With all the attention to money and payments related topics here at Red Planet Dust lately I feel inclined to explain how this fits in with the theme of this blog: investigations into human collaboration.
Crucial in the development of our societies was the introduction of mechanisms that would allow collaboration between groups and their members without the need to constantly tune what we do with (all) the others. For the lack of a better word I call this “implicit collaboration”. We tend to internalise these mechanisms very successfully, both socially as a group and psychologically as an individual. To an extend that we in general do not even see them as mechanisms any more and that most of us take the outcome of these mechanisms as absolute truths. (e.g. capitalism is best, democracy is best, my religion is best, etc. etc.)
Money is one of mankind’s most important and far reaching conceptions to facilitate large scale collaboration. Our conception of money has been developing over time. Today we see new technologies and new concepts like Bitcoin emerging and rapidly proliferate that have an impact on our conceptions on currencies and payments. If money changes it will have a major impact on our ability to collaborate.
The effectiveness of a currency (or payments) has to do with being frictionless, with the lowest amount of transaction cost, with the widest inclusion and safety and being highly democratic. The more efficient our money (as expressed in currencies and in payments as there logistical facilitator) becomes the better it is for the efficiency and effectiveness of our means to collaborate. NB Currencies and payments can be judged against this measure.
I have been quoting Felix Salmon regularly the last couple of posts, this time I fully agree with him:
Payments walls, these days, are extremely effective barriers to trade, and if they come down, then we’ll get much more trade, with transactions getting orders of magnitude smaller than what we’re seeing now. The disruption – and the global wealth creation – could be truly enormous.
But a universal payments system with no friction or interchange costs could change that model dramatically. And it would certainly help to level the playing field – for good and for bad – between skilled service-sector workers in countries like India and Russia and China, on the one hand, and their counterparts in countries like Germany, Japan, and the US, on the other.