Basis: a distributed-ledger implementation of a socialist mode of production

Or: How I learned to stop worrying and produce without profits and private property

(Last update: Nov 22, 2020)

Andrew M. Lyon

Introduction

Let’s start with a premise: we can make all the things we want and need without bowing to profit as our king and without ceding control of our productive instruments to private owners (and we can do these things without an authoritarian government).

If socialism and capitalism are languages, Basis is a translator that speaks both and allows members to exit the relations of capitalism without being subject to a life of puritanical simplicity.

Basis defines a distributed network of co-ops that produce things for use (as opposed to for-profit). This network eats capitalism over time, business by business, property by property, becoming more and more capable of producing the needs of its members internally.

Often socialists are asked “Why not just start a commune?” This is our commune. It has banking, it has housing, it has farm land, factories, and warehouses, and it has a militant business plan.

The economics of socialism

What is an economy? It’s a network. Each node is a person or organization. Each connection between any number of nodes is a transaction. That is all. It doesn’t require money or capital, it doesn’t necessitate social or private ownership of factories or warehouses. It’s a simple network, and all it requires is the ability for two or more nodes to exchange. A blank slate!

Given this, let’s start from scratch and discuss some possible ideas:

  1. The system of exchange used to facilitate transactions
  2. The system of ownership exercised over the productive instruments

The system of exchange used to facilitate transactions

The biggest question here is supply and demand. Many believe that socialism operates outside the bounds of supply and demand, but this is ridiculous: why would anybody make things that there is no need (demand) for? A market is essentially a distributed algorithm which finds a value that solves for the current supply and demand of a particular commodity. Price is that value. In essence, given supply and demand, find price. This is an oversimplification, but for our purposes this is fine.

What if instead of given supply and demand and finding a price, we start with demand and cost and we solve for supply? The solution is a bit more temporal…supply must be adjusted over time. But then again, if you think of supply not as “the current supply” but instead “the rate at which supply is replenished” (and similarly with demand) then supply can be adjusted almost as instantaneously as price. This can also be done in a distributed way. How?

By measuring orders. Orders are the precursor to the transaction. They are a marker of economic intent. “I want this.” If you have a system where orders for widgets (and other products) are publicly available, it would be very easy to measure how many orders for widgets there are and how backlogged those orders are in aggregate. If there is a backlog of two months, perhaps then it makes sense to open a new widget factory.

So in this system of transparency, orders become the signals of demand. In fact, demand becomes much easier to measure, and given demand, and a system of fixed (or at least not rapidly fluctuating) pricing, supply can be adjusted to meet demand. Thus, we do not need a market system of arbitrary prices to facilitate a system of primary production.

Why bother with this, though? Because if you have consensus on setting “price” in terms of costs to society (labor, resources, externalities), then it becomes much easier to measure the actual costs of things. Prices abstract and obfuscate the costs. If a TV costs $100, I don’t know how much of that paid laborers, how much went into machine maintenance, how much into regulatory compliance, how much in profit, marketing, advertising, and so on and so forth. Not only this, but if you can measure all the inputs to production back to the raw materials, you can know which products used more fossil fuels. Which products used chemicals that are known pollutants. Suddenly a TV isn’t $100 anymore, but a few grams of silicone, 32 labor hours, 800 miles in shipping, 1.5 kilos of CO2, etc. How would our purchases change if we knew exactly what went into our products, and what byproducts they had? Whether we like it or not, the things we do affect those around us and it’s time to stop pretending they don’t.

This method of measuring orders via a transparent network requires no central bureaucracy, meaning you can sidestep things like a command economy (although Basis does not preclude economic planning). Production would be measured based not on some obscured market process, but the actual costs to society.

In this sense Basis is neither a capitalist market nor a centrally-planned system: it lies somewhere in-between. It allows for distributed production like a market, but without the pricing and relations of a market. It’s what a market looks like if you take away money, profit, and private ownership.

The system of ownership exercised over the productive instruments

Capitalism is a market system with privatized ownership of the means of production. Socialism necessitates the commonly-owned means of production.

How is this common ownership exercised? What things are owned, in particular? Is my toothbrush really mine? If I lend my hammer to a friend, and she uses it at work, is my hammer then socialized?

Let’s talk about two things: effectiveness and intent.

Effectiveness in this case simply means “is it effective to socialize this?” Would socializing a toothbrush make sense? Would it make sense to track who is using it, schedule its repair and maintenance, arrange for its storage when not in use? By socializing something, there is necessarily some level of process and overhead it goes through…a cost to society. On top of this, if we were to socialize toothbrushes, and I order 100 of them for my toilet-bowl-cleaning-using-only-toothbrushes company, I might realize that there are only soft bristled toothbrushes available. I want firm bristles, or my fellow workers and I will have to scrub twice as hard. Do we socialize every form of toothbrush now? Or does it maybe make sense for our company to simply order the toothbrushes it needs, and for those toothbrushes be owned by our company, and accounted for in the costs of our services?

