would instead choose proliferation. With proliferation comes mutation and with mutation, fitness. The key here is to not destroy the bones that that the proliferation is occurring on top of. The bones can adapt and get stronger, but they cannot fail.

The hypercatallaxian economy ends up providing, over time and based on merit, what amounts to a basic income for both citizens and institutions. It does not promise continued dominance to any and in fact, makes an ultimate diminishing a foregone conclusion for all. But between the initial acceleration and the final diminishing, there is an extended period provided that allows for reimagination and solidifying a latch to the things that have worked.

We must develop a moral imperative to lead us through this period of economic inequality. This can’t be going backward. It has to be going forward to discover new answers that no one has thought of yet. This becomes more possible the more ways we have to attack the problem and with the more points of view that we have. Establishing a hypercatallaxian framework may be the answer to that moral imperative.

If you are interested in hearing more, follow @hypercatallax or @afat on twitter.