Home > On Finance > Building an Economy Chapter 2
On Finance: Building an Economy Chapter 2
So know we have a happy little village with Mary, Patricia, James, and John. Each has $2,500 in dollars sitting in the corner making them feel good about themselves. Let’s take a moment and get introduced to the village people…
Mary spent a few years building a communications network in the village including all the goodies… video, internet, phone, games, etc. She calls her business “Mary’s Communications”. She enjoys gardening and raising her own food — as do all the other villagers as there is no supermarket. She has a bit of extra time in her life as she just has to maintain the systems she spent so long building. The upfront investment is paying off in extra spare time today so she’s thinking about going into another business.
John just likes to make things. Pens, paper, knifes, computers, you name it. An ultimate tinkerer and inventor. He never knew what to call his company so he just call’s it “John’s Industries”. He likes to travel to other villages once in a while, but mostly just chats with them through “Mary’s Communications”.
Patricia had John make her a truck, a fork lift, and a number of other vehicles and calls her little business “Patricia’s Transportation”. As does everyone, she gathers together in the village square for a few hours every week to help keep the common areas nice.
James builds things… houses, factories, barns, tables.. just about anything for “James' Construction” (yeah, they’re not the most creative people when it comes to names). If it was built in the village it was build by James and lasts a long time. He has a number of hobbies but doesn’t have a lot of time as he is building a house in hopes that someone else will move to the village soon (hopefully a lovely lady as neither Patricia or Mary seems to have taken a shine to him.)
The economy is pretty much run on a you-help-me-I-help-you basis. The form of currency is work — If Mary spends an hour moving stuff for James then he’ll spend an hour building something for her. John makes stuff for everyone, in fact he just made a great new set of knives for Mary’s kitchen in return for using her communications network. It all works pretty well… most of the time.
You see Patricia had an argument with John about how many hours they owed each other. It seems John’s memory isn’t always great and he doesn’t write things down. He thought he was paid up while Patricia thought he still owed her a few hours of work. In addition, Patricia owed James an hours of work and wanted John to take an hour he owed her and help her pay off her work debt to James. John wanted James to take an hour he owed and use it to help Mary to help settle his own telecom debt — unfortunately Mary got confused and credited that work to James and still wanted an hour from John. As you can see, it all got very confusing, very quickly.
As they were sitting around the village square arguing over all this they decided they had to find a better way — or perhaps have someone keep track of it all for everyone. Suddenly John remembered the pile of “dollars” he had stuffed in the corner and had a brilliant idea. Why don’t we just use those dollar things. Every time I spend an hour making something for someone they can just give me one of those dollars. That way I’ll know how many hours work I’ve done by the number of dollars I have. If I want an hour’s work from someone else I’ll just give them a dollar. A dollar means an hour of work that you can get from anyone. If we all agree then we don’t have to keep track of everything. As everyone seems to have the same number of dollars we’ll start fresh with everyone.
Everyone thought that was a wonderful idea, and so the dollars got put to work…. Now those piles really meant a lot as each person had 2,500 hours of work they could buy from others. A perfect system. Yep, an absolutely perfect system… perfectly perfect in almost every way….
Posted by Paul Gernhardt on Wednesday, October 29, 2008