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					Altruistic Economics
   A Mathematical Basis
for a Networked Economy
        of Giving


                 A presentation by Dr. Robin Upton.
         London School of Economics, 2004-12-06 18:30
       Available for download at www.altruists.org/ae2

       Attribution – NonCommercial - ShareAlike

Altruistic Economics


 ”I suggest that we are seeing the … emergence
   of a new mode of production in the digitally
            networked environment …
                   (Yochai Benkler)

                   Peer Production
                 Peer                    Production
    … I call this mode “commons-based peer-
production,” to distinguish it from the property-
     and contract-based models of firms and
    markets. Its central characteristic is that
  groups of individuals successfully collaborate
   on large-scale projects following a diverse
cluster of motivational drives and social signals,
 rather than either market prices or managerial

        Coase's Penguin, or Linux and the Nature of the Firm,
           The Yale Law Journal 112 (2001) Emphasis added 

                  .     Routing of Resources
         Routing of Resources
     £££                 cars                   cars
 paint     Factory                Dealership           Showroom
                          £££                    £££

• Resources are routed between and within

• Resource flows are accompanied by backflows of a
  mutually agreed amount of money (price)

                     .   Arguing about Prices
                Arguing about Prices
Traditional, Real-World Goods                            Information-based Goods
   Significant labour & raw material                   Huge fixed costs. Negligible labour
               costs /unit                                & raw material costs /unit
     Price                                           Price

                                   Preparedness                                  Preparedness
  Unit          Room to Argue      to Pay                                        to Pay
                                                             Room to Argue
Raw                                      Raw
Materials                                Materials   Cost
            0        Demand                              0      Demand

         A policy of maximising profit makes the market less and less inefficient!
      Low marginal cost & High value = Lots of room to argue
                       .            Pricing Information-based Goods
Pricing Information-based Goods
          Large fixed costs, small unit costs
            makes pricing a real gamble!
                    Worse still . . .
 • Uncertainty about network effects, adoption rates
 • High start-up costs means less players
 • Fewer precedents to use as a guide for pricing

    Increasing amount of hidden information . . .
    Pricing is increasingly arbitrary and invidious.
             .          Failure of Classical Assumptions
 Failure of Classical Assumptions

      Traditional models look increasingly implausible
           due to social and technological change

              Increasingly skewed distribution of power
              Perfect Information is a bad joke1
              Trust is breaking down
              Economic arena is consuming the social one
               (and all others)
1 See www.ledgerism.net/theInfoGap.htm for more on information gaps

                                           .            Consequences of Prices
   Consequences of Prices
What results from the money backflow?

   Things remain „fair‟ at every point in time
   Parasitism of financial & legal systems
   Pressure to hide information
   Social pathologies: breakdown of trust,
    litigious mania, professionalisation etc …
   Psychological pathologies: contract
    mentality, lessened responsibility etc.
                .     Thinking The Unthinkable…
 Thinking The Unthinkable…
What if there were …
     … no backflow of money?                                 steel
     … no single price?                  Published records
                                                                     Published records

                                              steel                        steel
Both parties record their own               30 Tonnes                  10 Cars’ worth

perspectives on the transaction:                                          cars

      Things might not be „fair‟ – trading parties may „cheat‟
      No parasitism of financial systems
     Valuable resources move only over trusted relationships
      No invidious price-setting required
     Challenge to existing values
                 .        Fairness & Moral Obligation
Fairness & Moral Obligation

• Fairness will be promoted by use of a scoring system
     to keep track of benefit conferred on others.

 • To remove the most significant barrier to fairness,
benefit received (=obligation) should be self-reported.

• Adding legal rights & responsibilities would therefore
      be a superfluous addition to such a system.