Now, contrast that with a factory, warehouse, or office building. Whatever overhead cost there is in administration is a fraction of its value to society. Productive land, factories, warehouses, office buildings, heavy machinery, airports, seaports…these are the things that are effective to socialize.

Secondly, intent. There are things that can be used in the productive process, and there are things that are made to be used in a productive capacity. Do people buy semi trucks for a hobby? Or are they almost exclusively used in production? What about factories? Now, what about our toothbrush from earlier? It’s not made for a productive use, but rather personal. It can be used in a productive capacity, but it’s not made for that.

The point being, there is a clear divide between things that are made for the productive process, and things that are more general. Socialization, at least for the purposes of this system, concerns itself with those things that are intended mainly for productive use.

Along the lines of intent, things do not automatically become socialized just because they were used in a productive capacity. Instead, there must be a clear intent and effort to socialize it in the first place.

Why socialism seems difficult

The reason why capitalism often seems a much better solution than any form of socialism is because capitalism appears simple. The pricing mechanism is simple. The ownership mechanism is simple. Anyone can price anything however they want. Anyone can own just about anything they want. Socializing the means of production, as well as employing profitless production, takes more effort. It raises more questions. It changes our relationships to things. However, the simplicity surrounding capitalism is precisely because of the one thing capitalism does best: externalize. Capitalism appears simple, but only because the complexity required to manage it is forced onto communities, governments, and the environment.

This paper will define a system that makes implementing and maintaining a socialist mode of production as simple as possible. Its goals are to use incentives, as opposed to coercion or force, to naturally grow a system that pays people the full value of their labor, distributes based on contribution, allows unrestricted access to the means of production, and accounts for the costs that capitalism externalizes. It will organize production around social usefulness instead of individual profit, and do so without sacrificing autonomy or individual choice.

Chapter 1: Defining the goals of Basis

Basis is at its core a cost-tracking economic networking system that seeks to socialize property and empower its members with self-determination. It strives to strike a balance between being specific enough to support a socialist mode of production and the welfare of its members, while being general enough to model a large number of social and economic arrangements. It’s not a detailed blueprint for society but rather a set of tools by which society might organize itself around.

Let’s go over some of the key goals of Basis.

Membership

Membership of the system is controlled by policies set by current members. In general, a member of the system is a person who works at a member company, and member companies generally can join (or be created) under the conditions that they:

  • Are a worker-owned company or multi-stakeholder company where the workers have significant representation
  • Use Basis for their transactional system and labor time tracking

Membership is not binary, but rather is a sliding scale decided by the number of hours worked at a member company. With more participation comes higher voting rights and more use of shared resources, such as housing.

Companies

A company in Basis is a somewhat general concept. It can be a traditional producer co-op in that it is an entity with members who are workers, but a company can also have members who are other companies.

So you might have ten companies that produce food, and all those companies might be members of a larger company that stewards farm land, tractors, and other resources farmers might need. There might also be a housing company that members of a region join to get access to housing.

Companies are effectively self-managed groups or networks of people within the larger Basis network.

Economics

There are a few main facets to the economics of Basis that all work in tandem together to create a healthy internal ecosystem that self-tunes for growth and member prosperity.

Cost tracking

Cost tracking is the process of accounting for all the disaggregate labor and resources that go into products and services produced in-network. What does this mean? It means that a chair no longer costs $30, but rather 1.8 hours of labor, 12 kg wood, 3g steel, and 0.4l diesel fuel.

Why do things this way? Why not just tally up the costs of everything and give a final number? Because the final number will have erased all of the costs involved in production.

When we have a disaggregate list of costs for each product, producers, consumers, and governments can know the exact costs of something, as opposed to just the market cost. Fans of capitalism say that pricing allows you to compare the cost of two different things. They’re right in that prices as aggregate values allow easy comparison, but they’re also wrong because prices don’t reflect costs. Prices are arbitrary and meaningless, whereas costs are absolute.

Basis allows tracking of costs of production, retaining information about the labor, resources, and to some extent the externalities it takes to make something.

Raw material tracking and costing

Cost tracking for labor is somewhat straightforward: members track their labor when engaging in production, and are then compensated for their labor in credits. That credit amount is then added to the costs of the company they work for and ultimately assigned to products they make. This is similar to money. Things get interesting when we start talking about costs of resources.

First of all, which resources? Iron? Steel? Oil? Jet fuel? These might be obvious. What about chairs or widgets? Ultimately which resources are tracked is a globally-democratic decision, decided by the members.

Secondly, how much are these resources valued? In order for members to exchange credits for products, we need to be able to determine the credit value, per-standard-unit, of each resource. This is where our global and regional resource plans come into play.

Pricing

The total cost of a product, in credits (₡), is a function of not just how much labor went into creating that product, but the resources (such as raw materials) and the socially-decided credit value per-unit for each of those resources. In other words, if it cost the network 15 credits to build a chair, the base cost would be 15 credits, but if it has 2kg wood and wood is systemically valued at 0.003₡/g, then the final credit-cost of the chair might be 15 + (2000 * 0.0003), or 21₡.

