I agree that it is not necessary to peg Yootels to dollars; however,
some kind of constraint that creates scarcity is necessary. Fixing the
total supply of Yootels to zero is not sufficient. 

Here is a loophole that can destroy this currency unless it is anchored
to something real. Suppose both me and David are at zero Yootels. I
trust David with 1000,000,000 Yootels and he trusts me with the same
amount. Then I give David a favor and he pays me for that favor with
1000,000 Yootels. Now David is deep in the red and I am deep in the
black. I can go around getting favors from everybody in the network and
paying them with the Yootels that me and David created. In other words
any two members of the network can conspire to make one of them bankrupt
arbitrarily rich in Yootels. This may not be a problem in a community of
several people but it is certainly a problem in a community of an
appreciable size.

There are two solutions to this problem. Either Yootels must be loosely
linked to a dollar (then Yootels act like credit). The other option is
to regulate the "money supply" thus making Yootels more like a currency.
The simplest way to do so is to set a total number of Yootels to be
positive and to forbid the members of the network to go negative unless
someone with positive balance is willing to lend them his Yootels (this
is very much like our economy operates, I can not spend money I do not
have unless I can find someone who has money and is willing to lend me
some). 

Michael

-----Original Message-----
From: Daniel Reeves 
Sent: Thursday, November 09, 2006 1:28 AM
To: ykouskoulas Æ comcast.net
Cc: yootopia-discuss Æ yahoo-inc.com; imykouskoulas Æ gmail.com;
thecat Æ umich.edu; bethany soule; improvetheworld Æ umich.edu
Subject: Re: Yootles

Yanni, thanks so much for these thoughts and astute observations!
Delighted to have you as a yootles guinea pig.

There are some real economists cc'd who will correct me if I say
something stupid but let me start by claiming that yootles do not in
fact need to be tied to anything of value.
(Unlike with, for example, gold-backed currency there are always
exactly zero yootles in the world -- that is, the sum of everyone's
balances is zero.)
What we do need is reliable credit.

The forthcoming incarnation of the ledger system is borrowing a
brilliantly simple idea from ripplepay.com
(http://ripplepay.com/about) -- enforce the credit via pairwise links
between people who already trust each other.  In other words, you can
go as negative as your friends collectively trust you to go.
Any subset of the users can default on their debt and it's all vouched
for by the remaining users!

The question of whether yootles should be allowed to be exchanged
with dollars is a trickier one.  Bethany and I have one private
yootles ledger that we use on a daily basis in which no real money is
allowed -- we only use it for things like dividing chores and
paper-writing tasks or who gets the window seat on planes or for
deciding what to do, and sometimes for wagers.

In all other yootles ledgers, buying yootles with money is allowed,
though sometimes it is avoided or frowned on.  Prohibiting it would
be hard unless everyone on the ledger stayed very engaged (which is
why it works for Bethany and me).

Let me postpone the bit about fair playing fields and first make sure
you're with me on my answers so far...

Thanks again for trying out yootles!
Daniel Reeves, Yootler in Chief


Yanni Kouskoulas (ykouskoulas Æ comcast.net) wrote:

> Greetings.
> 
> Sorry for the long delay in my reply. When Dave explained Yootles to
> me, I was completely fascinated, and decided that it is an interesting
> idea that I would like to try. You have an interesting out-of-the-box
> way of thinking about the world.   
> 

> In economics class, I was taught that any currency gets its value by
> being tied to something else of value; it used to be that dollars were
> tied to gold bars, and that gave them their value. 
> 
> In my mind, the choice of what to tie the yootle to seems critical
> in defining its worth and allowing equal and fair decisions to be
> made -- if a yootle is worth more to one person than another, then
> the decisions made are skewed and not quite fair anymore -- and that
> is part of the objective of using yootles, no? After all, I won't
> know how to translate the strength of my preference into yootles if
> the yootle does not have a clearly defined value in my mind. 
> 
> At the end of your paper, you talk about having a yootle be
> equivalent to a dollar. But doing this allows rich people to get
> their way every time; poor people with strong preferences will not
> be able to provide enough services to outbid rich people with weak
> preferences who just want their way and have so much money that
> another 20 yootles doesn't make a difference. 
> 
> In your paper, you mention the option of preventing the rich from
> walking all over the poor in the yootle economy by outlawing
> yootle-dollar exchanges. However, it is difficult to do because
> these exchanges can happen indirectly. 
> 
> For example: Bob can pay Alice enough yootles to get his way, and
> then earn them back by giving Alice a certificate for an hour's
> massage at her favorite spa. No direct dollar-yootle exchange has
> occurred, but Bob was able to essentially buy yootles with cash that
> he paid to the spa for the gift certificate. Another way to look at
> this is to look at the net effect of the transaction: by accepting a
> yootles-based transaction system where a yootle is tied to a dollar,
> Alice has allowed Bob to influence their decisions by by purchasing
> a gift certificate for her. 
> 
> It seems to me that if there is a yootle-dollar equivalence, it is
> hard to prevent a black market from springing up, and then the
> monetarily rich can always get their way. 
> 
> I want to use yootles to help decision making between myself and my
> girlfriend, but I make more money than her, (in fact she will soon
> be unemployed) and unless I convince her that this is fair and I
> can't just buy my way every time, she won't accept it. 
> 
> Another proposition discussed in your paper is tying a number of
> yootles to an hour of unskilled labor. The same problem occurs; some
> people, due to their jobs or life requirements, have more free
> time. When my girlfriend becomes unemployed, she will have all her
> days free, and this could potentially extend for months. During this
> time, I might spend between 11-12 hours a day at work  and have an
> hour of free time to spare. Because of the scarcity of my free time,
> I will not bid many yootles, because I will not be able to pay them
> off. She will be able to simply buy her way, because I have so
> little free time. 
> 
> Would it be better to tie yootles to something else of value? If so,
> how do you establish a level playing field for yootles? One must
> define yootles in terms of something of value that everyone has an
> equal amount of. 
> 
> And I'm not sure what that is...
> 
> What are your thoughts on this? Is it even possible to have a fair
> playing field and prevent some subset of the population who has an
> abundance of something (money or time or whatever else you might be
> able to define yootles in terms of) from getting their way every
> time? Is it necessary to have a truly fair playing field for the
> yootles concept to be fair?  
> 
> -Yanni

-- 
http://ai.eecs.umich.edu/people/dreeves  - -  search://"Daniel Reeves"