Tuesday, May 8, 2012

Common Theme 2

I said earlier that the commons has become part of the political dialogue. Or at least, I am going to conjecture that it has and we have largely been unaware of it because we continue to deal with many goods as if they could be fully privately held and not be part of the commons. Bear with me because this goes a little of the beaten path.

Ok, if a common good is one defined by two characteristics—subtractability and difficulty of exclusion—then there are many markets that may be defined as common. The issue is that traditional economic transactions may not occur in these instances and thus their nature becomes hidden.

The first would be in areas where the value on a resource is extremely difficult to qualify or quantify. Take for example scenic view scapes. Certainly everyone can agree that a view adds value to a property but quantifying that is difficult. It becomes even more difficult in situations where a view has been obstructed by a nearby property owner. There are few laws regarding view scapes and many are left vulnerable because there exist no protections for this resource.

The second is in the world of money. Money in the modern world is supplied in quantities that are hard to fathom. There is so much money in circulation that one business couldn’t possibly make a quantifiable subtraction from the resource. Yet it is difficult to exclude anyone from using money as it is the basis of all financial transactions. Widespread exclusion from any rights to money would lead to revolt and chaos. Therefore, in order for civil society to function, most people must have access to some amount of cash.

At the level of big banks, governments, and the Federal Reserve the money supply is regularly produced and constricted based on market factors. These factors change the supply of money and the ‘cost’ of it. When large sell-offs and occur, the money goes into short supply. A drought. When this happens it is likely that people and institutions will overdraw and hoard cash, pulling it out of the market. This means that all subsequent uses of money in this system are not just constricted but ‘overdrawn’.

The only solution when money supply is short is to release reserves or borrow money.

If this doesn’t happen then the supply is restricted and people lose access to it. Yet it is hard to keep people fully excluded from the resource and there are increased pressures to release more supply in the form of loans or debt forgiveness.

Basically, money on the scale of economies can be treated like a common good and under those circumstances users have to treat money—at least at certain scales—as such. This means that choke points that restrict how much value can alter in a given time period are necessary. It also means that some institutions may not be self-regulating and may need regulations to keep the resource from widespread depletion.

This wouldn’t require radical shifts in how laws deal with money right now but it would open the door for creative methods of managing the resource that could help prevent further corruption and crashes without overburdening users with regulations.