Ushering in the age of Hypercapitalism with the Blockchain
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Money needs to be anonymous. When it is not, redemption and transfer will be given special preference based on who you are rather than an independent value. When you perform a transaction and its effects aren't solely the transfer of value or you even need to file paperwork to report it (!), you're not really dealing with money. When a transaction can be reversed after it's been made, you're not dealing with money.
And while Bitcoin currently has these properties in that a name isn't tied to a transaction, the blockchain is simply a list of which psuedonyms gave what to who. It lacks the important property of "untraceability" which prevents malicious actors from tying nyms to your singular government mandated identity (cf Chaumian tokens) and therefore implementing these "features".
(And for the inevitable response, no, ad-hoc mixes are not a solution. They force the attacker to be active (eg pass laws) instead of just passively watching. When untraceability doesn't apply unconditionally to every transaction, then transactions which attempt it will be gradually more frowned upon. It's not hard to envision a future where types of Bitcoin users are progressively forced to register their wallets).
Oh, that is nearly trivial with some of these systems. Dividends can be spent to the same scriptPubKey (or other mechanism) that controls spending the stock itself. I mean, in a system where there is apparently a "stock" asset, naturally.
Dividends can already be issued on some blockchain implementations. For example, https://nubits.com/nushares/introduction
"... order in actual markets depends on threats of violence – whether the penalties embedded in the laws of the state, or the bloody interventions of mob bosses. In the absence of such arrangements, predators move in. The Silk Road’s business model worked only if genuinely ruthless people didn’t notice its critical vulnerabilities."
What he seems to have in mind is a scheme where labor creates tagged money which returns rents to the laborer. There's a cost to holding money; all money is an interest-bearing loan. Whether this would result in a working society is questionable. Then again, we currently have some negative interest rates, which do the same thing to holders of cash.
The bookkeeping complexity would be high, but there's enough compute power around to handle it. The size of the problem is comparable to merchant reward points, which stores are now willing to track for the smallest purchases. The "blockchain" is probably the wrong tool for the tracking job - too many small transactions.
It would take a very authoritarian society to impose this scheme.
I'm glad you were able to get that out of the paper as that is what I'm calling for...I have no idea if it will work or not, so I'm going to try to build the experiment.
The bookeeping part is what is interesting. It is all already in the blockchain. We will have to solve bloat, but the current blockchain tech captures most of the info I need.
I have some answers to the authoritarian side of things as well...but that isn't in the paper. Specifically elective taxation and the citizen veto of cash accounts where the citizen accounts can vote to veto the use of government accounts. To get the veto you have to pay the tax.
Of course, they'd have to sell most of their income to pay for things. Only their savings would remain as equities. This seems equivalent to being paid in the prevailing currency and using your savings to invest, which is the current system. It also doesn't require anyone to force people to use a currency with demurrage fees, which no one would voluntarily choose.
Very interesting read, though. If you're going to implement this as an experiment, you'll probably have better luck building on Ethereum than a Bitcoin fork. The downside is that Ethereum isn't architecturally stable yet, which makes development a little rough. The upside is network effects and a blockchain you don't have to build or get people to mine.
But yes, the goal is the full benefit of labor.
I'm going to start on bitcoin because of the infrastructure. The experiment won't be distributed, but it will get there if it is successful. Multi-sig is enough for us to establish the distributed accountability that we need.
1. I think the argument about objectivistic capitalism being immoral was not fleshed out enough at all, a claim is made that it's just as bad as governmental "theft", but I feel one of the most important distinctions, the use of force, is not covered at all. How do independent actors in the market force you to buy their goods (and pay their economic rent?)
2. The actual idea is extremely interesting, and I liked reading the paper. (SPOILERS) - It's interesting to think of employees as really working for a portion of future proceeds rather than current pay... However, I don't think this model fits all business types, and it doesn't go into the humanist aspects of what happens when businesses fail.
2. One thing not covered in the paper is the compassionate bankruptcy that is in there. https://github.com/skilesare/art_and_democratic_hypercapital...
