Rethinking the Socio-Enviro-Economic System
Dirk Helbing / August 2017

Part V: Reform of the Financial System ... A “socio-ecological finance system” would be efficient, innovation-friendly and democratic at the same time.

Burgess COMMENTARY
Peter Burgess · Founder, CEO at TrueValueMetrics.org Great piece ... the role of money in enabling wealth creation is not well understood but money is a key constraint in limiting socio-enviro-economic performance. When the global financial system failed in the 2007 / 2008 time period, bankers revived banks and related financial institutions by the creation of massive amounts of 'money' ... and the systems is still running on top of a huge amount of this funny money. In engineering there is the idea of potential and kinetic energy ... and this idea has relevance for the world of economics and finance. People have potential and they need something that enables this potential to be realized. Financial money has been how this has been done ... but other ways are possible, and might emerge in the near future including systems built around blockchain and some forms of complementary currency. Thinking in terms of GDP growth and financial wealth cannot work in the modern world as it did 100 years ago or even 50 years ago! Peter Burgess http://truevaluemetrics.org
Peter Burgess

Future Of Globalization ... Part V: Reform of the Financial System ... A “socio-ecological finance system” would be efficient, innovation-friendly and democratic at the same time.

By Dirk Helbing, August 24, 2017

Credit: revers - Shutterstock.com

Takeaways
... The financial system is a coordination mechanism. It decides who receives how much of what resource at what price.
... We have just a few decades to build an ecological, digital economy that consumes much less resources.
... It is important to be able to distinguish innovations that hurt nature or other people from those that don’t.
... With the Internet of Things, the effects of our actions can now be measured at low cost.

Due to the implications of the new wave of automation on the job market and the need to create a resilient and sustainable world, we have to re-invent about half of our economy.

We have just a few decades to build an ecological, digital economy that consumes much less coal, gas, oil, water and other resources.

At the same time, it is important to be able to distinguish innovations that hurt nature or other people from those that don’t — and to promote the latter.

Better coordination systems

How can this be achieved? The financial system is essentially a coordination mechanism, which decides who receives how much of what resource at what price.

But there could be a myriad of better coordination systems. Instead of managing society with a complicated tax system with a 1-2 year delay, the Internet of Things will soon enable a real-time management of complex systems, namely by real-world measurements and real-time feedback.

This can be set up in such a way that the values of society are built into the system (“values by design”).

With the Internet of Things, the effects of our actions, including our “externalities,” can now be measured at low cost: noise, stress, carbon dioxide (CO2), other emissions, waste, etc.

The same applies to desired outcomes such as job creation, social cooperation, education, health and the reuse of resources.

These would be attributed a price or value in the socio-ecological finance system, which would be determined in a participatory way based on a subsidiary organization of the world.

New currencies

With the addition of numerous new currencies, existing alongside today’s one-dimensional monetary system, one could increase the desired effects and activities and reduce unwanted ones. Social and ecological commitment would no longer be expensive – it would pay off.

With such a multi-dimensional feedback and incentive system, a circular economy would basically emerge by itself, driven by new market forces rather than regulation or a digital command economy.

Numerous regulations could be replaced by measurement processes and participatory (subsidiary) pricing processes.

Through a hierarchy of incentive systems, one could promote local commitment to achieve global goals. The economy would become resource-efficient and driven by people’s needs.

Socio-ecological financial system

Businesses and citizens could benefit alike. In the interest of digital democracy and collective intelligence, the socio-ecological financial system would be jointly managed by representatives of the economy, politics, science and the general public as described above in the section on the World Council.

In addition, the socio-ecological finance system could be designed in such a way that it would automatically generate taxes to pay for public goods and infrastructures.

By means of the differentiated, multi-dimensional incentive system, one could manage complex systems much better, and even build self-organizing or self-regulating systems.

The externalities underlying this incentive system would be measured in a crowd-sourced way, using sensors in smartphones and the Internet of Things.

By sharing the measurements and making the data available to all, one could earn different kinds of money. Even without a redistribution of money and wealth, everyone could benefit, simply by organizing the use of resources much better.
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No related posts. 5 Tags: capitalism, currency, economy, finance, helbing-spotlight, internet of things, latest About Dirk Helbing Dirk Helbing is Professor of Computational Social Science at the Department of Humanities, Social and Political Sciences and affiliate of the Computer Science Department at ETH Zurich. Full bio → | View all posts by Dirk Helbing →

An Urgent Appeal to Save the Planet – Dirk Helbing Part I: The Moral Duty of the Elites Part II: Rethinking the World Economy: From Push to Pull Part III: A New Social Contract Part IV: Upgrading Today’s Capitalism Part V: Reform of the Financial System Part VI: Digital Upgrade of Democracy (“Digital Democracy”) Part VII: Guiding Principles for a “Golden Age of Prosperity and Peace” Sustainability, resilience and ethical alignment could be reached with a new, differentiated incentive system – a “socio-ecological finance system” that is efficient, innovation-friendly and democratic at the same time.