The Social Economy

post by kylefurlong · 2025-03-11T22:51:14.857Z · LW · GW · 4 comments

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The Social Economy is a proposal in political economy to equalize purchasing power through income based pricing. Informally called PMI, this new "currency" gives everyone about 100 PMI worth of purchasing power each month. Since the average monthly income in the United States is about 4000 dollars, 1 PMI roughly equates to about 40 dollars. Note, though, that a high income earner spending 0.25 PMI on a burrito will spend much more in dollars than someone with no income.

This works for business because at the end of every month, the IRS (or whatever new body administers the PMI transactions) "evens" revenue. That is, businesses with higher than average PMI values per transaction transfer some of their base currency revenue to those with lower than average PMI values. This means both that businesses can count on a "stable" PMI value per transaction, and serve communities with lower incomes without affecting their revenue.

PMI alone creates radical social change. When everyone has equal purchasing power, there is no undue economic leverage anyone can apply to anyone else. To make it work though, there need to be new monetary controls in the economy. Physical cash would no longer be legal tender, and account to account transfers (without annotated material exchanges) would no longer be lawful.

However, PMI on its own doesn't yield a viable economy. If everyone has the same purchasing power no matter what they do, one key work incentive no longer holds. This is actually part of the point of the system: if one has to work (in a post-scarcity society)[0], that is a form of slavery. However, if everyone were to stop working, even with the radical increases to automation that we expect in the near future, the economy would founder. So to reward the people who do work, we introduce a new currency, contribution points.

Contribution points accumulate to the earner for their contribution to PMI: If you earn any amount of income, that translates to dollars spent with PMI, and the system awards you with contribution points in the amount of the square root of the contribution.

This new social currency encodes a certain value: the person's contribution to the welfare of everyone in the economy. They can be traded for anything that isn't permanent, reservable, or accumulable. This means that the entire material economy operates on PMI, but there is a new "ephemeral" or "performative" economy operating in contribution points. This is an area of active discussion as is the whole, but the key point is to allow contribution points to give priority access and unique experiences to high contributors, while ensuring they do not contribute to wealth accumulation and rent seeking.

PMI and contribution points give us a fully self-contained currency system that could replace the current system and function well, eliminating poverty. However, these alone wouldn't achieve full economic democracy. The entrenched interests of property holders could still charge rents, and accumulate unearned contribution points. In order to achieve full democracy, two other changes are needed to the current system, and one change to our new system.

First, shareholder corporations must transition to worker associations. The reason for this is that shareholder corporations, and generally any ownership-based corporation, act as wealth "concentrators", giving a few people the ability to charge rents. If we were to implement the Social Economy only as PMI and contribution points, people with ownership stakes in companies would receive outsized contribution points for their actual labor. This gives us a clear understanding of the bad deals the current system enacts. In order to undo this, we set a date, allowing workers to organize, and negotiate buyouts with former owners through the SEC or another similar body. Typically these will be some form of share to IOU conversion, giving former owners a claim on excess income until paid (within certain bounds, on both sides). Former owners receive excess contribution points for this income, as their compensation for allowing the buyouts to proceed.

Once the Social Economy is up and running with worker associations, former employees now guide every economic decision, extending the democracy of the market to businesses themselves, and making contribution points truly accountable to the actual labor of those earning them. This is so, since with worker control of production, workers set wages for their co-workers, valuing their labor "fairly".[1]

Worker associations take us most of the way to making contribution points a legible marker of social contribution, but we require one other change to the current system to make them exactly equivalent, and prevent capital accumulation and rent seeking. We must end leases and rents. It makes no sense to end shareholder rent behavior and still allow people to charge interest, either for mortgages or leases, or any other form of payment. The Social Economy transitions mortgages, credit, leases, loans, and all other forms of finance to transfer agreements in PMI.[2] Simultaneously, it converts rental agreements (leases) to mortgages, so that former renters now own their homes and other property.

Transfer agreements are formal contracts encoded in the transaction processing system between two parties for some number of payments over some period. The full payment amount of a transfer agreement may not be more than the fair market value of the good or service paid for, plus (or minus) some percentage calculated from the moving average of increase (or decrease) in average PMI value. For example, if the economy were to be on an upward trend, the moving average percentage change of average PMI value over some months might be 5%. So a transfer agreement for a 100 PMI car could be made for 105 PMI.