What does that even mean? Capitalism the ideology takes more than its fair share of any one transaction? How does an ideology take a share? Does he mean bankers take more than their fair share?
What is a "fair" share?
If that is in the first paragraph, what hope can the reader have that this guy is going to think rigorously about things in the rest of his paper?
I specifically talking about the fact that a lot of 'profit' or 'economic' rent takes advantage of the disadvantage a person is in. For example, the gas stating that charges $50 for an empty gas can to the guy that just walked 5 miles because his car ran out of gas. Of course you CAN charge it, but should you?
Cash already suffers from entropy. One of the fundamental concepts of finance is the Time Value of Money (TVM) which (in layman's terms) states that a dollar today is more valuable than a dollar tomorrow due to its potential to earn a return over that time period. If you don't put your money to work earning a return, you are losing value.
Inflation is another force that devalues the real value cash. Even if we take the author's unsubstantiated claim that we have "managed to control [inflation] well in the last couple of decades" as a truth (which is clearly refuted by the current deflation in parts of the Eurozone and Japan as well as the inability of the Federal Reserve to consistently hit a target of 2% inflation), inflation still reduces the purchasing power of cash.
2. Economic Rent as Theft >
"Economic rent is the amount charged for a good or service above and beyond the cost of creation." AKA profit. Generating profit is not immoral, nor is it theft. The only way that I could partially agree with the author here is in the case of an oligopoly or monopoly forcing consumers to pay exorbitant prices for some necessary good. This is why we have the government, laws, regulations, and anti-trust agencies.
3. Making Everyone a Capitalist >
"∑bT must be established so that it supersedes the value of the labor at the time the laborer gets paid. To do this we need to make everyone a capitalist. When one account pays cash to another account, we keep track of this and give the paying account a ‘share’ of preferred stock in the paid to account equal to the dollar amount paid."
So basically hypercapitalism is a way to make every person into a corporation with dividend-paying equity. People contribute their own labor in order to obtain equity shares in other people. I think this is a cool idea. As long as the number of people in the economy increases without bound, then this idea could work. See the transition from PAYGO to fully-funded social welfare [0] as an example of another system that only works as long as the population is growing.
2. I agree with you, but is it a black and white distinction or a gradient of gray? The truth is some rents are good and some are bad and it is very very hard to separate them...so instead we overwhelm them from elsewhere and make them matter less.
3.Yes. And the theory relies on the long term increase in human productivity. In the event of a near extinction event you're going to have bigger problems than the economy not working. It can endure short term bumps in the road and actually has anti-fragile properties when it encounters volatility.
As for inflation: is it as simple to control inflation as you suggest? Why is 0% the target? Inflation is a terrifically complicated subject.
While there is agreement that inflation is costly and should therefore be minimized, for a number of reasons policymakers nevertheless aim for an inflation rate above zero. First, available measures of inflation are imperfect and tend to overstate “true” inflation. Second, a little inflation may make it easier for firms to reduce real wages—without cutting nominal wages—when necessary to maintain employment in an economic downturn. Third, a negative inflation rate—deflation— could be even more costly than a similar rate of inflation, suggesting that a low rate of inflation might be desirable to insure against falling prices. Finally, at very low levels of inflation, nominal short-term interest rates may be very close to zero, limiting a central bank’s ability to ease policy in response to economic weakness. Because nominal rates cannot fall below zero, policymakers cannot cut short-term interest rates any further once they have lowered these rates to zero.
-George Kahn, Federal Reserve Bank of Kansas
2. I'm not sure I understand your argument. What is "overwhelming" them, where is "elsewhere," and how does that make some profits matter more or less than any others?
3. I think your argument would be much stronger if you did away with all of the sections before your last and simply expanded on the possibility of somehow specifying and selling personal equity vis a vis blockchain technology. The rest is 100% going to draw criticisms and does not fully support your interesting and novel idea. Just my opinion though.
