Natural Economics

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An economy is defined by its state of supply, demand, population, and ruleset, at a particular unit of time. These factors determine its fulfillment value, the difference between the supply and demand of resources by its population at unit time t.

The fulfillment value may be determined for the entire economy, or for a set of resources r ∈ R. It is determined by subtracting, from the supply, the difference between the demand, and the magnitude of the difference between consumption and demand, i.e.:

It may also be localized:

We may wish to look at the fulfillment value in the context of different characteristics of the demand. Ft / |Dt| ∃MFD:

About Rules:

An economy has a Logistic Function. It can be designed for scarcity management (-∞ < Ft < 0) or abundant production (0 ≤ Ft < ∞). It is also an indicator of the state of industry. Rulesets designed for scarcity management which operate on an abundant economic state are going to have problems, and vice-versa. This practice will result in the need for artificial scarcity, or artificial demand, which we can see in practice in industrialized economies, with legislation to force supplies to be lower, to create a demand, digital rights management technology, and advertising.

Abstract economies are those which define some or all of their state in natural language. For this reason, it is unlikely that an abstract economy that is anywhere near real-world conditions could ever be simulated. However, it is possible to do black-box testing of an actual abstract economy's efficacy. As an example, we will define a term to measure the efficacy of an abstract economy's rules. This is known as the Abstract Efficiency, and is the parity between demand and consumption.

We can therefore simplify the fulfillment equation to: In a natural economy, AE should always be zero, and therefore the equation would further simplify to:

The primary important rule is that which surrounds ownership. The ownership state determines what other states are possible:

Ownership ( O ) may be represented as a graph between P and S. An economy with completely equal ownership, which is analogous to no ownership, can be represented by a complete graph,

or a graph with no edges,

Private ownership is defined as an ownership state in the set

There are alternative ways of defining the ownership set that are more practical for computation.
First, let's make certain we understand how we are defining S:

S is an array, whose size in one dimension is identical to R, the set of all resources. Each element of S is an array containing a real, a unit, and a descriptor. The real is the magnitude of the supply, and changes with time. The unit is the unit of measurement, and the descriptor gives a useful and/or human-readable representation of the resource. The important thing to note here, is that we have one real for the supply of each resource, but we may have a heterogeneous ownership state. Therefore, we must add weights to our vectors:

The expected value for the proportion of total resources in a population P of size n is n-1. Therefore, ki,j is the measure of the additional resources owned above the expected value:

Stratification arises as a requirement for ownership; Public ownership is included here, and still requires some form of stratification. Equality may therefore only exist in the absence of ownership. Skew, the tendency for a society to become more unequal, then arises as a natural social force from the economy. Inequality is of course multivariate, but here we will discuss economic inequality, which is independently controllable but affects nearly all other measures of equality.

Obviously, ownership causes lots of problems, primarily denying access of the resource to someone who may have a demand for it. This tells us that it is necessary to define another relationship from people to resources, namely the access. The simplest way to measure this would be the proportion of time that a person uses the resource.

This would be the secondary measure of logistic efficacy, and provides a way to map sensor measurements to values in S and D. Since S and D tend to be measured in product units, units of mass, and units of energy, sensors which measure seconds of use are going to require a map to be useful to fulfillment measurement. We can make this value even more useful by considering its complement. This would be called the idle time.

The most obvious thing that we can use this for is to determine the redundancy of our product supply. We do this by dividing the idle time by the access time of a single unit of r.

This directly tells us by what factor we have a supply redundancy.

Rule utility would represent the change in fulfillment resulting from a ruleset:

or to measure the utility of the addition of a new ruleset {rn}

Logistic deficiencies due to technical problems is called structural waste, which is distinct from distance to peak efficiency, as a result of human ignorance of efficiency improvements. Structural, or technical waste, is preventable, and may be measured as the difference between expected yield (YE) and actual yield (YA):

Logistic deficiencies due to human behavior is not, contrary to the opinions of market economists, distinct from technical waste. This can be a consequence of product/ service design, but in a market economy, it is primarily caused by a poorly-designed ruleset. Behavioral waste is largely caused by an excess of privatization, potential for externalities, desire to display status, and the increase in economic activity resulting in an environmental (as is relevant to human behavior) pressure to create waste.

Environmental waste, also known as pollution, can be thought of as a special case of structural waste, which causes the "supply" of habitable environment to decrease. This is the most insidious, destructive form of waste.

The primary form of behavioral waste in market economies is called profit.

Profit is a type of behavioral waste, resulting from differences in arbitrary, subjective valuations of goods, resulting in a disparity between input (cost) and output (price).

Profit-seeking behavior is obvious and rational, and thus will arise in any disparate economy.

In an economic system where each person must acquire, hold, and maintain their own pool of resources, a rationally-behaving actor would attempt to maximize their ability to do so. Since modern economic systems contain no maximum for acquisition, this leads to unbound degrees of lavishness and deprivation alike. This behavior could be reduced with the addition of a rule such as:

This prevents anyone from owning more than an equal share of the total known supply of resources, making this a possible step in transition.