Now, while the system incentivizes (via cybernetics) setting the price of products at-cost, pricing for consumers is somewhat fluid: a product might cost 10₡ to produce, but the final price might be set lower or higher to clear inventory (if its cost is too high) or to control inventory (if demand is much higher than supply). It’s important to note that the company the product is purchased from does not realize any losses or gains from price fluctuations and instead the delta between cost and price is used as a productive signal (ie, “produce less” or “produce more”) which is enforced by the cybernetics system.

Cybernetics

Given that productive companies don’t use prices and profits to determine their existence, it follows that some other system comes into play that can make this determination. This is the role of cybernetics: each company has a cost ceiling above which they cannot take on more costs (without transferring them to another entity) and this cost ceiling is adjusted by an ongoing systemic process that works to optimize the overall network health.

The idea here is that companies that operate in the best interests of the network are rewarded by commanding higher amounts of costs (which might be thought of as purchasing power in capitalism), and companies acting against the interests of the network get a lower cost ceiling, and thus have less social investment.

Public market

The public market is a place where members (both companies and individuals) can publish and order each others products and services. In a sense, the public market is like a big worker-owned Amazon.com that uses your incoming and outgoing orders to determine your costs of production.

When member companies order from each other, no money is involved in the transaction. Rather, costs flow from one company to the other. This means that that the larger the network of member companies grows, the easier it is to produce without relying on traditional capital.

When individual members (consumers) order something, the transaction is obfuscated and anonymized, and the credits (earned through labor) they spend on the purchase are immediately destroyed.

Banking

Banking forms the translation layer between the network’s socialist mode of production and the outside capitalist markets. It allows member companies to buy inputs to production that are not available in-network, but also allows individual members to exchange their internal currency (credits) for market currency (such as USD).

This translation layer is absolutely essential to Basis. It forms a protective barrier around the network that shields it from the relations of capitalism, and also works together with the cost tracking system to optimize for profit when conducting transactions in capitalist markets.

It’s important to note that banking is somewhat transitional: when the network grows large enough that most of the products and services desired by members can be produced in-network, banking becomes less and less important.

Credit system

In exchange for labor, credits are printed and transferred to workers. How many credits per-hour or per-year is a decision made between the worker and the company, and is effectively the same as a wage in a market system.

When credits are spent (exchanged for products or services), they are destroyed. This way, they do not enter the productive economy but rather only serve as a means to track a member’s contribution.

Universal Basic Income

All members receive a periodic payment, printed by the system, into a special account they own. This “basic income” can be used to pay for any in-network expenses, such as housing, food, or any other in-network product.

Management of property and resources

All property and resources in the network are owned by the network as a whole (and thus, by all members equally). However, it doesn’t make sense for every single member to be involved in every single decision about property and resource management. Basis provides a framework for determining the stewardship and use of these resources in ways that work for the local participants. In other words, we don’t force a one-size-fits-all approach to resource management, but rather give tools for people to figure it out themselves in a transparent and self-determined manner.

Governance

What good is the communal ownership of resources or worker-controlled production if you cannot exercise any sort of control? Basis allows various types of elections or consensus-based processes so members can define their own systems of governance.

This ranges from voting for people for specific permissions and positions in the system to voting for changing economic parameters.

Public companies/projects

At some point, it’s conceivable that this system might grow to large numbers of members. These members might want to have public services and infrastructure. It makes sense to define the ability to create companies that have some amount of their costs subsidized by taxes.

Examples might be hospitals, schools, bridges, pharmaceutical research, space exploration, etc.

Duality

Basis is a system of duality. The network incentivizes providing products and services to members at-cost, while also incentivizing charging market-rate (at-profit) to non-members. This duality is the main vector for the system’s growth. If you want the benefits of membership, you have to join the system.

Chapter 2: Membership

Membership in Basis is determined by a few system-wide policies, and after that, by policies set by the members of various companies in the system. The global policy is fairly simple: membership is only given to companies that are worker-owned (or are multi-stakeholder companies with a significant portion owned by the workers), and member companies must use the Basis system for their selling, purchasing, and labor time tracking.

Workers of a member company are automatically members of the network.

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Full and partial membership

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Member benefits

Members of the system have access to the resources in possession of the companies they are members of, and also can access all internal products and services at-cost.

What does this mean? If a housing company is steward to an apartment building, members of that company can use the apartments freely provided they collectively cover the costs of that resource (which might be property taxes, insurance, and maintenance). In other words, the housing company has no mechanism by which to extract profit from full members for use of its resources. This applies to not just housing, but commercial property, large machinery, and anything else companies are stewards of.

Members are given use of these resources, and while they are in use, are given control. So in our apartment example, if ten members share an apartment building, there is no landlord…those ten members are their own landlord and must set their own building rules, organize repairs, decide what portion of the expenses each of them pay (perhaps by number of bedrooms or square footage), and/or delegate these decisions to one of themselves or a third party (who might be compensated their time and labor as a portion of the cost of the apartment building).