                       Single-Value Scoring (Price)
    Single-Value Scoring (Price)
                                Systemic Conflict
               Buyer                              Sellers prosper by        Buyers prosper by
                                                 consistently pushing      consistently pushing
                                                     the price up            the price down
                                                   Buyer & Seller have opposite goals 

                           Inherent Instability

       The most effective at                                       The less ruthless are
  disadvantaging the opposition                                 effectively disadvantaged,
(sic) receive more money, which                                and their influence declines.
  further increases their power.        Buyer
                                         Price               Money becomes so concentrated
=> A vicious circle of increasing                             it bends the financial, legal &
   power for the ruthless                                   political structure to its will… 
                           .            Two Dimensions of Feelings
     Two Dimensions of Feelings

                               +            -2
                                                 -1                Win-Win Quadrant
                 Good for
                                       Good for1          2
                                                                     In surplus it is easy to
                 Right, bad                                           be generous, so win-
                                        Both                  3
                  for Left                                           win activities (such as
             -                                                           service for the
                                                          + Left
                                                                     community) often go
                     Bad for           Good for                           unaccounted.
                      Both             Left, bad
                                       for Right
   Quadrant                     -
                                                                  The blue lines show
                                                                  Win-Win and Lose-Lose
Predatory lending,
                                                                  can get the same scores.
   claims etc.         .          Creating, not Transferring Value
Creating, not Transferring Value
                       3   Right

             1
                                                         Win-Win and Lose-Lose
                                                            get different scores.
          Good for
           -1                      Good for
        -2Right, bad                              Created Value
   -3                               Both
           for Left
                                                  + Left

          Bad for                  Good for
           Both                    Left, bad
                                                            • A 1-dimensional value
                                   for Right               cannot possibly reflect the
                            -
                                                           full reality of a 2-party
                              Multiple-Value Scoring
               Multiple-Value Scoring
                             Systemic Cooperation
                                            Feedback about transactions, means habitual

                                          misrepresenters are easily recognised and avoided.
   The Wider the Better
    (for both parties)
                                                Trading Parties have similar goals:-
                    Value                     seeking wide value-gap transactions 

                              Inherent Stability
   Recipients who habitually
undervalue are less appealing to
future trading partners, since the   Buyer
                                                            The most appreciative of
                                                             what they are given attract
                                                           the attention of future donors.
   value gap will be narrower.        Price

=> Meanness puts people off                               => Generosity is rewarded 

                                      . Social Factors
                Social Factors
Networks of Care are safer than Markets …
  Reputation is a valuable resource - (c.f. E-Bay seller rating )
  Social integration – (We treat friends better than customers …)
  Culture of openness is likely

Spotting Problems …
  Bogus info is easier to see in an open environment
  Defaulters show up as „broken‟ link pairs
  (Decentralised) software could check for fraudulent patterns
  Identity theft may be the most serious danger
                           Ripple Credit
                                      Ripple Credit

If Tom doesn‟t trust Dick…?                         Tom                £££

Need a trusted intermediary…

   If there is no trusted                            Tom                              Dick

     intermediary…?                                £1000
Find some chains of trust…                                              £400
                                                          Larry                    Harry
1 See http://ripple.sourceforge.net                                     credit

                                         Summary So Far
                Summary So Far
Altruistic Economics offers a lot of alternatives to traditional theoretical ‘givens’:

                      Traditional Systems              Altruistic Economics
  Technology                 Simple                          Complex
   Requires               Marketplace                  Network or marketplace
 Information              Centralised                De-Centralised or centralised
    Credit           3rd Party Institutions           Ripple or 3 Party Institutions

    Fairness       Money backflow (Price)            Clearinghouse Function
                                                          or Money backflow (Price)

  Payment                  Irrevocable                 Revocable or Irrevocable
 Enforcement                  Legal                      Informal or Legal

                                     (1) Theory
Altruistic Economics
    (1) Theory


       . Telephone Dilemma
A friend needs a long talk with you. He rings from his
         mobile, and asks you to call him back.

         • Mobile Landline = 10p/minute
          • Landline Mobile = 6p/minute

       Would you call back if your friend asked?
If you had the mobile, would you ask to be called back?
          .         International Telephone Dilemma
  A friend needs a long talk with you. He rings from
  abroad on his mobile, and asks you to call him back.

