Mathematics Behind Global Currency as a Wealth Inequality Regulation System

[AplanisTophet]

I've no political agenda. This is strictly a math question about optimization. Those addressing it should do so strictly from a mathematical perspective. Thank you!

If the world simply had one global currency, like Bitcoin, and everyone had an account, then the sum total of all accounts could be calculated. In addition, if wealth accumulated in a select few, then an algorithm could run across the worldwide population's accounts so as to add (more) money to those with the least and reduce overall inequality systematically and proportionately without directly taking anything away from those with the most (ie, leave it up to the politicians to decide when a redistribution would be triggered, such as if 50% of the wealth is owned by the top $x$%, etc.). It would be a form of automatic welfare system that provides the minimum while simultaneously allowing for capitalism and the promise of the so-called American Dream. Isn't this an optimal method and what would the mathematics behind it be?

There would be no more need for filing income tax returns because wealth redistribution, including government funding, could also be optimized through these equations, correct?

Global prices for staple commodities like bread and rice could be indexed. Insurance, like health insurance, could be tied in so as to have one optimal global pool. All of this, technically, correct?

Could it be done just in the U.S.?

 

[TeethWhitener]

This is not strictly a math question. As far as I can tell, it's not a math question at all.

 

[fresh_42]

This is not strictly a math question. As far as I can tell, it's not a math question at all.

You could equip it with a macroeconomic model and it would be math. Without, it is highly speculative. The Green Back is already a global currency in some sense, the Euro is still an ongoing experiment where very different economies and policies share a common currency. These two examples alone show, that there isn't a unique mathematical model that could describe it. However, I'm pretty sure that economists investigate(d) such models.

I think the major fault in the OP's question is the hidden assumption that a common currency would result in common prices. This is not the case. A tv sold in Alaska is inevitably more expensive than a tv sold in NYC. And as a consequence, a common currency wouldn't solve any problems at all. The opposite is the case. It creates even more problems, e.g. to establish a common currency policy, to create some sort of leveling mechanisms (part of the price for a tv sold in Alaska is priced in the costs for a tv sold in NYC). Another example of one of the many dependencies is the price for tacos in Mexico. A few years ago they became too expensive for many Mexicans because in the US corn was used to produce bio-ethanol for cars instead. I don't know how they solved the problem, but it shows that such a proposal is extremely complicated.

 

[AplanisTophet]

This is not strictly a math question. As far as I can tell, it's not a math question at all.

I thought people might feel that way, so I put it in this forum instead of a math one. Nevertheless, my intention is strictly mathematical.

For example, take income taxes into consideration. The system would ideally be able to calculate everyone's net worth if optimized (ie, implying that it would intrusively track one's virtual currency balance, investment accounts, and liabilities like mortgages in real time). Your increase in your net worth for the year would be your income, which it could calculate for you. That wouldn't be necessary, however, because a redistribution algorithm wouldn't necessarily be based on income or even a period of time. The redistribution algorithm could be monthly or even perhaps constant in real time based on net worth (which goes up with income) and other factors. The United States Government could tax its citizens according to its laws while other governments theirs, but essentially, a redistribution equation would be such that people would be kept at a minimum percentage of the overall population's wealth (as adjusted per capita for factors such as, e.g., having kids, being elderly, attending college, etc.) absent their efforts to improve upon their situation via capitalistic efforts by extorting others' excesses or bringing in money from members of the global population residing outside of the U.S. population. Etc., Etc. I'm focused on mathematical optimization of a system.

As to goods costing more in California vs. Ohio, and stuff like that, I don't see that at all. I mentioned an indexed price for certain staple commodities in the OP such as bread and rice, but I didn't mean to imply that all items would be socially priced. We could have a few built into the system if the politicians wanted to, such that everyone could get bread every day, etc.

 

[Vanadium 50]

I still don't see any mathematics.

I do see someone trying to push a political/economic system.

 

[AplanisTophet]

I'm not into politics. I'm a tax professional and adjunct professor looking to make a rough sketch of what a systematic approach to managing global wealth through what is essentially a computer algorithm could look like purely for educational and research purposes.

 

[AplanisTophet]

Think of this as a chance to make utopian assumptions about the state of our currency as managed by a computer that tracks everyone's wealth in real time. What would the computer system do? It's math. Pure math.

 

[TeethWhitener]

What would the computer system do?

It would do what it's told. By people. Just like every other computer program on the planet. But what people tell it to do is politics, not math.

You could equip it with a macroeconomic model and it would be math.

Of course. But OP doesn't read in that way at all. There's nothing to be optimized in OP.

