How To Make New Currencies For Doughnut Economies

How To Make New Currencies For Doughnut Economies

(Updated November 2023)

Overview

Economics can be thought of like a game - when we play a certain way, we win. Change the rules in just the right ways, and it's the greater good that wins. By identifying and adjusting the interactions between our currencies and the physical properties of our world, we can produce economies where the individuals and communities that are most financially successful are also the ones that are eliminating poverty, cultivating equity, preserving nature, and introducing essential value. This tool is designed to enable communities to create their own "Regenerative Currencies" that allow commerce to thrive alongside the complete elimination of poverty and the lasting protection of the planet.

Why use this tool?

I don’t ever want another generation to face a tragedy like a pandemic knowing they must choose either the good of their economy or the survival of their families and communities. I believe public health and economic health should correlate. I believe ecological health and economic health should correlate. I believe that the health of our economies should correlate with the presence of social equity. I believe that the best possible economy is one that succeeds when the best possible common good succeeds. I believe Regenerative Currency Systems can make this a reality. 

Who is this tool for?

This tool is intended to be meaningful to everyone who is curious about how we can make our systems work better for our communities and our planet. It is ultimately designed to provide a flexible and scalable new approach for policymakers and community leaders at all levels. At first, however, it will probably be most relevant for academic innovators, visionary thought leaders, and those with a passion for alternate currencies - as well as those with enough conventional expertise in economics to scrutinize and adapt this model, nurturing its development beyond the form in which it is initially being proposed.

How long does it take?

Understanding the basics and beginning to share these ideas can take place within days. Implementing the model then scaling it to fully eliminate poverty and resiliently protect natural systems will take much longer. I am hopeful that through the use of Regenerative Currencies or similar tools, we will see the complete elimination of poverty and the lasting protection of nature within my lifetime.

How many people is it for?

This approach will be most applicable for communities that are at least large enough to provide for some of their own basic needs. The model is designed to scale along with the size of participating groups, making it possible for even small communities to initiate larger movements over time. Eventually, this approach may even be feasible to utilize at a global scale, though it is intended to self-limit its own growth based upon public choices about whether or not to participate.

Acknowledgements

Regenerative Currencies might be novel when it comes to their specific properties, but they strive to serve goals and priorities that have been held at the center of indigenous and sustainable models of society for much longer than any written history can trace, and they are made to facilitate at a global scale many of the same economic processes that already take place within individual households and small communities.

I acknowledge the work of the countless people who have fought for basic human rights throughout history to get us to the point that we can now systemically prioritize these rights. I also acknowledge the countless movements that have long fought to protect our planet, and I wish to honor the many individuals and communities involved. An extraordinary number of people have also made progress in technology and infrastructure over the last few centuries in a way that has introduced the possibility to even consider and globally discuss the creation of alternate currencies such as Regenerative Currencies.

Nature deserves central credit for the design of this approach: the infrastructure of this model has been built upon biomimicry in many ways, and it is particularly based upon the scalable, modular biology of plants as well as the systems of "exchange" that take place within the metabolic and cognitive processes of our bodies.

This model has been ideated alongside the study of circular economics, and I wish to particularly acknowledge the Ellen MacArthur Foundation in providing many public resources that have benefitted me in my process. 

It is important to me to acknowledge the brief but transformative mentorship of Asia Matthews in first empowering me to explore game theory and innovative problem solving. I also wish to explicitly thank Kate Raworth for her work in clarifying the important changes we need to make in our economies and for bringing this community together around this important work. 

Regenerative Currencies, described through the 7 Ways

 
This tool is being worded here to align with the 7 ways to think like a 21st century economist so that it will be applicable and relevant for the DEAL community. The Regenerative Currency System Model itself was first created without knowing of this movement, being innovated over the course of ten months starting in March, 2021 as a response to the economic impacts of the coronavirus pandemic. In exploring the Doughnut model after this initial period of ideation, I am excited by how well the two models can align with each other, and I am hopeful that my work will offer the DEAL community a flexible new toolkit for innovative solutions.

