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The Social Positivists

 the society for the advancement of positive knowledge 

The Egg Exchange Scenario

An entrepreneur going into the egg business may look for investors who donate money and equipment and receive charitable receipts for the value of the investment made. Alternatively, an Exchange can capitalize the business through donations by members, of needed assets.

Producing eggs increases Exchange equity. The egg business is able to acquire investors and capital (supplies and equipment) because the equity represented by the not for profit covers the investments.

Eggs are priced at 5 Ecumens or ecus (ecumenic dollars) a dozen. Bread is priced at 2 ecus (E) a loaf. Ham is E6 a pound. Selling a dozen eggs gives the seller E5.00. This allows the seller of the eggs to purchase a half-pound of ham for E3.00 and a loaf of bread for E2.00. 

The seller does not directly profit from the sale of ham, or eggs or other goods and services. There is no need for entrepreneurs to accumulate capital or to depreciate assets. The replacement of hens or ovens is not dependent on the business making a profit. There is no risk because one’s capital is not consumed or put at risk. In an Exchange profits are as unnecessary as insurance, both represent risk and in an Exchange risk is liquidated.

When hens are needed they are obtained by a simple inter-business transfer. If more eggs need to be produced then the egg producing facility acquires more hens from a hatchery. The Exchange transfers hens from the hatchery to the egg producer. This is just a transfer of assets from one account in the Exchange to another account in the Exchange. Hens go one way (in an accounting sense) and ecumens go the other. This keeps accounts in balance.

People brought up in a climate of risk have difficulty understanding how a business could be set up, operated and expanded without borrowing or saving or making a profit. Yet as members of a family or community this is done all the time.

When you help a friend move you have created a moving company with your friend as the client. You do not receive immediate payment, nor do you make a profit but at some point, your friend will help you or he will help a friend or yours who you owe a favour to. If one friend does not repay your kindness another one does, over-all the economy of your network prospers because of the contributions that you all make to it. Social Networks are informal Exchanges. They are informal because the accounting is subjective. Each person has an account that is debited and credited as help is given and received however the accounting is mental and lacks objectivity.

Exchanges formalize social networks by the addition of a method to balance accounts, i.e. ecumenic accounting.

When a business starts up the community benefits even though the business is privately owned. Even in conventional cultures the equity in a town increases when a new business is started. Exchanges organize what mankind has always done in a better and more efficient way.

When one member buys eggs from another member of the Ecumenic Exchange all shareholders benefit because the equity in the Exchange increases. The equity created by shareholders increases the equity of the Exchange. The Exchange benefits when eggs are sold and when bread is baked and sold and when ham is produced and sold because the Exchange is the economy of its shareholders and as the economy grows the equity of the Exchange grows. This happens in any community it is just encouraged more in an Exchange.

The Exchange provides feed and chicks to those who raise hens and ovens to those who bake bread. The Exchange provides goods and services as debits to the buyers account and as credits to the originating account. The person who provides eggs gets chickens from a local hatchery who is a client of the Exchange as needed. The hatchery is credited the value of the chickens as the egg producer is debited the same value. The hatchery uses her credits to get the farm supplies she needs. The Exchange credits the hatchery’s account for the value of the chickens sold and debit’s his or her account for the value of any supplies received.

It is not possible to externalize costs because all costs are part of the economy of the community, payable by the same shareholders who created them.

Shareholders find it beneficial to help one another because shareholders share and contribute to the same equity pool. One shareholder buying from another shareholder is akin to one friend helping another. There is no risk because the Exchange absorbs the risk and provides the benefit.

To start an egg production business the conventional way chicks, feed and equipment and facilities in which the production will take place must all be acquired. There are papers to sign and taxes to pay along with all the upfront costs. These costs increase risk because these costs may not be recouped. The less likely these costs can be liquidated the higher the interest levied on any money borrowed, increasing risk of failure.

