Etymology of “thanks” and the gift economy

I love etymology and I am also interested in how publication-oriented accounting may make us more generous. So I had to check the etymology of “thank”.

Interestingly according to etymonline, it comes from the same group as “think” so thanking essentially means to give good thoughts and gratitude. In French, the translation of thanks is “merci”, which is like mercy, to spare someone.

At the time these words started to be used, we had no way to publicize “good thoughts” beyond the parties to a transaction or a family or village, but today we have the Web.

If we think about the Web version of the “thanks”, it would essentially be a written statement of gratitude for something you’ve received, possibly because you didn’t have to sacrifice anything to obtain it, or because your sacrifice in the exchange was much smaller than the other party.

These “thanks” could be aggregated in a PageRank-like “ThankRank”, which would be quite useful when we want to decide where to direct our own generosity.

Why do CUs oppose ‘Reasonable Fees’ in card payment amendment

A few days ago, Patelco sent the letter below to their members asking them to voice their opinion against the REASONABLE FEES AND RULES FOR PAYMENT CARD TRANSACTIONS amendment (original text). This campaign seems to be orchestrated at the state and national level.

What is not clear to me is why would Patelco, a credit union with less than $4 billion in assets would campaign against an amendment, which exempts card issuers with assets of $10 billion and less?

Carla Day pointed me to this article by Russell Simmons where he explains that this exemption is unpractical from an implementation standpoint.It’s odd that Simmons’ letter does not mention that he is involved in a Visa Prepaid Debit Card business called RushCard whose business model is likely to be impacted by this amendment.

What can we learn from Japan

A friend of mine sent me this 2008 video of Richard Koo from Nomura Research Institute in which he presents his theory of “balance sheet recessions”. Mr Koo has been consistent with this message, with his presentation appearing in 2009 and 2010, and consistency is something I respect.


Mr Koo makes the case that in the type of crisis we are in – one in which the private sector is not willing to borrow and are actually paying down their debt – monetary policy is pretty much useless. The only effective tool are sustained public stimulus over a long period of time, not a series of small or big ones as we come out and come back in recession. He argues that there is no need to worry about inflation and higher interest rate, even with increasing fiscal spending, the reason being that banks will be happier to lend the money to the government and earn interest, than not lend money at all i.e. destroying money.

My opinion

I agree with Mr. Koo on his analysis of balance sheet recessions. But I think there are important cultural and political parameters for his solution to be viable in each geography (US, Europe, Asia):

  1. Debts must be repayable (including the government’s). If we are in a generalized Ponzi territory where we borrow to pay interest, hoping for assets to increase in value faster than debt, then it’s game over. I have high doubts about debts being repayable, but let’s assume they are.
  2. Economic agents must convincingly show they are doing their best to pay back their debt (and not hope that somehow they will be able to have someone pay for them). If they don’t, creditors will look for the exit and grab what they can before their promises become worthless.
  3. Savers must trust the public funds allocation process. This is probably the most important and challenging part and we must be creative about this. Good options to research IMHO to re-build trust that saved money lent to the Government will not be wasted: participatory budgeting or direct lending from savers to Government with specific projects people can invest in.

Topics for BarCampBankSF3

I know there will be many different topics debated, but here are some topics I would personally like to discuss at the next BCBSF3.

  • Automatic discovery of payment methods / currency services accepted by buyer/seller.
  • Ripple-like settlement using OpenTransact.
  • PAN to URL (same as EAUT & Webfinger but for card PANs instead of email)
  • OpenPOS
  • PROWL/Twollars-like publication-oriented transaction processing

Ignorance is bliss

Yesterday I read through a fascinating paper called Opacity and the Optimality of Debt for Liquidity Provision. The main point is that welfare of participants is maximized when using debt instruments to trade, rather than, say equity or real assets. The reason is that participants will be less worried about a debt than by a piece of equity, so they will seek less information, which in turn will maximize the issuance of debt, and maximize welfare.

Of course, while all of this is fine, a serious financial crisis can happen when everyone starts doubting at once about the debt that no-one seemed to question at all.

What’s fascinating is that according to the authors: welfare is maximized when participants are equally ignorant of the actual quality of the debt and trade simply according to its face value:

In this economy government policies that increase transparency would reduce welfare. This would seem to be counter to the intuition built from the idea of efficient markets.

They do not stop there. They actually claim that the complexity of securitization, CDOs, etc. is good because it increases costs about figuring out the exact value, which in turns maximizes welfare because it facilitates trade as long as everyone is equally unwilling to do any homework (if I understand correctly):

Clearly, if complexity raises the cost of producing information, raises ?, this can be welfare improving. Suppose that agent A could choose a level of complexity for the security designed at t=1. This corresponds to choosing some ? less than a given maximum. For large w, agent A would always choose to issue the most complex security, the one with the maximum ? because this maximizes the amount of debt that will be accepted by agent B without triggering information production.

More, they even justify one of the roles of the central bank as maintaining the opacity and secrecy.

