Too Much Aggregation


Update: My quality control department — which consists of one guy who lives in a different country, and gets paid nothing — alerted me in the comments to the fact that when posting this entry, I left the title which corresponded to the original point I was planning on making in place, without actually making that point. In lieu of this embarrassment, everyone from quality control has been promoted, and the post title has been changed.

David Henderson had a post yesterday that sparked something off-topic that I want to comment on, but first I’ll comment on the substance:

But that’s not the aha moment. The aha moment was in noticing the difference between my approach, on the one hand, and Michael Krasny’s and Sylvia Allegretto’s, on the other. I thought I heard a man who was frustrated at not finding a job in which he could use his professional skills–thus his opening statement about being angry. I thought of the fact that in the mid-1990s, my wife and I had paid a tutor for our daughter $30 an hour. I know that was the high end, but with the inflation since then, it’s probably about the middle. So that’s why I suggested that he consider advertising as a tutor. I was trying to help him solve his problem. For millions of people to get jobs, those same millions must, one by one, solve similar problems.

But then Krasny asked Sylvia, with a little laugh, whether she wanted to give her suggestion. I think Krasny’s laugh said a lot about his attitude. I think it said that he thinks we aren’t really there to help people solve their problems and that instead it’s about advocating large-scale government programs.

Unfortunately David is probably right…and even more unfortunately, the language economists and pundits use proliferates this view. I don’t personally know anyone (outside economics) that view economic activity as the solving billions and billions of coordination problems between individuals, and “the economy” as a set of institutions that have evolved to help us solve these problems more efficiently. When you turn on the news, you hear that “the economy” is doing badly — and financial news will break down sectors — but it all leaves you with a sense that “the economy” is an organism in-and-of itself…instead of the emergent phenomenon created by the billions of little interactions.

Now, taking a left turn, I want to add some comments to Henderson’s reference to tutoring. He laments that more people do not become tutors…but is it the world that is that way? Is there something inherently off-putting about tutoring that keeps the demand for tutoring way out of line with the supply of tutors? Of course not. The reason is, more often than not, money. Tutoring, in any field, is a very enriching experience for the learner, and creates a lot of value — and yet is largely inaccessible to a lot of people.

But there is a culture that values private education (tutoring) very highly. So highly that it is very common within the society. That is, Japan. What is interesting about the Japanese case is that they (under the Ministry of Finance) operate a complementary currency called Fureai Kippu. This currency is denominated in hours of service, and its purpose is to address both education and their aging population.

The way the currency works is that young people earn Fureai Kippu credits by providing care for the elderly. A study (which is not online, and I’ll have to find it and list it here) has even found that the elderly prefer care administered by people who participate in the Fureai Kippu currency system to people paid in Yen. These credits can be accumulated, and transferred to others through the exchange network, but they can also be used to pay for private education (tutoring). And again, the educators who receive this currency can then save or transfer it to others.

This illustrates the one of the principles I laid out in the introduction to my complementary currency series. Fureai Kippu is not intended to replace the Yen as a medium of exchange. Rather (and at the risk of cutting into future installments of my series), since the Fureai Kippu system operates under different rules (circulates in sufficiency, no positive interest), if fosters different relationships between people — and thus joins otherwise unmet needs with otherwise unused resources.

Because the Japanese Ministry of Finance took a positive attitude toward fostering alternative currency systems, Japan has been very active in creating and trying out different types of money systems. There is even a department within the Ministry of Finance with this very task! One other large complementary currency in Japan is the Yamoto LoVE. In addition, here and here are rather impossible-to-see images showing the locations and types of other complementary currencies in Japan. I’ll work on formatting the images to make them easier to read.

— — — —

Update: Here you can view the above images in much greater clarity, and also as part of a research paper on community currencies in Japan.

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4 thoughts on “Too Much Aggregation

  1. Couple of questions:

    – What’s the relevance of the post title? Yes, of course I agree that services do create wealth. But is this part of Henderson’s argument? Maybe I’m interpreting your title wrongly, but it reminds me of the argument I often have over here with “manufacturing fetishists” – who complain that we all work in Starbucks now instead of making cars like those rich, successful Chinese people. Maybe that’s not the point you’re highlighting though.

    – More substantively, I don’t understand what you mean by “circulates in sufficiency”? I’m not convinced by complementary currencies yet because of their patchy history in the UK, but I am open to persuasion. I do like the idea that they “join otherwise unmet needs with otherwise unused resources” – this seems to be a good principle. Indeed it’s the basis of all stimulus (monetary, Keynesian or otherwise) and of most Pareto-improving transformations. (Incidentally, maybe you can translate it into the language of entropy?) If you can demonstrate that complementary currencies are a good way of achieving these improvements, I’ll sign up as a fan.

    1. On point number two, “circulates in sufficiency” refers to the money creation process. Unlike legal tender, money that is denominated in “hours” (or, a time-dollar system) is created by the users themselves, every time they engage in a transaction. Thus, instead of being “scarce”, and issued by a central authority (or a licensed monopoly)…anyone who has time can “create money” (there is a real physical limit to the amount of “time money” you can “create”, and administrative checks on those who seem to be abusing the system).

      I’m going to add the other questions you have to my notes for the series.

      Thanks!

      1. Interesting! Does this change the dynamics of pricing in the system? For example, if I do an hour’s work and therefore create a new currency unit, how does that differ from me doing an hour’s work in exchange for an existing currency unit? Who issues the new unit (if that’s even a meaningful question in this context)?

        Another question: are prices fixed at one hour of work per Fureai Kippu? Or can I offer to work one hour for two units, or half a unit? If not, I wonder whether anyone with more valuable skills than the average volunteer will ever be willing to exchange their time for that currency? Can I provide an hour of care services and use it to buy an hour of a lawyer?

        And even if it’s restricted to buying tutoring services only, the best tutors will be most in demand – won’t this create a real shortage of good tutors if there is no price mechanism to regulate it?

  2. “Because the Japanese Ministry of Finance took a positive attitude toward fostering alternative currency systems, Japan has been very active in creating and trying out different types of money systems. There is even a department within the Ministry of Niklas Blanchard: “Finance with this very task! One other large complementary currency in Japan is the Yamoto LoVE. In addition, here and here are rather impossible-to-see images showing the locations and types of other complementary currencies in Japan. I’ll work on formatting the images to make them easier to read.”
    Jct: Any news about Japan’s community currencies is much appreciated.

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