Why the SCUE is a closed economy and what to do about it

[Ari Rahikkala]

Finally got around to writing this. Bjorn kept asking about this in the Antican roundtable last week, so, here goes. This is, by the way, a post about incredibly basic economics that I'm getting somewhat frustrated people aren't just getting by default, so I'm reserving the right to cuss out anyone who doesn't understand it.

In the SCUE, as it currently works, the money supply is always a precise constant, except for two possible events that can change it: When a nation joins, it is handed 7500 units of the SCUC (that I'll just call erb from now on because I'm a lazy Shirithian) for each of its citizens who were not earlier part of the SCUE, and when a nation leaves, all of the money on its citizens' accounts is removed.

Be sure to make that sink in. Really. If you didn't see why it's so significant, read it again. The SCUE gives every new new member a fat wad of money when they join. 10000 erb once bought the position of duke in Shireroth - yet it only takes two new people to pool together the money and have plenty left over if you're a new member.

You know what that money's called in my books? It's not welfare - you don't need it to live. I don't consider it pointless, no, it has an important function....

I believe that the money that's given to new SCUE member nations is credit. Credit, as in that word that's a synonym for trust. The member nations of the SCUE vet any new applicants in order to see if they're worthy of being trusted with the money. Granted, it's a very superficial vetting, because the perceived liability (both in terms of the likelihood and impact of failure) of granting credit is so tiny: The SC nations are all nifty and friendly and wouldn't willingly let their citizens use the money for anything they didn't feel they deserve anyway, and even if they did and it became a problem, the sellers would just specify higher prices for people from the offending nation or not do work for them or something. For the same reason the terms of credit are incredibly favourable to the debtor: Not only do you get a line of credit with zero interest that you never have to make any downpayments at all, it's not usually even called credit!

Still, credit it is. We *could* have a SCUE where every new nation starts from zero and has to get money for itself by providing goods and services or whatever to other nations. But who'd join in if we did that? Is that question even worth considering? Apparently not, given that the SCUE has no mechanism to do something like that.

So, yeah, Bjorn, you were asking about it, well, there you have it. You can't do business with the SCUE without being a member because it's expected that nobody who's sane would do business without the SCUE without first getting free money from it. Since all it takes to get that free money is to join, it's expected that you would do that without a second thought, and hence people like Mike will prefer to just tell you to join already rather than change the system to accommodate you.


... that all said, I'm hoping that now that I've formulated the issue properly we can do something about it. After all, there can be other creditors than the entire SCUE. There's no reason why, say, a bunch of Shirithians couldn't form a bank or union and grant enough credit for, say, Victoria, to be a fully active participant in the economy. There would have to be a little bit of bookkeeping outside of the bank, but Erik's given some vague hints about maybe possibly implementing a loan feature in the bank, so maybe that's not going to remain the case for long. The liability would be on those who granted the credit, it would cause no inflation (*), etc.. Now this would require adding Victoria to the bank database, but I double dare you to come up with a reason not to do that other than interface clutter. The SCUE administrator could easily handle that part alone.

I'm not sure we have enough people interested in taking this sort of a role in the economy, especially since anyone who understands what they're getting into is not going to accept any sort of terms of credit that are much worse than what they'd get if they just joined the SCUE (ergo, you can't really do things like demand significant interest on your money, because chances are that anyone who'd actually be capable of earning money to pay that interest would be smart enough to just go for the SCUE). But we *could* do it, if people want to. We *could* open up the economy for parties that participate with credit they get from individual nations or credit unions or such without joining the SCUE, and the SCUE as a whole could only gain from it.


(*) technically if it caused more economic activity it could cause prices to rise, but only because money that had already been inserted into the economy earlier had gotten moving, which could cause greater demand for things sold in the economy in general, and because sellers would notice that the prices they'd set for things when the money supply was smaller had become too low

[Andreas the Wise]

Beautifully written, Ari, and well thought through. I've never been against people giving private loans to others to let them start without their nation joining; and when you explain it like this, I'm happy to add other nations to the bank without them joining too. If they really want that.

[Kaiser Leto III]

We *could* have a SCUE where every new nation starts from zero and has to get money for itself by providing goods and services or whatever to other nations. But who'd join in if we did that?

And critics would say that Gralus and Shireroth hold all the money and it wouldn't be fair. The system is good and works, but nations will n,ot join if they can't offer their own citizens some money.

There would have to be a little bit of bookkeeping outside of the bank, but Erik's given some vague hints about maybe possibly implementing a loan feature in the bank, so maybe that's not going to remain the case for long.

That would make the system perfect!

[Andreas the Wise]

I believe Ari's point in the first quote is that is *exactly* why we encourage people to sign the treaty instead of starting with 0.

[Kaiser Leto III]

I believe Ari's point in the first quote is that is *exactly* why we encourage people to sign the treaty instead of starting with 0.

Yes, I know. But I found it necessary to confirm what he wrote.

[Maximilian]

Starting at zero would mean that nations with an economy would not really want to participate. As His Niftiness the Kaiser has pointed out, nations want to offer their citizens some money, especially if they already had some in another economy.

It is however good to think about options such as loans, though.

[Ari Rahikkala]

Of course there's always the technological solution, which is to introduce support for multiple currencies in the bank... and redefine accounts as holding fungible goods, and the stock market as an exchange market of those goods... and rewrite the transaction function to find a path of currency exchanges in the market for transactions involving multiple currencies, so that you don't need to do currency exchange manually... and somehow be brilliant enough to still keep the interface as convenient as it is for single-currency banking...

That's the solution that would just allow all nations to freely set their own monetary policy and, obviously, supply their own money. All the risk of a nation having an inflatory policy would be on those who choose to buy its currency. It's just that the technical solution comes with a problem of its own, that being that there's nobody around with the time, interest, and skill to actually implement it .

[Chrimigules]

Starting at zero would mean that nations with an economy would not really want to participate.

Hence why people would be encouraged to join the SC and the SCUE properly, because otherwise, they have an uphill battle.