Another CDAE Podcast- Feb 12, 2009

Listen to the Economics of Sustainability from February 12, 2009.

Morrill Money: An Expirement in Local Currency

The CDAE grad students have decided to create a currency for the CDAE grad students. The currency, Morrill Money, will be issued to those grad students who opt-in to participate in this experiment on currency and locality. For no cost each participant will be given an amount of money that they can use to purchase goods or services brought into the grad office, posted on the Morrill Money whiteboard or listed on a group email list including other Morrill Money participants.

Starting with a certain amount of money one can spend their dollars to buy items produced by the community – food, services, tutoring, etc. Once the participant has run out of money however, they have to produce something of value to sell back to the community in order to regain dollars. This insists community interaction and many tangential benefits as well.

The small size of the community is key because all consumers and producers interact on a daily basis in and around Morrill Hall. This interaction capitalizes on social behavioral norms and institutes a high level of accountability, recourse and offers a great deal of consumer information. Additionally, this currency may act as a motivator for students to produce goods and services that they otherwise would not have created. Not knowing whether reciprocity would prevail, I may not choose to bake a pie and offer it to my community of grad students – but by using Morrill Money to sell my pie I make a value on my pie, discover and affirm my pie-making ability and also interact with my community by feeding them a nice healthy pie. These secondary benefits of a very local community currency are paramount because one of the most prominent determining factors of one’s happiness (subjective well-being) is one’s interaction and presence in a local community.

Naturally this currency is most relevant if used for products that may have dubious or little value to the producer or in USD. This also means that people will only offer items or services to be sold in Morrill Money if the producer’s marginal return for the item is below the speculative return of the Morrill Money they pose to generate from the sale. This means that the value of the money will be directly correlated to the speculative value of the goods in the market. If everyone produces very good products then the value will maintain a high value. There are many reasons why this project may fail – if people begin spending too much effort calculating how much USD they spend to make the products they offer to the market and decide not to participate or if people begin attempting to deceive their consumers through false advertising, theft or offensive bargaining that deteriorates the fabric of the community.

There are many speculative theories being discussed about this currency among the CDAE grad students but one of the most important underlying factors of this experiment is that a discussion has been started about local monetary valuation, the functioning local economies and the issues involving local community development. I look forward to seeing how this project goes and hope to have many updates for readers of this blog.

-Jeff

Economics of Sustainability – Feb 10

Listen in on the Economics of Sustainability lecture from February 10th.

Comfortably Wrong

Thinking about CDAE and education at large I wanted to talk about an important misalignment of incentives in education that is perhaps having a serious dampening affect on creativity and innovation in society.  The problem is predicated on the simple fact that education selects for being Correct and one of the founding ingredients for creative thought and innovation is the willingness to be Wrong.

By passing our children through a system of education that determines success and failure based only on one’s ability to be Correct, we are extinguishing the creative cognitive patterns that produce new ideas by punishing Wrong.  Certainly we don’t want to start rewarding absolute wrong answers like 2+2=5, but what I mean to promote is that we try to remove the sense of absolute failure around being wrong by encouraging the idea that it is perfectly human to be incorrect and even that perhaps those who are willing to be wrong more often are more likely to stumble onto a fruitful idea they would have never let into the light.  I’m encouraged when Obama got up and was willing to be wrong when he admitted to screwing up on that Daschle fiasco.  That sets a precedent for us to embrace our wrongness, do what we can to limit it and move on.

The human ability to generate ideas is perhaps our most important universal ability and a system of education that selects for those who are able to most quickly mute their creative cognitive patterns is certainly doomed to the slow production of new ideas.  More than ever ideas are what we need right now.

As graduate students who have had at least some academic success in the past we have to be forewarned by this idea and try not to fear being incorrect.  We have been pre-selected by this very system for the ability to be repeatedly correct and possibly at the cost of limiting our willingness to be wrong.  With that in mind I encourage us all to be more comfortable with being wrong in the hope of being ultimately more right.

-Jeff

The Health Argument for Public Allocation

In doing research on the implications of public and private allocation of revenues collected by the Vermont Common Assets Trust, it became apparent to me that there is an easy argument for NOT giving [all] of the revenues gained to citizens of a state, country, city, whatever: health of the citizens.

It has been shown (and makes a whole lot of sense) that there are higher instances of children with asthma and other “pollution-induced” sicknesses (if you will, and I hope you will) in cities were pollution levels and particulate matter levels in the air are higher from the grind of the city life. The lifelong effect of the pollution on these children (disease and ailing health) as they grow to adults cannot be cured by a check in the mail every year. As we continue to use grossly polluting fossil fuels and dirty energy sources, the instances of these sicknesses may expand out of the city and into the suburban and rural parts of our country and world. It is not until we commit to creating clean energy technologies that we will begin “preventative” health care through investment in clean energy. If we are to invest this revenue into creating these clean technologies, we are providing a safe atmosphere (literally, as in the atmosphere that we breathe) for future generations, while working toward being independent of carbon intensive, global warming energies. And then Michael Jackson wouldn’t have to wear doctor’s masks and we could see that beautiful face again. Gross.

dk

Economics of Sustainability – Jan 29th

Economics of Sustainability – Jan 29th

Economics of Sustainability

Click below to listen in on lectures from Josh Farley’s Economics of Sustainability class going on now through May.

