The Machine Economy: An Essay on The Communication of Value in an Automated Economy

Abstract

In an increasingly automated economy, the future of human commerce will come to a fork in the road. On one hand, we have proposals for Universal Basic Income (UBI) schemes to be paid to all individuals, mandated by law from the proceeds of private enterprise, on a global scale. On the other hand, new technologies such as blockchains and decentralized distributed networks may offer a solution for an automated future.

As human beings, our labor is what creates a baseline value system. We work to provide for ourselves. In an automated economy, the human being is removed from the equation. Schemes like the UBI are intended to balance the equation by using the force of law to ensure the basis of industry continues to function. All funded, of course, through taxation schemes that require a non-automated industry to continue to exist long after obsolescence. This essay contends that to maintain a global exchange economy, we must automate the exchange of value as well as production; in tandem we would convert humans from a labor force to account holders for all the machines under their individual ownership, ensuring a stake in the economy as automation erases the current basis of valuation, human labor.

The Machine Economy: An Essay on The Communication of Value in an Automated Economy

To understand the future automated economy, we must first briefly explore the history of the exchange of value. We must explore the history of money as a technology, and how it has guided us from Ancient Mesopotamian barter systems to modern Globalism, in order to understand the trajectory of our economics into a post-human labor future.

This History of Money: Communicating Value

Money, at its core, is simply a method of communication. Prior to the invention of money as a means of exchange, value was transmitted by bartering. This was based on the assessment of needs versus immediate risks regarding trading off valued goods. The exchange of value as a concept seems to be inherent to humans. Throughout history we’ve placed value in many things, some tangible, others not. Perceived risks often drove our transactions, and for many generations, prior to the written word, the exchange of value was essentially the oral contract. However, for our purposes, we will focus on the history of the barter system in civilization. The barter system is an exchange system by which goods and services are traded for other goods and services. This system, while ancient, survives to this day even among advanced economies, though to a lesser degree. Early civilizations, such as the (Mesopotamian) Akkadian Empire used barter systems throughout their lands and with other empires (Arensberg, C. M., Pearson, H. W., Polanyi, K. 1957). Gold currency was typically reserved for those of higher status, whereas the overall trade economy was a complex barter system. The barter system of this Ancient World was sufficiently sophisticated to keep accurate ledgers, however, the accurate exchange of value as an abstraction was still an elusive concept, as was the mass circulation of currencies. At this stage in the history of money, value was an arbitrary idea based on the labors of humans and animals-divided by their time. It took a certain amount of labor to create a particular item or service, that labor is divided into time. That time is, in turn, calculated against potential risks far more real and dangerous in this era than the economic dangers we perceive today. This laid the foundations for what would be centralized accounting ledgers and denominated currency in much later civilizations.

Fiat Currency and Labor Economy

Money is a system of communication, an abstraction of value that we, as humans, perceive inherently. Humans went from the barter system to using items of perceived worth as a conveyance of value. At this point, gold and silver are the predominant forms of currency. But the supply of these metals is finite, and with an increasing population, metals become harder to divide and carry. This led to the Promissory Note. This concept migrated from China where it was first used (Szczepanski, K. 2017-03-08), to Europe where the Knights Templar began to spread the promissory note concept. This normalized the previously controversial idea of paper currency along their establishments across pilgrimage routes from England to Judea (Ralls, K. 2007-04-15).

The promissory note was the first paper currency. Despite its gold backing, the promissory note did not derive its value from the gold, but from the value depicted on the note itself. The Gold Standard is based essentially on the promissory note model. It can be argued that even the gold standard was a form of fiat, as there was never any real way to determine the validity of a government's gold and silver holdings. In essence, it was the promissory note that denoted the worth of the gold and not the other way around, even if the true value of gold and silver never changed, the speculative value has limits because the supply is finite. This was one of many reasons the United States and most of the world moved away from the Gold Standard, and then widely adopted the Fractional Reserve System in the late 19th and early 20th centuries. Fractional Reserve fiat currency is based on mathematics. The aggregate of our production, which is equal to our credit and the faith our creditors place in our ability to pay them back. In this process, the creation of debt and cash go hand in hand. When we add leverage requirements, we get exponential growth, this is an inflationary process, so interest rates are what is used to control inflation excess inflation in the money supply (Quickonomics.com, 2017). The fractional reserve system, and all systems before it, however, still use the labor of humans-- divided by time --as a metric of value (Smith, A. 1776). For this reason, I posit that even the exponential growth of fractional reserve banking has a serious problem shared by its predecessors, scaling.

