Economic Democracy via Social Resource Allocation
Sept 25, 2015

Theory is useless without implementation.

If people in the 17th century read Newton's Principia and then simply went about their lives as before, then it would've been another useless book. Likewise, mastering Smith's The Wealth of Nations would useless if it won't lead to any nation or society becoming sustainably wealthy. This is why our main effort is in implementing Smith's free trade system, as Social Resource Allocation, which incorporates all his ideas such as the division of labor in society, commodity-based valuation, the use of ratios (instead of equations), and profit-sharing or giving the real value of the produce of one's own labor, among others.

What is Social Resource Allocation or SORA?

SORA is our response to Smith's call for an alternative to money of the commercial system:

Money in this respect may be compared to the high roads of a country. It does not create corn or grass. But it circulates all the corn and grass in the country.If we could find any way to save the ground taken up by highways, we would increase considerably the quantity of commodities, and have more to carry to the market.

Lectures, Division 2, Chapter 9

Technically, SORA is a resource clearing system that circulates goods, services, and even money itself between 'dealers and dealers' and 'dealers and consumers' in order to increase sales and profitability by reducing the use of money and nominal value instruments, which Smith saw asDaedalian wings which can render any economy unstable. This can be seen in the 1929 crash (stocks), 1970's oil shock (petrodollars), Black Monday (stocks), Asian Crisis (hot money), Dotcom Bubble (tech stocks), and the 2008 Financial Crisis (derivatives), all caused by some form of nominal value instrument in parentheses. All those instruments (nominal value) resulted in an economic downturn or a decrease of real value in society.

In SORA, data and artificial intelligence replace money as the key tool of trade. Money, cryptocurrencies, shells, and pebbles can still be used to represent value-data, just as an actual car, banana, and musical performance represents the value-data of a car, banana, and musical performance.

Since we define commerce as the exchange of money for goods and services, and since money is included in SORA, then we can say that commerce is a kind of social resource allocation. This means that SORA is not anti-money, but rather against the dominance of money, in the same way that Britain is not against their Queen, but is against her dominance, different from the US which is anti-monarchy or, conversely, North Korea which is against anyone who is anti-Kim. Thus, SORA is in the center or in-between any two sides.

A System Based on Agreements and Fellow-Feeling

By reducing the circulation of nominal value and increasing that of real value, the users of the system can be better insulated from the crises mentioned, so that they in turn can keep producing during such times.

Therefore, the poverty of any country increases as the money increases. Money is a dead stock in itself. It supplies no life convenience.

Lectures, Div. 2, Chap. 9

Zimbabwe prints a lot of money, but is very poor

Though Smith explained the philosophy behind such a system, it was Jean Baptiste Say and John Maynard Keynes who were the ones to propose its real-world implementation, through binding agreements:

When a superabundant article can find no vent, the scarcity of money has so little to do with the obstruction of its sale, that the sellers would gladly receive its value in goods for their own consumption at the current price of the day: they would not ask for money, or have any occasion for that product, since the only use they could make of it would be to convert it forthwith into articles of their own consumption.

Say, Treatise

The proposal is to establish a Currency Union..based on international bank-money, called bancor, fixed (but not unalterably) in terms of gold.. for the purpose of settling international balances.. an agreement might provide that, in the event of one of the contracting States having a debit balance with the Clearing Union exceeding a specified proportion of its quota on the average of a period it should be free to resort to import regulation or to barter trade agreements or to higher import duties.

Keynes, The Keynes Plan

If academics in the 19th century understood The Wealth of Nations, then they would easily go against the Capitalism and Utilitarianism of James and John Stuart Mill. Without Capitalism, Marx would not have any need to create Communism and the Cold War would not exist. There would probably still be World War I unless the Europeans also understood The Theory of Moral Sentiments which was supposed to grow fellow-feeling among the humans as to prevent war. This idea of fellow-feeling manifested somewhat in the works of Keynes, but clearly was not present in the works of Samuelson * who wrote:

When the rich man's dog gets the milk that the poor man's child needs to avoid rickets, is the system working badly? No. It is working as it is designed to do - putting goods in the hands of those with the most money or dollar votes.

Samuelson, Economics
*Samuelson proves that Economic systems are desgined to let the poor die out, in favor of the rich.

What is a Society?

We define a society of collection of entities that work together towards a common goal. A society of plants works to maintain plant life. A society of lions works to maintain the lives of lions. The early humans formed societies as clans and tribes in order to support their own existence. But as their cognitive faculties developed, they realized that other humans, animals and plants are essential to their own life and so they developed human rights, international law, and environmental rights as part of their enlarging social system.

A team is an example of a society. Excessive ego, or overweening conceit, is its enemy.

