Community Over Currency: The Potential of Value Index Networks
The Folly of Market Pricing: A Call to Rethink Value
The Folly of Market Pricing: A Call to Rethink Value
The essence of a free market, lauded by capitalist proponents, is the setting of prices based on supply and demand. It’s Economics 101. But like any system pushed to its extreme, the ideal of pure market pricing has pitfalls — chiefly, that it doesn’t account for societal inequalities and can be easily manipulated.
The Beneficiaries of a Market Based Systems
At a cursory glance, the market economy champions competition, and by extension it might seems like consumer welfare. But, deeper scrutiny reveals its beneficiaries: those with the capability to monopolize products or, more concerning, the very money that underpins our market. Such monopolization allows them to influence not only the market’s direction but also its very rules.
The Illusion of the Supply-Demand Equilibrium
While supply and demand curves serve as a staple in economics classrooms worldwide, their real-world application isn’t as infallible. These curves are susceptible to manipulation, especially by monopolistic entities.
Picture this: A port bustling with fishermen who have just returned with their catch. Meanwhile, the city is experiencing a famine. The pure market mechanism suggests selling to the highest bidder — likely the wealthiest. Yet, is this the morally right decision? Shouldn’t those in need be prioritized, particularly in dire circumstances? This scenario illustrates that the actual worth of goods and services isn’t merely determined by supply and demand.
The Hidden Arms Race
As prices soar in an unchecked market system, participants engage in a sort of economic arms race, constantly vying to maximize their selling prices. Like all arms races, this is a runaway process, and history reminds us that such processes don’t culminate peacefully.
The Redemption: Value Index Networks
Enter the alternative: Indices of relative value. Instead of relying on a single market rate, imagine baskets or pools of commitments (vouchers) toward products. Within each pool, each voucher is assigned a relative value. Now, extrapolate this to multiple interconnected pools, each with its unique index of relative value.
How can these relative prices be set?
Committee/Mutual Agreement: A consensus-based approach where members discuss and decide.
Algorithmic: Formulas or mathematical models determine the relative value.
AI: Advanced models predicting value based on vast data and patterns.
Now, with the advent of public ledgers where these pools and indices are visible, we bypass the age-old socialist calculation problem. Analyzing these ledgers with enough processing power, we can compare, say, the pricing of tomatoes to wheat, based on their relative values and not just market whims.
The genius of this system isn’t novel. John Maynard Keynes, during the Bretton Woods Conference, proposed such an index-based approach, but it lost to the U.S. dollar becoming the world’s reserve currency. Also note well that pooling of commitments into mutual aid networks is an ancient concept that built much of pre-colonial society.
From Theory to Action
Transitioning to index-based pricing needn’t be a radical shift. It can start by mirroring current market rates, with products denominated in national currencies. Gradually, communities and cooperative networks can pivot away from pure market prices. Existing market systems can still coexist, provided they aren’t dominating these community-centric models.
Consider a group of businesses (service providers) issuing vouchers in their national currency (i.e. USD). They pool these vouchers, making them inter-exchangeable at a 1:1 ratio — similar to a mall’s gift card. Should a business fail or the USD fluctuates drastically, the group isn’t helpless. Their pre-established price index can be adjusted, allowing them autonomy over their economic destiny.
Through the lens of grassroots economics, the time is ripe for both academia and practitioners to champion community and cooperatively driven economic systems, valuing collective well-being over pure profit. It’s not merely an alternative; it’s a call for an evolution in our understanding of value.