Tokens and economies

Dan Ariely made a nice distinction between financial economies and social ones.  They are different and moving from one to another is not easy or reversible.

The poster child for this is the famous Israeli childcare case.  The problem was that the mothers were always late picking up their kids.  They solved the problem by instituting a penalty of $20 for being late.  That was it.  But…  it did the opposite.  Now, instead of being shamed into being on time, the mothers made a financial decision:  was the fee worth it.  All to often the answer was yes and they were late again.  Money doesn’t solve all social problems.

Similar to that, as Dan noted, if you invite me to dinner and i bring a bottle of wine, that’s nice.  But if I thank you for dinner and give you $20, it’s an insult.  To an economist, $20 and a bottle of wine are the same thing, but they aren’t equivalent to a host.  One is a social value, the other a monetary one.

I think we can explore the same idea using crypto tokens.  We can create a way of rewarding or fostering beneficial social action using a token as a representation of participation or as a merit badge.  For a nice example of this, there is a nice Planet Money program about food bank distribution that did something similar.  (https://www.npr.org/sections/money/2015/11/25/457408717/episode-665-the-pickle-problem).  They created “shares” to allow participating food banks to allocate and determine which banks got what from a central repository.  I recommend listening to the program. It is not necessarily a model, but it is a nice start.

We considered merit badges for fifty-nifty:  points for calling congresspeople, more for enlisting other calls.  Like affinity points, they have no real value, but they could be worn with pride, or perhaps used to get a ticket to a political rally.  They associate something you can show that arose from your  participating in the political process without transforming it into buying votes.  The tokens in both FiftyNifty and the food banks did not qualify as a currency — they were not really a store of value as they were used or hypothesized. But they did help allocate a resource or externalize some social value.  They were bottles of wine, in essence.

Of course, there is the danger that anything to which we can ascribe a value will accrete one.  Yes, one could sell a front row seat at a political rally.  Yes, you could game the food bank distribution system.  But the social environment works against it.  It is embarrassing to have bought your way into an event where everyone else worked to get there.  At least so we would hope.  (If we don’t know, then we experiment…)(Who knows if the Israelis ever solved the problem of late mothers…)

The bottom line is that I think we can try to consider developing non-financial, non-asset-based tokens that are a social good.  In our case, we use the political context.  I like merit badges.  Boy Scouts wear them with pride; there is no economic value to them.  But we need a name that evokes that pride without tainting it with a coinage.