Currently, this model is a conceptual proposal. It has not yet been tested in application, and the digital components of this tool have not yet been developed into functional code. Please scrutinize, use, expand upon, and adapt these concepts as you see fit.

The following are short explanations of how to make currencies that are optimized for a doughnut economy, phrased in alignment with Kate Raworth's 7 Ways, with more in-depth explanations included below within the "Links and resources" section for those who wish to dive deeper into the Regenerative Currency System Model.

1 - Changing The Goal 

We need to shift away from our existing metrics of financial success and move towards economic systems that thrive alongside greater social and ecological well-being. Among many important facets of this shift, the Regenerative Currency System Model presents a possible way to design new smart currencies with specific properties that make them suitable for use in a poverty-free, ecologically resilient global economy. By changing the properties of the currencies we use, we can make systems of exchange where the most profitable strategies are also those that serve the lasting well-being of our communities and our planet. 

2 - Designing Currencies Based on The Big Picture

To successfully create economies that serve our shared well-being, we need to acknowledge the entire social and ecological landscape of our global household. Treating the well-being of people and ecological systems as separate from our own financial wealth causes it to be most profitable to exploit that well-being. This passively makes the most successful users of conventional currencies the ones that extract the most value from the abuse of our communities and ecosystems. It is perfectly possible, however, to create financial systems that are responsive to ethically collected data on local and global conditions, translating this systemic information into a personally meaningful financial impact.

This can be done, for example, by using a currency to actually measure the amount of essential value on Earth (for example, levels of access to as-needed healthcare or levels of ecological resilience and biodiversity), regardless of whether this value itself is tradeable. When the global community has more security, resilience, and actual material value in circulation, such a currency can be more abundant; when there is less real value present for the global community, there can be less financial value present as well.

We also need to acknowledge that all forms of real value - unlike conventional currencies - are subject to the second law of thermodynamics: they slowly leave circulation, then need to be replaced or regenerated. To acknowledge this, we can design currencies that themselves slowly "decay" by losing value over time in a percentage-based way, making space for the introduction of new wealth. This makes it possible to adaptively introduce new currency into circulation where prioritized and essential value is also produced: at the inner and outer edges of the Doughnut. When somebody is fed for example, the services, production, and supply chains involved can be funded directly with a currency that is introduced to measure the value of feeding that person - at no cost to the recipient. When the value of preserving life on Earth is produced by essential ecological work, the value of this work can also be measured by newly introduced currency.

This funding introduces new currency where it is most needed, and this is balanced by the slow decay of the entire circulating supply. When the total supply of such a currency correlates with the presence of prioritized and essential value, and the generation of such a currency correlates with the production of prioritized and essential value, the longevity of the currency provides each holder with relevant information about the security and level of need within the global community. Improve access to well-being while reducing dependence upon currency-generating activities, and holders gain more wealth longevity. Using this kind of approach, it becomes most financially wise - even at the level of private, individual wealth - to eliminate poverty and to passively protect natural systems. We can use such currencies to acknowledge that basic human needs must be met repeatedly over time and human impacts upon nature must be counteracted repeatedly as well. By making a currency that decays over time before being regenerated along with the real regeneration of essential value, it becomes possible to completely eliminate poverty while indefinitely funding the protection of nature.

3 - Making Financial Systems That Nurture Human Nature

The goal of providing for all basic needs without a private cost aligns with a very different story about human nature from the one we currently perpetuate through our financial systems. We currently imply at a systemic level that a person without wealth deserves to be executed via starvation, homelessness, and a lack of access to essential services like healthcare. The flip-side of this narrative is that a person is assumed to only be worthy of survival if they offer work that is viewed as being valuable by the holders of financial wealth. Offer important work to those facing poverty, and you gain no financial reward; but destroy the lasting survival of a community or ecosystem at the whim of somebody who can pay, and you can earn your right to survive for the day. 