All members have voting rights in the system. They may vote on issues related to the various companies they are members of, or systemic properties in general.

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  • Rewrite the above with distinctions between full and partial members

Key management

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Member wallets

Members will have one or more “wallets” that stores their credits (more about this in chapter 6) which they can use to spend on goods and services in the Basis economy.

Members will also have one UBI wallet where their basic income is periodically transferred.

Loss of membership

As membership can be given based on global and regional policy, it can also be revoked. For instance, a worker co-op that converts to a privately-owned corporation would lose membership in the system.

Instead of forfeiting use of all network-owned resources, the region would simply engage in profit-extraction. For instance, if the company uses an office building, it is no longer provided at-cost, but rather at market-rate, and same for any housing used by the company members: they would have to start paying rent at market rate.

Thus there is an economic incentive to abide by the rules of the system.

Chapter 3: Companies

Companies are a core concept of the system. They define groups of people within the greater Basis network that have common purpose. This common purpose might be productive in nature, it might be based on shared resources like housing or farm land, it might be a geographical connection like a town, or any other type of association that people want.

Organization

A company is defined as a grouping of individual members, companies, and resources. A company might have only individual members, or all of its members might be other companies. It could be a mix.

The relations defined here allow for any number of general organizations or groups of organizations that might be needed for members. They might want a separate companies for housing and commercial property within their region, or they might want one large company in stewardship of all the resources in that region. They might want companies that mirror the current city, county, and state they live in. Whatever arrangements are used depend entirely on the participants, and members are free to arrange, re-arrange, enter, and exit these structures however they see fit.

It’s important to note that membership in a company could be based on rules defined and enforced by the members of that company (who would have to approve each new member), or membership could be defined automatically by someone using one of the company’s resources which might be the case for something like a housing company.

Resource stewardship

Companies can be in stewardship of network-owned resources, allowing the members of that company (whether individual or other companies) use of those resources. How stewardship is determined is covered in Chapter 7 (“Shared resource management”).

What’s important though is that companies are links between individual members, other companies, and network resources. The ultimate goal is to no longer mediate these relationships through markets, but rather create relations directly between resources and the people who use them, preferring self-management over profits and private ownership.

Cost tracking

Companies are all cost tracking entities. If they order products, services, or resources from other companies (or the market) the costs of those interactions are incorporated into their costs.

For instance, if a company is steward to an apartment complex, it would need to cover the cost of maintenance, taxes, and insurance. It could do this by taxing the members of that company or by passing the costs through directly to those in-use of the apartment building. However, the costs have to be paid by someone.

This follows with productive property as well. If a company is in use of a factory, it makes sense that the company would incorporate the costs of that factory into the costs of their products. This also creates an incentive: because property must be cared for by the occupant, it makes sense to only use what you need otherwise your company’s costs will be unnecessarily high.

Governance

Companies are self-governing, and therefor are free to choose whatever structure they see fit. For instance, how is it decided to purchase or sell a resource from/to the capitalist market? What ecological methods are used to make sure farm land isn’t permanently damaged? Are these decisions made via direct election or does the company elect a minister or council to handle these decisions?

Governance in the Basis system is generalized, and can be done via a number of voting or consensus mechanisms or can be done using a system of permissions that apply either to a member or a group of members (a council). Assigned permissions can be company-wide or only pertain to a specific class of resources. Decisions and permissions can be given by the members, and can be revoked by the members.

Capital pools

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Chapter 4: Economics

Basis defines a system of economics with the end goal of eliminating production for profit and for compensating members based on their contribution.

Basis uses the ValueFlows vocabulary for much of its economic system, which provides a general set of operations that can describe and model an incredibly diverse set of economic scenarios. It should be noted that while Basis does use ValueFlows for whatever it can, it also layers some other things on top of it (like disaggregate cost tracking).

Cost tracking

Cost tracking is a very important concept in a socialist economy, especially absent the exchange of money between producing entities. Basis tracks costs on a per-company level based on that company’s incoming and outgoing orders (what would be “sales” and “purchases” in capitalism). Incoming and outgoing orders are known because they either go through the public market or through the banking system, and thus we can easily determine a company’s total costs.

Each company has a set of costs and a cost ceiling. If a company’s total costs reach their cost ceiling, that company will be unable to take on any more costs (such as ordering new inputs to production or paying members their wages) until they transfer some of them out, which generally happens when someone orders their products. The cost ceiling ensures that costs keep flowing and do not accumulate or stagnate too much. For instance, if a company’s cost ceiling is 1000₡ and their current total costs are 990₡, they might want to seriously consider trying to get some other companies or consumers to order their products, otherwise they won’t be able to pay themselves or order more inputs to production.

It’s worth mentioning that cost tracking is more effective as the network grows: more participants transacting in-network means more accurate cost tracking. Remember, market prices obscure costs, so every time a company has to order out-of-network that’s a cost we can’t disaggregate, and every time a member company sells into the market, those costs are destroyed. The more participants, the more accurate, and ultimately useful, cost tracking will be.

