# Evolving Money

—Exchanging goods and services

## Introduction

While capitalism has provided many benefits, it is imperfect and can be improved. This course begins by acknowledging the successes of capitalism, and then enumerates remaining problems. Several improvements and solution approaches are then explored.
The design of money is important because it is the lynchpin in so many social interactions. Because money is a social construct, it can be redesigned by forming a consensus in favor of specific improvements and attaining the political will to adopt those improvements.
Money has a long history, and its evolution continues. We can improve our money systems to better align them with human well-being, broadly construed.
While the fundamental question is “How can we foster exchange of goods and services?” here we survey existing systems and explore evolutionary paths forward. A final section presents research opportunities.

## Objectives

The objective of this research topic is to catalyze the exploration, research, innovation, and improvement of our money, financial, and economic systems.

## The Benefits and Successes of Capitalism

Capitalism has been a dominant economic system for centuries, fostering unprecedented levels of economic growth, innovation, and individual freedom. It has been associated with some of the most significant improvements in human well-being, particularly in areas such as wealth generation, technological advancement, poverty reduction, and consumer choice.
The successes of capitalism are evident in the technological achievements, poverty reduction, and economic resilience seen throughout history. As societies move forward, refining and improving the system to address emerging challenges will ensure that capitalism remains a force for good, enabling people and businesses to thrive in a dynamic world.

### Assignment

* Read the essay The Benefits and Successes of Capitalism.
* Read the essay Déjà Voodoo Economics.

## Opportunities for Improvement

While capitalism has many benefits and can claim may successes, there are several important criticisms of capitalism that deserve attention. These include failing to account for externalities, ineffective sharing of the commons, undervaluing ecosystem services, failing to meet human needs, narrowly focusing on GDP rather than well-being, exceedng limits to growth, wealth concentration, hoarding the productivity dividends, accruing unlimited debt, and a cumbersome, unfair, and incomprehensible tax systems are discussed in more detail below.

### Displacing Externalities

In economics, an externality is a cost or benefit that results from an activity or transaction that involuntarily affects an otherwise uninvolved party. Examples include air pollution, water pollution, overfishing, extinctions, hazards of coal mining, and hydraulic fracturing, often called fracking.

#### Assignment

* Read the essay Economic Faults.
* Identify externalities that you generate because of your daily activities.
* How might the cost of those externalities be fairly paid for?

### Sharing the Commons

Free access to the benefits of the commons by organizations driven by economic gain leads to overuse of the commons and failure to allocate resources efficiently. This is a basic economic fault that is important to recognize, and to analyze in terms of fair allocation of the common resource. Advocates of free market solutions and opponents of regulation are obligated to offer some fair solution to allocating use of the various commons they seek to exploit.

### Undervaluing Ecosystem Services

Failing to place an economic value on ecosystem services causes another form of economic failure. Destruction of the wild bee population, for example by Colony Collapse Disorder, can take place without any financial cost to those responsible for destruction of this valuable ecosystem service. Yet if wild bee populations are displaced or destroyed, then crops relying on bee pollination will be lost, or some costly substitute to wild bee pollination will have to be found. In either case the economic costs, as traditionally recognized by financial accounting systems, would be substantial.

### Meeting Human Needs

Unregulated capitalism lacks mechanisms that ensure human needs are being met.

#### Assignment

* Read the essay Find Work or Starve.
* Does hard work guarantee economic success?
* Study the Wikiversity course Grand Challenges.
* How do our current financial systems contribute to creating and sustaining these grand challenges?
* How could improvements in our financial systems contribute to solving the grand challenges?

### GDP is not well-being

When people talk about economic growth or the strength of the economy, they are often talking about the rate of growth of the gross domestic product (GDP). The GDP is a primary measure of a country's overall economic output. It is the market value of all final goods and services made within the borders of a country in a year.
What GDP measures doesn’t accurately reflect well-being. For instance, war, car accidents, chronic illness, cancer, and many other tragedies all contribute to economic growth and increasing the GDP. It is time to choose a wiser measure of progress. Despite the ubiquitous and unequivocal praise for growth among economist and politicians, there are always limits to growth. Assumptions of unlimited growth are false and dangerous.
What if we, as a society, possessed the wisdom to redirect our focus towards what truly holds the essence of life’s meaning? What if we collectively decided to discard the outdated thinking and instead prioritized values such as: peace of mind, integrity, tranquility, clean air, clean water, the beauty of nature, a healthy environment to enjoy now and sustain for the future, awe, family, friendships, community, safety, stability, trust, leisure time, joyful play, meaningful work, authentic experiences, reciprocity, respect, good health, reduced stress, ongoing education and learning, deeper understanding and appreciation, fun, enjoyment of the arts, transcendence, and making significant contributions that help others. We can enjoy what is already available to us.