The Blockchain.

It is impossible for me to discuss blockchain technology without talking about Bitcoin. Bitcoin is a digital cryptographically secured and defined digital asset based on an immutable ledger system. What Bitcoin achieved, was to turn digital information into unassailable digital property, and make it tradable on the open internet (Nakamoto, S. 2008).

Its creator, Satoshi Nakamoto, is an enigmatic figure who has yet to be identified. This however, did not stop him from collaborating with other developers. The original whitepaper for Bitcoin was first submitted to Source Forge, and later moved to GitHub where its source code can be viewed, and submissions made for code adoptions. The first Bitcoin was mined in 2009. Since then, Bitcoin has outperformed gold, silver, palladium, platinum and every known national currency in value appreciation. It has also given birth, by further development of the underlying technology, to an entire class of currency and economic networking known as the alt-coin market.

In this market, Initial Coin Offerings (ICOs) work as a means for start-up technology companies and organizations to seek the funding necessary to build blockchain research and ventures without having to rely on research grants, loans, or crowdfunding (Sherry, B. 2018-01-29). In this way, they can generate capital for the project and return on investment for buyers of their currency, without the need for brokerages or other intermediaries. It is a very risky and unregulated market where money is made, but often lost to scams, hacks, and government interventions. Despite this, the growth of the alt-coin market has shown no signs of slowing down, nor has investment in Bitcoin. With exchanges like Binance.com boasting 100,000 to 200,000 new registered users per day (Lam E., Kang S., White, T. 2018-01-10), cryptocurrency has thus managed to lay the foundation for the 5th and most dramatic change in monetary history, automated communication of value.

The Automated Economy and the Universal Basic Income.

The concerns of economists, politicians, and workers in the 21st century is, and will continue to be, how to eke out a living in an economy where robots and algorithms perform all the work (Miller, C. C. 2017-05-03). Humanity has based its most fundamental economic valuation on the blood, sweat, and tears of human labor. Entire political blocs have risen and fallen under this very basic idea of economic value. But now, our labor is becoming less and less necessary.

The concept of technological unemployment was laughable only a decade ago, but today with machine learning, automation, artificial intelligence, and quantum computing making regular headlines, people are finally asking the question, “What will happen to my job?” Automation will affect much more than blue collar workers. White collar jobs are on the line as well. Most jobs that require record keeping and analysis, accounting, logistics, materials handling, packaging, transportation, sanitation, and even most police investigation will be automated. In response, some scientific and political organizations have partnered with governments to form a consensus for a universal basic income system.

The Universal Basic Income (UBI) is a collection of taxes based on profits made by corporations who use AI systems to replace their human workforce, carbon taxes, corporate and capital gains taxes, as well as civil asset forfeitures. Disbursements are then sent from a centralized authority where the money is distributed to national governments (Futurism.com 2017).

The UBI would be funded by a pool of money collected by global and national institutions who would then disburse funds to various nations or localities, convert it into local currency where appropriate, and pay the affected former workers. This would turn all affected human beings into legal employees of their respective governments. If the proceeds of production are to go to a workforce that doesn't exist, then it is only a government that can mandate this. They would have to convert everyone in the country to government employees and pay accordingly, but what does that do to the relationship between our now constitutional government that protects our rights, and a government-as-a-national-employer that reserves the power to restrict the rights of its employees? For the UBI to work, all industry would have to be nationalized, all humans would necessarily become wards of the state, and all private property would then have to be dissolved and appropriated by the state for later distribution.

