Commitment Pooling

* Article / Report: Commitment Pooling - An Economic Protocol Inspired by Ancestral Wisdom. By William O. Ruddick - Founder of Grassroots Economics Foundation, 2024

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"a protocol that GrE is developing for resource coordination. The paper theorizes concepts not as isolated phenomena unique to Kenya or GrE programs, but as universally applicable mechanisms that transcend regional and cultural boundaries."

Abstract

"This prospective report introduces the pooling of commitments, as a mechanism for curating and fairly exchanging resources within communities. This approach hinges on the idea that commitments can be effectively pooled to create a more equitable and collaborative economic system, and echoes traditional mutual service practices. To operationalize this concept, the paper presents a protocol being piloted by Grassroots Economics; the Commitment Pooling Protocol is designed to aggregate commitments while facilitating the management and fair exchange of resources. The study describes the background, development, and potential impact of this approach, demonstrating how it can support autonomous, decentralized, non-monetary, and polycentric systems of Commitment Pooling. The emphasis is on fostering community well-being, aligning economic practices with the ethos of mutual service, and collective agency. Through practical use cases and analysis, the paper showcases the versatility of this protocol in various socio-economic contexts, highlighting its potential in supporting a more inclusive and resilient economic future."

Excerpts

Theoretical Foundations

Will Ruddick:

"According to Bergstra and Burgess' (2014) work on Promise Theory, a commitment is a promise that requires a non-returnable investment of resources on the part of the promiser (commitment issuer). Trust, according to Promise Theory, is also built through the interdependence and flow of commitments. In a community, the fulfillment of one commitment often relies on others fulfilling theirs. This interconnectedness means that reliability becomes critical as parties consistently meet their commitments, trust grows. Vouchers represent a formalized commitment of the issuer to redeem the voucher as payment for specified goods or services (fulfilling their commitment) with various terms and conditions, such as expiration and transferability. A subscription can be thought of as a formalized commitment; you pay money upfront for a subscription and you use it over time for repeated, specified services of the issuer. A bus ticket or even airline reward points can be considered formalized commitments or vouchers. My mother holds about 5 forms of loyalty points - all of which are vouchers or formalized commitments of various businesses.

This is akin to the group voucher system GrE has used since 2010. This works when there are clear commitments in the group and processes to mitigate disputes as seen in the work of Ostrom (1990) on Commons governance.

A single business can issue a voucher, like a telecom issuing an airtime credit. In Kenya, exchangeable airtime credit - redeemable for using the mobile phone network - became a viable medium of exchange starting in 2008. These vouchers can flow and circulate as a medium of exchange if the terms and conditions allow it. However, in either case of a group voucher or single issuer voucher, one would be wary if the supply of vouchers greatly exceeded the issuer's (group or individual) ability to redeem them.

National Currency can be seen as a voucher redeemable by the state for tax payments and possibly, state services. When the state and banking system produce increasing supplies of their vouchers without clear service offerings (commitments), the risk of over issuing or overselling these vouchers is high and can result in a poor unit of account and can also cause inflation where the nation's subjects must increasingly pay for the state’s lack of commitment.

Note that the state is not alone here, the risk of over issuance (over commitment) can happen with individuals, groups and businesses as well. It is important to note that when vouchers are used as a general medium of exchange, there is a risk of glossing over their true backing or commitment. One would not want a telecom airtime credit to become the de facto national currency as it would risk the simple failure of that company (a single point of failure) to crash the entire system.

While any individual voucher could theoretically act as a general medium of exchange, a robust interconnected network of pooled vouchers can be much more polycentric and resilient. Learning from the ROLA traditions like Mwerya, commitments are pooled in order to be exchangeable for one another. These systems of exchangeable commitments are fundamentally different from group credit or voucher based monetary systems (credit money)."

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Pooling

Pooling defined, by Will Ruddick:

"Pooling represents the curation, aggregation and distribution or exchange of resources for collective use or benefit. In traditional Kenyan communities, pooling is a vibrant way of life in communal land stewardship and shared agricultural practices — a living testament to how communities organize themselves to show great collective strength.