Conventional businesses may miscalculate the cost of setting up production, the owner may not have understood all of the legal requirements that comes with selling eggs or he or she may have miscalculated potential profits and not be able to replace worn out equipment. These costs could be contained within a charitable institution or Exchange. Neither the individual hatchery or egg production facility nor banker or any component of the product stream assumes any risk. Costs and risks are contained within the charitable institution or Exchange. If a business does not do well it is a weakness in the Exchange itself, a weakness in the way assets have been allocated. The Exchange addresses the risk by reassigning assets to other uses. In the free enterprise system, large risk requires or justifies a large return. It is the business owner who must address all the issues evaluate what they mean and determine a solution and as said bear all these personal, financial and emotional costs him or her self.

Setting up an egg farm or any other business is a different experience than doing the same thing conventionally. Chickens are assets owned by a legal person transferred to another legal person only after the first receives an asset of corresponding value. Usually this means units of the national currency. In Exchanges individuals possess chickens and other assets but the ownership or final authority belongs to the Exchange. Chickens are assets transferred from one shareholder to another using the equity (represented by the chickens) as a form of currency. The transfer can take place at any time without any conditions being attached. It is not important if the chickens are under the care of Sam or Sally. The transfer of the asset (chickens) increases the equity of the Exchange. The asset is transferred to where the most value will be generated for all members. As assets in an egg production facility the hens increase the equity of the Exchange more than they would have as eggs consumed. Transfers are processed when the equity of the Exchange is enhanced. Chickens as eggs have only a limited value. Putting the chickens to work laying eggs increases the value of the eggs that were chickens. When the eggs were transferred to the egg producer the asset value increased because of the use to which the chickens were put. The farmer is given Preferred Shares to represent the chickens transferred and the egg producer is debited Preferred Shares to balance the asset received.

Assets represent values to individuals. The value of an asset represents what one individual will give another to obtain it. Equity represents value to the community. To increase economic activity and equity is why Exchanges facilitate the transfer of the chickens from the farm to the egg producing facility.

A free enterprise transaction may benefit Sam and harm Sally and the economy will be hit with social costs. In free enterprise, the net benefit of an exchange could be negative. Sally could buy 1,000 chickens and they all die before adulthood. Private ownership makes Sam and Sally combatants. Each business owner fights to gain an advantage over the other. In an Exchange the shareholder shares a common interest in increasing the equity of the community. 1,000 chickens might still die but it would not impact Sally the loss would be an economic loss; absorbed by the Exchange. The egg producer is an asset of the Exchange not a stand-alone proprietorship.

A family provides its members with what they need. Exchanges provide shareholders with what they need for the same reason. When each member of the family does what he or she does best the family qua family is enriched. Family members provide family members what they need because in so doing the family is benefited. It is a dysfunctional family that prevents members of the family from helping each other. There is and can be some ‘from each according to his or her abilities to each according to his or her needs’ in a family but an economy needs a more formal way to exchange goods and services.

A business that transfers a desk from one department to another increases efficiency without increasing risk; the desk is transferred to make the business as a whole more efficient without increasing costs. There is no danger that the receiving department will default on a desk payment and the seller go bankrupt because of the default, because the two departments are part of the same economic entity and the equity of one is part of the equity of all. The department that gives up the desk sees or ought to see a benefit in giving up something underused to make another department more effective for the objective of both departments is to make the business itself profitable. Equitizing assets in an Exchange produces the same dynamic for shareholders.

Builders, equipment makers, chick hatcheries etc. are assets that belong to a community administrated by those who use the asset to benefit the community. Assets can be transferred to where the need is greater. When more chicks are needed to supply egg producers, hatcheries supply more chicks. The buyer of chicks does not owe or pay the hatchery. The cost of the chicks is deducted from the buyers and the seller’s account is debited. The hatchery is not at risk of default by the buyer because it is the Exchange that credits the seller’s account. The buyer is not in debt to the hatchery or to a bank it has an account with the Exchange that is reduced by the cost of the chicks. It really does not matter about the buyer’s credit worthiness because the buyer and seller have accounts with Exchange and together they contribute to earth’s equity, so long as this equity of earth continues to increase the relative earnings of each account is not crucial.

The egg producer’s customers have accounts with the Exchange so those who need eggs can purchase eggs. For small purchases a local currency is used backed up by the customer’s account with the Exchange.