It is my view that such a scheme, one that benefits from the taxation of industries and revenue sources that will no longer exist, will be forever in deficits; further, that the UBI as it is known today would be devastatingly inflationary and without a system of valuation by which to maintain stability (Freedman, D. H. 2016-06-13). It violates the rights of individuals to their own inherent and real property. It removes the individual entirely from the economic process when accounting for how long the UBI operates. It appears that the UBI may be a way to pay off those left behind by technological unemployment rather than offer a solution for the inclusion of as many as we can into a new kind of economy. One that allows for the creation of virtual real estate, transferable digital property, and electronic services.

The Machine Economy.

If we're going to automate production, then it lacks forethought to neglect automating the exchange of value. Automating the exchange of value, fundamentally changing money to be a means for our machines to transact value, would necessitate that we convert the human owners of these machines into account owners. We can prepare for this today by using personalized blockchain ledger-based accounts. For instance, a digital currency can be used for service interactions between machines. Excess energy from your solar power system can be sold via this currency as a service rendered. Decentralizing and automating digital processing, fabrication, assembly, and service transactions linked to a single ownership account on a blockchain, would ensure that the owner gets paid and continues to participate in the economy. Decentralized economic networks and automation in a machine economy would make a cellphone, an electric car, or an idle computer a contributor to the economy, while the person reaps the benefits. With blockchain technology turning digital information into digital property, virtual environment simulations would be able to sell virtual property, create and sell virtual consumer goods and services, and even help create virtual societies in which people may live and work (Ordano, E., Meilich, A. Jardi, Y., Araoz, M. 2013).

Concepts like distributed networking and decentralized processing are already in use. For instance, the BOINC system, relies on distributed computing for the storage and processing of signals data for SETI and other scientific programs’ observations. If the value of labor is work divided by time, then this can be transferred on to an idle CPU to render a service that benefits the owner (Anderson, D.P. 2002).

Distributed networking and processing, machine learning, artificial intelligence, cryptocurrency, and blockchain are nascent technologies whose potential to fundamentally alter our understanding of human economics has not been realized. With distributed network systems and new, novel methods of computation, the expansion of human economics into the territory of the virtual is inevitable. We have not yet reached the limit of technological progress, and it may be that no such limit likely exists (Gelley, B., Vidal, C., Gendler, A. 2016-12-19)

Our technological horizon, for the time being, seems to be as elusive as the edge of the observable universe is to the astronomer. For this reason, the question of scaling digital assets and decentralization of production will eventually need to become essential processes in the creation of any machines for public or private use. These machines will have to have these concepts as built-in functions because we will need to create new economies far from the influence of Earth and her laws. I speak, of course, of the colonization of space. Without the scaling ability of automated, decentralized economic models, and the digitized exchange of value concept, human civilization may not survive the vacuum of space.

The economics of a space-faring human civilization has yet to be truly conceptualized. The colonization of space would, in my view, necessitate the maturity of the concept of economic decentralization, as any long-term expedition into the Final Frontier would require the extraction and refinement of raw materials, the production and application of resources, and all decision-making powers to be independent from the decision-making authorities of Earth. (Smith, C. M, Davies, E. T. 2012).


We will not have the luxury of a choice between one system or another. Our technological progress, as demonstrated by this essay, will drag us into compliance. It is impossible to say for certain where this untraveled road will lead, what this future will look like, or identify all the challenges a concept of this scale could face on the road to maturity. But, as we spread into our own cosmic backyard, we will need to address these issues economically, technologically, politically, and even spiritually. There may still be a Great Filter ahead of us (Urban, T. 2014-05-21). Tackling automated economics today, and how humanity can benefit from it, will increase our chances of surviving into the next chapter of our existence.

Conclusion

The question now becomes: If you automate industry and the exchange of value between machines for services rendered, and converted the human labor force to individual account holders for the properties they own that will render these services, then what is the daily relevance of the act of commerce for human beings?

The impact of daily commerce for individuals would be minimal. At this level of technological maturity, money as it is understood today, becomes not much more than a constantly updated ledger that tracks the exchange of goods and services for the purposes of managing resources in real-time.