The lender-of-last- resort’s role is to exchange information-insensitive debt for information-sensitive debt, possibly at a subsidized price to prevent information production, or, to make the private debt, which has become information-sensitive, information-insensitive. This prevents the crisis from being worse…

Keynes quote

“The ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed the world is ruled by little else. Practical men, who believe themselves to be quite exempt from any intellectual influence, are usually the slaves of some defunct economist. Madmen in authority, who hear voices in the air, are distilling their frenzy from some academic scribbler of a few years back.”

When is Michael Moore going to make a movie about money?

I watched Capitalism: a love story this Saturday night.

I didn’t think it was one of his best. Bowling for Columbine was my favorite.

I think Michael Moore failed on several accounts:

  • He vilified capitalism without defining it.
  • In particular, he didn’t distinguish capitalism and corporatocracy.
  • Most importantly, he didn’t dig deeper in the corporatocracy’s enabler: money.

When is Michael Moore going to stop beating around the bush and make a movie about money?

Beyond badges: currencies for online newspapers

When I see the Foursquare-style badges sprouting up in different places (most recently on Huffington Post), I can’t help but think of a section of Montesquieu’s satirical Persian Letters which is a collection of fake letters sent by two persian noblemen who are traveling through France. The section speaks about how the kind of France uses title of honour to finance his wars.

The king of France is the most powerful of European potentates. He has no mines of gold like his neighbour, the King of Spain; but he is much wealthier than that prince; because his riches are drawn from a more inexhaustible source, the vanity of his subjects. He has undertaken and carried on great wars, without any other supplies than those derived from the sale of titles of honour; and it is by a prodigy of human pride that his troops are paid, his towns fortified, and his fleets equipped.

Then again, the king is a great magician, for his dominion extends to the minds of his subjects; he makes them think what he wishes. If he has only a million crowns in his exchequer, and has need of two millions, he has only to persuade them that one crown is worth two, and they believe it. If he has a costly war on hand, and is short of money, he simply suggests to his subjects that a piece of paper is coin of the realm, and they are straightway convinced of it. He has even succeeded in persuading them that his touch is a sovereign cure for all sorts of diseases, so great is the power and influence he has over their minds.

Humor aside, there is this interesting connection between badges and actual money: sometimes titles/badges are a better way to have access to scarce resources, sometime they are the only way. More importantly, both are issued by the sovereign of the community and distributed by its agents.

I’m curious as to the actual benefits the badge holders will enjoy on the Huffington Post community. Will these badges unlock scarce resources ? At this point, their FAQ does not answer this question. I sent them an email and looking for their answer.

Also, I’m wondering how an actual Huff’ Post currency and balance could be computed, and work as an internal virtual currency. Sharing articles, commenting, writing articles, viewing ads and buying products advertised with US$ or donating US$ money would earn you Huff’ Post currency. On the other hand, reading articles would cost you Huff’ Post currency. Perhaps some advertised products would be available at a discount payable in Huff Post currency, which would cost Huff Post currency as well.

So if you are a big reader, you’d have a big negative balance and to not be viewed as a free rider by your social network, you could choose between participating more, buying more products advertised by the newspaper or giving money.  This would only require all users to be registered.

Are shared units of wealth still relevant in a world of open data?

Our current paradigm with money is one of a centrally-managed, privately-issued, state-guaranteed, accepted unit of value that we pass around in exchange for goods/services. If you look at this as an information system, this is a very primitive one inherited from the times when money was a commodity.

Given that credit money is merely information, many monetary reformists have questioned whether our money should be centrally-managed, privately-issued, etc. but most monetary reformists have assumed the use of a shared unit of value, if only at a community level. Shared units of value unfortunately always come with very difficult definition, adoption, and ongoing management issues. For instance, there must be rules as to how they are issued and how they move from one person to the next.

Tokens you pass around are like point-to-point communications model such as email, where messages are sent from one person to the next, forwarded, etc. We know the limitations of such a communication model. What’s valuable is what people decide to send you. A much more powerful communications model is the publish-subscribe model. This is the model of the Web/blogs/twitter/wikis: I don’t send to someone in particular, but to a shared space, where those interested to follow me get notified or know where to find the updates. What’s valuable is what you decide to receive.

In a world where huge amount of data flow every minute, what we need are not shared units of value in which we can express ourselves in an arithmetic way. What we need are the personal version of enterprise business intelligence tools that help us interpret our world in the way we want so that we know where to direct our energy.

Our personal intelligence tools, and how they render the world we live in, will drive an increasing portion of our actions, including giving away services or goods. Others will not necessarily owe us a favor or debt for these gifts, but will similarly act and give to enjoy the feedback of their actions. In the next 5-10 years, we can expect some interesting developments at the frontier of activity streams, information visualization and games. Expect to see people sharing their own renderings, which others will combine with others’, etc. This will be particularly interesting as the Social Web morphs into the Web of Things.

Power will move from influencing the distribution of money to influencing which personal intelligence tools we use and how we configure them.