A debit balance with the Exchange is a debit balance covered by Exchange assets. The debit column is decreased when goods and services are obtained (cash decreases). Cash is spent or the member’s account with the Exchange is reduced. A debit account is buyer equity and a credit account is seller equity. Remember all we are dealing with are equity accounts. When a buyer purchases goods and services his equity account or cash account or account with the Exchange is reduced, credit increases. Consumption action is recorded in the credit column. The seller’s account is credited. The Exchange credit is transferred to the debit column in the sellers account books.

The accounts of the Exchange tend towards zero. The higher the debit account the more credits are pushed by the community members. The higher the credit account is the greater the pressure to increase debits. This simply means the more cash or credit a person has with the Exchange the more the person has to spend. 

If the amounts of eggs being produced are no longer required assets from this market activity are transferred out of egg production. Assets moved from one account are credited. Accounts that receive assets are debited. Ecumens serve as the Exchange unit of account.

Suppliers are not dependent on the egg business producing enough eggs at a high enough price to produce a profit so any liabilities the company has can be liquidated. The Exchange serves as a store of value that sellers can access when wished. The egg production facility provides eggs to those who need them because this creates more value for the economy than to not sell eggs. No one is concerned about the credit worthiness of a community member anymore than a family member is worried about the credit worthiness of someone in the same family. Transfers of assets is just a transfer within the same economy and does not impact the over-all financial health of the community, what is important is the financial health of the community.

If the price of eggs is inadequate as the facility continues to increase debits the economic activity will increase the price of eggs and consumers will buy fewer eggs as the price of eggs increases. The Exchange will transfer assets into egg production or elsewhere, depending on what increases the equity of the Exchange the most. The business is part of the equity of the Exchange and all shareholders find it in their best interest to do whatever it takes to increase the equity of the Exchange.

If one thinks of the Exchange as a family or a group of friends working together on a project, it is easier to understand how an economy composed of not for profits works. 

The free enterprise system is composed of privately owned capitalist businesses that compete against each other. Each business tries to use what it owns in an efficient way to make more money than competing businesses. But people stranded on an island would not allow competition in the way the private enterprise system does. In a closed economy such as exists on this planet, where costs cannot be externalized the group is not benefited if one or two individuals shift costs onto the rest of the group. On an island or in any closed economy, if 70% of the population work and 10% benefit while 20% are destitute the ones in charge are likely to be metaphorically voted off the island.

Exchange accounts are always in balance. The debit accounts of some equal the credit accounts of other members. Debits always match credits and credits are always equal to debits.

If the accounting department of a large corporation decides to separate the tracking of income from the recording of expenses the income tracking office does not have to purchase what it needs from the accounting department. The assets are transferred from one part of the business to the new department. The costs may accrue to the new department and the assets transferred may be recorded as a credit to the department supplying the assets but these are simply paper costs and do not create any additional risk for either the business or any of its constituent departments. The business is not going to push its Accounts Receivables into bankruptcy because it missed a payment. This scenario reflects the process used to create a new business using Exchange accounts.

The costs of setting up a new department are not a liability to the organization. Set-up costs do not pose a risk to a new department in the way they do to a business that is setting up using conventional methods.

When a child wishes to put on a play and needs props and costumes she takes clothes and other articles freely from family members – her need she feels is sufficient to justify them being pressed into service. If additional materials are required, the family purchases them but the child does not incur a debt at least not in the formal sense though a sibling pressed into service may believe he or she is owed a favour in return. The child does not make a profit and the family does not suffer a loss. There is no risk in the venture and thus no need for anyone to be compensated. Yet, a benefit is produced for all the members in the family even as all contribute in varying degrees to its success. Even being part of the audience is considered part of the project. All of this takes place without the profit motive being present and indeed specifically because it has been rejected. To put a monetary on the service and demand compensation is to destroy the very value that would otherwise have been created.

In the same way one member of a family may hand down clothes to a younger sister, members of an Exchange may give ecumens to another investor. Investing using ecumens is a good way to promote economic activity. There is no risk as ecumens are part of an Exchange’s equity and are always spent on products and services available through an Exchange. Giving away ecumens creates business for the shareholders of an Exchange. Ecumens are a perfect way to invest in future economic activity or pay economic development forward.

It always benefits the Exchange when investors spend or gift ecumens because this generates business activity.