Our daily lives would be consumed with exploration, education, and innovation without having to concern ourselves with menial tasks or the real threat of poverty. With technology, our labor no longer must be the base valuation of economic activity. Machine labor can now fill this role both in tangible and intangible goods and services. The ultimate goal of money should be its own obsolescence as we understand it today. In this essay, I have shown the trajectory of money as a means of communicating value from history, into the future of automated economics, and proposed an economic model for the benefit of people based on the potential of technologies realized, or those yet to be.

References

Arensberg, C. M., Pearson, H. W., Polanyi, K. (1957) Trade and Market in the Early Empires, The Free Press, Glencoe, IL

Szczepanski, K. (2017-03-08) The Invention of Paper Money Retrieved 2018-2-04 from (www.thoughtco.com...)

How Fractional Reserve Banking Works (2017) Retrieved 2018-02-04 from (quickonomics.com...)

Smith, A. (1776) (Inquiry into the Nature and Causes of the Wealth of Nations) NP

Nakamoto, S. (2008) Bitcoin: A Peer-to-Peer Electronic Cash System Retrieved 2018-04-02 from (bitcoin.org...)

Sherry, B. (2018-01-29) What Is An ICO? Retrieved 2018-02-04 (www.investopedia.com...)

Lam E., Kang S., White, T. (2018-01-10) Retrieved 2018-02-04 from (www.bloomberg.com...)

Miller, C. C. (2017-05-03) How to Prepare for an Automated Future Retrieved 2018-02-04 from (www.nytimes.com...)

The Universal Basic Income: The Answer to Automation? (2017) Retrieved 2018-04-02 from (futurism.com...)

Freedman, D. H. (2016-06-13) Basic Income: A Sellout of the American Dream Retrieved 2018-02-04 from (www.technologyreview.com...)

Ordano, E., Meilich, A. Jardi, Y., Araoz, M. (2013) Decentraland: A Blockchain Based Virtual World Retrieved 2018-02-04 from (decentraland.org...)

Anderson, D.P. (2002) BOINC: A System for Public-Resource Computing and Storage Retrieved 2018-02-04 from (boinc.berkeley.edu...)

Gelley, B., Vidal, C., Gendler, A. (2016-12-19) Is there a limit to technological progress? Retrieved from (ed.ted.com...)

Smith, C. M, Davies, E. T. (2012) Emigrating Beyond Earth: Human Adaptation and Space Colonization, Springer/Praxis, New York, New York

Urban, T. (2014-05-21) The Fermi Paradox Retrieved 2018-02-04 (waitbutwhy.com...)

I wrote this essay with the help of members of ATS in the following thread:

Machine Economy vs. Universal Basic Income

Because of their challenges, this essay, while admittedly incomplete in terms of potential and scope, got me an A in my Com 101 class, so it was at least good for that.

The concept itself is something I'm very passionate about. I believe we can expand upon this in terms of mechanics to fundamentally change the role of money in our lives. I want to make money obsolete, and I believe this is how we do it.

I took some liberties with the APA format, both for my convenience and for readability here on ATS as a general consumption essay.

If you're a stickler for APA format, bite me. That is some annoying crap that makes things more difficult to read not less, and you know it.

Edit:

I didn't correct some citing format mistakes because I didn't feel like it and I got an A anyway.

References are NOT in alphabetical order, they are in the makes-much-more-sense order in which they appear.

Alright, I am going to play the devils advocate.

I don't think we are anywhere near the dire projection you have towards automation in the work force.

There will always be machines helping people, just like computers. People said the sky was falling when they first came out.

The UBI thing sounds like legit communism.

Bitcoin sounds like a legit ponzi scheme.

Anyone doing legal transactions already has a bank account with federally insured money in it.

There isn't some need to transfer cash electronically, unless it's to bypass borders. You just enter your debit card number and it's done. No need to transfer to wallet, send, then they transfer it back to their currency. It is too many steps for a transaction.

Bypassing tariffs and going to a global cash is not a good idea if you live in a 1st world country.

The way forward. in my opinion is small business.

Specifically, make some laws that support them for once. This system could work if the people at the top weren't so greedy.

