Ooh, thanks Michael [0], that's true for the current structure of the 
ledger system but there lies the beauty of the new ripplepay-inspired 
system:  No one else cares that David owes you a million yootles.[1] 
You can only get favors from Alice to the extent that she trusts you, 
plus the extent that she trusts David.[2]  As the social/credit network 
grows, you'll be able to pay virtually anyone... You want to pay some 
stranger, Fran? Your IOUs from David are valuable to David's friend Eve 
who is happy to take them and give her own IOUs to Fran who trusts Eve 
(or was negative with Eve)!  You, the user, of course are oblivious to 
all this.  You just know how you stand with each of your friends and 
when you pay someone the IOUs get routed through some chain of 
trust/credit.  Another way to think of it is that the system just tracks 
who owes who what and whenever it finds a cycle of debt it just 
short-circuits it.

What do you think?  The awesomest thing you've ever heard? :)

Dan

Footnotes:

[0] Introductions: Improvetheworld is a mailing list I started at 
Michigan about, well, improving the world (politics, feminism, 
utilitarianism, ...) which I very much hope yootles will do.  Yootopians 
are very welcome to join it.  For those on improvetheworld who don't 
know Michael Schwarz, he's the superstar economist featured in the 
recent Wall Street Journal article about Yahoo!Research.

[1] This is subtle and confusing at first for the uninitiated, but the 
way to think of it is that IOUs and yootles are equivalent.  If I give 
you yootles -- maybe yootles I have or maybe it puts me negative -- 
that's the same as owing you favors.  This is in fact how government 
money works too.  A dollar bill is an IOU issued by the government, 
redeemable by the bearer.  When I pay you with that dollar bill, I'm 
simply transferring the IOU -- instead of the government owing me it now 
owes you.  We just short-circuited a debt-triangle.  (Keep that example 
in mind if the next bit about Alice and David and Eve and Fran is 
confusing...)  Oh, and how do I actually redeem that government IOU? 
Who cares!  Everyone's mutual trust in the government (ok, the federal 
reserve) makes the IOUs valuable in and of themselves.	Just like an IOU 
from a trusted friend is as useful as cash, if you happen to need a 
favor from that friend, or someone who trusts them.

[2] "Trusts" here means "has extended credit to".  Extending 5 yootles 
of credit to Alice means that I'm ok with doing 5 yootles worth of 
favors for Alice before I need to start seeing some reciprocation.


michael schwarz wrote:
> 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"