Assigning costs to products and services

How costs are assigned to products and services by each company is completely up to them. They might want to automate this based on inputs and outputs over time. They might want to carefully assign costs manually for each product. They are free to handle this however they want, provided that their total costs are kept under their cost ceiling.

Labor costs

All things take labor to make or use. Apples must be picked. Iron must be mined. Chairs must be crafted.

Basis tracks labor in two ways. First, is occupation-wages, and secondly is occupation-hours. Occupation-wages track the credit values paid out to workers, and occupation-hours track labor in hours that occurred. This means if I work at the widget factory and I make 10₡/hr, then if I work 7.5 hour day, the occupation-wages would be tracked as {"factory-worker": 75} and the occupation-hours would be tracked as {"factory-worker": 7.5}.

From the above, we see that we don’t track just labor wages/hours in total, but rather bucket them by occupation. This gives us more disaggregate information that would otherwise be wiped out by a price: how much were the factory workers paid? How much were CEOs paid? How much was spent in marketing? Knowing these things about a product give us valuable insights into how it was produced.

Which occupations we track is a matter of systemic governance.

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(Semi) raw material costs

Basis can track not just labor costs by occupation, but also costs of raw and semi-raw materials. In effect, if wood from a lumber mill is tagged as a tracked resource, anyone who orders that wood from the lumber yard will have the cost of that wood added to their total costs. For instance, if I make wooden chairs, I need lumber, so I order 10kg of it. The lumber has a cost of:

{
    "labor": {
        "mill worker": 8.0
    },
    "resources": {
        "wood": 10000.0
    }
}

If I pay myself 10₡/hr and I use that wood to build four chairs in one hour, the total cost would be (notice I added in my own labor to the costs):

{
    "labor": {
        "mill worker": 8.0,
        "chair maker": 10.0
    },
    "resources": {
        "wood": 10000.0
    }
}

Now if I price my four chairs equally, the cost of each chair would be:

{
    "labor": {
        "mill worker": 2.0,
        "chair maker": 2.5
    },
    "resources": {
        "wood": 2500.0
    }
}

If a company were to order one of my chairs, the above cost would be subtracted from my company’s costs and added to their costs. If a consumer were to order one of my chairs, the costs are subtracted from my company and both the chair and the costs are marked as consumed and disappear from the system.

The above is a contrived example that ignores things like shipping, amortized costs of machinery, costs of property usage, etc. However, we can see how resource and labor costs accumulate, divide, and flow within and between companies.

Currency tracking

When a company needs to buy something from capitalist markets, it spends currency out of a capital pool to do so. The cost of this currency, like all other costs, is tracked by Basis. This is covered in more detail in the banking section.

Flows of costs

While this has been touched on already, it’s important to note that costs can be created (via labor and resources) but that costs can only ever be destroyed by three processes: consumption, taxation, and market sales. Consumption means a consumer covers the cost personally, using credits they have earned via labor. Taxation is the process of spreading a company’s costs equally among its members over time such that they use their personal credits to pay the cost. Lastly is market sales, where a company sells a product into the market system at which point the costs are wiped out of the system.

Within the productive network, costs are accumulated, divided, and transferred but are never destroyed.

Raw material tracking and costing

By default, all products in Basis are categorized the same way: as a product! A hunk of coal or a barrel of oil is modeled the same way in the system as a pack of socks. So how do we tag certain products as tracked resources?

It makes sense that we would want to track raw materials (oil, silicon, iron) but it also might make sense to track resources that are taken one or two steps further: diesel fuel, steel, various chemicals. How it’s decided to tag a product as a tracked resource is a matter of systemic governance.

It will also be the case that not just the resource type will be tagged, but also its source. Is an old-growth forest being decimated to make gift shop trinkets? Maybe producers or consumers would want to know this information. This helps us not just with individual knowledge, but also systemic knowledge: where are our resources coming from and at what rates? Having exact data on this could help us achieve much better ecological equilibrium.

Once we have our list of tagged resources, how exactly do we cost them? This is another issue of systemic governance. The process behind this is still being decided on.

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Pricing

So far we’ve talked a lot about costs. Does this mean that every product purchased by a consumer will be provided at-cost? No, and there two facets to this.

First, for members, the system will optimize for providing products at-cost. In other words, companies that do sell products for exactly their cost will be rewarded (more on this in the cybernetics section). That said, companies can set whatever prices above or below cost they want. The difference from a capitalist market however is that when a company sells a widget for 10₡ that only cost 8₡ to produce, it doesn’t realize the extra 2₡: the credits are still burned on purchase.

Secondly, for non-members, companies are incentivized to sell at the highest price they can. So each product that is available for public consumption will have at least two prices: the in-network price and the market price.

So why let companies set arbitrary prices at all? It enables things like clearing inventory for products that didn’t sell well, and also it enables inventory control for higher-value items. Member companies don’t realize the delta between cost and price as a gain or loss, but rather it is used as a signal to determine if the production of that particular product should be expanded or contracted. In other words, we retain the signal mechanism from pricing without using it as a distribution mechanism.

