Cold vs Warm Currencies

Discussion

Jeff Emmett:

“ In my conversations over the past months, I have realized there are semantic difficulties in discussing some of these topics. Some terminology that was useful in capitalist paradigms is no longer welcome in post-capitalist worldviews, which is completely understandable, but can lead to breakdowns in communication. I find the miscommunications most severe when it isn't clear whether we are talking about "cold" currencies or "warm" currencies.

In my opinion, the currencies we know today are "cold", and embody extractive, debt-based value systems. When we talk about Commons initiatives existing within these cold currency systems, as islands on a sea of capitalism, there are huge mismatches in value systems and exploitation of the commons is the norm. However, using a Cyber-Physical Commons framework, we can design "warm" currencies that embody community value systems. We can imbue community currencies with semi-permeable membranes and governance toolkits (along with cultural best practices) that allow us to embed pigouvian taxes to internalize externalities, and limit exploitation by capitalist systems.

The 'tragedy of the commons' as explained by Hardin was a misnomer, as Jean Russell points out. However, the 'free rider problem' still exists, and although we cannot eliminate it completely, we can mitigate it with proper ecosystem design. Free riders cause what I think is the biggest problem in OVNs today: altruist burnout. It is our reliance on the continual goodwill of 'do-gooders' (without appropriate value compensation) that will keep the commons playing second fiddle to corporate and state forms of collaboration. A lack of proper incentive alignment makes OVN participation unpalatable to the general public (who can garner better 'market value' for their skills in traditional economies). Even the super-altruists among us who forego big salaries (or any salary at all) take a personal loss to provide good for the world. This eventually drains their resources (or their will) to help, leading to systematic altruist burnout. Doing good for the world often comes at a huge personal cost, in today's day and age - does it have to be this way?

The view of the Commons Stack is that good people should be rewarded for doing good things. We can decry 'profit incentives' as extractive in our "cold" monetary system, but in a "warm" monetary system it could alternatively be understood as a 'generated value surplus'. By designing these commons ecosystems with positive feedback loops that offer reciprocal rewards to people who provide value to the community, we are aligning the incentives of participants to propagate what is best for that community. To me, this is preferable over expecting people to sacrifice their bank accounts to chase dreams of doing good in the world, only to quit and go back to the 'real world' after realizing how little their efforts are financially valued. After all, even altruists need to eat!

In commons circles, it seems we are jaded by the existing financial system, and for good reason. But I feel like many commons approaches throw out the baby with the bath water. "Cold" currencies have a big issue with exploitation and value extraction, but with appropriate system design we can retain the useful aspect of incentive alignment in "warm" currency systems, and mitigate the extractive tendencies of unchecked capitalism. "Warm" currencies will allow us to step away from talking about 'dollars' and start talking about 'value'. With community attribution networks to appropriately value care work and monitoring systems that respect complexity, we can address the shortcomings of our current system and build something new atop the rubble of neoliberalism. There is a reason markets are the largest decentralized coordinator of human behavior the world has ever seen - the question is, can we harness that power to do good in the world?

There is promising academic research coming out of BlockScience and the University of Vienna, mathematical foundations that open up the potential for token engineering and rigorous complex system design with agent based simulation - I highly recommend a read of these papers, and checking out what the Commons Stack is doing to build on that research with an open source, customizable library of Commons components, a cultural and technical 'stack' to empower the commons.” (email January 2019)