Towards Abundant Currencies
All economic theories you are likely to have heard of are based on the assumption that we live in a world of scarce resources. Commodities markets allocate those resources based on price equilibrium, but in the end the market does not actually create any new value. The supply of oil in the world, for instance, is already set, and it’s limited. As we approach that limit it becomes scarce, and the price (i.e. marginal value) goes up. More fundamentally, with a limited resource, my acquisition of it precludes you (or anyone else) from simultaneously having it. From a value perspective, it’s a zero-sum game: if I win, then you must lose.
If we assume there are resources that are not limited, but rather are abundant, then an amazing shift occurs. Such resources cannot become scarce (by definition) and thus the price/value of those resources does not rise the more they are “consumed”. In fact, it’s just the opposite. The value of an abundant resource increases the more it is consumed. This is the so-called network effect. The very first telephone was worthless and it only became worth something when it was connected to the second telephone. The more telephones were added to the network, the more valuable each pre-existing telephone became!
You will probably be objecting right now that there’s a limit to how many telephones can be created since the raw materials are finite. And you will probably also note that the added value in going from two phones to three phones is smaller than going from zero to one; in other words there are diminishing returns. Both are true statements, but miss the crucial point that if the universe is more abundant than it is scarce, then the fundamental rational economic motivator goes from competition and acquisition to cooperation and giving. Let me explain by example.
I was scheduled to meet with Stephen recently and as the meeting time approached I realized that Kim and Jose (whom I’d been meeting with just prior) would benefit from meeting Stephen and joining the conversation Stephen and I were about to have. I also felt that Stephen and I would benefit from the inclusion of Kim and Jose in our conversation, so I invited them along. At the close of our four-way conversation Stephen took a book from his shelf and gave it to me as a gift. He said that, based on our conversation, I would probably get a lot of value from it. As I prepared to stuff the book into my backpack, I noticed Kim and Jose straining to get a glimpse of the title, and I lamented to myself that there was only one copy available when it was clear that all three of us would benefit from it if we could. So I took a picture of the cover with my iPhone and emailed it to Kim and Jose so that they could locate a copy and enjoy the book at the same time as I did. In doing so, I also happened to connect Kim, Jose and Stephen via email. Prior to that they only way they could get in touch with each other was to go through me.
One great thing about information is that the cost to replicate it asymptotically approaches zero, whereas the cost to replicate physical materials approaches some value greater than zero. Just look at what it would have cost to get a physical copy of the book for Kim and Jose vs the 30 seconds of my time that it cost to snap the photo and email it.
But more importantly, information has this other crazy aspect to it: giving away information (unlike physical objects) does not diminish its value; more often than not, giving away information increases the value of that information. There are exceptions to this rule, of course, but on average this is true. (At the least, this is an empirical assertion that can be falsified, and you are invited to explore whether it holds true in your experience or not).
The question that I’m trying to answer here is what would it look like for a currency to be based, not on a scarce resource, like physical materials, but on an abundant resource like information?
It’s hard for us to even conceptualize an economy of abundance because our brains evolved in a time of relative scarcity. Furthermore our thought patterns, beliefs and models of the universe have been colored by scarcity through the lens of culture.
So to help with the mind-shift necessary to explore the world of abundance, I’ll ask you to observe that the constant injection of energy from the Sun into the Earth’s biosphere eventually gets converted, at least partially, into value that drives our real-world, present-day economy. That oil came from fossils of living organisms, grown and nurtured by the Sun. I will leave it for another time to argue for why value-creation is pervasive in the universe, and not just a function of where you draw the system boundary (as sunshine hypothesis implies). But suffice it to say, if you grant me that value is created by the Sun and converted into a form that drives our economy, then we can proceed.
By the sunlight hypothesis, it should follow that, on the time scales that matter to us humans, there is at least one truly abundant resource: energy from the Sun. If you are worried about a billion years hence when sunlight runs out, then I doubt we will ever see eye to eye anyway….
It also follows from the sunlight hypothesis, and the arguments I’ve sketched above, that the information economy that is so widely talked about, truly is an economy of abundance. And as more and more human activity is devoted to the creation, spreading and sharing of information, the more our “real” economy becomes based on abundance.
It may be true that we will never move entirely away from material needs and scarcity economics. But regardless, as a percentage of the total real economy, we are on a trajectory that suggests that the vast majority of economic value will be backed by abundant resources rather than scarce resources.
In other words, if we were to imagine a currency of abundance, we’d also have to re-imagine what what happens when the “federal reserve” for that currency grows all by itself (or if you prefer, as the sunlight pours in). In such a world, in order for the currency to represent the true value in the economy, we’d be forced to print new currency on an accelerating basis just to keep up. A currency of abundance is a very different beast than the currencies of scarcity we know of today, which is to say all of them. Instead of runaway inflation being a bad thing (as it is with currencies of scarcity), it’s actually a great thing, something to be desired, and something worth striving for.