         • Mobile Landline = 160p/minute
          • Landline Mobile = 8p/minute

       Would you call back if your friend asked?
If you had the mobile, would you ask to be called back?
         .           Telephone Dilemmas - Conclusion
• Selfish behaviour has a long-term cost
• People do act altruistically within
  relationships, especially long-term ones
      “How selfish soever man may be supposed, there
     are evidently some principles in his nature, which
      interest him in the fortunes of others, and render
    their happiness necessary to him, though he derives
     nothing from it except the pleasure of seeing it.”
                          Adam Smith
                    .   Altruistic Economics
Altruistic Economics
Sympathy, s = emotional proximity

A small personal loss is preferable
  to a bigger loss to a friend …
           .   Telephone   Solution
      Telephone                     Solution
                 Sympathy, 0 ≤ s

Example 1:   Indifference value of s      = 6p/10p = 0.6
Example 2:   Indifference value of s      = 8p/160p = 0.05

                      Numerical Example
Numerical Example

Our demonstration world
   has only 4 People:

     Andy      -         A Tax Adviser
     Betty     -         A Gardener
     Coco      -         A Clown
     Dave      -         A Hermit
                   Network Of Care
           Network Of Care

Andy has a Sympathy
of 0.4 for Betty, so
                       .   Time-backed Currency
  Time-backed Currency
Andy, a poor gardener, estimates that 1 hour
 of competent help would save him 4 hours:

      In return, he offers Tax Advice:

                Requests & Offers
      Requests & Offers



            Part Transactions
       Part Transactions

Just match up offers and wants in the same category…

                 .   Possible Transactions
Possible Transactions

    .   Simple Transaction – A1, B1
Simple Transaction – A1 B1
  U0, the selfish (personal) utility function, shows the
      self-evaluated time costs of the transaction.

      U0 is irrespective of the Network of Care

         .           Transaction Evaluation – A1, B1
Transaction Evaluation – A1,B1
   Now apply the sympathy values…


                 1       0.4

So both A and B would like the transaction to proceed. The combination of A‟s care
for B (and the extent of B‟s need) is sufficient to outweigh his A investment of time.
                     .                Transaction Evaluation – A1, C1
      Model Modification
          Limits To Sympathy

• If you would spend £1 to save someone £5,
  does that mean you would also spend £100
             to save them £500?
• Could you spend £1M to save them £5M?

• There are limits to what we do for others, so
   we add limits to sympathy to reflect that.
               .   Non-Linear Sympathy
Non-Linear Sympathy

                        • Sympathy is not constant
                  Gradient = 20

                        • People run out of sympathy
                            & get gradually less
   Gradient = 3

  • Gradient increases with Time Given

                  .   Modelling Sympathy
Modelling Sympathy
      Approximate the curve with straight lines:

      Length 5h, gradient 2, so write it (5h 2)

      Length 5h, gradient 10, so write it (5h 10)

       Express the sympathy as

        Multiplier = 1/s
                Multiplier = 1/s
 A is willing to spend 5 hours to save 10 hours for B
    Hence, sympathy =5h/10h= 0.5

      We will be looking at the reciprocal,
       1/s, which we call the multiplier…

Lengths of Time                 Multipliers

                        .    Earlier Example – A1B1
Earlier Example - A1B1

 Suppose A cares for B as follows:

B gains six hours for every hour of input from A, so
        the transaction has a multiplier of 6.

 A will put in 5 hours of work for B (because 6>2)…
      However, he will not work any more for B,
  since 6<10, so that a multiplier of 6 is insufficient.
                   . Modelling of Credit
        Modelling of Credit
                                2h     1      • Increasing
                                1h     2        multipliers
                                2h     3        show
                                1h     4        reluctance to
                                1h     7        work
                                1h    10
                                                as input is
                                1h    13        used up
                                1h    15
• Curves can be modelled as closely as is required

                      .   Numerical Example
                      Numerical Example

                                           B’s evaluation
A’s evaluation
                                           Cheapest Rate (2):
                                                              12 B = 24 C
 Cheapest Rate (3):   4 A = 12 B                                   .

                                             Next Rate (4):   +24B = 96 C
 Cheapest Rate (3):   6 A = 18 B
     Next Rate (6):   1 A = +6 B
                               .   Numerical Solution - SABC
 Numerical Solution - S                                            ABC

A evaluates       B evaluates        Overall
4 A = 12 B 12 B = 24 C               4A=24C             SABC =   4h 6
6 A = 18 B 18 B = 72 C               6A=72C                      6h 12
1A= 6 B       .   6 B = 24 C         1A=24C                      1h 24

                        .       Multiple Path Example
 Multiple Path Example
Suppose A cares for D, who cares for C as shown below:

                                               We know     4h 6

                                                SABC =     6h 12
                                                           1h 24

                                                           15h 2
                                                           2h      5
                                                 SADC =
                                                           3h 10
                                                           2½h 20