Gift funding is a new system that allows people (who now have equal purchasing power) to aggregate their purchasing power into blocks for others to make large purchases with. This fully replaces finance and health insurance, and fully enacts economic democracy. How it works is that people stake some portion of contribution points to start a request for themselves or someone else. The number of contribution points is proportional to the amount of the request in PMI. Once started, others can also stake some amount of contribution points, proportional to the amount of the request, in order to give credence to the validity of the request. Both the original poster and any others staking contribution points this way lose all of them if the request is not fully funded, however, those joining in to validate a truly valid request receive 20% extra contribution points back when funded.

Once the market for funding requests is active in this way, we allow everyone to contribute some amount of PMI to any request they wish. If they do, they receive contribution points according to the square root rule on the average PMI value of the gift. This gives people without an income a way to earn contribution points.

With gift funding active, the Social Economy is mostly complete. We have equalized purchasing power, giving everyone equal footing at the cash register. We have transitioned shareholder corporations to worker associations, ending rent seeking and normalizing labor value. And we have ended finance and interest, replacing them first with transitional transfer agreements, then gift funding.

With all of this active, we now have an economy that is mostly democratic, that is, no one person or group of people can exercise disproportionate control over the means of production, people's taste, or the political narrative. However, this is still not enough to achieve full equality. We still have a competitive market, with worker associations vying for share, driven by the contribution point wish of their workers. This being so, we have merely moved the competitive drive and its vices from former owners to the worker associations themselves.

This is vastly better than the current system for all the outlined reasons, especially that businesses are governed by their workers in aggregate, however, worker associations still may have perverse incentives (perverse being any incentive that causes a drive for inequality). We have not removed the accumulative power of worker associations themselves, merely given control of these mechanisms to democratic bodies formed of the workers doing the labor.

In order to ensure that worker associations don't grow without bound, we legislate that no worker association may hold assets unrelated to their business. Additionally, we do not allow mergers or acquisitions.

In order to control the growth and market behavior of these new entities, we also introduce worker credits.

Worker credits function in the following way. Any worker association wishing to hire someone must spend a worker credit. Worker credits are offered on auction every month, and any association with worker points may participate, spending any number of points in any number of bids. To earn points for these auctions, associations participate in gift funding in the same way as anyone else.

This means that the associations that can achieve the most growth are those that contribute the most to the general welfare. It also means that worker associations have a secondary purpose beyond satisfying the market, and that is providing funding for large purchases, and funding the most worthy causes. And in contrast to the current system, this isn't merely virtue signaling: an association's growth depends on being actually social in this way.

To further reward the most social associations, we introduce the Cooperation Index. This is calculated in the following way (remembering that all transactions flow through IRS or another body at this point). First, group all individual association monthly bi-directional payments by payer IDs, then rank by amount. Calculate a cooperation value by the power series E[p_n ^ n] where p_n is the nth greatest trade relationship amount, dividing by worker count. Then, put all association cooperation values in distribution, taking the z-score of a given value as its index.[3]

We use this in the following way. Whenever an association bids for worker credits in auction, (Which they can do in any number and size of bets, the system taking the highest bids one to one with credits) their bid is either multiplied or divided by their Cooperation Index, multiplied if positive, divided if negative.

With all of this, we have an economy based not on accumulation, but on contribution. Both contributing to others through your unique skillful labor, but also through your altruism, both in aggregate as worker associations, and as private citizens.

The reason this matters beyond the humanitarian concerns has to do with AI risk. In nearly all of the disaster scenarios outlined on LW recently, the AI achieves its goal by compromising the economic system to achieve inhuman ends.

The Social Economy removes this ability in two ways. First, all economic activity is guided by worker associations, democratic bodies that determine if their activity is valued. Second, and most importantly, the Social Economy removes survival pressure from economic relationships. This means that no economic coercion is possible, and so no amoral, acquisitive, or disaffected person can be convinced to do something that might harm everyone else.

That's all she wrote. Let me know what you think.

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[0] Current GDP per capita is 2.46 times the average living wage: https://claude.site/artifacts/4ed7751d-27d2-4631-83ea-6853c3a9ab51
[1] There are some incumbent effects, so a possible future system will treat those, however, as a first pass, we take a new step forward into a worker-led economy.
[2] This would also be where you transition income tax to a flat transaction fee, replacing income tax with a revenue neutral new tax that functions like a combined VAT and sales tax.
[3]  We may also apply this to individuals, to incentivise buying from multiple vendors, and giving a multiplier to contribution points.

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