#### Assignment

* Read the essay section Acknowledging Limits to Growth.
* Read the essay Good Government.
* How can we best measure well-being?
* How can we better align economic measures with well-being?
* How can we focus on what matters?

### Money Ignores Limits to Growth

Money, despite its ability to facilitate growth, operates within the confines of a finite world. This reality is compounded by the mounting financial debt, both public and private, that we collectively bear. Moreover, we are simultaneously depleting the Earth’s natural resources, including fresh water, fertile soil, forests, marine ecosystems, biodiversity, fossil fuels, minerals, waste dumps, and pollution sinks. Since debt inherently involves a promise of future repayment through labor and resources, it becomes inevitable that the aggregate promises to repay will eventually surpass the available resources for repayment. In fact, this situation may already have reached a critical point.

#### Assignment

* Study the Wikiversity course, Limits to Growth.
** Study the section on System Behaviors.
** Watch this video on overshoot.
** Describe your understanding of overshoot.
** List examples of overshoot.
* Read the essay section Acknowledging Limits to Growth.
* Read the essay Pollution as Trespass.
* Study the Doughnut Economic model.
** Meet our obligations to the fulfil the social foundations.
** Live within the ecological ceilings.
* Study the circular economy model.
** Waste less, reuse, remanufacture, and recycle more.
* Shift your focus from opulence to flourishing.

### Wealth concentration

Wealth concentration describes a condition where a large fraction of the world's wealth and income is held by a small fraction of the population. This commonly occurs in capitalist systems where distribution of wealth can be very uneven. For example, a 2021 Oxfam report found that the wealth of the ten richest men in the world collectively surpassed the combined wealth of the bottom 3.1 billion people, almost half of the entire world population. Their combined wealth doubled during the pandemic.
Various theories of distributive justice propose socially just allocations of resources, goods, and opportunity in a society. These theories typically argue for distributing wealth more equitably than typically occurs.
With great wealth comes great power, but unfortunately, this power can sometimes lead to corruption rather than benevolence.

### Hoarding the Productivity Dividend

As advancing technologies lead to productivity increases, a productivity dividend accrues. However, unregulated capitalism lacks mechanism to encourage sharing that dividend with the workers displaced by these productivity increases.

#### Assignment

* Read the essay Who owns the Productivity dividend?
* Describe various productivity dividends that could be shared more equitably.

### Debt Accrues Unsustainably

When we create debt, we are obligated to repay both the principal and the associated interest. However, our financial systems only create only enough money to repay the principal. This is a Ponzi scheme at the foundation of our financial systems.

#### Assignment

* Watch the video, The Story of Debt. The video describes how we create debt faster than we create money.
** Read the associated transcript.
* Read the essay Genesis of Debt.
* Browse articles at the Emancipation Party website, especially the article on Free Money.
* What changes could be made in our monetary systems to reduce risk and eliminate this jeopardy?

### Incomprehensible tax code

The US federal income tax code is one of the most convoluted, intrusive, unfair, and burdensome regulation crippling the United States citizens. The present federal income tax code is now more than 73, 000 pages long when including the official IRS tax guidelines. It can only be understood by special interests that use its obscurity to gain unfair advantage over United States citizens.
When the entire tax code becomes simple enough to be clearly and entirely written in a few pages or less, it will become understandable, fairer, transparent, better trusted, and less expensive to administer.

#### Assignment

* Read the essay Reforming Taxation to Promote Growth and Equity, by Joseph Stiglitz
* Advocate for a simpler and more transparent tax code.

