Context : OnMoney

Proposal I made on the AltEconomics Tribe, here : http://brazil.tribe.net/thread/11320f64-0655-4c60-a9f2-e2783e0c97a5?tribeid=4354f356-567e-4688-9447-00397e48914f&r=10275

The good thing about this tribe is we have very different perspectives. It's an over-simplification, but you could roughly categorize some people here into "left" and "right" wing attitudes to money.

The right's position seems to me fairly straight-forward : they propose a FixedCurrency, backed by some kind of material, like gold, which is

  • a) sufficiently desirable that there's always a demand for it
  • b) not going to vary too unpredictably or dramatically

Once this fixed supply of money exists, prices of everything else can float in relation to it.

The most important constraint is that the quantity shouldn't be manipulable by the government (or it's proxy central bank) to engineer inflation which, ultimately, is seen as a kind of attack by government on the wealth of citizens.

The left want money which

  • a) makes "accumulation" (the unequal distribution) harder
  • b) avoids problems caused by scarceity (willing buyers and sellers who don't trade due to lack of money, a more competitive zero-sum game attitude to negotiation)

The ultimate aim is to try to achieve more equal distribution of wealth, social justice, more balanced society etc.

OK, in this thread I want to explore whether there's something that can keep both camps relatively happy. I'm not particularly interested in agreement for its own sake, I just want to use this idea to explore how people's intuitions about money run.

A fixed currency that's not lent into existence, is attractive to the left in that it seems less liable to promote the extreme competition that fiat money created by lending, and requiring impossible interest repayments, does.

But the big problem with it from the perspective of social justice is this :

The world's population is increasing dramatically, but the quantity of gold doesn't increase. So labour (and the people who work) are losing value against the gold pretty quickly. Anyone who has spare money is going to find themselves getting richer and richer relative to those who merely subsist on selling their work. (That's probably why you can find strands of aristocracy worship over on mises.org. "Old money" loves fixed money. Everything else just gets cheaper and cheaper each year.

This is purely due to the changing quantities of work and money. And it's a more vicious scarecity than that created by central banks who are, at least, allowing the money supply to grow along with perceived growth in value created by the economy.

So here's my proposal.

A money which is backed by people. (On the grounds that people are valuable).

More specifically, every time a new person is born, (or immigrates to the market) a certain quantity of HumanDollars are created by the census office. Doesn't matter how many, just that it's fixed and the same for each person. A proportion of those HDs go to the parents at the time of birth, and the rest go to person themselves on reaching adulthood.

That's it. No demurrage, personal credit etc. And I'm open on the obvious question of whether the dollars should be removed when people die. Not sure.

What this gives the right :

  • a stable and predictable money supply which isn't manipulable politically by government. It's simply based on the number of people in the population
  • money backed by something which is inherantly desirable and tradable (human labour)

What it gives the left :

  • no possibility that simple population-growth devalues labour.
  • accumulation is still possible, through luck, skill and effort. But it's scope is reduced. Whenever new money is created it's spread equally throughout the population, and its relatively fixed quality means that government can't - as often happens at the moment - be encouraged (by the IMF) to nationalize private debts.

OK, that's the basic idea. Criticism from left and right welcome. :-)

Criticisms

John said : Nevertheless, the problem that comes to mind about "a money that's backed by people" has to do with the hazzard of too many people. Your provides a monetary incentive for population growth.

My response :

I think that's a very good question : would this incentivate people to just have more children?

My hunch is "maybe - but how much compared to the current situation? "

First, children also have a cost. In terms of money, time, energy etc. I'm suggesting some of the created money goes to parents when the child is born, and the rest when the child reaches adulthood (or working age) One way to fine-tune the system against producing children to earn money, would be to give less up-front to the parents and more to the adult. Hence making children still a slight financial burden.

Second, in a lot of the world, people are already incentivated to have children by the economic system. For example, I've moved from the UK (which has relatively good state pension provision) to Brazil, which doesn't. And where the only decent pensions that exist go to government employees. (Of which I am not one.)

Wheras in the UK I was fairly indifferent as to wheather I and my wife had children, I am finding myself (having hit my mid 30s) seriously wondering whether we shouldn't have children - partly as an insurance for when we get old.

This seems a less absurd thing to worry about in a country where family is still the main welfare service, than it did in the UK.

If HumanDollars can produce a fairer distribution of wealth, one of the side-effects of that is a fairer distribution of risk. And places where there's lower risk ie. welfare-states in European countries, have a shrinking population because people seem happier to choose childlessness.

So HumanDollars do give a financial incentive to produce more people, but maybe it can be balanced by a lower risk world and an up-front cost.