Pooling seamlessly extends into many modern contexts, too. In Economics, pooling is seen in collective savings schemes and joint investment funds, and in Environmental Science, community-led conservation efforts show how collective management can preserve natural resources for the greater good.

One of the core elements in pooling is peering. Peering, in its essence, represents fair exchanges of resources. In the realm of Economics and Resource Management, this can be seen in practices like barter systems and direct trade. In rural Kenya, peering finds its roots in traditions that reflect a profound connection and mutual respect among individuals, such as knowledge transfer, reciprocal exchange, and mutual service and aid practices.

Although economics and anthropology have a lot to say about direct exchange, important insights can be learned from networking technologies and systems theory as well. In Information Technology, peering typically occurs through Peer-to-Peer (P2P) Networking, a form of direct and decentralized communication that allows individuals to enter into various forms of market and nonmarket exchange. Systems Theory provides concepts for understanding network collaborations and direct data synchronizations."

(https://docs.google.com/document/d/1Vr9Q6nIYwSXELDVXwG5-N-9A2JspzeUCCZzOFnQyZ-g/edit?fbclid=IwAR3eGNogOKpwP2lw_AQaylm1bPf-5dzVLqnqPIBL8MygFV6QfTHTRa6oAkg#heading=h.cpe7ju5oh3e) "

Discussion

Will Ruddick:

"A formalized commitment is a non-returnable investment of resources, symbolized as a voucher, representing a promise to redeem for specified goods or services under certain terms. A commitment pool is a financial product that aggregates these vouchers, allowing for the exchange and relative valuation of various commitments within a community, enhancing resource coordination and mutual support.

Credit and debt arise from rights conferred to the bearer and issuer respectively as defined by the terms and conditions.

A credit note and a voucher are the same, many credit obligations are similar financial products based on formalized commitments that can define credit and debt relationships as well as the conditions for settlement.

Mutually issued and jointly liable financial products can instantiate and settle credit and debt, but they are not credit or debt themselves.

The term Mutual Credit is and has been a brand name for systems in which a group creates a financial product based on a formalized commitment (In brief)that whomever has a -ve trade balance will be productive for others in the group until they reach a 0 trade balance.

It's a fine name, but it is unscientific and used in many contradictory ways. (Mutually held, mutually liable, mutually redeemed)

Consider instead or in addition to this form of agreement or financial product what actually makes resource pooling and peering functional?

Pooling of Commitments is in essence what a Mutual Credit is trying to do. The Mutual Credit though lacks resolution on the individual commitments and liabilities of the members. This can be fine if they really have strong trust systems in place. But for most of society we need some form of curation to bring people together as living healthy thriving systems.

Because Mutual Credit philosophy starts with groups and spontaneous credit and debt, it misses the core ingredient of commitment and how those are pooled. Instead Mutual Credit moves directly to exchange and bridging mutual credits with more mutual credits becomes a carnival missing the key.

I think Keynes' Bancor was the key (but too large), Imagine aggregate Bancors across regions. Commitment pooling on decentralized ledgers gives this possibility. It provides memory, authentication, execution and transparency. On top of which every function a pooling system needs is there (curation, limitation, valuation, exchange). Networks of pools each with their own Bancor (Price Vectors) can be very effective.

I'm inspired by the physicist Dirac and practical examples based on ancient rotational labor practices I am part of weekly here in Kenya and these practices are global and ubiquitous (or were at some point) in nearly every culture.

- mutual credit is a fine short name for a particular form of group financial product and could be broadened to cover a lot of mutual created instruments. But it is shrouded in myth and pseudo science and does no favors in a history of poorly implemented and understood systems that have nearly all failed for 30+ years.

I think the terms communism and socialism have a similar faithful following and poor understanding."

(email, March 2024)

More information

This video explanation makes the concept simple to understand: https://www.youtube.com/watch?v=_TLly1aEkyE