For a small enough group it's certainly possible to pull yourself up by 
your bootstraps and establish the value of a yootle out of nothing but 
mutual expectation. [1]  For larger groups, I recommend keeping it tied 
to dollars until the yootles economy has enough momentum of its own.  A 
simple way to do this is to follow the protocol we use in the New York 
office:  whoever is most negative picks up the lunch tab and collects 
everyone's share of the bill in yootles on the ledger.

But my feeling is that even when it goes off the dollar, the value of a 
yootle does self-stabilize, at least enough so for practical purposes. 
[1] When things get out of whack there are also some tricks that can be 
used -- adjusting interest rates and tinkering with the money supply by 
allowing a central bank to go negative or positive via taxes and credits.

Thus, my conjecture is that in the long run we won't need to tie yootles 
to anything else of value.  Of course, the proof of the pudding will be 
in the yootling...

Your other question is, when yootles are in fact tied to something of 
value (let's say hours of labor), will it be unfair?  Will the 
unemployed be able to trample the interests of those of us who really 
don't have time to go clean someone's bathroom to get out of yootle 
debt?  I say no, it's not fundamentally unfair because the transactions 
are always win-win.  The person with lots of free time will be happy to 
spend their time in order to get their way in group decisions or 
whatever else yootles are used for.  The busy person will be happy to 
make some sacrifices in order to buy some hours of valuable labor.


Footnotes:

[1] At least for groups of order two [2] we have empirical evidence that 
the bootstrap, mutual expectations method works.  Bethany and I have a 
private yootles ledger disjoint from real money that we use on a daily 
basis for everything from deciding who codes up a betting mechanism we 
thought of to how to split the last 5 pieces of ravioli 
(dreeves.wordpress.com).  It's true we've had surges of 
deflation/inflation but it's clear that yootling, for us, finds far 
fairer and socially efficient resolutions to everyday decisions than we 
could do by trying to remember who did what for whom last and, more 
saliently, second-guessing each other's utility functions.

[2] Completely unrelated, but pretty delightful:
   http://www.youtube.com/watch?v=UTby_e4-Rhg
     (Finite Simple Group (of Order Two))


Yanni Kouskoulas wrote:
> Very interesting answers.
> 
> I accept and understand points made by Michael and Steve and Kevin about 
> how the supply of a currency affects the value of that currency, and can 
> affect inflation. And while I agree that controlling supply is part of 
> what gives a currency value, it seems to me that it is not sufficient; 
> one must also have a demand for the currency for a value to be set.
> 
> The problem in my mind is not understanding the effect of supply, it is 
> understanding where demand comes from, and what puts the demand curve 
> for a currency for an individual in one place as opposed to another 
> place. Clearly demand for yootles is determined by their utility; but 
> what determines the utility of a yootle to an individual?
> 
> Kevins answer addresses some of this. His argument that demand is set by 
> peoples expectations; they expect it to be worth something, and so it 
> is. But it begs the question of how their expectations get set, and how 
> everyones expectations are synchronized to be the same. If I have one 
> expectation for the value of a yootle, and you have another, the 
> currency system will break down because one of us will be surprised at 
> what we can or cannot buy. Kevin's summation is somewhat convincing to me:
> 
>>  As far as fundamental value goes, I think a yootle needs to be tied
>>  to something else of value to have any real value in itself, at
>>  least until people become accustomed to the system
> 
> I agree that it seems that a yootle must be tied to something at some 
> point, to set the expectations of its utility. I could accept that a 
> currency could be "not tied" to anything if people have a general 
> expectation of how much that currency is worth. But the expectation must 
> be set in the beginning, somehow, and synchronized and maintained. Once 
> it is untied, I am unsure how synchronization of peoples expectations of 
> the utility of a yootle is maintained.
> 
> As a point of curiosity/interest, I was taught that the dollar is 'tied' 
> to something of value even today and that something is banking 
> transaction services.
> 
> As it was explained to me: One of the Feds functions is clearing checks 
> between large banks. This service indirectly backs your ability to write 
> checks on your checking account, because small banks use larger banks to 
> transfer funds, and largest banks use the fed. So it is a useful service.
> 
> The Fed clears a finite number of checks a day which correspond to some 
> amount of currency transfers and some amount of labor. You can get the 
> Fed to do this by paying them dollars.
> 
> This labor backs the value of the dollars in circulation, because the 
> fed guarantees that you can always exchange dollars for banking 
> transaction (check clearing) services. Conceptually, if you give the Fed 
> a few pennies, they will clear your check for you. That is a guaranteed 
> exchange, and that is how dollars are tied to or backed by banking 
> transaction services.
> 
> So it used to be that the Fed guaranteed an exchange of
>		   dollars   gold
> and now it guarantees an exchange of
>		   dollars   banking transaction services
> 
> There is nothing special about banking transaction services; they are 
> just the service that the Fed guarantees you can buy with your dollars. 
> There is something special about the Fed, since it issues those dollars 
> and this is what creates the "tie."
> 
> That was the source of my resistance to a tie-less currency, because 
> that is how I thought peoples expectations about the amount of value a 
> particular currency holds were set and maintained and synchronized.
> 
> Mabye, as Kevin suggests, once the expectations are set, they remain 
> synchronized without necessarily having a tie.
> 
> So mabye I can summarize my remaining questions thus:
> 
> A: If we have tied yootles to something of value, how do we prevent 
> someone who has an abundance of this resource from getting their way 
> every time? Is it necessary to prevent someone from doing this to have a 
> fair system?
> 
> B: If we have not tied yootles to something of value, how do 
> expectations of the utility of a yootle get set, synchronized and 
> maintained for individuals (specifically referring to the demand side of 
> the yootle-value equation)?
> 
> It is entirely possible that the answer is B and someone can point me to 
> a theory or paper that describes this mechanism..
> 
> -Yanni

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