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Modeling Blockchain-driven Global Macroeconomic Evolution - Anthony Di Franco, Refactor Camp 2018

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Talk given at Refactor Camp, May 2018

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Modeling Blockchain-driven Global Macroeconomic Evolution - Anthony Di Franco, Refactor Camp 2018

  1. 1. Modeling Blockchain-driven Global Macroeconomic Evolution Anthony Di Franco Refactor Camp 2018 13 May Austin TX
  2. 2. Economy 2.1β3: ¿Thean? Unfuckening? Anthony Di Franco Refactor Camp 2018 13 May Austin TX
  3. 3. The Problem Long period of apparent stability (with slow accumulation of debt); Followed by rapid accumulation of debt; Followed by crash.
  4. 4. Debt to GDP
  5. 5. Equilibrium models did not (and cannot) predict it “Dynamic stochastic general equilibrium” A priori rule out state-change-based phenomena such as transition from apparently stable oscillations to crash. Nonetheless standard approach among economists.
  6. 6. A dynamical system model did
  7. 7. Answering a question with it Can crypto platforms be economically useful in some way? Be used to address this most pressing of problems?
  8. 8. Cryptoeconomic proposals ● Basic Income ● (Rolling Jubilee) ● Financial gains for all (many)
  9. 9. Basic Income An original motivation of Ethereum Solve identity (sybil attacks) and provide all with basic income Mitigate inequality?
  10. 10. Steve Keen Take three macroeconomic definitions: ● The employment rate: the number of people with a job (L) divided by the total population (N). ● The wages share of output: the total wage bill (W) divided by GDP (Y). ● The private debt to GDP ratio: Private Debt (D) divided by GDP (Y).
  11. 11. Steve Keen Differentiate them with respect to time: ● The (percentage) employment rate will grow if the (percentage) rate of real (inflation-adjusted) economic growth exceeds the sum of the rate of population growth plus the rate of growth of labour productivity; ● The wages share of output will grow if wage growth exceeds the growth in labour productivity; and ● The private debt to GDP ratio will rise if debt rises faster than the rate of economic growth.
  12. 12. Steve Keen Differentiate them with respect to time: ● The (percentage) employment rate will grow if the (percentage) rate of real (inflation-adjusted) economic growth exceeds the sum of the rate of population growth plus the rate of growth of labour productivity; ● The wages share of output will grow if wage growth exceeds the growth in labour productivity; and ● The private debt to GDP ratio will rise if debt rises faster than the rate of economic growth.
  13. 13. Steve Keen
  14. 14. Modifying Keen’s model
  15. 15. Modifying Keen’s model Introduce parameter that has: ● Labor spend a proportion of its wages to buy financial assets from financial sector; ● Thus labor gaining a proportion of its income according to the dynamics of finance, and ● finance gaining this proportion of its income according to the dynamics of wages.
  16. 16. Modifying Keen’s model Introduce parameter that has: ● Labor spend a proportion of its wages to buy financial assets from financial sector; ● Thus labor gaining a proportion of its income according to the dynamics of finance, and ● finance gaining this proportion of its income according to the dynamics of wages.
  17. 17. Modifying Keen’s model Sponsor of this work was developing blockchain-based asset exchange platform with goals of: ● Financializing vastly more types of assets (art, real estate) ● Permitting much broader participation in financial markets and their gains Modeled as labor buying share of financial gains from financial sector.
  18. 18. Results
  19. 19. Modifying Keen’s model Tested range of parameter values 1% labor share of finance to 80% Spoiler: none stabilize economy
  20. 20. Modifying Keen’s model: 10% sharing
  21. 21. Modifying Keen’s model 50% is a special case: financial and labor sectors gain exactly the same income
  22. 22. Modifying Keen’s model: 50% sharing
  23. 23. Remaining model shortcomings No buy and hold. Introduce integrator?
  24. 24. Upshot Debt always explodes! (taking down rest of economy with it)
  25. 25. Upshot Rolling Jubilee looks not just nice but necessary Graeber, Keen, …
  26. 26. Other Perspectives
  27. 27. Econophysics: Bouchaud & Mezard “Wealth condensation in a simple model of economy,” Physica A 282 (2000) 536–545. Thermodynamic model of the economy Velocity of circulation like temperature
  28. 28. Econophysics takeaways Higher velocity of circulation → less wealth concentration Introducing friction to exchanges (constraints on amount / type of transactions) → more concentration Qualitative phases / regimes exist (winner-take-all vs competitive market)
  29. 29. Bernard Lietaer “Community Currencies: A New Tool for the 21st Century” Contemplating taxing holding of assets (instead of taxing transactions). Proceeds could be used for basic income / jubilee like spending or other public goods (the latter historically but should be similar). Structural incentives around transacting also related to time horizons of decision making:
  30. 30. Bernard Lietaer “Community Currencies: A New Tool for the 21st Century” “[C]hanging the "arrow of time" in the investment process[:] Under the present system, the discounted present value of any investment has to be higher than the interest rate of a risk-free government bond. This implies that anything that produces value more than twenty years in the future is basically worthless today, thus providing a systemic incentive not to care about the long-term consequences of our actions. Under the proposed system, the incentive works in the opposite way: income in the future would become more valuable than income today, thereby automatically prioritizing the long-term implications of today's actions.”
  31. 31. Governments do everything wrong (because they want to be in charge) Do the opposite
  32. 32. How to make a real difference with new technologies Wrong: ● Tax transactions ○ Income tax ○ Sales tax ● Prop up monopolies ○ IP ○ Regulating commerce and professions ● Spend narrowly ○ Highly politicized spending ○ Pork given away to cronies ● Heavy financialization focus ● Inefficient markets Right: ● Tax holdings ○ Land value tax ○ Money tax ● Crush monopolies ○ Deprivilege large incumbents ○ Free market anti-capitalism ● Spend broadly ○ Basic income / rolling jubilee ○ “Just give money to the poor” ● Real economy, not derivative assets ● Efficient markets (broad participation)
  33. 33. Discuss!

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