Transcript Document 7273519

Altruistic Economics
AE7: Multiple Currencies
v1.0
www.altruists.org
Recommended Pre-requisite: AE6: Exchange Rates
A presentation by Dr. Robin Upton.
Available for download at www.altruists.org/ae7
Attribution – NonCommercial - ShareAlike
.
Introduction To Multiple Currencies
Introduction to Multiple Currencies
• Users can use any currencies they like
• A Currency is a unit of measurement
identified by a unique URL
$
http://treasury.gov/dollar
• People evaluate transactions either with single
or multiple currencies
• Personal exchange rates are used to convert
currencies automatically
.
Currency Conversion
Currency Conversion
Dollars
• Personal exchange rates represent the
relationships between different currencies
1
• In AE6 we denoted this:
-60
60
Taka
(nDollars, -60nTaka)
Taka
-1
Dollars
For the next few slides, summarise it:
Converts
.
Multi-step Conversion
Taka -> Dollars
Multi-Step Conversion
• Aysha has a transaction request, denominated in A …
… and she wants to convert this into G, but she cannot
convert A -> G directly . What can she do?
Converts
Aysha:
A -> B
Converts
K -> G
Converts A -> II
Converts
-> G
G
II ->
Converts
J -> K
Converts
H -> K
Converts
B -> H
Converts
C -> K
Converts
B -> J
Converts
F -> H
Create an indirect exchange rate, from a pair of direct ones:
A -> I and I -> G
.
Indirect Exchange Rates
Indirect Exchange Rates
• Suppose the exchange rates are:
A -> I
(nI, -60nA)
I -> G
.
6G, -I
4nG, -nI
We use Conflation, as described in AE1, 2, 3 & 5:
60A => I => 6G,
and
n60A => nI => 4nG
A -> I -> G
So the net exchange rate is :
.
.
Multiple Exchange Rates
6G, -60A
nG, -15nA
Multiple Exchange Rates
• Indirect exchange rates allow multiple rates to coexist:
e.g.
A
> I
I
also
6G,
>G
.
A —> B
B —> H
H —> K
K —> G
How to combine these 2 exchange rates …?
.
Combining Exchange Rates
-60A
nG, -15nA
5G, -30A
2G, -20A
nG, -22nA
Combining Exchange Rates
• Consider the exchange ratios of the exchange rates’ components
5G, -30A
6G,
-60A
2G, -20A
nG, -15nA
1:10
nG, -22nA
1:15
1: 6
1:10
1:22
Note that both exchange rates have increasing ratios
(so they define a convex region of strict loss)
In this case, exchange rates can be combined as described in AE1, 2, 3 & 5:
.
Simple Exchange Rate Combination
Simple Exchange Rate Combination
6G,
-60A
1:10
nG, -15nA
1:15
5G, -30A
2G, -20A
1:6
1:10
nG, -22nA
1:22
Never useful, so discard it.
People use the most advantageous
opportunities available …
5G, -30A
… so they use the lowest ratios first:
nG, -15nA
The general case is described in
.
8G, -80A
AE8: General Exchange Rate Combination
Multi-Person Conversion
.
Multi-Person Conversion
• Aysha wants to convert A -> K …
Aysha
Birbal
Converts AA ->
-> II
Converts J -> K
K
Converts
C -> K
Converts
F -> H
Converts
B -> A
Converts C -> F
Converts II -> JJ
Converts K -> H
… but she can’t do so on her own, ...
so she uses Birbal’s statements!
A -> I
I -> J
J -> K
Using different people’s exchange rates greatly increases the options!
.
Complexity of Currency Conversion
Complexity of Currency Conversion
• Suppose we wish to convert A -> B. This may require …
…
A
B
… an arbitrary number of intermediate currencies.
…
A
B
… exchange rates of an arbitrary number of other people.
A
=/?
B
… a lot of calculations just to discover whether or not it’s even possible.
• In general, it is a complex task. However …
.
Reference Currencies
Reference Currencies
… as with barter, complexity
can be reduced by a standard
Medium of Exchange.
• A Reference Currency, R, is one
that is commonly used in
converting other currencies.
REFERENCE
M. O. E.
if
It is possible to Convert A -> B
Convert A -> R and
Convert R -> B
• Friends will tend to use the same reference currencies,
further reducing the complexity
.
Common Reference Currencies
Common Reference Currencies
• Good Reference Currencies are those in which people can
easily express the values of other currencies. i.e.
National or Local Currencies
for Goods:
… since people are familiar with using them
for stating how much things are worth.
Personal Time
for Services:
… since people are familiar at estimating
how long activities take them.
.
Currency-Specific Sympathy
Currency-Specific Sympathy
• AE6 introduces sympathy as a currency-specific exchange rate
e.g. A salaried professional may be
less willing to give time than money
to an unemployed friend …
Friend’s
3
2
1
Sympathy of Time
Sympathy of Dollars
Resource
-3
-2
1
-1
-1
-2
.
Summary Of Multiple Currencies
My
Resource
Summary of Multiple Currencies
• Multiple Currencies are a flexible & easy way to declare sympathy
and to evaluate goods & services
• Personal exchange rates allow for efficient, decentralised trading
in multiple currencies
• Reference Currencies improve efficiency of currency conversion
Recommended Further Reading:
AE9: Personal Time-Banking
http://www.altruists.org/ae9