Currency must be Backed by a Creative Asset
Dialogue with an intrepid scholar about Universal Basic Income
UBI [Universal Basic Income] is interesting but what would it take to actually have a generosity-currency that does not cause rampant inflation immediately? It’s one of the most pressing questions of our time, and in this exchange with Lockheart, I feel that some notable progress was made.
Our Discussion
Lockheart said:
I agree that we do not seem to know what effects the introduction [of UBI] will have.
“It must be backed by a creative asset.”
[quoting me from earlier in the discussion]It must? Why? I’ve read your article [Direct, Web Satisologie] and it’s still unclear. If I understand you correctly, you’re basically saying that money relies on a psychological feedback loop: we must create something valuable in order to feel than the money we hold has any value.
But oxygen is free and abundant, and we don’t feel guilty for consuming it - we don’t feel that we need to create or produce a thing in order to consume it, we don’t feel the need to earn it. In a society where the basics are abundant, they should be provided for free.
I’m not saying we’re there yet. But if we can 3D print homes, generate food proteins and get the energy to do those things from renewable sources, then we’re not far off.
My reply was: Interesting thoughts. Oxygen does not cost money x) It would have to be a private entity [to disperse a UBI] -- otherwise we're inventing a new kind of global government -- which is at least as hard [in terms of complexity and organizational difficulty] as starting the United States with lots and lots of member states.
Lockheart continues:
It would be extremely difficult, agreed. I mean, I don’t think I’ve even seen the question raised. UBI discussions (not like I’ve read the entire literature but I’ve read a bit) tend to be so hypothetical that they either remain location-non-specific, refer to extant trial runs in small communities, or sort of take for granted that they’re talking about a single country, often the USA.
In terms of the entity backing it, it could be an international agreement based on an existing technology. Bitcoin and ETH are already out there, and it’s possible to set up new protocols on those blockchains with whatever rules you want. They’re decentralised networks which don’t require a single entity to back them.
To which I replied: Yes it's technically [that is, with technology] possible, but it still needs to be backed by a creative input. Currency denotes, or used to de-note, the agricultural output of a territory -- plums, raspberries, wheat, and things that are otherwise consumable and exportable. Today we encounter a large variety of consumables, Bitcoin is somewhat unique in that its value is tied to computers starting with the idea of "one cpu one vote" and building a distributed ledger. One could argue that the "fruits" [or creative-backings] of bitcoin are locked-up cpu cycles and global warming. There are many other creative outputs that could be used to give a currency value, but simply creating a currency does not give it an inherent value. It must, at the very least, have creative backing. Think about creating a physical paper for a "global money" and it must also have some backing -- not an entity, but a creative value -- a stand-in for an actual apple or actual loaf of bread -- if there are only 2 loaves of bread the currency for bread exchanges is tied to this fact of limitation. Bitcoin and Ethereum are backed by a distributed computer network that is engaged. It's not the most efficient way, because we cannot actually consume (as humans) computation cycles. It's closer to money based on ant hills, rather than money based on artwork and the like. Bridging the digital/non-digital divide is not obvious and quite abstract, but in general the same principles of currency-needing-creative-backing apply.
Lockheart then asked an amazing question:
Would your creative input include automated production? i.e. if we had farms that ran entirely automatically and produced enough food for the population to subsist on, would you consider this output sufficient creative material to back a currency?
To which I was much floored and I replied:
That's a very creative question! :D
The bigger problem is soil health. In some places fruits are becoming less tasty because the soil health is not being adequately replenished. If there were a way to automate soil health regeneration with mycelium (mushrooms) and crop rotation that replaces necessary nitrates and all that jazz it might be better.
But in general I wonder about your question in a broad sense:
is automated industry capable of creating returns sufficient enough to hoist up a currency?