Instead of perpetuating these narratives about which work is valuable and which people deserve to survive, Regenerative Currency Systems are based upon a different assumption: that it is innately valuable to serve the lasting survival of human beings and natural systems. Perform an essential service - as much as it is needed - and you will be paid in newly generated currency. Instead of being designed to perpetuate the wealth consolidation of the greedy, Regenerative Currency Systems fund the work of the generous. Wherever there is need, well-funded support can be provided. And if levels of outstanding need become lower worldwide, the longevity of this kind of currency becomes greater: personal financial security depends upon the actual security of the larger community. 

Such a currency will only be useful if it is accepted widely in exchange for meaningful goods and services, so only essential activities would be funded by generating new currency: all other forms of commerce would take place through familiar exchanges and purchases. The level of commerce taking place using such a currency would dictate the volume of currency generation that it would be rewarding to provide. Within this context, offering your work for traditional forms of payment using a Regenerative Currency would not only be financially rewarding, it would also be a pivotal way to make sure that essential work is rewarding for currency-generating providers to offer. Instead of implying that human beings deserve to die unless they serve the wealthy, Regenerative Currency Systems are designed to provide basic access to well-being regardless of the ability to pay while simultaneously creating a context for commerce to be celebrated. 

4 - Getting Savvy With Systems

We live within complex, beautiful, interconnected, and chaotic social and ecological landscapes. We need economic systems that are designed with this in mind, knowing that there is much more at play than we acknowledge through conventional economic theories. We miss massive swaths of truth by looking at key economic ideas like supply and demand as linear and isolated ways of predicting patterns. Instead, it's important that we integrate a deeper, more systemic way of thinking into our studies of how our economies function, and we need this understanding to inform a fundamental redesign of our media of exchange.

I believe this redesign is necessary because conventional currencies produce poverty as a mandatory side effect of how they systemically interact with supply and demand. Whenever a conventional currency is broadly used within essential markets, it is impossible to meet the needs of all people: doing so would lower demand past the point where production loses its funding. You can read more about this pattern in depth here (also available within the "links & resources" section of this page), though the basic principle is simple: there has to be poverty in order for demand to exist in survival-level markets. Essential work becomes less and less rewarding as poverty is reduced, eventually reaching a minimum floor where it becomes financially impossible for either private or public actors to afford to continue providing it. Because of this, within any economy where we continue to use conventional currencies in survival-level markets, poverty will be impossible to eliminate through even the most effective strategies for employment, education, public welfare, basic income, or charity.

Instead, we can design media of exchange that have a fixed value relative to essential work - actually defining their standard units based upon the value of sustaining a person's life for a day - guaranteeing that this work generates meaningful payment even while serving those who cannot pay. Preserving this kind of fixed currency strength in an inflation-proof way requires a new, dynamic, modular science of economics that is person-centered at every level. Within a Regenerative Currency System, each participant with access to currency-generating support is associated with a specific amount of the currency in circulation. When new participants join, the overall circulating supply grows; if participation (or access to support) wanes, so does the total supply of the currency. The average amount of circulating supply per participant needs to be appropriate in size relative to the amount of commerce that is also associated with an average individual if such a currency is to be truly inflation-proof. This same per-participant amount of supply can then be recycled into new currency generation at a rate that permanently provides meaningful payment for meeting the personal, systemic, and ecological needs of the average person as well. The whole system is modular. The overall supply of a Regenerative Currency would fluctuate along with changes in participation, changes in real conditions, and changes in levels of commerce, with an average participant's wealth and wealth-longevity being a direct financial image of their share of global conditions while continuously funding their survival as well as their share of essential global work. 