Your entire premise that we should reform society to favor consumption (even more than it is already favored now) only exacerbates inequalities, because at the end of the day, all you have to do to increase the value of Bitcoin, or similar crypto-currencies, is incapacitate another user and render their wallet outside of the entire money supply; since, it would be cryptographically locked. The argument against Bitcoin, if any, is (that at some point) it's deflationary mechanics will incentivize the elimination of other users so that the remaining currency holders will hold a larger percentage of the pie. If connected to an AI that was simply hellbent on maximizing its percentage of the money supply, you can easily see how a machine could learn bad ethics.
It is also hard to see how a blockchain technology would encourage faster consumption than an inflationary fiat system like that which we have with FRNs, but maybe I missed something in the OP.
When the bubble collapses you can just follow the chain, convert the failed companies to pass through entities and move on the next best idea. The money went somewhere after all. Today we can't find it because of complexity theory. With a chain, you can find it. Or at least that is the theory....
I'm not favoring consumption. This system actually creates a flight to value and sustainable, renewable systems of production. Of course one of the things you can do with your decaying money is spend on consumptions, but you'd be an idiot because you're going to be getting stock in the producer of that thing and if they are strip mining you upper limit of benefit is drastically reduced.
If stored value is truly a bizarre concept, then society should completely reevaluate schools, and learning in general. Even this discussion; because what is the point, or value? Is storing any nuance of thoughts pointless? You have a highly cyclical argument, favoring Singularity, and not allowing for any other perspective.
Your attempt to laud your position and derail Austrian Economics with the "Hauling Gold to Mars" example is insulting and disservices your own ability to make a valid point. Already in place, society has a concept that dismisses your absurdity, I.e., "Contracts;" which fully eliminate the need to haul physical resources or commodity around and merely show them on paper. Not too dissimilar to the blockchain.
From a statistical standpoint, statistics are irrelevant when they are put into practice. For they either ARE or ARE NOT and DO or DO NOT come into effect. They are a summation of the past, not its predictor.
In your very own argument, "You can't predict the future." But then go on to argue people would "be idiots" for investing in "consumption" instead of "productive" things or businesses. In a single paragraph you've argued against your own theory. People can't predict the future, but they can somehow tell what is productive versus not? Hah! I think the last business cycle is evidence enough.
Your idea isn't completely without merit in its attempts to reward persons for making good predictions. But again we already have similar systems for that purpose already in place in the stock markets.
A lot of my ideas of what would be good to do are based on Chris Alexander's idea of wholeness in which we actually have a better than 50/50 chance of telling what a 'good' transformation is. If it is less than 50/50 then very little will work.
I don't mean to insult. I need to do more study of what the austrian's really put forward. It is my least favorite of the schools and I haven't spent as much time learning about it as I should.
Well, I, for one, appreciate that you laid this out as the first sentence of your paper/blog post.
And I'll agree to a point; capitalism is the worse system there is, besides everything else of course.
No economic system devised will ever be able to directly fix the problems of "lack-of-humanism" that you so describe. As shredprez succinctly put it, "there is no effective way to control the inequities of power."
The best our system...any system...can hope to achieve is to try to guarantee equality of opportunity, but not equality of outcome.
Market-based systems such as capitalism have this feature baked into its' DNA, as the market can never afford to marginalize any individual or effort, via political means, that could threaten a working business model.
Although the plutocrats certainly try their best.
Blockchain technologies certainly have the potential to shake things up, unless, of course, its crypto gets cracked soon, which many here seem to think will be the case.
[edits]
Isn't the 20th century sorta proof of the opposite?
I'm under qualified to address the paper itself, but it was an interesting read.
Looks fine when I download it and read in Document Viewer.
It seems to me that economic rent, far from being an immoral oversight, is the fundamental law of capitalism. In all cases a capitalist seeks to charge more than it cost them to produce an item, or to gain some information, or to acquire a property. The more that item, or information, or property is worth to the market, the greater rent/profit the rentier can extract.
