Socioeconomic systems may be conceived in the same vein as organisms: driven, replicated, non-equilibrium systems in a landscape of steady-states. Lifetimes and sustainability in such systems are parameterized by the capacity to represent and predict driving signals, and to use the energy contained in such signals to replicate successfully.
Driving signals are the cycles of availability of input energy that drive systems out of equilibrium. Driven systems favour the formation of well-organized, low-entropy structures to the extent that they are better able than high-entropy forms to store, utilize, and ultimately dissipate input energy.
This is what makes life inevitable yet absurd in our universe - beauty in form derived from superiority in destruction.
Organisms and economic systems are assemblages of cells and datastructures encoding driving signals like biochemical nutrients, electromagnetic radiation, physical forces, and the presence of others.
In organisms, the cells and data structures are biophysical; in economies, they are socio-political. In economies, the presence of others plays a disproportionately powerful role as signal and source of energy.
Market data structures (prices, exchanges, commercial law, etc.) have been paramount to our ability to represent the presence of others, and to co-ordinate with other humans at large scale by mediating exchange between otherwise entirely unrelated people.
This is a representational problem and solution. The problem is, how do I represent the presence of unknown, unrelated agents? For most of history, the solution was primarily as “other, probably hostile”, precipitating much of our bloody past. But with markets and currencies, the representation of unknown, unrelated agents becomes suddenly “opportunity to exchange value”; an astounding change in posture that lubricates co-operation across a tremendous range of peoples.
Of course, market structures have been used in highly absuive contexts as well, for instance in their original encounter with native people’s of so many lands, and in the debt slavery they perpetuate today. These abuses are similar in that they both constitute an unprecendented decoupling of the representational state of the system from its environment.
In the former case, invaders by-and-large obliterated age-old customs for survival, customs deeply embedded with representations of the myriad patterns of the enviornment, replacing them with cross-platform industrial mechanisms with global supply chains that care little for local rhythms or sustainability.
In the latter case, the credit bubble, across humans and nations, has long out-paced the capacity of its debtors to repay, and hence interest rates have all but ceased to be useful in their representation of economic potential and credit-worthiness in the global economy.
More generally, this decoupling of representation from environment, and its corresponding implications for our sustainability, correlates closely with the massive negative externalities of our modern markets, and is a symptom of the insufficiency of existing market mechanisms to adequately represent our environments as our population sizes collide with our carrying-capacities.
Indeed, the idea that the central bank will stabilize the economy with a single lever, the interest rate, is laughable in its ignorance of the essence of stability and the complexity of our social economics.
What should the central bank due to promote stability in its economy? It should be obvious: nurture, promote, and protect the self-sufficiency of its regions. Long distance trade is a luxury. In so far as it is a critical dependency for any region, there is work to do.
The dominance of dollar-denominated international trade has canabilized the global pricing mechanism and systematized fragility. Hence why it literally costs less to ship something from China than from across the street, and why it’s become increasingly difficult for people in urban centers to meet their basic needs.
The representational capacity of local systems (ie. their sustainability) appears to have been chronically undermined by the adoption of an internationalized currency to denominate all exchange - local capacity devalues so-far as it cannot be priced and shipped in global markets.
Typically, currency is considered to play three roles: medium of exchange, unit of account, and store of value. Global currencies have succeeded significantly in the first two, but utterly failed in the third, as their values have become increasingly decoupled from productive reality, and increasingly coupled to crippling debt. Precious metals, conversely, have stored value considerably well, despite their failure as media of exchange and units of account. As the currency degrades in its representational capacity, so too does it degrade as a store-of-value.
What does it mean to store value? It is to harbour potential energy in a usable way. Natural ecosystems and organisms have highly distributed stores of value, across a great many forms, allowing them to respond robustly to fluctuations in input energy. The local distribution of value and capacity is critical to their sustainabilty. They also have currencies, energy carrying molecules like ATP and NADH that are accepted roughly everywhere. Value is transferred across systems by the exchange of currencies.
Currencies are not the primary stores of value, but are rather its carrier. In the role of carrier, they must faithfully store value, lest they continuously leak it. The dollar leaks, big time - systematic inflation and the siphoning of value into the hands of the patently unproductive financiers. What would it mean to compound value, instead?
Value compounds by finding new sustainable cycles of flow. Lower-entropy structures that emerge because they can somehow better harness available energy. Small and medium sized local businesses are the essence of this in our economies. Under the dollar regime, they are disappearing.
Humans have steadily abstracted our value stores away from their underlying energetic forms, decoupling them from the salient driving signals and productive capacity that sustains us. The dollar denominated asset values and patterns of circulation in our economy come increasingly to represent the over-leveraged financial prophecy of governments and bankers, and decreasingly the local information that imbues sustainability.
In turn, we have become increasingly dependent on large, fragile, hierarchical, and global systems to provide our basic needs, using the dollar as a mediator. But sustainability is a local phenomenon, it can’t be denominated in dollars.
Can we integrate local stores of value with global markets in a manner that doesn’t undermine the local systems? Can we empower both local sustainability and global integration?
Local currencies have been posited as a solution to this problem. Their purpose is to encourage local circulation patterns that represent relevant community values and driving signals, nurturing sustainability and the compounding of value in local communities.
Most implementations to date have failed. The most successful, a mutual-credit token in Switzerland known as the WIR, demonstrates hope, but is currently faltering.
A major challenge with local currencies is their exchange rate. The traditional options are to peg it, or to let it float freely. Pegs make it difficult to compound value in the new currency, especially when the reserve currency is inflationary. Floating rates are just too volatile, but this can perhaps be partially mediated by a stable coin using the floating coin as collateral.
Some currencies are pegged to a resource, instead of another currency. Time banks are pegged to hours of time. The ancient Egyptian currency was redeemable for bread. Local currencies pegged to local productive capacities sounds like the kind of thing that sustainable societies are made out of. But how will such currencies relate to eachother, and to the existing national fiat and to the global crypto currencies?
Token bonding curves suggest a way forward; they bridge the gap between pegs and floating rates. They can support multiple reserve tokens. So new currencies can be created that are backed by a portfolio of other tokens, including, for instance, a global cryptocurrency, a national fiat currency, and a set of local resource tokens. The new currency is accepted (“valued”) by those who trust in the value of the underlying productive capacity of the resource tokens.
How this actually works, I don’t begin to know. But multi-collateral bonding curves with resource tokens seems like an incredibly promising approach to a new sustainable economic system.