## Solution Approaches

The previous section describes a variety of problems with our present money and financial systems. Several solutions are suggested as those problems are described, including capturing externalities in our financial systems, ensuring we meet human needs, aligning economic measures with human well-being, living within planetary limits to growth, using the doughnut economic model to guide us, evolving toward a circular economy, sharing the productivity dividend, and simplifying the tax code.
This section explores additional promising solution approaches.

### Block Chain Technologies

A blockchain is a distributed ledger with growing lists of records (blocks) that are securely linked together via cryptographic hashes. In short, it is a tamper-evident shared document.
The security, accuracy, and trustworthiness provided by blockchains can increase the efficiency, accuracy, security, and trustworthiness of various financial systems.
Today’s financial ledgers are replicated and duplicated in an unreliable, inaccurate, slow, and inefficient manner. Consider the various financial bookkeeping records generated by a single credit card purchase. The cardholder, merchant, card-issuing bank, acquiring bank, card association, your bank, the merchant account, your personal financial records (checkbook ledger and bookkeeping), and inter-bank clearing transactions (now handled in the US by the ACH network) are all updated by various agents and methods as a result of each purchase. Alternatively, if a single shared ledger, secured by a blockchain, were employed, this transaction could be recorded once, and each authorized party could access the same accurate record. Each interested party would have private access to a single shared record of the transaction.
Existence of such a reliable record of financial transactions can simplify tax preparation and ensure accurate reporting and collection.
An international blockchain could arise from early cryptocurrency experiments. This blockchain could become the foundation of an international banking system that instantly reconciles transactions and creates a verifiable and secure record of each. The tax law can be simplified. It can become simple, understandable, fair, and international. Because it is implemented in the blockchain, it is transparent and automatic. The ReadyReturn model of return-free taxation could prevail. Tax accountants, tax court, tax shelters, and tax fraud could disappear while tax revenues increase.

### Abundance Mentality

Several conditions can come into place to allow a transition for a scarcity mindset to an abundance mindset. The most important is the remarkable increases in productivity that has been occurring over the past several hundred years and has continued to accelerate rapidly. We can learn to share the resulting productivity dividend. This has allows us to adopt an abundance mentality, rather than a scarcity mentality. We can also recognize the cruelty of creating economies based on the principle that everyone must find work or starve. Because traditional economic theory is based on assumptions of scarcity, this requires fundamental rethinking of economic possibilities. We could be enjoying a post-scarcity economy. We can choose to extend compassion to the most vulnerable. We can focus on what matters.

#### Assignment

* Read the essay Coping with Abundance
* Focus on what matters.

### Sacred Economics

The book Sacred Economics, by Charles Eisenstein, presents a bold vison of a more human-centric economic system.
His solution is an economic system that integrates these seven features: (quotations are from the book)
* Negative-Interest Currency— “Because of interest, at any given time the amount of money owed is greater than the amount of money already existing.” Because the interest rate establishes the minimum growth rate of the economy, negative interest rates are needed to allow a decrease in monetization.
* Elimination of Economic Rents, and Compensation for Depletion of the Commons—Because there is no legitimate claim to private ownership of the commons, private seizure or exploitation of the commons must end and users must pay the public for private use or depletion of the commons. “Generalized, the principle is, ‘The use of anything for money will increase the supply of that thing.’” Choosing to back money by use of the commons will increase the supply of those commons.
* Internalization of Social and Environmental Costs— “Money as we know it ultimately rests on converting the public into the private” Today, pollution and other forms of environmental degradation generate costs that are usually borne by society and future generations, not the polluters. This unfair private gain from exploitation of public assets must be reversed to discourage pollution and environmental degradation. “Whatever form it takes, an essential purpose of government—maybe the essential purpose of government—is to serve as the trustee of the commons”
* Economic and Monetary Localization—True cost accounting favors local commerce. “When production and economic exchange are local, the social and environmental effects of our actions are much more obvious, reinforcing our innate compassion.”
* The Social Dividend—Earth’s bounty and the accumulation of thousands of years of technological advances are public wealth. The benefits must be distributed as a social dividend to increase the well-being of all the earth’s people. “Mathematically, if money is subject to diminishing marginal utility, the optimal distribution of money is: as equitably as possible.”
* Economic Degrowth—As technology continues to advance, we can choose to work less or, more accurately, to work less for money. “Here is a certainty: the linear conversion of resources into waste is unsustainable on a finite planet. More unsustainable still is exponential growth, whether of resource use, money, or population.”
* Gift Culture and P2P economics— “When every economic relationship becomes a paid service, we are left independent of everyone we know and dependent, via money, on anonymous, distant service providers. That is a primary reason for the decline of community in modern societies, with its attendant alienation, loneliness, and psychological misery. Moreover, money is unsuited to facilitate the circulation and development of the unquantifiable things that truly make life rich.”
Chapter 17 of the book provides a summary and roadmap of these transformational ideas. Although these ideas are bold and fundamentally transformational, encouraging transition scenarios are presented.