Transition

In fact, having mathematically-defined economic rules, rather than natural language rules, is an important step to transition, as well. There is no way to interpret that in any other way than it was intended. We can map this rule to a monetary system by establishing a logarithmic currency. Rather than having lots of different banks with their own accounts, there would be a single store for all wealth, which we can call Wt[,i]

} and each additional unit of wealth in a given account would be worth less than the previous one, on a logarithmic scale. This establishes limits to wealth, and thus reduces antisocial profit-seeking behavior. Having this single wealth store also enables mathematical laws to be implemented instead of natural language laws. Obviously, not all of them will be replaced, but this is a transition economy, which will be entirely replaced.

Here are some other rules that would be useful in lessening the social recklessness of the market system:

Reducing hoarding:

Hoarding is the problem of someone owning a resource without using it. We may define a way to reduce this phenomenon:

Logarithmic wealth accretion

Growth in nature is not unbounded. Almost always, it is logarithmic, and the unbounded ability of wealth and power to grow prevents the cessation of wealth consolidation.

Equal and open business:

We may create ways for prices to be set automatically, giving some degree of control to the business, but preventing certain deviant behavior in pricing.

Inequality gradients

Given an inequal society, it is possible to improve it by reducing the relative inequality. We can do this by strategically relocating people so that the inequality of a person and their closest neighbors is small. If you imagine a map, and color their home on a grayscale according to their relative wealth, this rearrangement would create a smooth gradient, rather than what we would have now, which is much noisier. Unfortunately, this would likely require coercion, and it isn't always possible to move people (e.g. farms) but it is an interesting example of how these problems may be approached.

Natural economics

To reiterate, a natural economy is one whose state is completely mathematically defined.

Because of their superior social characteristics, we are interested in the set of economies which are not stratified. In other words, we are looking for economies where:

In a resource-based economy, as The Zeitgeist Movement, The Venus Project, et al. advocate, the ruleset is: This is a very simple way of breaking it down. The goal of an RBE is a sustainable, steady-state economy, which is defined in the second item of the ruleset, as an economy whose function produces a fulfillment value which is a set of nonnegative values in ℝ. It accomplishes this chiefly by its practice of declaring all resources the common heritage of mankind, or O = ( V, V ⨯ V' ). The only seemingly arbitrary value in this ruleset is c, the set of fulfillment values to produce by the economic function. However, even these values are going to have a relationship to Ft,r ; in a disaster scenario, an insufficiently high value of cr will cause a scarcity state; but if the resource in question decays in some appreciable way, then too high of a value for cr may result in a lower fulfillment value.

The Natural Efficiency (NE) measures the fulfillment value created by a given measure of resources. There are a few possible measures, such as Fulfillment per Unit Mass (FPUM), Fulfillment per Unit Energy (FPUE), Relative Abundance Fulfillment Effectiveness (RAFE).

Relative Abundance Fulfillment Effectiveness is much more complex, as it relies on an ordering of the set S by relative abundance. Measuring fulfillment per unit mass is very simple, but not particularly useful, since some product may create a high F value but require some obscenely rare material. Therefore, it is more useful to weight the resources by how abundant they are. The weights will occupy the set AR × R'

Further thoughts on specific rulesets:

On Earth in 2012, we have lots of different types of population subsets. Each population subset has its own subset of the rules, and many of them are mutually exclusive. Nations, businesses, NGOs, mutual funds, communes, all are subsets of P, with subsets of R. Thus in an economy there are sets of vectors which map R, S, and D to P; In a natural economy, R and S have a complete mapping, and it is probable that once we are able to use computer and network technology at the speed of thought, D will also have a complete mapping. In other words, once human thought is connected, it will share demand. Until then, however, demand is not terribly hard to survey, and there are lots of ways to do it. The price system adds a set of products, called currencies, which are the primary medium of exchange in the economy. A price is therefore a mapping of monetary units to another product. The only rule for prices is that they are emergent, based on what people are willing to or can be coerced to trade.

Further commentary, adapted from discussion elsewhere:

The reason we say that capitalism is scarcity management and nothing more is because of its mechanism, which was made utterly clear to me when someone suggested that graphene electronics would actually be a good thing in capitalism because of their abundance lowering their cost. This got me for a second, until I realized that it's not the graphene that then chiefly dictates the cost, it's whatever is the scarcest component; Whether a complex process that requires specialized equipment or knowledge, a difficulty in making graphene into electronics, or special handling procedures, there has to be some sort of scarcity. If there is no scarcity, then one must be created, whether through intellectual property (or intellectual theft, as I call it), government regulations, etc. If we were able to freely manufacture graphene electronics using low-cost equipment and open-source designs, there would be no money to be made.

It is for this reason that capitalism and other scarcity-management systems do not behave as expected when fulfillment values are positive. In a scarcity state, fulfillment grew with abstract economic growth. Once it exceeded the optimal state, however, fulfillment and economic growth were no longer associated.