Do we need money at all?
[Dave Birch] There is a phenomenon, well-known to economists, that is labelled “the double coincidence of wants” and is taken to explain the very fundamental first steps in the evolution of money. It is called the double coincidence of wants because it depends on two coincidences about things that are wanted. Let me explain.
Suppose I have a pig and you have a lawnmower. No trade between us is possible unless we happen to bump into each other at the very moment that I need a lawnmower (unlikely coincidence) and that you need a pig (a doubly unlikely kind of coincidence). Hence the end of primitive barter and the invention of a trade intermediary otherwise known, in the general sense, as money.
Thus, in a primitive economy, such as we have today, money is an inevitability because we either use it to overcome the double coincidence of wants or go back to being feudal serfs. Technology, however, can serve to increase the probability of the double coincidence and thus serve facilitate trade. Writing in Victorian times, William Stanley Jevons observed of the Victorian eBay (or “vBay”, as I like to think of it):
Within the last few years a curious attempt has been made to revive the practice of barter by the circulation of advertisements.The Exchange and Mart is a newspaper which devotes itself to making known all the odd property which its advertisers are willing to give for some coveted article. One person has some old coins and a bicycle, and wants to barter them for a good concertina. A young lady desires to possess “Middlemarch,” and offers a variety of old songs of which she has become tired. Judging from the size and circulation of the paper, and the way in which its scheme has been imitated by some other weekly papers, we must assume that the offers are sometimes accepted, and that the printing press can bring about, in some degree, the double coincidence necessary to an act of barter.
In the age of the interweb, it seems to me that there may be an opportunity to use another intermediary otherwise known, in the general sense, as identity. Here’s why. The double coincidence of wants does not exist as a dynamic in a fully connected world, because there will always be someone, somewhere, who wants anything at all, whatever it is. Let me explain.
I have a pig. You have a lawnmower. You want a pig, but I don’t want a lawnmower. I do, however, want a day’s golf. You don’t know anyone who has a day’s golf, but you do know that the golf club needs some paint. You swap your lawnmower for some paint and give it to the golf club. Then you ask them to give me the day’s golf, and I give you the pig. To our primitive forebears, the cost of resolving this transaction chain would have been utterly prohibitive. But tody we can resolve the long chain of intermediate coincidences, minimising each step by search, in a few milliseconds. In this way, it is possible to imagine trade taking place without money.
On the other hand, it is not possible to imagine it taking place without trust. If, at each step of this chain, the buyer had to institute a detailed examination of the seller in order to determine the likelihood of them delivering the goods or services as advertised, the chain would never resolve in a reasonable time. With some kind of trust infrastructures, while fraud may never be eliminated, it can be controlled to the point at which trade may flourish. Let me explain.
Imagine the chain or barter is being resolved through a system much like eBay. I might set my turbo-barter client to auto-resolve at 100 stars. So you look for someone who wants a lawnmower and you find a taker who has 70 stars and one who has 200 stars, so the software automatically selects the 200 star taker and moves on. Now it’s looking for someone who wants paint, and it finds the golf club. The golf club has 6,500 stars so that is auto-resolved too. In a few milliseconds the whole chain is resolved and everyone knows where to take their goods or deliver their services. You the deliver the lawnmower to Alice, she delivers the paint to Bob, the golf club sends you a day pass. Everyone goes up one star.
Except… For this kind of auto-trust to work, I need to know that Alice really does have 200 stars. And for that, I need an identity management infrastructure. Note that I don’t need to know who Alice is, I only need to know certain facts about her. So as long as the infrastructure enables me to determine those facts, no problem.
Now imagine a world without money. A world where eBay has been replaced by tBay, the trusted online Exchange & Barter for the 21st century and beyond.
I want to buy a bus journey into town. I got to tBay and select “Arriva Bus Day Pass”. My preferred unit of currency is kCalories, so my phone tells me that Arriva have set a reserve price of 3.5kCal. I know that bus tickets always sell for their reserve price, except in very special circumstances. I click OK.
The system now starts two searches: one from my tBay account, where the things I have as surplus are listed, and one from the Arriva tBay account, where the things that it wants are listed. in a couple of milliseconds the bargain is struck: because I volunteer at a local care home for two hours a week (I play Bridge with the residents), I have plenty of surplus time in my Time Bank, so my phone redeems an hour of this time for some surplus kilowatt hours of electricity the care home has from it’s solar panels (it used to feed these into the grid, but now it uses them to negotiate barter deals) and the care home passes these to Shell. Shell credits three litres of diesel to Arriva. Everyone is happy. My phone confirms that a deal has been struck. I know nothing about the electricity, or the diesel, or whatever. I just know that there’s less time in my time bank and a bus ticket in my m-wallet.
At every stage in this chain, the identities have been checked and the credentials validated using cryptography, tamper-resistant keys and interoperable credentials. The Time Bank sent a digitally-signed message to the Care Home, the Care Home used the Time Bank’s digital certificate to check the signature, and so on.
Proving, once again… identity is the new money.
These are personal opinions and should not be misunderstood as representing the opinions of
Consult Hyperion or any of its clients or suppliers
The English language version of this work is licensed under Creative Commons Attribution-ShareAlike 3.0 Unported License. If you wish to acquire the rights to make a foreign language translation of the work, please contact Consult Hyperion.
Please note that by replying in this Forum your comments become the property of Consult Hyperion and you assign all rights in your comment to us. Your comments may be edited for length and used online and in print but will always be attributed.
Meet us at:
- June 2013
- May 2013
- April 2013
- March 2013
- February 2013
- January 2013
- December 2012
- November 2012
- October 2012
- September 2012
- August 2012
- July 2012
- June 2012
- May 2012
- April 2012
- March 2012
- February 2012
- January 2012
- December 2011
- November 2011
- October 2011
- September 2011
- August 2011
- July 2011
- June 2011
- May 2011
- April 2011
- March 2011
- February 2011
- January 2011
- December 2010