                 .   Intelligent Path Choice
        Intelligent Path Choice
  A has 2 sympathy paths to C, A B             C & A     D   C:

 Simply order the different
 time values by multiplier:

                             15h 2
The combination, SAC =        2h 5
                             4h 6
  • SAC „contains the        3h 10
    intelligence‟ of         6h 12
                             2½h 20
   alternate paths of        1h 24
       sympathy          .     Recording Work Done
       Recording Work Done
• Scoring would encourage people to give more

                  A                     B

• Fairness is satisfied if, for any pair of nodes, resource
  flow from A B is about equal to the flow from B A
              .        Swinging of Relationship Credit
    Swinging of
 Relationship Credit
 • Work Balance can be pushed out in either direction…

       40h 1
                                                20h                40h 1
       20h 2       40h             40h                             20h 2
SBA=   20h 4
       20h 10                                               SAB=   20h 4
                                                                   20h 10
       8h 20       A                      B
                                                                   8h 20

 • Effect of variable multipliers is to restore the equilibrium

                         .   Range Of Applications
Range Of Applications
Altruistic Economics could apply at many levels.
    Each node could represent, for example…

          A person             •         An idea
          A project            •         An institution
          A family             •         A country
Different scales could coexist, adding greatly
  to the power & flexibility of the system.

               .   Multiple Currencies
          Multiple Currencies
                                                       Staff Days

                                                       Staff Nights

                                                       Patients (Public)

                                                       Patients (Private)

• Users offer whatever currencies they like
• Survival of the fittest will decide which are used
• Users may publish rates of conversion between the currencies

                     .     Voting As Currency
   Voting as Currency

1. Everyone receives one unit of a new resource;
2. It can be kept or transferred to others at will;
3. Whoever has the most units of this resource at a
   set time receives special treatment.

             • This is a delegated voting system

         .              Ranking By Relationship Credit
     Ranking By Relationship Credit
Computer/Hardware/Repair            Offers                                 Requests
An F2F trading system      Robin Upton, +120h –40h, Skill= 8.2        Mike Channel, +120h –40h, Rate= 10h
 could rank people by      Computer Hardware, Statistics, Foreign     Help! My scanner doesn’t seem to work. I
                           Languages, Bangladesh Contacts …           urgently need it to do a job on Nov. …
  contribution made.
  This would reward        Kevin Towell, +14h –3h, Skill= 8.8         Mike Flex, +550h –175h, Rating= 70h
                           Computer Hardware, Motorbike repair,       Can you fix my broken Laptop? The
 altruism by meaning       Shop Management, Psychology …              power supply is dead, but probably…

that the most generous
people‟s requests were     James Beckett, +60h –15h, Skill= 7.0
                           Computer programming, Computer
                                                                      Graham Upton, +3h –2h, Rating= 20h
                                                                      I just can’t get my Wireless LAN working
  met more quickly...      Hardware, Electronics, Internet Advice …   properly. It keeps cutting out, just …

Rewarding generosity, not selfishness, is the opposite of how capitalism works…

                            .        Tale Of Two Systems
  Tale of Two Systems

Economic System Capitalism                      Altruism
   Assumption       Selfishness Love of Others
     People         Irrelevant     Essential
     Maths           Zero Sum               Positive Sum
     Wealth          Resources              Relationships
Scoring System       Provision                   Provision
 Encourages …         for Self                  for Others

              .   (2) Practice - Nearest Info
Altruistic Economics
    (2) Practice


         Nearest Info
         Nearest Info
     A File-Sharing System for WWW

What proportion of websites have …
Resources for download?                             __%
Links to friendly sites?                            __%
A search mechanism for links?                       __%

     .    .    One Interface to Search them All …
One Interface to Search them All…

1.    Search the site you are on for resources   …

2. Automatically follow the friendly links   …

3. Repeat Operation 1. from that site!

                      Limiting Searches
        Limiting Searches
Many rules could allow resource to be kept finite:

     Time         - “Stop after 2 seconds”

     Node count - “Stop after 10 searches”

     Depth        - “Stop at Friends Of Friends”
Similarity is a more                                           Manually-
                                                             entered values
logical and intuitive
way to limit – and to           0.5
direct – search
effort.                         0.5                   0.35

                              0.8     0.7      0.6           0.9
  Search sites with
 similarity > 0.33:           0.4     0.35