A failed society is one where its members fail in their existence by a failure of their social system. This failure occurs during either man-made disasters such as wars and economic crises, and natural disasters such as volcanic eruptions and climate change. Our proposed science of Social Superphysics  deals with man-made crises, with its child science called SORAnomics  (the study of social resource allocation) dealing mainly with economic* ones.

*We use the words 'economics' as budgeting and economizing, 'Economics' as the economic science emerging from the Marginal Revolution to Samuelson, 'Economists' as the followers of Economics, and 'OEconomists' as the followers of Physiocracy. 'Capitalism' is a subset of Economics that favors the equity-owning people. 'Mercantilism' is the precursor of Economics which favors the merchants or inventory-owning people, which includes bankers who own an inventory of money.

We define economics as the allocation of resources, such as for a field of crops (crop management or crop economics) or a fleet of cars (fleet management or fleet economics), consistent with the words 'budgeting' and 'economizing'. A failed social economic system is one that fails to provide for the maintenance of its members. This failure can manifest as a family-society abandoning its children, or a town which has abandoned people who still want to be part of that society (i.e. do not commit crime). While Economic systems do not care about such abandoned people, as proven by Samuelson's quote, a proper Social Economic system such as SORA does.

SORA deals with resource allocation for the wealthy, as an enterprise resource allocation systen, and even for dirt-poor humans and even plants and animals, as a disaster relief system

What is a Proper Social System Supposed to Do?

Humans do not exist for the sake of existence, such as eating and sleeping like animals. Rather, human existence is just a means to an end. It follows that the effort for self-preservation should be allowed up to a certain extent, relative to the goal. One grabs a pen not for the sake of having a pen, but for the goal of writing something. The existence of the pen is essential to, but is insignificant, relative to the existence of a great novel or treatise that can be written with it. In order to make that great novel, the existence of the pen must therefore be preserved, or in simpler terms, the pen must be cared for.

Making money is not the only thing that people in society do. Some humans want to develop their arts to feel good, and so a proper social economic system must also be able to preserve those arts.

Therefore, the proper economic system not only is designed for its members to achieve a basic existence, but also provide avenues for their development. Each person's direction in life is different, yet is reliant on others. For example, a baker's goal is to bake bread, but is dependent on the wheat farmer, who is then dependent on the fertilizer maker, who is then reliant on the mineral miner, and so on. This personal direction under the regard or oversight of others is called svadharma or self-dharma (In Hinduism, the oversight is done by God). Injustice is done when people's dharma is violated and are made to do something that is not natural for them (adharma).

How Can a Social Resource Allocation System Create Economic Democracy Better than a Commerce-Only System?

Merchants created the commercial system which was later developed by Economists as the current Economic system. Then and now, this system has failed regularly because every value is translated into money, which is then controlled by banks or some monied persons. A bank will give credit only to people or activities that have commercial value or value that the mind can assign a number to at the current time. It does not give funds to unseen value such as in the unseen labour being done by a rainforest in cleaning the air, the health benefits of eating vegetables, and inventions that will only have impact after long and costly research. The people who are not able to get access to these funds lose access to their society and end up as anti-social elements as gangs, rebels, and terrorists. Moreover, the centralization of value as money also creates boom and bust cycles as the money is either pumped or withdrawn from the economy, in the same way as the kings of the past had arbitrary power over the taxation of his peasants and vassals, and the spending of such revenue.

The formalization of the Commercial system as Capitalism of Economics in the 1870's and Global Capitalism in 1945 via Bretton Woods creates a pattern of increasing crises followed by collapse

If you went back in time and told a feudal lord or king to voluntarily give up his political and economic power after 6 or 8 years to be replaced by someone who would be able to use such powers better, as to sustain his kingdom longer, he would laugh at you and think of you as crazy. Likewise, in the current economic system, it would be absurd to tell a CEO of a too-big-to-fail bank or corporation to spinoff some of its businesses, or to tell a central banker to not do quantitative easing and instead just breakup big corporations for a more sustainable economy. It would also be in vain to tell a communist leader to split up the communist party or to sell state-owned enterprises to prevent their arbitrary control of society and the economy.

But in a social resource allocation system, such decentralization of economic power would be a fundamental idea directly related to svadharma and justice. The poorest person would have the same access to economic information as the richest person, allowing everyone to make better resource-allocation decisions such as employment, purchases, and investments. More importantly, an economically democratic system would prevent having a single point of failure so that the economy can continue even if banks collapse, or if a president overprints money, making the society resilient to crises.

Political democracy didn't come to the world overnight -- it arrived through a series of upheavals and tragic wars. We expect that our proposed social resource allocation will also follow the same pattern, arising only after a series of severe economic crises and depressions, such as the Great Depression, 1970's stagflation, 1997 Asian Crisis, 2008 Financial Crisis. Thus, we predict another big economic crisis within 10 years to fill this pattern, especially since the core beliefs in Economics have largely remained unchanged.