5 - Designing a Currency for a Distributive Economy

Existing systems of trade are based upon the assumption that a financial economy is fair and just when equivalent amounts of value are exchanged in every trade, with currencies standing in to represent this value in all financial purchases. What this kind of assumption does is it maintains the wealth of the wealthy and the poverty of the poor, due to the fact that sales and exchanges are designed to provide reimbursement that is equivalent to any loss, preventing changes in the distribution of wealth. In addition to this idea of fixing wealth where it is, multiple dynamics also amplify existing patterns of wealth inequality in our conventional currency systems. Even the physics of our universe require that all real value leaves circulation over time, while conventional currencies can be retained indefinitely. This means that a sale can be made where an equivalent amount of value seems to be exchanged to both parties, but the recipient of financial gain generally consolidates their total wealth while the recipient of real value - like food, housing, or care - gains value only for a temporary period. Repeated, survival-level costs counteract a high percentage of any low income, and those with high amounts of conventional wealth can invest in ways that produce financial returns. Because of this, the longevity of conventional wealth becomes exponentially higher as levels of wealth increase.

Instead of being an engine for the exponential accumulation and consolidation of wealth, Regenerative Currencies would be designed to passively circulate and redistribute themselves. Because they lose value over time in a percentage-based way, these currencies would reallocate the most essential funding from the places where the most stagnant wealth accumulates, while presenting minimal losses to those who are actively participating within commerce by making purchases. These are media of exchange that do not pretend that such a thing as a "store of value" actually exists when it comes to the value we need to survive: instead, they are currencies that acknowledge that the best way to preserve real wealth is to constantly regenerate it, and they also recognize the importance of building personal wealth by accumulating real value instead of saving money that can lose its backing value as real material wealth is constantly being lost.

The fundamental function of a Regenerative Currency is to literally regenerate into the possession of those who provide essential and prioritized work. In its impact, this essential work is the act of providing real value - true, actualized security and wealth - to all people and ecosystems in an equitable way. Regenerative Currency Systems are designed to circulate financial wealth wherever it needs to be in order for real value to be exchanged into the hands of those who need it, as well as into the preservation and regeneration of our natural world. This is naturally distributive - it equitably and adaptively remedies inequalities in basic well-being while eliminating the repeated survival-level costs that generally hinder low-income individuals from utilizing their wealth. Regenerative Currencies can even be designed to fund the training and resources involved in positioning marginalized communities to provide their own currency-generating services. This is a system that optimizes towards making the entire global community more secure, particularly those who need it the most.

6 - Regenerativity Instead of Consumption

The only way we will thrive as a global community in the longest term is for our models of society to become truly regenerative. We cannot continue to indefinitely consume and degrade the world around us, and we cannot continue to ignore the real costs and impacts of our actions. We need our societies to systemically cultivate the lasting well-being of people and nature, and we need to consciously design our currencies to facilitate this. 

Regenerative Currencies aim to accomplish this by eliminating "externalities" from the financial paradigm of how we balance costs and benefits. We currently ignore many of the real costs involved in how we do commerce, frequently exploiting both people and nature for financial gain, assuming that these costs and consequences don't exist (or aren't within the scope of our responsibility) simply because they don't impact us financially. The properties of existing currencies encourage this, as they only represent goods and services - not essential forms of value that are shared or untradeable like survival security, social equity, and ecological resilience. This means the costs involved in existing commercial activities frequently exceed their benefits, especially while considering all of the costs that are actually being passed along to consumers, governments, ecosystems, marginalized communities, and future generations.

But if you take all real costs into account, the only economic strategy that makes sense is a waste-and-pollution-free system where both social and ecological value are at least preserved, if not actively cultivated. Regenerative Currencies ethically measure the presence of prioritized and essential forms of value, becoming more abundant as carefully chosen metrics of access to health, security, equity, and ecological well-being are increased, and they recycle themselves more quickly into basic funding when more work is needed to compensate for negative impacts and high levels of need. Through these mechanisms, the longevity of a Regenerative Currency drops when essential value is lost, making it financially impractical to exploit each other and our environment for profit at a systemic level. The only financially sustainable strategy in such a system is to actually have a sustainable society, and the most profitable financial strategy will be to cultivate global equity, well-being, and resilience. Each stakeholder in such a currency becomes a stakeholder in the lasting preservation of humanity, of nature, and the continuation of life itself.