                        0.6                          0.3
                                    0.3      0.6

              .         Altruistic Economics Testbed
  Altruistic Economics Testbed

• Nearest Info is a system to distribute digital
  resources amongst websites

• This provides a real-world application of
  resource flow in a network of friends

• Altruistic Economics is intended to reward
  those that help the others the most
            .      Altruistic Accounting Model
Altruistic Accounting Model
Specify the key factors as separate currencies:

                3-Currency Model:
   Site owners benefit from Attention             Attention (A)

       Site owners pay for Bandwidth              Bandwidth (B)

            Viewers benefit from Data             Data (D)

Restriction on system usage:
                Single Constraint:
    Each server has a maximum load                CPU Time (C)

                          Costing Actions
                     Costing Actions
#                Transaction                Attention Bandwidth CPU Time             Data

T1 Receive a Search Request                       0           b            c          0
T2       Send a Search Request                    0           b            c’         0
T3       Receive Search Results                   0           b’          c’’         0
T4 Send back Search Results                       0           b’          c’’’        0
T5            Search the site                     0           0           Ck          0
T6         Request a Download                     Ai          0            0          0
T7        Dispense a Download                     0           Bi          ck         Di

     i   – Different for different files,    k   – Different for different servers

                                .     Transaction Sequence
            Transaction Sequence
T0: User Makes Search Request
                                                          This Site      (j)      Next Site       (k)

    T5 –Search this Site              j                   ( 0 , 0 , Cj , 0 )

         T2 –Send A Search Request                        ( 0 , b , c’ , 0 )

         T2 –Send A Search Request                        ( 0 , b , c’ , 0 )
              T1 –Receive Search Request                                          ( 0 , b , c’ , 0 )
                   T5 –Search this Site                     j                    ( 0 , 0 , Ck , 0 )
              T4 –Send Back Search Results                                       ( 0 , b’ , c’’’ , 0 )
    T3 –Receive Search Results                            ( 0 , b’ , c’’ , 0 )
T6: User Requests A Download                              ( Ai , 0 , 0 , 0 )        Other Site          (m)

                     T7 –Dispense A Download   (File i)                             ( 0 , Bmi , cm , Di )
                                  . Choosing A Policy
          Choosing A Policy
A shared accounting framework does not mean that
policies must be shared.
 Policies cannot be evaluated independently - (Except trivial ones)
 Users will change connections & policies dynamically
 Calculating optimal policies is infeasible
 Design pragmatic, satisficing policies, using theory from Game
      Theory, Artificial Intelligence & Dynamic Stochastic Control …

De-centralised choice of policies, but note that …
  The accounting system minimises the incentives for information hiding
  Sympathy structure ensures a non-zero sum game

                            Example Policies
               Example Policies
1. Search/forward if CPU cycles are spare, otherwise reject
2. Never carry out or forward search requests
3. Perform search and forward requests on a FIFO basis
       Efficient Policies may not be hard to deduce, depending upon…
       Personal Utility Function:           Efficient in what sense?
       Time Scale:                          Infinite/Finite Horizon?
       Other Players:                       Fixed/Variable Policy ?
       Dynamic Stochastic Control literature needs to be looked into …

                                Model Set-Up
               Model Set-Up
To join Nearest Info file-sharing system, webmasters will

1. Upload the site code to their server
2. Enter their resources for download into the database
3. Add their friendly sites into the database, specifying
   •   Similarity
   •   Sympathy
4. Specify Their Maximum Server Load       (?)


 From URL                                                 From URL
            Encrypted                    Disburse                    Encrypted

  Search Request                         Queries          Search Request

      From URL                                                From URL
                        Encrypted                                                Encrypted

       Search Results                   Aggregate              Search Results

See Nearest Info Project Summary for more details …

                                    Initiative Partners
               Initiative Partners
  Developing Altruistic Economics.
  30,000+ links to progressive sites.
  Complementary currency developer community
   Popular open source website platform (PHP)

                            Real World Resources
             Real World Resources
              Address                           Database of …
                                                Free belongings

           www.free2.org                     Free Goods & Services
                                                 Lifts in Cars
                                                Courier Service
  irational.org/cgi-bin/accomodate           Free Accommodation

       Free Software has inspired Free Hardware.
    Altruism is an increasingly powerful motivation …

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