From: Sandy <72114.1712@CompuServe.COM>
Date: Sun, 23 Jan 94 10:16:34 PST
To: <cypherpunks@toad.com>
Subject: DIGITAL BARTER
Message-ID: <940123180755_72114.1712_FHF35-1@CompuServe.COM>
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  SANDY SANDFORT               Reply to:  ssandfort@attmail.com
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Primates (think about it),

Mike Ingle has been discussing the issues of barter, digital cash
and "real" money.  He has proposed a variant of commodity money
to serve as a basis for digital exchange.  He asserts that this
could perhaps lead to the elimination of money, altogether.
While interesting, I think his argument is muddled and ultimately
not logical.  It appears this is because his basic premises are
erroneous.  Mike wrote:

    . . . Money can either be based on a standard such as
    gold, or it can be "fiat money" which has value only
    because people accept it.

Actually, Mike has this somewhat backwards.  Fiat money has value
mostly because the government says it does.  Legal tender laws
and the elimination of, or interference with, competing moneys
artificially supports government's fiat money.  Gold or any other
form of non-governmental money has its value precisely because
people--not the state--subjectively give it such.

    Standard-based money is dependent on the standard - if
    there isn't enough gold, the economy can't grow.

This is nonsense.  Theoretically, all the world's economy could
be based on a single ounce of gold.  When the economy grows or
shrinks, all that happens is that the relative value of a given
amount of gold changes.  You have deflation in an expanding
economy; inflation in a contracting economy.  An economy does not
need more gold (or whatever) to expand.

    . . . Money has been necessary to facilitate the
    operation of the market, but it also interferes with the
    "pure" free market. Perhaps money is no longer the best
    solution.

    Instead of representing money, a digital certificate
    could directly represent a product or service.

I think these last two paragraphs represent the crux of Mike's
misunderstanding about the nature of money.  A certificate
(digital or otherwise) that represents a product or a service
*is* money, if people accept it as such.  It is, in fact, just
another form of commodity (or "standard") money.  It is not some
new critter.  As former Secretary of the Treasury, William Simon,
answered when asked to define money:  "If the dog eats it, it's
dog food."

There is certainly nothing wrong with this form of digital money.
Mike, however, took it one step too far, in my opinion:

    . . . Everyone would, in effect, print their own money.
    Its value would be determined by their reputation.

    If you work for one company, you would be paid in coins
    representing the products or services of that company.
    If you are self-employed, you would create your own
    coins for whatever type of work you do, and spend them
    directly. . . . The buying and selling would be done
    through a huge, distributed international network,
    similar to the over-the-counter stock market.

    The value of all coins would be determined by the
    market, using reputation banks. . . .

    The negotiation and reputation lookups involved in any
    purchase would be far too complex for the person to
    handle in real time. . . .

Never happen in a million years.  As Mike correctly pointed out
in his post, money was created to eliminate the inefficiencies of
barter.  What Mike proposes is nothing more than the elevation of
barter's inefficiencies to a computational nightmare of truly
epic proportions.  Even fiat money would be better than this.

By all means, let's have commodity or even serviced based
(digital) money.  But we don't smelt our own metal ores nor
butcher our own livestock.  Why, then, should we each issue our
own money?  Let's leave this banking function to the "bankers"
and other specialists in the money business.


 S a n d y

>>>>>>    Please send e-mail to:  ssandfort@attmail.com    <<<<<<
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