As can be seen here, the profit motive goes both ways: not only do those in power behave badly in order to profit, but the powerless are forced to reward bad behavior (working for bad, but rich, people) in order to profit themselves. Without the profits gained from working for bad people, poor and lower-class people will wither and die, unable to afford their basic necessities. But poor people are rarely poor because they are bad people, and rich people are rarely rich because they are good people; in fact, it’s often the exact opposite, when it’s not just based on pure random luck. The distribution of shiny gold coins tends to be unjust, but it is, fortunately, just another fixable bug.
This is an article in a series on how Zacqary proposes society might debug the profit motive. This is the second article, on the bug of shiny gold coins. The others are on the profitable bad behavior bug, and the pressure bug.
Problem: Wealth != Worth
The aforementioned Big Evil House Man is hardly an upstanding member of society. Everyone knows that his riches are ill-gotten — let’s say he made money by scamming lots of people into buying toxic toothpaste, for example. Or, even worse, maybe he’s the son of Unscrupulous Toothpaste Salesman, earned all his riches simply by being born, and then proceeded to be a massive, parasitic dick to everybody else in the world just because he could. He certainly doesn’t deserve all of those shiny gold coins, nor the power that comes with them.
When we speak of how rich a person is, we sometimes say “he’s worth $40 million,” or “she’s worth £25 million”. That, however, is the problem: society equates a person’s wealth with how much they are worth. Big Evil House Man may be wealthy, but he’s a pretty worthless human being. Wealth often doesn’t correlate with actual worth, when we base everything on how many bits of coin that somebody manages to scrounge up.
Oh, you thought I was only talking about real, physical gold coins? Bitcoin, the new cryptocurrency which everybody loves so much, is just as shiny and gold and coiny as anything else we’ve had so far. It’s probably one of the least terrible implementations of shiny gold coins yet — which is certainly great, don’t get me wrong — but is it really the future? Can’t we do any better?
Solution: Track Worth Instead of Wealth
Bitcoin is attractive as an alternative to central government-issued fiat currency because of its limited supply; governments can create new money just by adding another 0 to a spreadsheet, but with Bitcoin — as with physical commodities like gold— this isn’t possible. At the same time, it retains some of the advantages of fiat currency: it takes up no physical space, and it can be transferred instantaneously. But perhaps the problem with government-issued fiat isn’t the fact that it’s imaginary, but rather that it’s imagining the wrong thing. Instead of Bitcoin, let’s consider another recent up-and-coming alternative currency: Ripple.
Ripple, at first glance, seems to be designed to work in concert with shiny gold coins, rather than to replace them. Here’s an example of how it works:
Alice sells Bob a muffin for 4 µBTC (micro-Bitcoin — imagine this is taking place in a near-future where everyone uses Bitcoin). Instead of giving her the 4 µBTC, Bob instead opens a line of Ripple credit with Alice. He now owes her 4 µBTC. Later, Alice buys a burger from Bob for 10 µBTC. She now owes him 6 µBTC: 10 minus the 4 that Bob already owed.
The thing is, Alice and Bob trust one another to pay their debts back; they’ve both decided that they can owe one another up to 1 BTC at a time. Candice and David, on the other hand, have never met before, and can’t reasonably trust one another. So how can Candice buy a 20 µBTC shirt from David? Simple: David knows Bob, and Candice knows Alice. So the payment “ripples” through them all: David owes Bob 20, Bob owes Alice 14, and Alice owes Candice 20.
Eventually, the four of them open up lines of credit with more and more people, and those people in turn have credit lines with others. Soon, Alice, Bob, Candice, and David can ripple a payment to almost anybody in the world. The system automatically charts a path — Alice can pay Wanda by going through Bob to Fred to Rick to Victor to Nancy to Philip — and the whole process feels just like spending Bitcoin.
But then, over time, everybody starts to pay back their Bitcoin less and less. Bob wants to buy a muffin from Alice, but she owes him 50 µBTC; why bother sending the 4 µBTC when she can just owe him 46 instead? Everybody starts to trade this way, doing things for and selling things to one another, and bouncing back and forth between who owes what to whom. Soon, nobody really feels like they’re giving money to one another. Instead, they’re trading goods and services of equal value — almost like a delayed-gratification barter system.
