Introduction to open money material

By Michael Linton. Mail sent April 19, 2004, to the Angenius team

The main menu

Almost all the core work on LETSystems, community currencies and open money is linked from http://lets.net. However, the commentary here is very thin, so for some added guidance, these are the sections I think you will find most interesting.

1986 : the original LETSystem publication, distributed on floppy diskette

http://www.gmlets.u-net.com/letsplay

These pages include early references to what has since become the general philosophy and practice of open source programming and chaordic collaboration.
These texts are now nearly 20 years old now and while there are only a very few places where I would change the content, there are many where I would change the tone.
http://www.gmlets.u-net.com/letsplay/summary.htm : ‘’conventional money is scarce and can go anywhere. Personal currency is plentiful and stays in the community. If we create money in a different way, and it moves in a different way, we will see different results’’

http://www.gmlets.u-net.com/letsplay/id-9-2.htm : ‘’a LETSystem is a self-regulating economic network which allows its members to issue and manage their own money supply within a bounded system’’

http://www.gmlets.u-net.com/letsplay/id-10.htm: in a green economy, the money supply is sufficient to ensure that good work will be available to any who want it.

Fritz Schumacher, in the prologue to Good Work, derives "the three purposes of human work as follows :

• to provide necessary and useful goods and services,
• to enable every one of us to use and thereby perfect our gifts like good stewards,
• to do so in services to, and in cooperation with others, so as to liberate ourselves from our inborn egocentricity

This threefold function makes work so central to human life that it is truly impossible to conceive of life at the human level without work. "Without work, all life goes rotten," said Albert Camus, "but when work is soulless, life stifles and dies." "

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1993 : core LETSystem materials

http://www.gmlets.u-net.com

These pages are required reading for anyone who intends any serious work in open money.
If the publication in 1986 was an early form of "copyleft" or "creative commons", these pages attempted an interactive community site, inviting wiki-like participation.
The Design Manual - principal co-author Angus Soutar - remains the standard reference work on LETSystems. This and other defining texts, software, trademarks were in 1997 legally protected from commercial enclosure and co-option by the LETSystem Trust http://www.letsystem.org

This body of work was far better prepared than anything earlier (or later) and the tone has definitely changed as the difficulties of paradigm shift have become more a matter of experience.

The only error of significance (in my view) is a statement that Frederick Soddy won a Nobel prize in Economics, which he most certainly did not, as I knew very well at the time the page was posted. Unfortunately I can't now easily edit http://www.gmlets.u-net.com/explore/problems.html to correct this.

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1996 : materials that chronicle the "community way' design process.

http://www.gmlets.u-net.com/go

This section shows our move from theory to business, a response to the necessity to make money making money. Since no conventional support from government, foundations, academia or even venture capital was forthcoming, we designed this application as a special short term initiative for grassroots level development.

There is an inherent paradox in publishing information on how to create and propagate open money. It's only "free" as in "free speech", not as in "free lunch", but yet the facility that allows general creation also makes cost recovery by any conventional means entirely impractical. However low the charge structure, other providers can go lower, so there's no money in it.

Hence the financial model for development is based on providing a generic platform at almost no cost to users, and running a community fund-raising application on the platform that generates for good causes 10x as much as it diverts to funding growth. We feel this provides a reasonable chance for a predictable revenue source and some immunity from incursions by commercial competitors.

http://www.gmlets.u-net.com/go/kitsproj.html: a business plan that remains at the core of the recommended start-up strategies for open money. A micro-enterprise based on this design requires very little startup capital and should be in positive cash flow in 2-3 months.

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1998 "community way" prototype development and performance

http://lets.net/communityway.org

The community way design has proved itself an effective and viable means of initiating cc services, demonstrating how socially responsible business can apply cc to generate both sales and financial support for the community.

After three years of expensive and futile efforts to have our design tested by others in more appropriate communities - Victoria, Vancouver, Seattle, San Francisco, Palo Alto, Toronto, Boston, Boulder, Manchester, London, Sydney and many others of sufficient scale and variety - we were forced to test in our home base, whose population we estimated perhaps at 10% of that required for a first self-sustaining prototype.
Despite home pitch disadvantage, and other impediments, the first flight of this device was entirely successful in all essential design criteria - particularly in cost of introduction, initial revenues generated, and on-going operational costs and technical performance.

This was certainly strongly assisted by the off-line multi-currency smart card system, with a point of sale unit cost of $100 at the time, now cheaper.

But proof, it is clear, lies in the eyes of the beholder, and as yet there has been no recognition beyond one feature in SoToKoTo, a Japanese travel magazine, scanned at http://openmoney.org/omp/links.html.

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2001 : the big picture on open money / cc development at each level from local to global

http://www.openmoney.org

The main body of this site is composed of materials prepared for Hakuhodo, a major Japanese advertising agency, for each of the 6 editions of their magazine published in 2001.
This is presently our most complete and extensive set of materials, with the core outlined in http://www.openmoney.org/top/introduction.html
However, perhaps the heart of the matter for an economist is defined in these links
http://www.openmoney.org/way/oecd.html

"One way to create new markets is to create new moneys. When the micropayments world extends the services they offer from legal tender to virtual money services, it will resolve their market development impasse. People will spend virtual money much more readily than they will spend legal tender, for instance for software, music and information services.

