Comments: How to do Hayekian Private Issuance

farmer co-ops ... at least back in the 50s worked somewhat that way .... the farmer's co-op grocery store, gas station, hardware, etc ... carried people on account until harvest ... at which time things were settled up.

recent post:

Posted by lynn wheeler at July 18, 2005 12:47 PM

Maybe it would make sense to go even beyond goods and services and accept one's own issue as a tender of any debt towards the issuer.

Posted by Daniel A. Nagy at July 18, 2005 05:29 PM

Are you thinking here that 'tender of any debt' is closer to what it's for? Or are you thinking about a particular debt that isn't covered in the general nature of commerce arising out of a company's goods and services?

Posted by Iang at July 18, 2005 08:46 PM

I am not sure that I understand your question correctly, but I obviously do not mean that the issue should be an obligation to be accepted as a tender of any kind debt. If that were the case, then company A holding the issue of company B could choose to give B-units instead of goods and services, when B wants to redeem their A-units for goods and sercvices. Mutual debt cancellation should be, in my opinion, an option requiring the consent of both parties.
What I was alluding to is that it makes sense for the issuer to accept their issue as a tender of any kind of debt (without explicitly promising to do so). Following the previous example, if B wants to buy back their own units for A-units from A, there's no reason for A to refuse (B-units held by A are a debt of B towards A; A should accept its own units as a tender thereof).
Have I answered your question?

Posted by Daniel A. Nagy at July 19, 2005 07:28 AM

Right, I think I follow. That is the case. To re-iterate: The contract of issue does not oblige the issuer to take own issue for any debt, be it goods, services or indeed other debts. This lack of obligation operates as the check against the holder of the issue.

But it makes a lot of sense; reputation provides the balance that forces the issuer to take his own issue, and the lack of obligation provides us a test of the reputation on an ongoing basis.

Ones own issue *is* ones own company, just like a nation's money is its best representation of its own economy. The USD is the best single measure of the economy of the USA, and the ability of the people (and government via taxes) to deliver value into the future; the same applies to a corporate issue, it is a great single metric of the corporation as a living breathing microeconomy to deliver value in the future. In this sense, as money reduces all value questions into one number, so the float of issue reduces much of corporate value into a single number (it can replace and absorb the debt side of the balance sheet but it can't replace the shares of course).

It would be an extraordinary event if a company didn't take its own issue for anything it could, as its credit rating - ability to pay more employees - and its very reputation is enhanced every time it absorbs and retires units of its own issue. So an offer to exchange A for B is just sweet!

(As an aside, I personally do this with Paypal - I don't "do" Paypal myself, but I pass Paypal across to anyone I know who holds Systemics issue and uses Paypal to buy stuff on eBay. That's an example of a market solution arising...)

Posted by Iang at July 19, 2005 10:29 AM


yes you are right - in broad terms communities do this, and they are called "community currencies." I think the difference between what CCs have done in the past and what the new way is:

* digital issuance allows a much greater reach of audience over the net or hypothetically through tokens (handwaving there), so we can create a different set of communities other than purely narrow, geographic ones.

* Cryptography provides for much greater security against external attacks.

* We now know how to put in place strong open governance regimes that permit unregulated issuers to be safe.

* Finally, the marginal or running costs are zero, effectively. Capital and up-front costs are still present, but they are surmountable and with community help, can be reduced quite substantially.

Posted by Iang at July 19, 2005 11:07 AM

Speaking of agriculture and communities. There's an interesting initiative lead by an English gentleman (his name is Matthew Hayes) in Hungary: the Open Garden Foundation (
Right now they are running a planned economy, which obviously won't scale (I'm wondering how much they are aware of the similarities between their initiative and the way Soviet agriculture was run -- their survey form evoked warm and fuzzy memories of my childhood in the USSR :-); communal farms would send us *very* similar things to Leningrad to find out what the needs of a city-dweller were -- and those evil, irresponsible city-dwellers shamelessly inflated their needs causing both shortages and overproduction (at the same time!)).
I think, that by making the promises within the system transferable and tradeable, efficiency can be improved, and the system can be made scaleable, while preserving all its benefits. I'd like to talk them into adopting a more XXIst century approach. :-)

Posted by Daniel A. Nagy at July 20, 2005 01:49 PM
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