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The rarity of currency

The last four posts have been examining the similarities between 'liking' posts and buying stuff with money. This post is going to start looking at the last of the differences; we have a limited amount of money but an infinite number of 'likes'.

We value things more when they are hard to obtain. For example, a poster of a famous painting is not very valuable, say £15, but the original can be worth a small fortune, such as Cezanne's Card Players which recently exchanged hands for more than 259 million dollars.

Money being a finite resource is what makes it valuable. It was originally made from gold and silver coins and each coin reflected the value of the metal in the coin. But why is gold valuable? Sure it is a pretty yellow colour, but I think I would rather have a house than a few kilograms of shiny gold. The reason is that gold is rare, which enables it to be used as a place holder for other items that are genuinely valuable.

We don't use gold as money any more, instead we place our trust in the government to set the limit on the amount of money that there is, but the principle is still the same. The value of money represents how hard it is to obtain the stuff we buy.

The rarity of money enables it to act as a kind of social glue that keeps us all connected with each other. We use it as a form of communication to indicate to each other how much we value items, allowing us to negotiate on mass how much any item is worth. The general consensus is that onions are worth about 50p a kilo at the moment. This price is worked out in small steps, starting with a base cost to the farmer to produce them and for shops to supply them. This price is then changed depending on how in demand they are. If there is more demand for onions than shops have available, then the price rises so that the shops and farmers can make as much money from the onions as they are able to. If there is not enough demand then the price is lowered so that they can be sold before they go off.

Social networks do not have a mechanism that enables 'likes' to be a finite resource that is traded, but there is no reason they cannot. The simplest way would be for the owners of the social network to act like a central bank and limit the number of 'likes' available and then allow them to be swapped when a user 'likes' something. The reason this is not done is because the value of a 'like' is more profitable to the social network if they are free – it helps them to identify the most 'liked' posts, which in turn helps them with making money from adverts.

Babbling Brook does introduce an optional mechanism to enable 'likes' to be traded, but it does not act like a central bank. The vision behind Babbling Brook is not to just create a copy of the free market in a social networking site, but to create an entirely new form of economic system. One that can solve some of the most difficult problems that society faces, such as global warming and inequality. The next post will explore the open ended nature of Babbling Brook.

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