TowardsaQualityFinancialCommons?

DavidHalesTechnicalUniversityofDelft,

TheNetherlandswww.davidhales.com

Tragedyofthefinancialcommons

•  Someexamples:–  Individualbankcreatesexcessivecreditthroughlaxloansthatcanbesecuritisedandsoldon(toanotherbank)

– Assetbubblestransferwealthfromthemajoritytotheminority

–  Statedebasesthecoinviaprintingmoney

•  Twobroadresponses:– Morecentralcontrol–HobbsianLeviathan–  Lesscentralcontrol–Efficientmarkets

Somefinancialfunctions

•  Valuetransfer•  Creditcreation•  Valuestorage•  Exchangeofservicesandproducts•  Qualitymoney?

Alternative

•  Possibleemergingalternative:– Radicallydecentralisesystemsthatsupportfinancialfunctions

– Useemergingtrendsindistributedinformationsystems

– Alternativeeconomic/cooperationtheories

Emergingtrendsininfo.systems

•  Overrecentyearsanumbertrendshaveemergedwithininformationsystems:– socialnetworks(facebook,LinkedIn)– peerproduction(wikipedia,opensource)– peer‐to‐peersystems(BitTorrent)

– virtualcurrencies(secondlife,farmville)– cheapmobiledevicesconnectedtoglobalnetworks

Alternativecooperationtheories

•  Bottom‐upformsofaltruismandtrust– groupselection,migration

•  Reciprocity:– direct,indirect,network

•  Others:– affinity,reputation,altruisticpunishment

Someon‐goingprojects

•  P2Plending(eliminatebanks)•  Membersbanks(becomepartofabank)

•  Moneyfreeeconomies(eliminatemoney)

•  P2Pmoney(createyourownmoney)

Eliminatingbanks/interest

•  Zopa–P2Plendingsystemwithoutabank.Nonlocal,becomingsuccessful

•  JAKBank–Membersbankcontrolledbyandforonlythemembers.Eliminatesinterest.Highlylocal

Eliminatingmoney

•  CouchSurfing–peoplefreelysharespareaccommodationallovertheworld.Globalandactive

•  Freecomony–peoplefreelyshareanything(generallylocalised)

P2Pmoney

•  Usingasocialnetworkoftrustedfriends•  Eachpersoncanapplyacreditleveltoeachlinkinanymonetaryunit

•  Paymentsbetweennodes(valuetransfer)involvesthesystemfindingarouteofcreditbetweennodes

•  Dependsontrustandenoughback‐to‐backtransferstobalanceovertime

•  ComparetoHawalasystemandother“informalvaluetransfer”IVF,systems

P2PMoney

•  Currentlyknowofnowidelyuseddeployedsystem

•  Bootstrappingproblem‐possiblewayforward:–  Createap2pvirtualcurrencyinavirtualgameworldwithexistingsocialnetworks

–  Takedetailedmeasurementsandcollectdata–  Seeifitworksandproducemodels

–  Ifsuccessfulgrowthecurrencyoutsidethevirtualgame

Qualitymoney

•  Subjectiverating=objectivequality?•  Inagivencommunity:–  ifenoughpeoplebelieveaunitofexchangeishighqualitytheywillacceptitforpayment

–  thenitishighquality– But,youcanonlyfoolsomeofthepeoplealloftime…

Let1000experimentsbloom

•  Givenasufficientecologyoffinancialcommonssystems(avoidingafinancialmonoculture)

•  Individualscan“votewiththeirfeet”migratingtothosethatareofhighquality

•  Henceeven“rational”behaviourcoulddrivequalityratherthandrivingitout

•  Tiebout(1956),Hayek(1978)‐backtosquareone?