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The Babbling Brook - an economic system category

How Babbling Brook can develop into an economic system

It can be hard to imagine how a social network can develop into an economic system. Let's start with an analogy that explains the difficulty. We all know how money works in our everyday lives, but imagine for a moment that you live in a small tribe that has never seen money. One day a group of very strangely dressed people approach your village. They see some baskets that you have made and they want to exchange some grubby bits of paper for them. What would you think? Would you understand that these strange bits of paper could then be exchanged for other things? Would you believe them even if it was explained? Money is a very strange concept to someone who was not raised to use it, and the same is true of Babbling Brook. This is why I have designed Babbling Brook to start out as a social network, similar to those that you recognise, and allow it grow organically into an economic system.

Here is the shortest possible, but rather opaque way to explain why it is possible for a social network to develop into an economic system : Both use numbers to indicate value. For example, a tomato might be worth 20 pence and a blog post might have been 'liked' 20 times.

That's it, job done. If you can hand in your 20 pence’s, then I can wrap this blog up. Ok, so it's not really that simple and obtuse. In the next few posts I'll go into a bit more depth and look at some of the ways in which Babbling Brook is both a social network and an economic system.

What is an economic system?

Economics allows us to exchange stuff. If you've got too many onions and the flatulence is getting out of hand, then perhaps you could give me some and I will give you some chocolate that I have spare. Sound like a good deal? Actually, I do love onions, but I'm not sure I love them as much as chocolate. However it just so happens that I really want to make curry tonight, so lets swap.

There we have it, an economic system. Economics does not have to be complicated.

This kind of economic system is what most people image people used way back in the dawn of time when we used fingers to count instead of computers. Unfortunately it's not actually true. This kind of swapping has always gone on but it has never been common, due a problem called the coincidence of wants. It is generally unlikely that when you have spare onions that I will have spare chocolate. Never the less, in this instance it's your lucky day (Hmm, shall I make a rogan josh, or maybe a bhuna).

You have some onions. Lets say one kilogram. I have a cupboard full of chocolate, but there is no way I am giving you all of it. Tell you what, I'll give you 100 grams of chocolate for your onions, is that fair? No? You want 200 grams. Lets settle on 150.

What we are doing here is finding a comparative value for our goods. We are not using money, but we are using numbers to decide how much to exchange. We could just eye it up and come to an agreement, but we would still be doing the same thing, just without formalising the quantities. We have assigned a value to something we have and something we want and used that to exchange resources.

The economic transaction described here is very primitive and limited. We have since developed a rich history of different methods to exchange resources. I'll be examining them in detail at a later date as they provide a lot of insight into what causes humans to organise, but the next post is going to sprint to modern times and look at the similarity between purchasing curry ingredients and making a blog post about making curry.

A finely chopped blog post

In the last post we swapped some onions for some chocolate but in today’s world we use money to buy things. So I've popped down to the local shop and bought the onions. I paid 65 pence for them. Now I'm heading home to make curry. I made the rogan josh but it was a bit too spicy and my tummy wants something mellow today so I'm going to make a korma.

Lets switch gears now and look at a social network. I love onions so much (have you noticed?) that I've written a blog post about making an authentic British Indian takeaway curry – should the onion paste be made from liquidised onions or finely chopped? It turns out that this is a hot topic and fifty five people have 'liked' my post.

On the surface these activities seem different but they actually follow a similar pattern. Value has been assigned to the blog post in a very similar manner as to how I paid for the onions. Both situations involve a producer providing something – onions or a blog post. Then a value is given to it that reflects how much it is worth. However, there are three important differences. Firstly, anyone could read the blog post without giving something in return. Secondly, a value has been assigned after consumption of the blog post. Finally, you only have a limited amount of money but you can make as many likes as you want without cost to yourself.

We will look at these three points in the next few posts.

Payment

In the last post we explored how making a blog post is similar to buying some onions (the korma was delicious). In this post we will examine the first of the differences: That anyone can consume a blog post without giving something in return.

The answer is that you paid for it without realising. Let's use Facebook as an example. I've taken a picture of some beautiful onions that I am going to make into curry and posted it on Facebook. You load up Facebook and see the post and at the same time you glance at an advert to the side of the post. Bazzam, money has changed hands. I didn't receive any money but Facebook did. I am being paid with services in kind. Instead of money I get the opportunity to see a video post you make of your kids eating a chocolate bar - or rather smearing it everywhere.