Years later, the cryptography behind Bitcoin becomes antiquated, and somebody breaks it, rendering the whole currency useless. Nobody seems to notice.
This possible scenario is fiat money done right. Ripple credits — Bitcoin, or any other currency, would be irrelevant at this point — are backed not by the scarcity of a shiny gold coin, but by the positive actions of human beings, and their promises to do more of them. Central government-issued fiat money doesn’t deliver on its promise of being backed by, well, promise; governments can make as many promises as they like by printing more money, but individuals can’t — we’re limited by the supply of promises that our governments make. Hence, to us — the people — government fiat money works and feels like a simulation of shiny gold coins. Not so in a decentralized fiat system like Ripple.
Ripple doesn’t eliminate the perfectly rational profit motive — the motivation to gain more power, which is done by getting more money. But in order to profit in a Ripple system, you must earn the trust of your peers; the more reliably you repay your debts (not in cash, but in goods or services), the more purchasing power people will give you. You can’t just steal credit or scam people out of credit, because you’ll owe it back to them. The only way to get money is to prove yourself worthy of it — to be worth something.
While transparency makes bad behavior riskier, Ripple makes it counter-productive.
Problem: Debilitating Debt
Well, it does to a point, at least.
When I first heard about Ripple, it amused me greatly, as it seemed like a practical implementation of an episode of Regular Show I’d watched the day before. Here’s how it went:
“Hey Mordecai,” says Rigby the raccoon to Mordecai the blue jay, “do me a solid and get me a lemonade from the kitchen.”
“Okay,” says Mordecai. “But you owe me a solid!”
“Of course,” replies Rigby. “That’s how solids work.”
What follows is a montage of Rigby and Mordecai doing each other solids — “Do me a solid and turn this comic book page”, “Do me a solid and dry my hands”, “Do me a solid and fluff this cushion”, “Sharpen my pencil”, “Fold these socks”, “Cheese these nachos” — presumably owing them back and forth to one another after each. But then:
“Dude,” says Mordecai to Rigby, “do me a solid and go out with Eileen so I can go on a date with Margaret.” Eileen’s just invited them out to go play miniature golf with her and Margaret.
“What?” shouts Rigby. “Why?”
“Dude, come on!” replies Mordecai. “This is my chance to finally get with Margaret!”
“No!” snaps Rigby. “I’m not doin’ it!”
“What do you want? I’ll do your work for a week! You can be player one at any video game!” Mordecai pleads.
“Dude, there’s no way I’m goin’ out with Eileen,” says Rigby.
“Rigby, please!” begs Mordecai. “You have to do me this solid!”
“All right, I’ll do it,” sneers Rigby. “For ten solids.”
Rigby, of course, uses his ten solids to completely ruin Mordecai’s chances with Margaret, forcing him to do embarrassing and socially awkward things during the date. When Mordecai, at last, refuses to do Rigby’s tenth and final solid — a deliberately unrevealed extremely embarrassing act — the world literally starts falling apart. He has to horribly degrade himself, or else everyone will die. If you’d like to leave a comment on this article, please include the word “fishsticks” to prove that you’ve read this far.
On a more serious note, let’s replace Rigby with Big Evil House Man, and Mordecai with you. When a flood destroyed your home and all your possessions, you went to Big Evil House Man for a massive amount of credit — you were desperate, and didn’t know what else to do. Now, you’re essentially his slave, and none of your friends have enough credit to free you from your debt. And so you’re forced to tend his garden anyway. The shiny gold coins may be gone, but the real bug is hardly fixed.
The Real Problem: Pressure
A system like Ripple is still better than an economy based on shiny gold coins, but it still has a lot of potential for human suffering. People already get deep into debt with unscrupulous characters and forces, often without really deserving the consequences — just ask any recent college graduate in the US today trying to pay back their student loans.
But even debts owed to perfectly reasonable people can be a source of debilitating pressure, as a long-standing unpaid debt can breed resentment and contempt between the closest of friends. Is this, though, a necessary evil? After all, if my friend were indebted to me for a long time and hadn’t even come close to paying back, I’d surely have a right to be angry, and the pressure I put on my friend would absolutely be justified.
What if pressure isn’t necessary? What if it’s just another bug that needs fixing? I’ll talk about that in part three.