Economics of Sustainability – Jan 22nd

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CDAE Collaboration Space

For those that are interested, CDAE has initiated a SharePoint collaboration space, which you can access with your uvm id at:

https://sharepoint.uvm.edu/sites/cdae/

If any of you want to create a space for project collaboration (including document handling, setting tasks, etc), I can change your status to a “contributor” so that you can use it for that. Currently, you can just view the content. If you’re interested, let me know at amasozer@uvm.edu.

Anna

Perfect Information Issues and Consumer Choice

It occurred to me this morning during a class discussing the topic of consumer responses to genetically modified food labeling that there are not only marginal, but also inherent and absolute flaws in the theory of perfect information.  Traditional economics relies on the supposition that if you give consumers all the information, then they will process that information and come to a conclusion on their best consumption choices.  The flaw here is the issue of human cognitive capacity.  How much info can we take?

Neuroeconomics research is proving that people simply cannot process all the information that is involved in some consumption choices.  More insidious still is the fact that not only do we have a limited cognitive capacity for processing consumer choice information, but we also consume during time that is positioned as a counter to our work time.  How many times have you purchased something with the lingering voice in your head saying something along the lines of:  “Oh, I work hard, I’m going to buy it.”

It isn’t a great conceptual leap for us to agree that after a long day of work we are less likely to do the mental math to figure out if the ounces of cereal in a box of Cheerios are cheaper than the ounces of cereal in a box of Raisin Bran.  Just buy what you want because you’re tired and don’t have the time.

The point is that the traditional theory of perfect information is critically flawed not only because of our limited ability to process consumer information, but because the time periods of our consumption and work magnify our inability to process consumer information.  The issue begs the question of where and when is it the role of good governance to step in and make decisions about what products are offered to us.  Many years ago it was thought of as being outrageous to institute a tax on cigarettes because it limited the freedom of consumers to make their own decisions.  Nowadays it is crazy to think that we wouldn’t incorporate such regulations.

Would you rather have full disclosure on all of the information surrounding the products you consume so you can make an informed choice, or would you rather have the government make some of these choices for you and ban dangerous goods?  What goods do you think make by dangerous and unregulated?  Are toxins the next frontier of consumer good regulations?  What do you think?
-Jeff

Local Financial Markets: Call for Ideas

The recent financial collapse, and perhaps the overall state of the world, has gotten a lot of people thinking more about going more local.  In theory as we all begin to have less and less money we will supplement our buying power with alternative forms of exchange – be it barter, community buy-in, volunteerism and so on.  I wanted to write a post that would ask people to tell us about some of the instances of local ideas they are aware of.  These can be farmer’s markets, local currencies, labor banks, barter situations you’ve been in personally, new community housing schemes and so on.  I’ll list the few I’m aware of to start the list but please comment with links to your favorites.

Burlington Bread: Was created as a local currency in Burlington, VT but died off in 2006 because it couldn’t reach the necessary critical mass to catch on.

Burlington Time Bank: This is a group where you can use your particular skill as a currency to buy the labor of others.  Good at painting? Paint a house for 6 hours and you can get 6 hours of credit from others in the Time Bank – plumbers, carpenters, accountants and so on.

The Toronto Dollar: Local currency in Toronto.  Circulated about $90,000 worth of currency last year.

The Worgl Schillings: During the depression the town of Worgl, Austria came up with a local currency that saved the town.  The trick was that each person was taxed at the end of each month for how many shillings they held.  This caused people to spend like crazy at the end of each month, boosting the economy.

What about a local stock market where any local company could sell a portion of it’s worth to local shareholders.  You could only buy shares of the local grocer, restaurant, shoe store, etc if you could prove you held residence in the area.  It would create loyalty among the shareholders for their local companies and would give a boost of money back to the local economy.

Local debit/credit cards.  We talked not long ago about the Brighter Planet model of using spending to fund good projects.  How about cards backed by local banks/credit unions that would give feedbacks to local community development projects.

How about community solutions campaigns where town managers would turn some problems over to the hands of the people by buying space in the newspapers and using a section of the paper to challenge local citizens to solve local problems. “How can we reduce traffic in the downtown area?” “What can fix our snow removal problem?” “Why are beds left empty at the local homeless shelter yet homeless freeze to death on the street?” I think turning local problems into publicly local problems might spur people to make creative solutions. The more minds working towards these problems the better and perhaps local government would benefit by facilitating the forum.

Let’s generate some ideas, bizarre and impractical and wild ideas are all welcome.

-Jeff