Full and Partial Demurrage Parameter

[onewhouse]

If you think this is a worthy open money meme, please contribute generously. The attached slide is from
Miguel Yasayuki Hirota's excellent presentation, slide number 8. You'll find it in the video section here:
http://openmoney.ning.com/video/yasayuki-hirota-complementary
It illustrates historically very successful open money meme of making it perishable, just like apples or anything else natural.

Perhaps community currencies should be hard-coded in the meta to be fully perishable (full demurrage) so communities would be encouraged to fully spend whatever is their customized currency, or only a partial demurrage allowed - eg. to just the applied reputation points or a percentage fee paid on the generated tokens - if you think so tell us why. And if not, you may want to tell that also.

[ernie yacub]

in an open money world, currencies that charge interest of any kind won't be able to compete with free currencies.

[onewhouse]

Thanks, Ernie, for the nice reply and considering interest relating to demurrage.
What would be interesting to consider is the intrinsic properties of the new value that the meta of open money introduces. I see you consider the old pieces of money in your pocket are "the currencies that charge interest of any kind." In effect it depreciates its value over time, which, looking at the illustration by Hirota, would be the opposite of the effect of demurrage.
It would be good to consider what that implies in an open money that is a complementary system. If it needs to have the properties to appreciate in value, where to apply those properties and in which way. If this is to be demurrage, do you make perishable the money itself, the reputation points or both, do you suggest charging perhaps a demurrage levy that is direct or indirect. Eg: in cw$ Commox Valley retail businesses could buy tokens at a higher old money value than the issued value, like with the Chiemgauer circulation in Germany

[Michael Linton]

Otto,

I think you're missing the point about open money. Prescription isn't possible.

There will of course be all sorts of proposals, including demurrage and many other such ideas. And people will use what they choose.

Ernie's point is that people are unlikely to accept imposition of taxation / interest / rusting etc if they don't have to.

[onewhouse]

Thanks, Michael, for this very valuable distinction.
I am a huge fan of the Commox Walley movement that started it all back in 2001 with those tests bringing up successful results. Your post made me think deep to consider the meta properties that will be aided with some help instruction as to choices versus the actual customized currencies that users will have after applying those choices. On this level I see the distinction you make that users should be made aware of the possible consequences of their choices.

On the meta level it also triggers a very interesting question. If we look at a flow landscape taken from the four dimensions of human incentives there is a very nice metaphor:

"what things attract participation, etc?:
Those are low points
what are the repellers?:
Those are high points on the map
what stuff is flowing on this landscape?:
In economic terms, it's money, goods and services. Part of what we talk about is there are other things that flow, trust, knowledge, stories, etc."

If I understand it well: currency in organic motion flows like energy. From lower entropy points to higher entropy points.
Does it mean that over time it dissipates as well, in other words it is naturally perishable so it can regenerate? Bit like apples... Or is it like with consciousness, that a natural open system always GAINS energy, so in the meta currency wealth will be hard-wired perhaps to appreciate, not dissipate? it may be two different interpretations of the same law of Thermodynamics, or may be not.

But on the meta rule level they may require different approaches to dissipation or demurrage. At this point I am inclined to think that if you don't allow complete energy dissipation on the meta level, you can hard-wire optimum or maximum consciousness (the potential of generated information) in the ensuing open systems that it will be applied to. In other words only allow partial demurrage.

You made me understand that to hard-wire the actual occurrences of this important property into the meta would not make sense. Thanks again for clearing that up.

[Sepp]

Thank you for sharing the excellent presentation by Yasayuki Hirota on complementary currencies.

I had some trouble seeing the slide you copied and attached in sufficient detail, and I imagaine others might have the same trouble - so here is my attempt to make a better copy of it.

I see the system makes images smaller. Here is another try...

Whether demurrage should be hard-coded into community currencies already at the meta level ... it's a bit difficult to decide and probably in the interest of increased choice it shouldn't. Personally, I would prefer a cc that incorporates demurrage in its design over one that doesn't.