7 - A stable system of finance

The central goal of our economies can no longer be limitless financial growth; we need economies that prioritize our well-being in a way that will be stable and sustainable for an indefinite period of time. It is silly to think that our lives become better as our lifestyles become more expensive, which is the unavoidable side effect of pursuing continuous economic growth. Instead, we need to design our economic approaches so that each person has access to at least a minimum baseline of survival security, opportunity, and access within a thriving global ecosystem.

Within Regenerative Currency Systems, economic progress is framed in an entirely new way. While using this kind of currency, economic health comes from meeting all essential priorities, keeping us safely within the Doughnut while making it profitable to reinforce its edges - the places where we produce essential value and protect essential systems. Because of the behavior of wealth-longevity within these systems, it even becomes most financially wise to reduce the total cost of all goods and services that are part of essential activities, optimizing towards community self-sufficiency, increases in equity that reduce outstanding need, passive and self-owned technologies like water-recycling systems and clean energy systems, and truly affordable forms of public support. The average amount of commerce taking place per person would not seem as high as it does within a system where basic survival has an indefinitely high cost, but the amount of meaningful value in circulation could become much higher. It can even be reasonable to actively pursue an increase in the ratio between tradeable wealth and financial wealth, intentionally cultivating deflation as a way of making the fixed payments for essential work more rewarding. Commerce can still thrive within such a system while being the central mechanism for motivating all essential work. And, instead of cultivating indefinite financial growth at the cost of real value, it would be the production and preservation of real value that actually makes these financial systems successful.

And this value production itself would not have to continue indefinitely - this is a system where there simply has to be enough commerce to preserve the strength of the currency relative to essential work. In existing systems, it is profitable to manufacture artificially high levels of need so that indefinitely more commerce takes place per person. By contrast, in a Regenerative Currency System, the amount of currency in circulation relative to an average individual can be stabilized and even adjusted to stay appropriate relative to a humane and healthy expectation for an average person's participation within commerce. This system can be designed to sustain all essential functions of society while just leaning upon an average amount of work per person that is reasonable to expect from the natural productivity and creativity of a secure, healthy human being. 

The properties of Regenerative Currency Systems are carefully designed so that their best possible state of economic health can only be reached by acknowledging and equitably filling the needs of the entire global population while prioritizing the health and resilience of the living planet. These are currency systems where it is strategically optimal - even at a purely financial level - to feed those without food, to house those without shelter, to empower those without opportunity, to preserve materials and resources in circulation rather than packing them into landfills, to protect nature rather than exploiting it, and to cultivate the regenerative production and distribution of tradeable value. It's an economic toolkit that makes our money work for us, rather than us having to constantly work for money.

Links and resources

For those who are interested in learning more about the Regenerative Currency System Model, here are some places to start:

     - A basic introduction to Regenerative Currencies that isn't dependent upon an understanding of Doughnut Economics

     - A more thorough explanation of how I argue existing currencies chronically produce poverty, and how I believe we can solve these issues

     - The current home for my work surrounding the Regenerative Currency System Model

     - Shareable Google Doc of "Make Money Better", an early-access, publicly licensed manuscript outlining my initial thoughts surrounding Regenerative Currencies (This is the working document where I first ideated this model. I briefly adjusted my writing to be in a more logical layout for readers, but it has primarily served as a reference for me while I have tried to create more approachable and accessible resources. I have learned much more about writing since completing the most recent draft of this manuscript [in January, 2022], and I have already changed my thinking about some of the concepts it contains. Nevertheless, it remains a robust resource for people who wish to explore my process and thinking behind ideating this model. This link allows visitors to view the working manuscript in its current state, and it can also be copied (File > Make a Copy/File > Download) for interested individuals to edit directly under its CC BY-SA 4.0 License.




Components of this tool have been taken or adapted from Make Money Better, a public manuscript initiated by the same author, Alex Bernat.  Both this tool and the original work may be used under a CC BY-SA 4.0 license.

Photo credits go to Eduardo Soares and NASA, whose images were combined and edited under the Unsplash License.