Module #4 Trade & Autarky
Social, Moral, Economics of Foundational Business, MBAC 6002
Discussion Questions & Responses
Can blockchain end poverty?
I almost worked for a startup here in Colorado that specialized in blockchain software, trading, and knowledge sharing. I learned everything I could to prepare for the interview. In doing so, I had a crash course on the subject of blockchain, cryptocurrencies, the benefits, and potential.
The lightning Network, https://lightning.network/ (Links to an external site.), refers to Scalable, Instant Bitcoin/Blockchain Transactions as the ‘Transactions for the Future’.
The company made a website to educate users and the common person about the topic called the Lightning Network. It is similar to how Google created Google Material. Both companies shared this information in hopes of ‘everyone’ adopting the technology. This does bring up the topic of inclusivity and access.
One way I see blockchain ending poverty is the security it provides. Essentially, blockchain creates a record of information that can not be obscured, nor altered once in the system. Blockchain allows for instant payments. The Lightning network describes this as lightning-fast blockchain payments without block confirmation times. Security is enforced by blockchain smart-contracts without creating an on-blockchain transaction for individual payments done in milliseconds to seconds. This instantaneous transaction also supports the security of the transaction.
The second way I can see blockchain and cryptocurrencies end poverty is through its low cost and scalability. The barrier of entry for developing countries to take out loans is lowered because of these two factors. The company further states that by transacting and settling off-blockchain, the Lightning Network allows for exceptionally low fees, which allows for emerging use cases such as instant micropayments. The advantage of using blockchain rather than traditionally borrowing money from a developed country or the world bank is that you can do it without incurring high-interest or expenses. The scalability is achieved due to the software’s ability to make millions to billions of transactions per second across the network. There is not a current payment technology that can compete.
Cross blockchains also make it feasible to make transactions across blockchains without trust in 3rd party custodians. There is not a regulating force that could charge high expenses or veto a transaction based on bias or self-interest.
Essentially, blockchain and cryptocurrencies are forming a ‘new world bank’, however, the system is decentralized, more secure, is more accessible and secure. For those reasons, I believe developing countries or communities suffering from poverty have a possible way to reach a better living standard with this technology.
Curious to hear if other historical examples come of the failure to instantiate enforceable property rights come to mind. What might be some of the key challenges the developing countries attempting to do so face?
How does the current American property rights system fall short of its objective to maximize the productive output of U.S. property?
There was a period of American History when the government was giving away land to incentivize its citizens to move West. A great example is that of Oklahoma. Have you heard of a sooner? I recommend watching Drunk History’s episode titled Oklahoma (Links to an external site.). It explains how the term sooner came to be and outlines the story of a woman Kentucky Daisy who took full advantage of the incentives to move west.
Another example I can think of is that of New Zealand. The British Empire not only incentivized its people to move to the islands by giving away property, but they also capitalized on the fact that they knew a favorite past time of their male population was hunting. The empire imported stags, or elk, to the islands and advertised the hunting opportunities to further attract more people to move to the country.
Hope you enjoy those fun history tidbits!
What would be your approach to generating wealth from the 13 Trillion dollars of assets?
Establish your goals and define wealth. Can you share any real-world examples?
Necessary Conditions versus Sufficient to Generate Wealth
De Soto seeks to explain why some countries were able to develop versus others and why does poverty still exist today. He states 80% of the world has been left behind on the standards of defining property rights and the regulators or regulation from governments to make defining property rights possible. He believes Adam Smith’s theories of prosperity achieved through division of labor, specialization, and world trade are necessary to economic wealth, yet not sufficient in ridding the world of poverty.
De Soto argues that incentives need to be structured. He believes the right institutions have to be established, honest government, social norms, and competitive open markets. Formal and informal rules lead to better economic prosperity through protecting investments.
Do you agree with De Soto, that it is not for a lack of assets, the reason poverty exists is institutional? He believes that without proper institutions, dead capital exists. The extra-legal economy is not sanctioned by the typical institutions that the government is meant to provide. This all creates uncertainty. When these uncertainties exist the investments made by the business owner, nor investment from third parties are not protected. There is high unprotected risk and no clear legal titles or permits to operate your business.