### Steady State Economy

Recognizing limits to growth, economist Herman Daly defines his concept of a steady-state economy as an economic system made up of a constant stock of physical wealth (capital) and a constant stock of people (population), both stocks to be maintained by a flow of natural resources through the system.
Daly’s concept of a steady-state economy envisions an economy as an open subsystem embedded within a finite natural environment. This environment is characterized by scarce resources and fragile ecosystems. The economy operates in a constant and irreversible flow, where valuable natural resources are imported from the input end and valueless waste and pollution are exported at the output end. Any subsystem within a finite, non-growing system must eventually reach a state of non-growth and establish a steady state, maintaining itself as best as possible. This vision diverges significantly from mainstream neoclassical economics, which portrays the economy as an isolated and circular model. In this model, goods and services are exchanged endlessly between companies and households without any physical connection to the natural environment.

#### Assignment

* Read the essay From a Failed-Growth Economy to a Steady-State Economy, by Herman Daly
* Browse articles at the Center for the Advancement of the Steady State Economy.
* Take steps to evolve toward a steady-state economy.

### Gift Economy

A gift economy or gift culture is a system of exchange where valuables are not sold, but rather given without an explicit agreement for immediate or future rewards. Social norms and customs govern giving a gift in a gift culture; although there is some expectation of reciprocity, gifts are not given in an explicit exchange of goods or services for money, or some other good or service. This contrasts with a barter economy or a market economy, where goods and services are primarily explicitly exchanged for value received.

### Wellbeing economy

Wellbeing economy is a public policy framework in which the economy is designed to serve social, health, cultural, equity and nature outcomes. The aim is to go beyond gross domestic product (GDP) as the main measure of national economic performance. Since the early 2000s there has been growing interest in wellbeing as a framework in research, measurement and policy.

### Green economy

A green economy is an economy that aims at reducing environmental risks and ecological scarcities, and that aims for sustainable development without degrading the environment. It is closely related with ecological economics, but has a more politically applied focus. The 2011 UNEP Green Economy Report argues "that to be green, an economy must not only be efficient, but also fair. Fairness implies recognizing global and country level equity dimensions, particularly in assuring a Just Transition to an economy that is low-carbon, resource efficient, and socially inclusive."

### Degrowth

Degrowth is an academic and social movement critical of the concept of growth in gross domestic product as a measure of human and economic development. The idea of degrowth is based on ideas and research from economic anthropology, ecological economics, environmental sciences, and development studies. It argues that modern capitalism's unitary focus on growth causes widespread ecological damage and is unnecessary for the further increase of human living standards. Degrowth theory has been met with both academic acclaim and considerable criticism.
Degrowth's main argument is that an infinite expansion of the economy is fundamentally contradictory to the finiteness of material resources on Earth. It argues that economic growth measured by GDP should be abandoned as a policy objective. Policy should instead focus on economic and social metrics such as life expectancy, health, education, housing, and ecologically sustainable work as indicators of both ecosystems and human well-being. Degrowth theorists posit that this would increase human living standards and ecological preservation even as GDP growth slows.

### Anti-consumerism

Anti-consumerism is a sociopolitical ideology that advocates for intentionally and meaningfully excluding or reusing goods from one’s consumption routine to avoid unnecessary consumption. It stands in opposition to consumerism, a social and economic order where individuals often aspire to acquire goods and services beyond those essential for survival or traditional displays of status.
Anti-consumerism is concerned with the actions of individuals, as well as businesses where they act in pursuit of financial and economic goals at the expense of the perceived public good. Commonly, anti-consumerism is connected with concern for environmental protection, anti-globalization, and animal-rights. Post-consumerism, the prioritization of well-being over material prosperity, is a related ideology.