This system of pricing is described in “Towards a New Socialism” (Cockshott & Cottrell, 1993).

Cybernetics

Cybernetics is a system of self-regulating and automated control. We employ cybernetics to incentivize companies to act in the best interests of the network. This is done by adjusting a company’s cost ceiling: the more the company acts in the interests of the network, the higher its cost ceiling. In effect, a high cost ceiling translates to a higher social investment.

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Public market

The public market is where members advertise and consume each other’s products and services. It is also the medium by which orders are processed.

Non-member companies and users are free to use the public market for buying or selling, but may have to pay a monthly service fee and/or per-transaction fee. Thus, the public market is not just a system for discovery and economic processing inside the network, but also a vector for growth of network capital and resources.

It should be noted that the definitions, processes, and interfaces of the public market are not going to be defined yet because the need for it is somewhat far off. There needs to be a critical mass of members and products in the system before the market even makes sense to define and plan.

Anonymity

While the transactions between member companies are transparent and freely observable by any member of the network, there are a few cases where privacy is offered:

  • Consumer purchases. Whether a member or a non-member, purchasing goods from a member company is anonymous. The order is viewable by members, but looks like it came from the Basis system directly and is not tied back to the originator in any way. Only the user and the company have the full information on the order.
  • Non-member orders. Any time a non-member is involved in an order, the order details will be available, but the non-member company will be anonymized. This is to protect the privacy of companies who do not wish for their purchasing to be transparent. Like consumer purchases, the order will look like it came from the Basis system directly, and the non-member company’s identity will be anonymized.

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Chapter 5: Banking

Banking acts as the membrane between the network and the capitalist markets. It provides seamless transactions for member companies into and out of the market, tracking currency costs for purchases and evaporating internal costs for sales into the market.

Banking also allows simple conversion of credits to local currency so individual members can purchase things from the market that are not available in-network.

Investment

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Currency tracking

When a company needs inputs to production that are not produced in-network, they need to interact with the market. The banking system allows a company to spend out of a capital pool to buy these inputs. When this purchase happens, the cost of that purchase is added to the company’s costs in the form of tracked currency.

So just like we track labor and resources as separate costs, we also track various currencies. Then that company can assign those currency costs to its products just like it would any other costs. When another company orders one of those products, the capital pool of the ordering company transfers the total currency cost of the order to the capital pool of the producing company. This way, currency costs are repaid immediately as they flow from company to company (or rather, capital pool to capital pool).

When a product is finally either consumed or sold into the market, the currency cost will be factored into the total cost in credits of the product. If the product is consumed by a member, the currency is converted into a credit value using the network’s credit-to-currency conversion rate. For more information, see the section on currency conversion. If the product is sold into the market, the optimal target price will include the currency cost imbued in the product (along with whatever other internal costs there are, converted into a currency value).

Cashing out

Members of the system earn credits for their labor. However, in the beginning the network might be very small and it will be impossible for members to meet even basic needs internally. They might have to turn to the capitalist markets for purchases.

Basis defines a process for a one-way conversion between the internal credit currency and external market currencies. The one-way distinction is important: we only ever want to create credits when labor is completed. This eliminates many forms of speculation and manipulation. When credits are converted to outside currency, they are burned (as they are with purchases).

The conversion rate between internal credits and external currency is defined in the currency conversion section.

Currency conversion

The project defines a method to peg the internal credit currency to an external market currency (likely USD in the beginning). The ultimate goal would be that 1₡ = $1.

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Chapter 6: Credit system

Workers, in exchange for their labor, receive credits. After a labor record has been finalized by the company, the credits for that labor are printed by the system and transferred into the worker’s preferred wallet.

Credits can be spent on goods and services provided by companies in the Basis system, and are destroyed on spending. They can also be freely converted to local currency for purchasing from the capitalist markets.

Properties of credits

While it might be somewhat clear that credits share some DNA with labor vouchers, there are some significant differences.

Credits do not expire. There is no attempt made by the monetary system to limit individual accumulation of credits in any way.

Secondly, credits are freely transferable, privately and anonymously, to other members. This allows for secondary markets, which Basis has no desire to control or eliminate in any way. If your toaster breaks, why buy a new toaster when you can buy your neighbor’s for half the price? It’s not ecological to force everyone in the system to buy everything new. It’s also futile to attempt to eliminate secondary markets completely. So we don’t bother.

The case for non-transferable credits is that people might sell their labor in the secondary market and therefor the secondary market must be eliminated. If we have a situation where people feel compelled to sell their labor in the secondary market instead of the primary market, Basis is a failed system. What we need instead of control and force is strong incentives to participate in the primary economy. For instance, someone selling their labor in the secondary economy would need enough credits to buy the equipment they need up-front whereas if they are a producing member in the main economy, they would be given an up-front cost ceiling (ie, a social investment). Secondly, member companies cannot pay people directly in credits because they don’t handle credits, so if you’re selling your labor in the secondary economy only those who are also operating in the secondary economy can hire you.