While this function can clearly be abused by those with great means, the basic concept is exactly what makes capitalism so efficient when it comes to growth: any person has the chance (hypothetically) to find and exploit differences in cost and value to increase their personal wealth. I can't find anything immoral with this form of rent-seeking. Which seems to imply it isn't so much the practice that we hate, but who chooses to practice it. When the laborer exploits, he makes a living. When the banks exploit, our whole economy shifts. We applaud the former and fear the latter, and that fear appears to be the motivator behind most criticism along the lines of that in your paper (apt criticism).
But, fear aside, there is no effective way to control inequities of power. If you cap access to power too low, you rob your economy of potential growth. If you cap access to power too high, the cap is meaningless: the powerful will circumvent your laws and do as they wish. And no matter how you cap it, the real effect will be to entrench the current elite and prevent new blood from cycling into the upper echelons (which is to say, you will have institutionalized inequality). Those currently in power will simply find a way to conceal or transform their power and rule in a shrinking market of rivals.
All of this is to say: inequality is an issue of power, not money. And in that context, inequality is a law of nature. If our goal is ending inequality in nature, we are wasting our time. If our goal is unseating those currently in power, we need to be honest with ourselves about that. In the end, questions of fiscal inequality are about power (a real force), not morality (an imagined one). While power can be taken, it can't be destroyed. And if we take fiscal dominance from the powerful, that dominance will just take a different form.
tl;dr What we're really grappling with is fear of nature, inequality being a natural and unavoidable result of differing degrees of individual and collective power.
Really enjoyed the paper, and I'd love to see these principles tested in the coming years. Any plans to develop the blockchain protocol you described anytime soon?
I'm launching a kickstarter tomorrow to build an experiment on test net.
Economic rents run counter to properly functioning markets, e.g. by raising artificial barriers such as patents or counterproductive regulation.
The key tenet of perfect competition is that in the long run, only normal profits exist. Since economic rent stands contrary to this, it cannot be a fundamental law of capitalism. In fact, economic rent is a sign of market failure. But this is reality and markets can't be perfect, so we try for good tax policies to redress this imbalance. Look at the section on rents here: http://www.economist.com/economics-a-to-z/r#node-21529784
As an aside, people think Thiel's idea on monopoly is controversial, but really it's just a catchy way of portraying the observation that, since in well functioning markets, competition leads to zero economic profit, you should always be seeking advantages (innovating) and situations which allow you to (temporarily) extract economic profit.
Edited to add: The more I think about it, the more it seems all business is really about rent on information: profits are extracted by discovering a cost-effective source and repackaging that information at a higher price to an ignorant market. Innovation as a source of profit seems like rent-seeking on initially exclusive knowledge. Even production is a cascade of information bundled with profit margin and sold to the next party who lacks access you have. The physical product is only the end-game of that information chain. The profit all comes from privileged information, ie charging for something that, once obtained, costs nothing to continue profiting from. Which is economic rent, no? I feel like I must be missing something.
Edited once again: Looked into normal profit, which reframes my question slightly: is the phrase "economic rent" used to describe an objective behavior or a behavior relative to the local market (where average profits and opportunity costs vary)?
I'm not sure interest is immoral really. I just think it make more sense for it to be low. In the specific instance of a first time home buyer, this person is typically young and has a lot of earning ahead of them. They can get a lower rate because the banker is thinking more like a VC now and will issue a low interest rate loan to bet that this person will have a significant amount of cash go through their account over the next 80 years that will add up to a nice profit for the banker.
The banker's interest in the well being of the person also extends far beyond the repayment of the principle. Win-win for everyone other than the vampire bankers out there.
One interesting observation that you may like is that relative poverty in the US ('the divide between the rich and the poor', if you will), which has generally been getting better over the course of 200-or-so years took a turn for the worse in 1972, when Nixon closed the gold window, and hasn't clawed back.
Drop a line, I have some interesting thoughts that I'd like to share (contact info in profile).