### Dividend Money

Jim Rutt describes proposals for dividend money in this video of his presentation to the Santa Fe Institute.
He begins by describing several problems with our present money systems. These include: an expensive, cumbersome, and inaccurate implementation, instability at both the bank level and macro level, misallocation of investments, exploitation of the unbanked, and financial dominance.
As proposed, dividend money could be used to pay income tax, has legal tender status, and can replace the United States dollar.
The proposal features a single ledger, creation of new money as a citizens dividend (as money is created it is credited to individuals rather than to banks), full reserve, and radical transparency.

### Modern Monetary Theory

Modern monetary theory or modern money theory (MMT) is a heterodox macroeconomic theory that describes currency as a public monopoly and unemployment as evidence that a currency monopolist is overly restricting the supply of the financial assets needed to pay taxes and satisfy savings desires. According to MMT, governments do not need to worry about accumulating debt since they can pay interest by printing money. MMT argues that the primary risk once the economy reaches full employment is inflation, which acts as the only constraint on spending. MMT also argues that inflation can be controlled by increasing taxes on everyone, to reduce the spending capacity of the private sector.

#### Assignment:

* Read the book Diagrams & Dollars: modern money illustrated, New Economic Perspectives.
** A book review is available that includes a summary of the book’s claims.
* Think carefully and draw your own conclusions.

### Evolving Government

Because money is a social construct, it can be redesigned by forming a consensus in favor of specific improvements and attaining the political will to adopt those improvements. This transformation is likely to require evolving governments to improve the well-being of the people.

## Live Wisely

We can begin to evolve money by choosing to live wisely.

## Research Opportunities

This course has presented a summary of the benefits of capitalism, identified several areas where our present money systems can be improved, and suggests several approaches to solving those problems.
These ideas present opportunities for evolving and enhancing our current system, but they might be rooted in outdated concepts. To gain a broader perspective, it can be beneficial to delve deeper into a fundamental question that unveils even greater potential for improving our money systems.
A deeper question to consider is:
   How can we foster exchange of goods and services?
This invites us to explore the deeper fundamentals of money.
Another research question to explore is:
   What forces shape the evolution of money?

## Additional Resources

The resources listed here can provide additional background and insights related to evolving money.
The Stanford Encyclopedia of Philosophy entry on Normative Economics and Economic Justice explores philosophical perspectives on fairness and justice in the distribution of economic resources and opportunities. It discusses various theories that address how wealth, income, and opportunities should be allocated in a just society.
The Emancipation Party website advocates for several solutions to problems existing in our current money systems. The website includes a detailed problem statement, suggested reforms, and a transition plan. The site also includes an extensive bibliography, and reading list.
The book The End of Money and the Future of Civilization, by Thomas H. Greco, Jr. is freely available online.
The James Robertson website advocates for a comprehensive reform of the worldwide money system.
Economist Laurence Kotlikoff is a specialist in macroeconomics and public finance who has written more than 20 books.
Columbia professor David Beim wrote the confidential report on Systemic Risk and Bank Supervision for the New York Fed in 2009. The report examines systemic risk in the financial sector, focusing on the interdependencies between financial institutions. It highlights how the interconnected nature of large banks can amplify risks, leading to broader economic instability. The report also discusses potential regulatory reforms aimed at reducing such risks by improving transparency and oversight. It underscores the need for better risk management practices to prevent future financial crises.
The essay "What if jobs are not the solution but the problem?" by James Livingston questions the societal emphasis on work as a source of meaning and character. Livingston argues that with fewer jobs and increasing automation, society must rethink its dependence on employment for purpose and income. He suggests shifting towards welfare models and reimagining a future where leisure, care, and community replace traditional labor structures. The essay challenges the belief that full employment is inherently good and explores alternative ways to structure society beyond work.
In our current system, finance and the economy tend to serve themselves rather than serving society and the environment. A wellbeing economy is an alternative vision for the economic system, in which finance serves and incentivizes the economy, and the economy serves society – and the environment – as part of its intrinsic purpose.