Corporations make the legislation and tax codes now. Taxes have gotten so out of whack since the constitution was amended.

The big corporations that where supposed to be the only tax payers have taken over the show. They pay jack, the employees pay all now.

It has turned into a giant debt slave system.

The corruption is out of control in almost all branches of the gov now.

IRS, Congress, DOJ etc, etc...

Everyone needs to stick together and handle this before it's too late.

Handing over even more power is not the answer.

This country was built on the backs of small business owners, it can do it again.

5 years or so of hell and sacrifice to start your biz is the answer to financial freedom, once you organize a system, the money will just pour in.

I have a neighbor making 6 figures mowing lawns.

I don't think speculative trading on bitcoin is an answer either.

I know you like bitcoin quite a bit, but I won't touch it, and I know a few millionaires with the same thoughts.

I wouldn't go beyond disposable income short term day trading with it, it's too volatile.

Anyway, nice essay, that was quite a read.

a reply to: Mandroid7

Alright, I am going to play the devils advocate.

Damn it! I thought I was doing that!

I don't think we are anywhere near the dire projection you have towards automation in the work force.

My projection is optimistic. Did I come off as dark? That was not the intention.

There will always be machines helping people, just like computers. People said the sky was falling when they first came out.

I do not contend in my essay that people will no longer contribute to the economy as direct buyers and sellers. Human creativity in all of its forms will ALWAYS have some form of economic value.

Money is nothing more than the abstraction of value. I view modern economics and ideologies as the Industrial Revolution's refuse thrust upon the digital era, the era of space colonization, the era of AI and automated economics.

Without automating the exchange of value concept we will forever be slaves to money. We have to ensure that people come first, not SOME people, but all people. With this idea realized into a truly unlimited, automated network, we can ensure every contribution, no matter how large or how small, can be justly compensated. I'm looking to mature this idea through technological research being done today.

a reply to: Mandroid7

Anyone doing legal transactions already has a bank account with federally insured money in it.

This system conceptualizes decentralization. You are the bank account.

a reply to: projectvxn



How does it differ from Samsung Pay, or similar payment apps now though?
Beyond avoiding transfer fees which, if I am right, you have to pay fees anyway in the wallet transfer process.

The ledger concept is kind of cool, but it has it's downsides too. Like it is a ledger, copied across the whole planet.
It would be like a giant record of everything, open to the people with the right tech skills.

It would be one thing if Bitcoins where the only currency, if the dollar went away.
There are too many power players and policy makers in the game for dollars to be replaced at this point.
So bitcoin will be in limbo and constantly fluctuate like a penny stock.

It would take the removal of the entire government to stop dollars as the currency, or the acceptance of a government bitcoin, which would be no different than a dollar anyway, so the concept would cancel itself out, it would basically just be better encryption for you debit card, at that point.

Another problem with encrypted transfer cash on the internet is quantum computing.
Whoever has the computer can jump in and put your cash where they want. They are already doing it in exchanges without quantum computing.Exchanges are too risky for my cash at this point.

Your bank account has better protections in place from hackers, that is federally insured.
Even if your card is stolen and used, they back it up, like the $5000 dollar charge that was ran on mine the other day.

It is an interesting topic, no doubt.

a reply to: Mandroid7

Don't reduce this to an app on iTunes. This is an economic model for the next century, maybe more.

Blockchain ledgers, as explained and referenced in the essay, are cryptographically secured. All you see on the public ledgers today is transactions, not who is making them.

Quatum resistance is also a concept being worked on by Blockchain developers. But like the essay States, these are all nascent technologies, not mature ones.

Like the essay States and references, scaling is the issue. Even fractional reserve can't scale to include the trillions of transactions all of humanity's machines will make, let alone that of billions of humans. This is why several distributed networks and ledgers will have to be used. Again, this essay uses decentralization to as much potential as possible.

Some of the mechanics of how an economy like this could work was conceptualized and referenced in the essay as well.

originally posted by: projectvxn
a reply to: Mandroid7

Don't reduce this to an app on iTunes. This is an economic model for the next century, maybe more.