Universal Basic Income (UBI)

This particular aspect of the currency system is extremely important. In effect, it acts as the pressure release valve for the entire economy. Let’s first define the properties of our UBI, and then we’ll go over the possible effects.

  • UBI is printed and paid out whenever participants wish to claim it, and is paid based on how much time has elapsed since it was last claimed.
  • Credits and UBI are not interchangeable. They are distinct currencies.
  • UBI is paid into a special wallet that is attached to each network member.
  • The UBI wallet has a ceiling value which caps the maximum amount of value the UBI wallet can hold. For instance this ceiling value might be 12 months’ worth of periodic value. This effectively limits UBI from accumulating endlessly if it’s not spent.
  • Unlike labor credits, UBI cannot be transferred to other members. It is always attached to one person.
  • UBI can only be spent on in-network products and services (including housing costs), and cannot be converted to external currency.
  • UBI can only be spent on non-currency costs of products and services. In other words, if an apple has a cost of 3₡ + $2, the UBI can pay for the apple’s three credits, but the $2 of currency value will have to be covered by credits obtained through labor. The reason for this is that currency costs are an obligation to the market that must be paid back by value creation. If this obligation is not met, the network will go bankrupt and fail. This has another interesting side effect though: producers are incentivized to obtain their inputs to production in-network because it means their outputs will have less currency and consumers will be able to afford them at a higher rate. In other words, a systemic incentive on productive self-sufficiency.

Effects and goals of UBI

We’ve defined a per-person currency that only accumulates to a certain amount and must be spent directly on products and services produced in the primary economy. If the UBI is high enough to be a living wage, what this does is effectively remove the cost of survival from the productive system. In effect, we make it easy to quit a job. This is seemingly banal but the effect is incredible: this would lower externalities in production, lower the labor costs of products significantly, and ultimately make the productive system much more adaptable.

If nobody needs a job to survive, then there’s no systemic pressure to win at all costs, which would effectively not only eliminate entire classes of externalities but also reduce the pressure of competition within the system. No longer do companies have to balance survival with being community members, because survival doesn’t need to be covered by the productive system. Companies are free to expand and contract as members see fit without needing to worry about the welfare of those who might come and go. Industries that find themselves teetering on obsolescence (for instance the coal industry) could be phased out more easily and quickly if the participants in that industry no longer relied on their jobs to put food on the table. What were once bureaucracies can now be adhocracies. The productive system is free to morph and shift to the will of the participants without fear of leaving people behind, and without massive and expensive redistribution programs.

Now imagine everyone gets a living wage just for being a member. It’s quite possible that people might not even feel compelled to take a wage for many jobs. This would mean the costs of products and services is no longer the cost of labor and resources, but just resources. In effect, profitless production in combination with a living wage UBI could make self-organized communism a reality.

There’s one more important point to make. There are entire classes of people who do productive labor every day and are not compensated for it. This includes homemakers, stay at home parents, community service volunteers, artists, etc. Don’t these people deserve compensation for their contributions to society regardless of how markets value their contributions?

UBI Governance

An automated “sufficiency” metric which measures how self-sufficient the network is as a whole (in other words, how much of the participants’ needs and wants are provided internally vs how much are provided by the outside market). In the beginning when sufficiency is lowest, the amount and ceiling of UBI will be set as constant values in the system. As the self-sufficiency metric increases, the UBI amount and ceiling will be more and more controlled by democratic process.

The democratic process is described in the chapter on governance, but in general will involve voting on how much UBI should be paid over time and what the UBI account ceiling balance should be.

The reason for this setup is that in the beginning, the network is fragile and paying out a living wage UBI would have the large potential to quickly drain the network of its value. A network-provided UBI is at its most effective when the network is self-sufficient because it means the value system of capitalist markets have been replaced, allowing us to create our own system of value.

Chapter 7: Management of property and resources

In Basis, there are three main concepts regarding property and resources: ownership, stewardship, and use. Ownership is somewhat static: everyone who is a member of the network owns an equal share of all resources managed by the network. This includes property and natural resources, but really applies to anything tracked by the economic fabric. It’s important to note that while ownership is shared, that doesn’t mean anyone can do anything, but rather everyone has an equal ability to manage the resources that affect them.

Stewardship, held by companies, defines a relationship where a group of people get to decide on how a resource will be used. Keep in mind, a company isn’t necessarily a productive company but can also be a town, neighborhood, or any collection of people with common purpose. Stewardship might mean setting guidelines on how a resource is used, setting time limits on use, determining costs of use, and any other facet that might arise.

Lastly, the concept of use is a relationship in which a resource is in active consumption by either a member or another company. Usage of a resource might often happen by members of the company in stewardship, but this isn’t a given, and anyone can use a resource within the bounds set by the stewards. Even non-members can use a resource. For instance, an apartment could be rented to someone outside of the network for an at-profit rate, the difference between rent of the unit and cost of the unit being distributed back into the network (perhaps to aid in purchasing more apartments). There are no systemic rules on resource usage, only those set by the stewards.

