*Please note, I am not an economist! These are just my opinions and reflections as a student of business and a lover of humanity and the ecosystem.
Introduction to Externalities
As a young man in my late teens I felt like I was born to rebel against the capitalism structure. It didn't seem fair to me that corporations could legally expose society to the negative impacts of operations without having to pay the true costs of the pain, damages and suffering being created from their immense profits.
It felt wrong that corporations could simply externalize their true costs in an act of evil laziness simply because it was 'legal' to do so. It made me very angry!
Then as a freshman at The University of Wisconsin-Madison I took a class in microeconomics and I learned about production and consumption externalities. I realized that in fact it wasn't 'capitalism' that was making me want to rebel, it was a corrupted and unregulated form of capitalism that was creating deep levels of inefficiencies and limitations in our society and spirit.
In order to unlock our true potential for innovation, sustainability, equity, justice, peace and love we must find a way to correct the rampant negative production externalities.
That's where legendary economists Alfred Marshall and Arthur Pigou came into my life. These are the economist who in the first part of the 1900s developed the concept of the externality. In 1920 Pigou published "The Economics of Welfare" in which he explained that the chimney smoke in London caused economic and social damages to the greater society yet they were not compensated.
Pigou's solution to externalities was for government to impose taxes or an additional cost to the producers of negative externalities. This additional cost is meant to reflect the true economic circumstances, thereby adding cost, increasing market pricing and ultimately leading to a lowered demand or avoidance of the output, and thus a far more efficient outcome. In some cases in some countries there are examples like tobacco, alcohol, noise pollution, air pollution, and other costs which are being properly taxed, but overall, a lot of the costs are not being accounted for.
The Pigouvian tax concept is great in theory, but unfortunately we live in a society in which the corporations that profit from the externalization of true cost also manage the politicians and create the laws thereby making certain these costs remain in the public sector, and profits remain unnaturally high as the rest of humanity sits by and watches our environment and integrity get destroyed everyday. In true university academic fashion, Pigou created a wonderful solution that has no evance or applicability in the real world.
100 Years Later… Nothing Has Changed!
Fast forward to almost 100 years later. The problems identified by Pigou and Marshall have yet to be solved! The taxes are not creating true economic efficiency. Humanity is far away from reaching its productive potential. We remain in a capitalistic mess of primitive proportions leading to the current collapse of ecosystems and social decay that is facing our species today. I think it's pretty fair to say that Pigou's tax solution isn't working.
There is a devaluing of ecological resources by capital markets and financial institutions. The food at McDonalds, the grains from Cargill and underwear from Fruit of the Loom are dramatically underpriced given their true costs of production that are currently being absorbed by greater society and the consumers of their products.
Carbon emissions, methane gas emissions, destruction of freshwater resources, destruction of soil, desertification, cruelty to animals, consumer health impacts, air pollution, and other costs are not being factored into the price of the goods. If the true cost was represented in the price very few people would be able to afford the products offered by McDonald's, Cargill and Fruit of the Loom. Plus the people who could afford the true price tend to be intelligent enough to understand that these products are crappy and they would be best served to instead purchase higher quality alternatives made from non-toxic, organic raw materials.
This isn't about McDonald's, Cargill and Fruit of the Loom going out of business. This is about these companies transitioning into doing ethical business that is aligned with the personal values of the people who work for the business. It's about creating more profitable business through the action of integrity and ethical sourcing practices. It is about investing in true innovation that aligns human happiness and purpose with business operations. It's about optimizing the power of the human spirit instead of repressing it and destroying it for the sole purpose of maximizing profits for some shareholders that do nothing for the business except invest money into it.
The Post-Externality Value of Resources
One of the greatest impacts of the rise of digital currencies is that it will give power to the average person to invest and transact with currencies that are aligned with their values. It will be instantaneous, and cost nothing for individuals to convert their fiat and other currencies into their favorite digital coin or token. This represents a major turning point for humanity in which the mass of individuals don't have to participate in a currency manipulated by a centralized organizing body that is rewarding corrupted organizational nonsense. Instead, people can chose to participate in whatever wacky idea or wonderfully aligned vision they want to change their money into. The idea of "voting with your dollars" now goes well beyond the action of what we chose to purchase, into the action of what currency we chose to use.
A few months back our founding team started brainstorming if there is another way that we could achieve the efficient outcome of a Pigouvian Tax without the actual power to tax the legally destructive forces of negative production externality.
Welcome to the Era of Externality Correction Incentive (ECI) Bonuses
Registered producers on the PMKT Holding platform will be eligible for the Externality Correction Incentive Bonus ("ECI"). The ECI is an algorithm to correct production cost externalities in the supply chain through a rewarding process that provides additional transactional coins based on the extent that the actions offset negative externalities. Launching in Q4 2018, the ECI will enhance profitability on transactions for those who do things the right way. The most horrifically inefficient generators of negative production externalities will be eligible for bonuses as well as the start of the incentivized bonus range. The bonuses will start at .0000000001, essentially no reward, and range up to 10.0 bonus coins for those who do things aligned with human values.
PMKT Holding is developing its Externality Correction Incentive (ECI) to provide a weighted bonus issuance of @ag coins to producers based upon their sustainability index rating as a corrective measure to any existing negative or positive production externalities. The purpose of @ag coin is to empower producers with a tool for more efficient transactions, and to supplement producer income with a token asset where value in the real world can be mirrored and stored.
Producers who are efficient and don't put their costs onto society will be greatly rewarded and have a direct economic incentive to move their transactions into @ag coin whenever possible.
Our prediction is that buyers and consumers that would like to support a true economic system of efficiency and equity will prefer to transact in the @ag coin since it will be consistent with their personal values.
Transactions within the Producers Market platform provide a profit margin to the platform. Therefore, at its essence the coins are being rewarded to producers as a dividend back to producers. The coins therefore are being released in conjunction with the profitability and growth of the platform itself to transparently connect the "mining" of coins to the use of the platform. By limiting the mining of coins to registered producers, it fulfils our mission to directly enhance the economic wellbeing of farmers and other producers of all sizes around the world.
This concept is still a work in progress but we are excited to share it with you and get your feedback and input for how we can make the @ag coin the most efficient form of currency for the future of agriculture capitalism, unlocking the full innovative potential of the human spirit.