[roughly quoting Lockheart]
I am tempted to say no, because creativity is much more unbound than simply automating things. It is the whole flaw with the Communistic idea that all wealth must be divvied up and shared -- that is only tenable if wealth itself is something limited and not increase-able. Yet, we see that by creating new services and new goods we are actually increasing the capture on Creativity with a capital C. So in short, automated crops are a very clever idea to try and bridge Branch and Brain creativity, but the fruits are not consistent because we are not appreciate the interconnected system of causes and effects and if we are not regenerating the health of the soil there will be smaller and smaller yields. We ought to be making sure that the soil health is amazing, fantastic, beyond necessity. Then, perhaps, our fruits shall grow abundantly, but it's a bit at-odds with this idea of automation. Kind of like the difference between Holistic medicine and Mass-produced medicine. One is clearly taking into account the whole organism while the other is trying to defeat particular obstacles with tiny missiles that may have many inadvertent externalities and consequences. Like medicine for a cold accidentally destroying your liver, or something like that.
Rather than automate crops entirely and try basing a currency on that, markets themselves are quite creative and so the goods offered must also be commensurately creative and/or new and/or fresh. In this regard, we might think of having a currency based on land and its fertility and therefore the offerings of the land could be a variety of fruits, like an orchard with many different kinds of trees. This would be more along the lines of currency creation because currency is supposed to be the [only] constant, where the creative offerings are developing and becoming more numerous. For example, if you have an automated apple orchard and you have AppleBucks, they will have to be tied to this physical real-world asset, so maybe I can exchange 3 AppleBucks for one actual apple. Eventually, however, due to systems effects and the existence of network effects and multiple "markets" for various fruits, it will cost more AppleBucks to buy a single apple. Now, if there are rare fruits being grown in the AppleBucks orchard, this can then drive the relative value of the AppleBuck higher, or help it maintain some semblance of stability, but that would require creative input beyond that of automation. A currency could theoretically be based on simple apples and their orchard but competition effects will eventually drive the cost of each apple higher and higher and without new creative input to back up the currency, the value will fall relative to other currencies that can be exchanged for the large variety of creative goods.
So in short, yes it can but not for long. The creative inputs have to sort of "keep coming" and that is why it might be more tenable to have a fertile field where a variety of crops are harvested, but that is at-odds with "automation." Without new creative outputs from the field, the relative value of the currency will not be able to stay stable and will drop relative to other "fields" that are creating "fruit variety."
The main takeaway here is that the currency must have a tethering to a creative field, whose fruits are indeterminate. The "automation" clause of your question implies that the fruits are determined ahead of time, and therefore the creative output would not be as impactful relative to other "creative orchards" over time. The reason is that if one is constantly selling apples, and another field starts producing pineapples, due to the rarity of pineapples the "currency backing the pineapple" will have a short-term relative value spike upwards. So maybe one PineappleBuck is worth 10 AppleBucks, and maybe next week one PineappleBuck is worth 15 AppleBucks. Although hunger is consistent, the presence of apples saturates the market. So, there will have to be some sort of pivot in operation to help bring into the world another fruit, and that is not very automate-able. The infrastructure can be mechanistic and readily set up, but the actual creative process and new creative-input-output-satisfaction-loop requires action that is not automate-able.
So may our conduct be virtuous and may soil health increase and may all fruits be delicious. May we rotate crops and may we be creative in our tending of our fields.
I asked Lockheart if he was satisfied with my reply, to which he said:
That’s a very in depth argument and the idea that a currency is backed by creativity is quite an idiosyncratic one. It’s clear that you’ve given it a ton of thought and I like the idea a lot, so yes I’m more than satisfied with the reply, without fully grasping it.
Are there others with similar ideas?
And I said:
I do not know. That would have saved me a lot of pondering time 😂
"The Order of Things" by Michel Foucault is a resource I have used as a launching off point for this sort of thinking. His chapters on Exchange are quite interesting. It is jam-packed with info to the point that a whole sentence might run half a page, but it's worth trying to sort out if you want a clearer picture of "trade."
We have not really had the luxury to entertain a plethora of currencies in the real-world as something beyond just a thought experiment until crypto. So I suspect more people will come to these conclusions as time goes on, but it seems to be a recent innovation. Maybe the guys at The Federal Reserve know. But I haven't been able to reach any of them 😂
I wrote an article about a Progessive-version of Guaranteed Income I dubbed Guaranteed Progressive Income you can here read. It might just be the ticket.