Simplicity and complexity of resource management

The system we use for property and resource usage is somewhat simple: groups of people manage resources. Who manages which resources is a difficult and interesting question, the answer to which is somewhat outside the bounds of this system. In reality, trying to devise a framework which can determine optimal placement of resources within groups of people is futile. The people themselves know which resources they should manage and which they shouldn’t, and Basis makes no effort to enact any one system on them. In other words, the members are ultimately free to decide who stewards what properties and resources.

This is done through the company governance process. Nations, regions, syndicates, and any other type of group works together to determine the optimal stewardship. It might just so happen that organization follows existing city, county, and state lines. Perhaps it will be entirely different. Members are free to organize as they see fit.

Determining use

Determining who gets to use a resource could be as simple as first-come-first-serve. It could be a complicated decision tree based on information that may exist either inside or outside of the network.

For instance, perhaps a community only lets people have a second home if everyone in the community already has a primary residence. To do something like this, the community’s housing company would need to know the usage status of every member, not just in that company, but in other companies.

A regional farming company might give usage of farm land to members under the condition that they follow certain guidelines on land maintenance. They might provide tractors for farming companies with time limits on use.

There are many ways in which use can manifest. Basis strives to provide a system of automating determination of use as a way of reducing administration and increasing member trust. Ultimately though, use can be assigned using any agreement between steward and user, whether automated or by hand. Because companies are controlled by their members, people are free to find the best ways of organizing.

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Fail-safe

There are interesting considerations to the above system of property and resource management. If a housing company has a mass exodus and a handful of jerks find themselves in stewardship of an entire neighborhood which they wish to keep others out of, how is this problem solved? Self-organization works wonderfully if people can form consensus, but if there are conflicts, what then?

Basis has a fail-safe mechanism: people within a certain geographical distance of a resource can band together and change the steward of that resource with a vote. This is a measure that only needs to be used in extreme cases, but will ultimately put the control of a resource into the hands of the people closest to it. Keep in mind, this power only determines stewardship. All other aspects of the resource (including rules on use) can only be changed by the steward.

This in itself is not a perfect system. What would be closer to perfect is if the people affected by a resource were the ones to decide how it is managed, and the weight of their deciding power would be determined by how much that resource affects them. However, determining the amount that someone is affected by something is an impossibly complicated and subjective problem to solve. There are ways to sidestep this complexity and let people communicate this affect, but this itself comes with its own set of issues. Until a better method presents itself, the most effective way to move forward is simply geographical connection. This mirrors a favorable aspect of our current system: local production and decision making. The people of a region know their area and resources better than anyone else, so in the absence of a better method of decision making, Basis gives ultimate decision power on determining stewardship of property and resources to local communities.

Chapter 8: Governance

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Network self-sufficiency

A very important aspect to the Basis network is self-sufficiency: how well is it producing the things its member’s need both in inputs to production and products for consumption? The more we rely on the outside market, the lower the sufficiency, and the more vulnerable the network is.

We use this measurement of sufficiency as a way to automate phasing different states of the network in and out. The idea is that while the network is young and vulnerable, certain aspects are “fixed” and as the network grows and becomes more self-reliant, more democratic control is used as a governance mechanism. For instance, see the section on UBI governance

Definition of self sufficiency

The basic idea here is that network self-sufficiency can be measured by how much people need to go out-of-network to get things. This can be measured on the consumer side via

consumer_sufficiency = (credits_printed_over_time - withdraws_over_time) / credits_printed_over_time

Here, credits_printed_over_time is the total measurement of labor credits we have printed over some period of time (excluding UBI), and withdraws_over_time is a measurement of how many credits were converted to currency over the same period of time.

Consumers converting credits -> currency means that they wish to buy or pay for something that is not available in network, whether this is housing, gadgets, vehicles, etc. It means the network is not providing something they want.

We can measure sufficiency on the producer side via

producer_sufficiency = 1 - (order_credit_value_in_currency_over_time / order_credit_value_total_over_time)

Effectively order_credit_value_in_currency_over_time is the amount of currency leaving the system into the market over a period of time, measured in its value in credits (if we maintain a USD peg then this ratio would be 1:1 for USD, and would fluctuate for other currencies). order_credit_value_total_over_time is the total credit value of all orders of producers (in-network or otherwise) over the same time period. So what we’re determining here is the rate of total currency leaving the system (measured in credits) vs credit value of all productive (not consumer) orders in the system. This gives us a ratio which measures how much our productive system depends on the market (which requires currency to participate in).

So our final sufficiency would be a simple average:

sufficiency = (consumer_sufficiency + producer_sufficiency) / 2

This value, which starts at 0 and as the network relies less and less on the market approaches 1, is used to smoothly transition network states. This removes the need for human controls or governance of certain mechanisms and allows the network to shift operations as it grows.

Chapter 9: Public companies

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Chapter 10: Duality

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References

  • Cockshott, W. P., & Cottrell, A. (1993). Chapter 8 - The Marketing of Consumer Goods. In Towards a new socialism. Essay, Spokesman.