Mixed Economies
As I’d hoped, my post on Post-Monetary Economics stirred up some significant discussion on the subject of living without money, and the subject of creating a world that doesn’t need money quite so badly. In particular, the idea of getting the money out of what will for a while be stubborn hold-outs against de-monitization. However, in the first follow-up post, I want to talk about what is already happening: the gradual transition of many activities from monetized to non-monetized markets, and the impact this will have on a world increasingly driven by two economies: one with money, and one without it.
First, a few words on my idea of “fundamental economics”. This, I’ve found, is a surprisingly controversial topic. Although the details vary widely, it usually comes down to: some believe that value is created by exchange, while others believe it is created by labor. Both ideas have legitimate objections: both can be twisted to imagine scenarios where the definition would claim value was created, where clearly it was not. (Exchange can happen which is circular, and work can produce useless things.) I tend to operate on a definition which is a sort of smear between these two ideas, which is to say that value is created by labor which adds to the exchangeable value of the medium. That’s a load of pretty horrendous jargon for someone who got a C-minus in AP Economics, but I also got a 4 on the test, so I’ll summarize: I think that the fundamental unit of economics is value, not currency, and that value comes from useful work.
With open source hardware and software, design work begins to become non-monetary. Designers create value, do not draw salaries, and do not pay money when they benefit from other designs. This has already, I would argue, deflated the apparent amount of economic activity in the US. The open source software generated by developers in the United States does not show up on GDP. It doesn’t show up on any economic indicater we have, BUT it enriches us all, and the world. There are people in the open source community working their butts off for “nothing”.
It’s as though there was some mysterious corporation that spit out multimillion-dollar design efforts on a regular basis, without paying its employees or charging money for its software. This conglomerate doesn’t pay any taxes, either. It’s off the radar.
But it matters.
It matters because the people who work on open source projects are taking time off from their jobs to do it. They’re working fewer hours to do it. They’re taking less-taxing jobs to do it. And if the open source phenomenon gets to be big enough, it’ll start making the figures show a nation slowly turning into a bunch of bums. And while they’re doing it, they’ll be pumping tremendous amounts of value into the economy.
Countries that do not revise their economic policy and accounting practices in the face of this shift will misread an increasingly important economic movement as waste. Countries that work to encourage this trend will enrich themselves. This is no longer a hypothetical discussion on some Star Trek Moneyless Future. This is current policy. I think if the governments of the world want to have rational economic policy in this century, they will have no choice but to begin conducting surveys of open source technology and creators, constructing metrics to measure the created value, and providing grants that will encourage greater open source development.
The nature of economics is changing, and policy makers need to be watching.
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Demented Chihuahua Said,
June 3, 2009 @ 11:48 am
It’s actually worse than that.
I’m doing some web design for a company during the summer off-season for college. They’ve had some really bad experiences with big web-design firms charging them tens of thousands of dollars and only giving them slightly-pretty Photoshop pictures of “potential” websites they could have.
When they hired me, they were expecting to do something like the same racket. I took a different tack. I’m a student, I expect internship wages–though I’m a mechanical engineering student and not a CS major–so my prices were nothing compared to the pros– $15 to $20 per hour compared to $50 to $100 per hour. Add to this that I ONLY use open source software and you have HUGE cost savings for this small company.
The point here is in what they expected and perceived as possible. They, the company, didn’t know that open source software existed to do everything the pro shop and degree holders did with fee-ware and un-degreed people. It wasn’t even on their radar. This situation is becoming the case with opensource hardware.
I, as an early adopter of opensource hardware/software/education, bring a lot more to the table than companies or individuals are expecting. Far from the point of governments not getting it, companies by and large are not getting it. They are plowing along full-steam and are heading right for a cliff of drastic change.
Demented
DrTread Said,
June 3, 2009 @ 3:36 pm
I love the open source movement. It is our best hope for a redesign of our economy. Our money-based economy is in serious need of redesign, as the last year has demonstrated that money and value are no longer related. I continue to be pessimistic about the medium-term effects of an open-source economy, as I do not see a pleasant changeover from one type of economy to another.
Governments require taxes to operate, and governments tax wealth or the ability to generate wealth. Most governments tax economic events. When things of value exchange hands, an economic event has taken place. Such events events, for example retail sales and employment income, are easily taxed in a monetary system, because an exact monetary value is attached.
Another source of tax revenue is property value tax. Ad valorem taxes are also easy to assess when every possession has a monetary value.
No government will enjoy seeing its revenue decrease. Because no monetary value is attached to open source events, they can’t be taxed under the current tax regime. A change must occur, and however it comes about, it is likely to be unpleasant. If government sees open source as a threat, it will be treated as a black market and suppressed. If the government embraces open source, it must find a way to tax it.
The former won’t be pleasant. It will be as if Guido van Rossum were a drug lord, conspiring to smuggle contraband Python into the country.
The latter won’t be much more pleasant. If I download the latest build of Python, will I be taxed an equivalent amount as if I’d purchased Visual Fortran?
Even if I’m not taxed on the download, I now have a piece of capital equipment: a tool for creating value. If I use it to create programs I sell for money, it’s as useful as if I were a carpenter buying a new table saw. How will I be taxed on that? What if I use it to write more open source software or design a widget for Thingiverse? More value. More potential for taxation goes untapped.
I have no idea how this will play out, but I’m hanging onto my seat, because it’s going to be a bumpy ride.
–DrTread
Demented Chihuahua Said,
June 5, 2009 @ 2:08 pm
That’s a nice point of view. Value events are what the governments have historically been taxing. When looking at it from that paradigm, they will have to find a way to tax me on my life because simply through the act of living I add value–I like to believe–to the country and the world.
The open source movement brings this sort of conclusion uncomfortably close to the front of our minds…How would you like to be taxed to live?
Demented
Allan Ecker Said,
June 5, 2009 @ 9:04 pm
I forget where I was reading about governments being event-driven software, which they are, really.
In the mixed-economy regime, I think governments have a chance to partake in the same benefits reaped from open source work, mitigating the losses they take from value events migrating off the moneyed plane.
Essentially, if a government is event-driven software which requires tax and tax-like inputs, its livelihood during the transitional period will require that it come to incorporate non-monetary value in its own influence space.
Of course, this won’t fix everything. There will be dropping revenues in sectors which would otherwise be generating growth. Tweaking governments to make them compatible with mixed economies, and eventually non-monetary ones, may be one of the big social engineering challenges of this century.