|1. Aligning Moral and Economic Incentives||2. Functions of Money|
|3. Conflicts Among the Functions of Money||4. Problems with Interest|
|5. Reprogramming the "Invisible Hand"||6. The Validity of "Booster" Currency|
|7.Historical Precedents||8. Community Currency|
|9. Potential Misunderstandings||10. Conclusions|
|'A "Green" Convertible Currency'|
Community Currencies: A New Tool for the 21st Century
The three most important concerns of our contemporaries in the developed nations are remarkably convergent--unemployment, the environment, and community breakdown--and there are strong indications that these same issues will remain on top of the agenda well into the next century. Emerging technologies promise to keep unemployment a major issue, even if all Western economies get out of recession. By 2010, China will introduce as much carbon dioxide in the atmosphere as the entire world does today. And community breakdown is one of the most systemic, deep, and complex societal trends of the past 30 years, with no signs of any reversal.
Precisely because we will have to live with these issues for the foreseeable future, only a long-term structural approach can successfully resolve these problems. Here I show how community currencies could contribute to tackling all three problems and also permit us to "retrofit" economic motivation to desirable human behavior.
When these incentives conflict, problems will arise. For instance, when there is an economic incentive to do something a regulation or law prohibits, we need costly and permanent enforcement systems. Even in the presence of such enforcement systems we expect smuggling and many more imaginative forms of cheating to occur. More evident are cases where moral pressure is supposed to overrule economic interests. Consider, for instance, the well-known saying, "Money is like manure; it does good only if spread around." This sentiment has been espoused in less florid language by most religions for a long time. However, this moral pressure is diametrically opposed to the concept of receiving interest on money, which provides a built-in incentive to hoard currency. Whenever there are such structural contradictions many people are unable to afford, or simply do not care enough, to follow the moral advice.
It is possible, however, to design a coherent and operational currency system so that this apparent structural contradiction disappears. In other words, by questioning some traditional implicit assumptions, we can realign the moral and economic incentives so that they are in harmony.
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Since the breakdown in 1972 of the Bretton Woods system, the world has been living with pure fiat currency--that is, there is nothing material backing the currencies of the world. Nonetheless, money has continued to fulfill a number of different functions, only two of which are essential:
|The Future of Money|