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24 June 2010

Building the new allocative mechanism within the shell of the old

A rough outline of this schema was offered as a comment on Non-Monetary Coordination at the Angel Economics blog. That blog suggested use of an input-output matrix to model the processes of production and trace supply chains. My comment related some modeling ideas I've been tossing around over the years using graphs, Pareto optimality and a preference description language
I call 'maxhi schema.' I call this bundle of concepts pubwan. Pubwan was initially intended as a set of tools for studying and mapping the actually-existing economy by reverse engineering the mechanisms of market intransparency and asymmetry. Angel Economics, as proposed, has inspired me to envision applying these and other ideas to the much more difficult problem of modeling economic calculation itself.

My first suggestion was to start with a simple production process; organized around one person or some other small number. Identify the inputs and outputs of that process. This activity should be simple, step-by-step and replicable. A large number of people modeling a large number of processes in this way should start a discovery process that identifies, among other things:

  • opportunities to link processes within the community of participants
  • as a consequence, transparent, openly documented supply chains
  • which processes can be implemented (i.e., which products can be produced) most cheaply in the economy under construction, relative to their prices in the actually-existing economy.

Note that prices from the actually-existing economy are used to initialize the model. It is hoped that prices in general can be phased out, but even if not, the creation of extreme transparency and a cooperative model of production would seem a worthy goal, even if liberation from the the price mechanism itself turns out not to be feasible.

A logical step to take after describing and modeling production processes is to actually implement them. This entails obtaining equipment and supplies, and documenting in detail where, when and at what cost these are obtained. Thus far, except for treating vendor transactions as nonproprietary data, we are describing the setting up of a place of business. The practice of 'business,' like the price mechanism, is something we would like to phase out, assuming we are good little anticapitalists. I should point out, of course, that my interest is experimentation. I would not be inclined to bar people from participation in the project based on their opinions. Here are some important differences between the quasi-business (QB) proposed here, and business-as-usual:

  • We are starting with the assumption that all accounting information is nonproprietary, down to the resolution of individual journal entries.
  • We are starting with the assumption that the relationship between such 'business' units is entirely cooperative, and not competitive.
  • We are not trying to maximize profit, at least as a singular objective.

To some extent, these ideas have been adopted by actually-existing-capitalism, as 'B corporations,' 'open-book policies,' and 'multiple bottom line accounting.' One thing that is different about the QB is that the primary objective here is one of experimentation and data collecting, to see what happens. In particular, the third difference above, about goals other than profit, needs to be fleshed out. Here are some objectives to optimize early on:

  • informational closure. By this I mean a preference for pursuing projects that have the potential to fill in informational gaps in the shared database.
  • 'autarkic' closure, or the pursuit of relative self-sufficiency by the QB economy. This means seeking to minimize inputs from outside the community, or 'imports,' and a preference for pursuing projects to produce products identified as inputs (especially expensive inputs) of already implemented or modeled processes.

Once a number of closed loops are established within the QB economy, perhaps there will be opportunities to explore decentralized and democratic approaches to allocation of resources.

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