The Relative Theory of the Money written by Stéphane Laborde is in line with the great French tradition of economic science works produced by engineers like Dupuit, Cournot... until our only Nobel price winner in the discipline: Maurice Allais.
But every science builds a specific language for itself and I fear that economists, as well as the Honest Man of this century, won’t grasp all the interest of this theoretical contribution without a “translation”.
The “Universal Dividend system” proposed by the author is a monetary system in which money is uniformly distributed between all the actors, individuals of all age or sex, any one of them receiving an equal part of it.
Nearly all of us have already used such a system ... when playing Monopoly™. Indeed, at the beginning each player receive the same amount of money, and at each turn by passing through the start square, they earn some money, each one receiving the same amount. One turn is the base period, theoretically identical for all, except that because of chance, dice throws... the turn passes faster or slower and money gains then get different between players. Note that the equality of the monetary donations does not prevent the appearance of winners and losers according to their individual choices and the opportunities of chance.
Nowadays, in our reality, the distribution of the money supply does not correspond to such a system. It is created and distributed under the form of debt through the banking system, which answers the money demand from the citizens by lending them far more money than the banks themselves detain, at an interest rate greater than the one they have to pay for when supplying themselves from the Central Bank, the one and only true emitter. So the country has at its disposal this monetary supply called M3.
One should clearly distinguish the money supply - which is an available stock of money, all the time present, fixed except for additional monetary creation - from the income flows in money that individuals capture through economic activities and exchange: the money supply generates the flow of the revenue, which when summed up for a year, is traditionally evaluated as the GDP. This link which seems trivial is in reality very subtle, as we shall see later.
So the author seeks to answer to the following question: which rule should we adopt for monetary creation, and at which rhythm should the money supply grow, in order to institute a system with Universal Dividend, where the money supply’s density, meaning its distribution among individuals, would be uniform in space and time ?
He assumes a stable population in number with a given life span. That is, he admits a zero demographic growth: there are as many births as deaths and no migrations. In this case, the life span corresponds to the duration at the end of which there is no individual from the old generation left. The population is totally renewed since the setup of the new rule ; the density is now uniform for everyone, whatever the density prevailed at the origin. The Universal Dividend system, the one in which each individual receives an equal part of the money supply, is completely realized.
The answer is what the author calls “the Optimal Universal Dividend”: the money supply must grow annually according to a “c” factor, which of course is inversely proportional to the life span – meaning the duration of the population’s renewal rate, or the time to put the system in place completely – and that money surplus must be equally and unconditionally distributed among all population members. This “c” factor is roughly equal to 5% for a life span of 80 years.
How can we deduce from this the unconditional amount to assign not in money supply, but in monthly income flow, an “existence income”,here totally consistent with its definition: an income distributed because one exists, as a member of the community, and not in order to exist ?
If we compute, as the author does, for Europe, 5% of the M3 euro mass divided by 330 millions Europeans citizen, we obtain 1515€ per person. What does that mean ? We must create 5% of additional money this year and distribute it on the next 1st of January by giving 1515€ to each European citizen and not create any more money during the whole year 2011.
Do it again on the 1st of January 2012, 5% more ... and so on each year so that in 80 years everyone would possess an equal part of M3 at that time. This method would only be applicable if: only one money emitter exists, the ECB for example, creating the additional euros whether in notes, whether by crediting the accounts of all individuals and by imposing the exclusive usage of “100% money”, as Maurice Allais wanted, so the banks could not lend more than the amount they hold in their deposits.
Such a setting would correspond to an institutional Big Bang. A monthly attribution of income, an existence income, seems to be a less traumatizing implementation for our institutions.
How to Go from Money Supply to Income?
If we simply divide the 1515€ in 12 months, we implicitly suppose that money supply takes exactly one year to generate a total flow of revenue equal to itself. By the way, it is the way I defined the “economical Unit of Time”, the single norm in which the switch from the mass to flow can be expressed everywhere without distortion. Indeed, depending on the country or the times or circumstances, expansion, recession, a particular monetary supply circulates faster or slower, supporting more or less frequent exchanges, together with higher or lower monetary values. In one civil year the sum of the flows can be worth three times the monetary supply. The Economic Unit of Time does not correspond to the real time unit. With a GDP that would be equal to 3 × M3, the economic unit of time would be roughly equal to one quarter and one semester if the GDP equals 2 × M3.
In reality, the GDP varies between two and three times M3. So the 1515€ should be divided by between 4 and 6 months to give the monthly income. For Europe, we obtain approximatively 300€ per month and per person of Universal Dividend or rather Existence Income to be in conformity with the economic language: a dividend is given one time, in principle, extracted from a stock, the money supply in this case, whereas an income is a regular flow coming from monetary exchanges.
It is remarkable that Stéphane Laborde’s theory meets the one of Time-Value up to its very measurement, since its universal dividend for Europe closely matches the existence income computed from Time-Value which is evaluated today at around 350€ for France.
These two theories, “Relative Theory of Money” and “Time-Value” converge to build the foundation of a new paradigm, a new vision of economy. Based on them, the architecture of a new social organization – more respectful of the equality we must imagine – could be elevated. I have personally attempted to propose one, establishing consequences of an existence income or a system with a universal dividend, to follow the author, by publishing “Une Clémente Économie” (in French). But this essay is neither exclusive nor definitive. The “Relative Theory of Money” which is offered to the Libre Community of cybernauts is an invitation addressed to it, in a total sharing of creative ideas, to imagine, then to materialize another world.