## Recommended Reading

Books listed here provide valuable background information, describe impacts, identify causes, and suggest solutions.
These books also appear on the LibraryThing Rethinking Money list.
* Piketty, Thomas (2017). Capital in the twenty-first century. Cambridge, Massachusetts London: The Belknap Press of Harvard University Press. ISBN 978-0-674-43000-6.
* Graeber, David (2012). Debt: the first 5,000 years (1. Melville House paperback print ed.). Brooklyn, NY: Melville House. ISBN 978-1-61219-129-4.
* Jackson, Tim (2011). Prosperity without growth: economics for a finite planet. London: Earthscan, from Routledge. ISBN 978-1-84971-323-8.
* De Graaf, John; Batker, David K. (2011). What's the economy for, anyway? why it's time to stop chasing growth and start pursuing happiness (1st U.S. ed ed.). New York: Bloomsbury Press. ISBN 978-1-60819-510-7.
* Heinberg, Richard (2011). The end of growth: adapting to our new economic reality. Gabriola Island, B.C: New Society Publ. ISBN 978-0-86571-695-7.
* Naam, Ramez (2013). The infinite resource: the power of ideas on a finite planet. Hanover [N.H.]: University Press of New England. ISBN 978-1-61168-255-7.
* Wilkinson, Richard G.; Pickett, Kate (2011). The spirit level: why greater equality makes societies stronger (Paperback edition ed.). New York NY London Oxford New Delhi Sydney: Bloomsbury. ISBN 978-1-60819-341-7.
* Eisenstein, Charles (2021). Sacred economics: money, gift, and society in the age of transition (Revised ed.). Berkeley, California: North Atlantic Books. ISBN 978-1-62317-576-4.
* Barnes, Peter (2006). Capitalism 3.0: a guide to reclaiming the commons. A BK currents book (1. ed ed.). San Francisco: Berrett-Koehler. ISBN 978-1-57675-361-3.
* Lietaer, Bernard A.; Dunne, Jacqui (2013). Rethinking money: how new currencies turn scarcity into prosperity. A BK Currents book (1. edition ed.). San Francisco: Berrett-Koehler Publishers Inc. ISBN 978-1-60994-296-0.
* Hawken, Paul; Lovins, Amory; Lovins, L. Hunter (2000). Natural capitalism: creating the next industrial revolution. A Back Bay Book (1. paperback ed., [Nachdr.] ed.). New York: Little, Brown and Co. ISBN 978-0-316-35300-7. </ref>
* Pinchbeck, Daniel, ed (2011). What comes after money? essays from Reality sandwich on transforming currency & community. Berkeley, Calif: Evolver Editions. ISBN 978-1-58394-349-6. OCLC 696099144. https://www.worldcat.org/title/696099144.
* Barber, Benjamin R. (2008). Con($)umed: how markets corrupt children, infantilize adults, and swallow citizens whole. New York London: W.W. Norton & Company. ISBN 978-0-393-04961-9.
* Alt, J.D. (January 12, 2014). DIAGRAMS & DOLLARS: Modern Money Illustrated. pp. 36.
* Batra, Raveendra N. (2015). End unemployment now: how to eliminate joblessness, debt, and poverty despite Congress. New York, NY: Palgrave Macmillan. ISBN 978-1-137-28007-7.
* Admati, Anat R.; Hellwig, Martin (2014). The bankers' new clothes: what's wrong with banking and what to do about it (9. printing, 1. paperback printing, with a new preface by the authors ed.). Princeton, N.J.: Princeton Univ. Press. ISBN 978-0-691-16238-6. </ref>
* Ásgeir Jónsson (2009). Why Iceland?. New York, NY: McGraw-Hill. ISBN 978-0-07-163284-3.
* Lietaer, Bernard (2001). The future of money: a new way to create wealth, work, and a wiser world. London: Century. ISBN 978-0-7126-9991-4.
* Frankfurt, Harry G. (2015). On inequality. Princeton (N.J.): Princeton university press. ISBN 978-0-691-16714-5.
I have not yet read the following books, but they seem interesting and relevant. They are listed here to invite further research.
* Kennedy, Margrit; Kennedy, Declan. Interest and Inflation Free Money: Creating an Exchange Medium That Works for Everybody and Protects the Earth. Inbook. pp. 144. ISBN 978-0964302501.