There are plenty of interesting mathematical questions to be asked about wealth distribution. But as soon as you use the word 'optimal' without defining what you're trying to optimize, you're officially a politician. How does a wealth distribution evolve over time given a set of policies? Great question; that's math/economics/political science. How do microeconomic fluctuations in a wealth distribution affect the macroeconomic evolution of that distribution? Amazing question; that's math/economics. But OP just says "hey isn't this a great idea, and also can you turn it into math for me?"

 

[AplanisTophet]

But OP just says "hey isn't this a great idea, and also can you turn it into math for me?"

I resent that. I gave you a population (the global population) and a factor (wealth) and the notion that it would all be managed on a single optimized global computer system. How much wealth redistribution is a question for the politicians. The ability to set wealth redistribution is a product of the system. We're talking about the system.

Treat this like a video game and you want to give the user options. We're not worried about playing the game, just designing the controls. Make sense? Yes, it's an open ended question meant for discussion. That's it.

 

[TeethWhitener]

I resent that. I gave you a population (the global population) and a factor (wealth) and the notion that it would all be managed on a single optimized global computer system. How much wealth redistribution is a question for the politicians. The ability to set wealth redistribution is a product of the system. We're talking about the system.

Treat this like a video game and you want to give the user options. We're not worried about playing the game, just designing the controls. Make sense? Yes, it's an open ended question meant for discussion. That's it.

Wait, is your question just "if we give computers the ability to access all private wealth and the ability to carry out any transactions, can they redistribute wealth?" If so, then the answer is yes. It's still not math. Also, you still haven't defined what you mean by "optimized."

 

[AplanisTophet]

There would be many different optimizations. Consider insurance. Let's say I break my arm and owe a $50,000 hospital bill. The entire world would pitch in a fraction of a cent, which the computer would take, and the hospital would get its money. That's pretty optimal, correct?

What about if I owe taxes along with half of my fellow countrymen? The United States doesn't have to take my money. It can simply increase it's own treasury balance and every other United State's citizen's account balance that has a negative tax rate by just the right amount so that, within the U.S. Global wealth system, we all end up with corrected percentages of the global pie. No tax filings would be required and no payments would need be made. My percentage of the overall wealth goes down when other peoples' goes up assuming the U.S. populations' overall wealth is held constant on a global stage during this reshuffling. That's optimization.

 

[Bystander]

"Zero sum" game? "Growth" or "No growth" models?

 

[TeethWhitener]

There would be many different optimizations. Consider insurance. Let's say I break my arm and owe a $50,000 hospital bill. The entire world would pitch in a fraction of a cent, which the computer would take, and the hospital would get its money. That's pretty optimal, correct?

Global healthcare costs in 2018 were $8 trillion. There are (for easy math) 8 billion people in the world. So who's going to explain to those starving people in Yemen that they each owe $1000 so that an American multimillionaire can afford his lipitor prescription because he can't control his sweet tooth? Optimal?

Or let's say you break your wife's arm. Should the entire world pay for what you did? Optimal?

But that's beside the point. The way you're using the word "optimization" has very little to do with the way mathematicians and scientists use the word "optimization," and it sounds like you're using that ambiguity to try to frame a political question as a mathematical questions. The irony here is that's exactly what a politician would do.

 

[hmmm27]

The way you're using the word "optimization" has very little to do with the way mathematicians and scientists use the word "optimization,"

I think he means "optimism" or "optimistic" ; makes more sense when read that way.

 

[TeethWhitener]

I think he means "optimism" or "optimistic" ; makes more sense when read that way.

Ok but I’ve never heard of ‘optimism’ being used as a mathematical term.

 

[hmmm27]

Ok but I’ve never heard of ‘optimism’ being used as a mathematical term.

You've never seen me do math.

 

[Office_Shredder]

You haven't even described how to actually compute someone's wealth. Let's say I own space x, and it generates for me 50 billion dollars a year in profits. I then spend all that money on expensive food, wines, cocaine, paintings, whatever. At the end of the year, what does this system think my wealth is? 0? You have no ability to measure the value of my company, or my other goods.

All you are going to do is encourage everyone to keep none of their savings in your currency, which is kind of how inflation works today.

 

[rsk]

I had understood that the introduction of the € was supposed to level things across Europe. But look at the price tag on anything which is sold across the EU and you'll see vastly different prices in different countries, Wages remain far higher in the likes of Netherlands & Germany than they do in southern mediterranean countries (which, as an aside, exacerbates the effects of poverty there, as relatively wealthy northern europeans buy second homes in the sun, pushing up property prices beyond the reach of many locals).

So while I like the idea of a system which would help redisribute wealth and resources more equitably, I think it's more a question of attitudes than currencies.

