Semantic Money

Lately, we see that the sheer concept of money is lacking, in several ways. For example, there is a grwoing number of Local Exchange Trading Systems, in which participants trade goods and services through an internal currency system. Whitewashing crime and terror money is becoming harder to stop, as the international banking systems gets more and more complicated. More and more people are concerned that their money goes to means which are distanced from them. For example, to polluting factories. People giving gifts want their money to be used in specific purchases, such as books or CDs.

Historaically, we can find evidence of the initial use of money (as we know it), at around 2000 BC in Mesopotamia (that’s where Iraq, actually) and in China at around 1200 BC. In the Bible, for example, Abraham buys the Cave of the Patriarchs in Hebron for 400 silver Shekels, a currency based on fixed weight of expensive metals. Before using these currencies, business was done through barter, the direct exchange of goods and services. Naturally, the introduction of money had revolutionized the economy. For the first time, new ventures could be driven by loans, and welfare could be maintained by investing money. The basic principle behind the this revolution is that money is unrelated to its previous or future intention. Money which one earned by selling cows can be used for buying a house. One do not need to find someone who needs cows and has an extra house. If all the participants trust the value of the money, the deal can be done.

Therefore, the fact that money is free of ties to its origin is its great advantage in economics. But, as mentioned above, it is also its weakness. We do not have an actual control over our money. This problem is ranging from the international level (i.e. whitewashing crime money), through the community levels (i.e. Beads community), and up to the personal level (i.e. gift money). While some solutions exist to all of these levels (for instance, gift certificates enable gift money to be used), they are always local. A gift certificate is always valid to a certain store, or to a limited set of stores. No one can give you 100$ to buy books anywhere. Nobody can give you 1000$ to buy art.

So, how can we gain control over our money, without bringing the economy into a deadlock?

If we take into account the different types of money usage suggested above, we can cluster several levels of restrictions on the distribution of money. The diagram on the right depicts the a simple hierarchy of money restriction. The squares reflect types of money, and the arrows a type-of relation. At the top level, there the simple money, which represents the regular, unrestricted, type of money we use today. The restricted money represents all types of money that are constrained by their utilization, which are then classified under finer categorizations, such as green money, community money, gift money and national bounded money. Each classification is modeled using a conversion rule, which is checked when converting to and from simple money to restricted money. For instance, the following rules specify some of the diagram’s money types:

• 1$ of green money = 1$, if the receiver is not defined as a polluting entity.
• 1$ of community money = 0.5$, if both the receiver and the sender are part of the same community.
• 1 Ithaca hour = 7$, if both the receiver and the sender are part of the Beads community.
• 1$ of gift money = 1$ of money, if the transaction purpose is aligned to the specified purpose (book-buying, for instance).
• 1$ of national bounded money= 1$, if the receiver’s country is the same as the sender’s country.

In order to implement the usage of restricted money in the real world, businesses, bank and customers need tools to safely convert restricted money into simple money. I will try to suggest such an architecture in the following posts.

Further reading:

• A Comparative Chronology of Money
• How Money Systems Work
• Wikipedia: History of money
• Local Exchange Trading Systems