One paper, however, is right on the money. The treatment of the intangible economy is especially good. In all matters covered, it seems to me the information is accurate, the analysis faultless, the projections reasonable.
I agree almost completely with everything. In my opinion, this material - at http://www.gefma.com/Articles/OECD%20Money%20and%20economy.htm - is required reading in this field.

But even this writer doesn't cover the whole field. He and all others writing for the conference stay almost entirely within the central bank "box". They all seem to assume the only way money of significance can work is when it has guaranteed convertibility with legal tender.

For money that is intended to have an assured value, to be generally transactable, this is very likely so. But there are other forms of money that don't have that requirement.
There are two main forms of money:
1) hard money that goes fast and generally goes away
2) soft money that goes round and always stays here

The "hard" stuff goes anywhere and so goes through communities, financing import and export. The "soft" stuff only works through reputation and so goes round within networks, sustaining community.
In due course, we're all (virtually all) going to use both moneys - the hard (fast/away) and the soft (round/here)."

http://www.openmoney.org/way/dif.html is fundamental, our tour de force. What it may lack in elegance and eloquence, it entirely compensates in rigour.
http://www.openmoney.org/way/difmoney.html and http://www.openmoney.org/play/why.html provide perhaps more intelligible expositions of the core issues.



http://openmoney.org/dmf is also something you might like, although those that heard the presentation at the time evidently thought little or not at all.

"This is a familiar story - it's tough talking money with banks and governments. For a start, they think they know everything about what it is, and it's counter-productive to suggest there might be anything they don't
already know better than anyone else."

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2002 : “community way”

http://wildfire.communitycurrency.net

A scenario showing how "community way" projects can be introduced as social enterprise, for instance, by youth. This is the model we are proposing as the primary initiative in the London open money projects.

There's a very compelling presentation, a brief video in RealPlayer format, at
http://wildfire.communitycurrency.net in the "media" page, on the "short description" link. This sets a standard - a simple implementation that seems surely beyond dispute.

If you don't have RealPlayer, the material also is at http://openmoney.org/cw in a less compelling form, but equally clear in content.

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June 2004: LETSplay

http://www.openmoney.org/letsplay

Not the finished article, but certainly enough for a start, is now on-line in beta and open for play. It's probably a good idea to read at least some of the game instructions and notes before joining the play - then you may at least understand the intention of game and how to play it to best effect. However, for those who prefer fresh experiences untainted by expectations, just do it here http://game.credguard.com.

This game shows how the Pareto effect is differently realised in conventional and community money processes.
http://www.ecademy.com/module.php?mod=club&c=242&t=228969

"The LETSplay game ISN'T a test of skill, acumen, perception, IQ (unless you completely lack them). It's simply and only a structured simulation of a collection of independent traders buying and selling with each other using two different forms of money. The game introduces the basics of community currencies ("cc") and shows how cc differ in crucial ways from normal, conventional money, legal tender, etc - the stuff we already know so well.

"...every individual ... by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention. ......By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it."
Adam Smith, The Wealth of Nations.

The LETSplay game demonstrates how the famous "invisible guiding hand" works to different ends in two different economic contexts. One currency disposes us to compete, the other to collaborate."

The on-line game itself is regrettably prone to server failure at present, so I am reluctant to recommend it very strongly - it's more often a route to frustration than enlightenment. However, I have hopes that the increasing
interest we are now attracting will persuade the game writer and manager to sort out these problems.

And finally, for now

http://www.thememorybank.co.uk/book/
http://www.thememorybank.co.uk/members/keith

There are very few theorists with any academic standing who have yet formed any useful view of virtual money, and Keith Hart is both the most eminent and the best informed. He is also a brilliant writer, whose contributions to our publications have very significantly raised their quality.
http://openmoney.org/play/unequal.html
http://openmoney.org/view/letsnme.html

Keith is generally resident in Paris, and I am sure he would be very willing to share with you some of his perspective on this field.

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How we propose to support account holders who don't have internet access

In short, we do so much as have banks in the past, but with much less concern for security. It is quite difficult to steal virtual money, and most error and fraud can be very easily corrected. The local cc registry responds to the transfer instructions received from users, which can come through a variety of channels other than over the internet - phone, cheque, letter are all used in different communities.

In 1983 we kept a phone answering machine open 24 hours a day to catch instructions such as "This is Joe, please transfer $45 green to Pete for plumbing". The administration team later transcribes in the accounts database. This approach has for over 20 years been able to process transactions at well under 25 cents full cost of service.

More recently (2001) http://openmoney.org/way/topay.html projects the range of channels an account holder will be able to use when the platform is fully deployed, but the voice recording method is still good
enough for most purposes. The proliferation of cell phones, even in the 3rd world, will enable people who know people with phones to have transactions posted by text messages, for instance.

Michael Linton