 

[rsk]

Personally, my preferred economic system would be based on the Mario Kart philosphy of Hiroshi Yamauchi.
Those at the back get the big power-ups to help them get back into the pack with the rest.
Those in the main pack get regular power ups to boost them, help them on their way and to keep them happy and content.
The ones at the front don't need power-ups, they should be happy to be where they are.

 

[rsk]

So who's going to explain to those starving people in Yemen that they each owe $1000 so that an American multimillionaire can afford his lipitor prescription because he can't control his sweet tooth? Optimal?

That's essentially what happens though, just less directly than that.
The poor are kept poor so the wealthy can keep their comfortable lifestyles.

 

[phinds]

The ability to set wealth redistribution is a product of the system. We're talking about the system.

I cannot imagine how this "system" can be divorced from politics in this world, as you seem to think it can be. Maybe in some mythical magical alternative reality that has nothing to do with the world we live in.

 

[AplanisTophet]

There are easy answers for a lot of these things and to some extent it's what I'm looking for. Starving people in Yemen wouldn't be paying our health insurance directly, for example. If anyone owes anything covered by insurance or perhaps even a long term debt, then instead of having someone pay a bill directly, a global system allows all other peoples' wealth to be increased instead. E.g., increase the hospital's wealth by $50,000 in my example, temporarily putting all other people and entities across the globe at a disadvantage. Increase every person's account by a fractional amount so as to proportionately offset the disparity, except for perhaps my account as I am the true recipient of the $50,000. Needless to say, funny things could theoretically happen in a global system like the one I propose that simply cannot happen in today's system.

Good question Office Shredder (I am an accountant afterall...). Wealth would generally have to be measured in terms of virtual currency, investments, and liabilities technically trackable in real time by computers. Property like land and equipment may not be measurable in this system because a market simply isn't available for all assets from which a computer could derive fair value, implying people would be encouraged to accumulate wealth 'off grid' so to speak, but that's ok too. It would be difficult to pay for everything using property alone and it could be your reward from a tax perspective so as to defer wealth recognition in the system by holding it in the form of property until such time as you convert the property back to currency (if ever, and much like our current system). A little side currency in the form of gold and other precious assets not traceable in the system could be considered both legal and fun, who knows (again, not saying what we should do), but it probably won't be easy to pull up to Taco Bell and pay for your grub in gold nuggets either.

We have little hope of seeing a system like this in our lifetimes and it's obvious the politics would get in the way, but who knows. I didn't have a cell phone when I was a kid either. The thing is, people tend towards progress and there is a wrong side of history. We can drag our feet and stumble through the issues, or we can get it together, but ultimately we are using technology and a better understanding of how to go about working with each other to pool our resources and trend towards utopia (or at least we should be...).

I'm enjoying this fun conversation. Thanks.

 

[Vanadium 50]

Starving people in Yemen wouldn't be paying our health insurance directly

Good idea. But this is politics, not mathematics.

 

[AplanisTophet]

They could and I don't care. Take the money directly then. That's not the point. The point is that we could take it indirectly too if I'm envisioning this correctly. I think that's pretty cool. That's math though. It's the ability to do something systematically via computer. I'm not saying we should.

 

[fresh_42]

They could and I don't care. Take the money directly then. That's not the point. The point is that we could take it indirectly too if I'm envisioning this correctly. I think that's pretty cool. That's math though. It's the ability to do something systematically via computer. I'm not saying we should.

You gave the bitcoin as an example. Imagine for a second that this would be a universal currency. Now try to figure out which consequences the huge volatility of bitcoins has to buy e.g. daily bread! This would be a nightmare of a currency.

 

[AplanisTophet]

You gave the bitcoin as an example. Imagine for a second that this would be a universal currency. Now try to figure out which consequences the huge volatility of bitcoins has to buy e.g. bread! This would be a nightmare of a currency.

Very good point. It would have to be created the same way we currently create money perhaps, not the way bitcoin is. That is, the U.S. government would have so many coins in circulation. It would control the total and could adjust as it saw fit to immediately control inflation for everyone.

 

[fresh_42]

In any case and as has been mentioned: macroeconomic models are highly mathematical and there are many interesting questions. But you did not provide any models to discuss, only crude ideas. I gave you two cases of currencies that already have some global properties: the US dollar and the Euro. The first one is a de facto global currency, and the Euro is used by 25 different economies. I suggest studying these two cases as a first step. They have all properties you have to consider: partial regulation, a leveling system or none, freely tradable, and what else is necessary for a currency to function.

The question itself is - apart from politics - highly complicated and we would need a lot more specifications before we could discuss any models. Especially AFAIK we don't have members who are macroeconomists or employees of a central bank. Even the lecture of Marx's The Capital would provide more insights into market mechanisms than can be expected from a discussion on the basis given here.

This thread is closed.