Let's do another example. You are reading this blog post yet there are no adverts. How am I getting paid for the service of writing this blog? I'm doing it in the hope that you will tell your friends about Babbling Brook. I need to get the attention of as many people as possible before I launch a crowd funding campaign so that I can buy more onions to feed me whilst I work on Babbling Brook. I am being paid in eyeballs. Urrrk, I'd rather have chocolate.

The point of this post is that we do pay for the social media that we consume, we just don't use money to do so. Babbling Brook takes this process to the next level, making it possible to exchange resources as well as just posts, tweets and images. We'll look at how it does that shortly, but first, the next post will look at the second difference between a monetary transaction and a social media one - value is assigned after the transaction rather than before.

When we pay

In the last few posts we have looked at how using money to buy stuff is similar to making social media posts. In this post we will look at the difference in how value is assigned to stuff we buy and in social media.

When we use money, we pay for the things we want before we consume them, yet with social media a post is only 'liked' after it has been consumed. The reason for this is self evident: The shop keeper is not going to let me eat their precious onions before I've given paid for them and also you can't judge whether you 'like' my picture post on Facebook until you have seen it.

Does it matter that the value is exchanged at a different time? In these cases no, but if 'liking' the picture of onions resulted in you receiving an express delivery of curry at your door, then it would matter. But wait a minute, the item of consumption has changed. Now you are receiving curry after 'liking' the post. The picture was just an advert for the curry; the difference is an illusion.

There is a more complex topic that I am brushing over – to do with the paying for written and visual material, or to use the technical term, intellectual property. I'll get to that later, for now it is just important to realise that when a value gets assigned to something, the context is more important than the medium that is used to assign the value.

This post has been short but take a deep breath as the next is a little more complex (Only a little). It looks at the final difference between a monetary transaction and a social network one; that we have a limited amount of money, but an infinite number of 'likes'.

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.

Intermission : The open ended nature of Babbling Brook

In the last few posts we have been looking at the differences between spending money and 'liking' a blog post. In this post we are going to have an intermission from the main thread to explore a problem that I have in explaining how Babbling Brook works.

The aspect of Babbling Brook that is hardest to explain is its open ended nature. Babbling Brook is not simply a new economic system that is more efficient than the free market. It is a new platform on top of which many different economic system can be built. It is perfectly possible to build a free market democracy using it, but it is also possible to build any other system that uses numbers to place value on things. In using analogies to explain how Babbling Brook works I am selling it short. It's not that the analogies are wrong, it is just that they are limited.

All economic systems essentially describe how people interact together to create a society and the technology that is used to do that informs what kind of society can be created. In other words an economic system can only use mechanisms for exchanging value that technology permits. The invention of money provided some very interesting properties, e.g. it made it possible to store a lot of value in a small token. However it also has limitations, such as making it impossible to track the morals associated with work done to create the value.

The interesting thing about the internet is that it makes it possible to exchange value in any way that can be mathematically modelled. This is not possible with money, which is much more limited. The internet makes it possible for society to organise in a multitude of new ways and rather than tightly define a single new method of doing that I have designed Babbling Brook to make it easy for many new methods to arise.

For example, Babbling Brook makes it possible to build a system in which every transaction ever made is public, but it is also possible to make transactions that are private. How much each is used will ultimately be decided by the people using the system. For example, public transactions make it possible to track the morals of work done. Private transactions allow people to obtain things that society considers ok but at the same time can cause problems for the purchaser, such as buying medication.

The downfall of the abstractness of Babbling Brook is that is that it is a harder sell. There is less to immediately grab hold of. The purpose of this intermission is essentially to point out that the examples I give in the following posts are all only part of a larger picture. When I talk about the benefits of something like tracking transactions it is not without being aware of the problems this might also cause. Babbling Brook is designed to let the people using it find the balance between how much is public and how much is private.

In the next post we will get back on track with a post about how you earn credit in Babbling Brook, and how you get stuff for it. (I've also had a request for more curry analogies, I hope you like Thai?)

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