The presentation by Hirota mentions Banca Etica as an Italian example of an innovative financial system. However Banca Etica operates much like a traditional bank. The difference is that there is some control over where to invest - you can choose not to help arms fabrication and instead divert your part of the financial resources to fair trade or other socially more appealing options. However the money used is the one issued by the commercial banks inside the normal economic system.

An interesting variation on complementary currencies in Italy is what's called SCEC - La Solidarietà Che Cammina (in English more or less: Circulating Solidarity or "Solidarity that walks"). This is a prospective community currency that is starting out as a discount chit representing a price reduction of at least 10%, medium 20%. SCEC works to increase the purchasing power for locally produced goods. It has important synergies with the local (an national) economy. As its use grows, it will more and more assume the "beingness" of a real local currency, but the promoters prefer to emphasise the current advantages of countering the effects of globalization on our local economies.

A description of the SCEC project is available as ArcipelagoSCECproject1.pdf

www.arcipelagoscec.org/doc/ArchipelagoSCECproject1.pdf

[onewhouse]

Hey Sepp, thanks so much for the great contribution. I also happen to think that demurrage is a great idea. It is also important to remember that we are considering of setting a fresh new open system afloat. Carefully calibrated initial conditions will make a huge difference in where the system will likely converge. Bit like the flutter of those proverbial butterfly wings...Thanks for adding an enlarge pic. The problem with pic in general, that you can only add to comments, so it is great that you have done this. I see you are a big fan of Gesell. I also happen to think the idea is pretty brilliant.

As to setting demurrage into the initial condition. Personally, and it is my idea I believe, making reputation points slowly perishable could engender permanent activity. And might not enrage the big banks as it did in Austria in the said example.

It may also be a good idea to set the two streams apart. Starting one thread for some initial demurrage, and another making it fully optional.

[Sepp]

Hi Otto,

I see demurrage as a useful tool in currency design. Perhaps the two most important functions of it:

- it allows to diminish the amount of units in circulation when the economic base served by a currency contracts.

- it effectively counters the tendency to hoard (save up) currency and thereby eliminates the necessity for interest as a circulation-stimulating measure.

Of course demurrage can be adjusted fine tuned) by playing with the percentage, so it is quite a flexible and useful tool for any currency to incorporate.

It does meet some perplexed reaction from people though ;)

[ernie yacub]

why would anybody use a system that taxed their money when there will be many other similar systems available that don't?

why would anybody subject themselves to a central committee when they can manage their own affairs?

[onewhouse]

Ernie, I agree that those concerns are strong and legitimate. End when you issue something so new, you are justly concerned with getting the ontology right.

But I also look at continuity of operation and incentives. Just looked at a New Scientist report about what portion of our conscious decision is irrational. It is almost half. And they are deeply rooted in the legitimacy of the processes. But I digress...We have to be careful with ontology so they don't fall into the same exclusionary trap as the one we are trying to avoid.

And from merely practical operational point of view? Some kind of demurrage could ensure that people will keep trading, don't lose heart even when material rewards are little. To me it's a bit like deadline on a loyalty mileage: you go and transfer for that Lufthansa bag and don't throw your points out and everybody stays happy including the airline business partner. And onto working up your way for the next stainless steel candle holder.;-)

I could very well be wrong, but this is how I see it.

[onewhouse]

;)
An argument can only be stronger if challenged...no?

[onewhouse]

Making good on separating the thread: just added the first post there, take a look:
http://openmoney.ning.com/xn/detail/1180168:Comment:12934

[onewhouse]

Just found a good administrative reason for hard coded demurrage parameter:

"...members will be required to trade at least once in a two year period, so as to ensure that the membership register does not swell with non-trading members."

They are saving the grace and say that it is only for the electronic registry...But if they could just turn the nob on the demurrage parameter, then there -- for that currency it can be set to full and for two years.
http://thebegavalley.org.au/bvlets.html