-At this point, bitcoins are less secure than an app on itunes.
I think you are overvaluing blockchain currency. And no, the kids speculating and trading bitcoin etc are not the policy makers in the country. It is like a mini alternative speculative stock market. It is not a realistic economic model.

-We will never wake up tomorrow and all the androids will be doing all our jobs. People need to produce and create things to be happy. People need to eat, so they will always be collecting new foods and trying new things.
You could end all jobs tomorrow, and people would get bored and start up businesses just for something to do.
You can't remove the human element from the equation

Blockchain ledgers, as explained and referenced in the essay, are cryptographically secured. All you see on the public ledgers today is transactions, not who is making them.

-There really is no such thing as cryptographically secured as we come into the quantum computer age.

Quantum resistance is also a concept being worked on by Block chain developers. But like the essay States, these are all nascent technologies, not mature ones.

-Well, they better hurry, because they are already here, and gullible people are putting real money into it.

Like the essay States and references, scaling is the issue. Even fractional reserve can't scale to include the trillions of transactions all of humanity's machines will make, let alone that of billions of humans. This is why several distributed networks and ledgers will have to be used. Again, this essay uses decentralization to as much potential as possible.

-I don't see how you will solve a transaction volume problem with a longer transaction time and an endless growing
ledger size

Some of the mechanics of how an economy like this could work was conceptualized and referenced in the essay as well.
The only thing decentralized is the money transfer and your bank account, your whole premise is based off of bitcoin replacing a dollar to work. That just isn't going to happen, like I stated in my comment, it will have to be a gov.bitcoin
or they just won't let it happen, but they won't mind allowing trading for capital gains taxes. That is what we have now.

-You can do what you want obviously, I am going off the advise of people who are successful investors and say avoid it.
Doesn't mean I wouldn't day trade it, if I still did that, but people are deluded if they think the power structure will allow their currency to be replaced.

-These concepts are playing on peoples emotions. It's a big pyramid scheme, there is no value to me in bitcoin, I don't care if someone's computer is doing math, or running electricity.
It's worse than the tulip fiasco. You don't even get a flower, you just jump in and hope enough idiots buy the concept, then jump out with your profits when the value rises. Just like day trading.
It is a pretty scummy way to make money.
It is taking advantage of others and just like day trading, it is frowned upon in investment circles that have any class.
The unregulated markets are even worse.
Now everyone and their mom want to start their own coins and exchanges, further diluting the concept into the future.
No bueno in all directions.

Interesting essay.

If I am going to be overly critical I would say that you conflate fractional reserve banking and fiat into a single concept (that could just be my reading, perhaps not what you meant).

Also the Labour theory of value isn't really accepted as valid in economics out with Marxist economists.

My question would be how the transition to such a system work given the massive wealth inequality.

Don't the current owners of capital just by economic the new owners of these decentralised accounts. If so automation will just increase inequality further as labour loses its value.

a reply to: projectvxn

I'm curious why you chose such a drastic & global version of UBI? I don't even think a version like that would be possible in a world where the prices of living can be so drastically different depending on the country, region, city, neighborhood, etc.

The most common versions of UBI's that I've seen simply reallocate funds from existing social services and their affiliated government agencies. These versions typically save money by eliminating those social programs and their affiliated agencies, while also reducing the number of govt employees, which reduces govt expenditures on benefits for those employees. And the more drastic versions even include merging programs like Social Security into the UBI program.

Another thing I'm wondering is how this would work in developing countries. Many of them don't have stable power grids, and the majority of their citizens may not have access to electricity, the internet, or both. Some of these countries are several decades of constant infrastructural development away from reaching our current level of infrastructure, and that's assuming they can avoid the wars that typically undo their growth.

In a welfare economy, it doesn't matter if you used to make more money than others, the food stamps and income are all the same, across the board.

In a monopolistic corporatocracy, all the workers will get the same salary, so nobody can complain about lack of fairness.

Is that any different from socialism or, dreaded heresy, communism? If so, how so?

Some of you are hopelessly stuck on one or two points that I am certain you didn't bother reading passed.