Economic Proposal

Hi ya'll,

I've read a lot about changes recently. I've heard a lot of rumors and probably a lot of truth as well.

What my basic understanding is as follows:
1. Lindens as a unit of monetary value decreased dramatically over the past few months.
2. Population exploded when the decision was made to offer free memberships (vs. the basic account that I paid for some months ago that cost me US $9.95.
3. Dwell incentive, developer incentive, and bonuses (like for good behavior/positive ratings) have been systematically removed to make SL a pure market economy rather than a subsidized social economy.
4. People are inflamed, angry, emotional, and dramatically affected on all levels of the food chain from the very involved long term land barons to the very recent "free" members.

When countries change leadership, one of the things that often happens is the "old money" is trashed and new money printed representing the new leaders. This has undoubtedly powerful effects. SL has not changed leaders, but the regime in control have made many changes that do cause many rippling effects. The value of "old money" - that money contributed under the old system, and the value of the money traded today is vastly different, and continuing to chasm.

Economists in the 20th and 21st centuries have fought hard to keep countries alive during political change that effected great and small nations. Without such controls, and people fighting around the clock, inflation rates reached proportions of deadly consequence, but with their influence, and control, the changes were far less impacting, and thus some goverhments changed hands, and monetary systems, with few long term devastating occurrences.

I see the system changing. I understand the Lindens have a plan. I may not fully understand their plan, and it may or may not succeed. Every great nation rises and falls. That's history. Perhaps the same can be said in the microcosm of the internet worlds. I do not have enough data to say for certain.

IF the value of the Linden is lower, and the exchange rate from dollar to Linden is different than it was 3 years ago or so when LL first brought SL into existence, then someone's got to do some scale balancing. There are people who have earned long term rights, if such a thing exists in a cyber world, as consistent players - supporters who joined SL in those early days and stayed. Those people have invested time. They invested resources. They created the world we share now. It isn't always our ideal world. Not everyone believes in casinos. But we're all here now because they began what now exists. Those people made an investment that should hold power, power to help define what works and what doesn't and in the end, sway in a way, like shareholders, in a large company or nation.

How do you reset the value of the Linden to once again equal the exchange rate that is comparable to the flux of inflation and deflation that makes sense in a market economy AND allow for the Lindens to pull their subsidizing influence out? I suggest that you look at history and world economics and make some basic decisions to accompany these somewhat obvious devaluing blows.

What if current land owners no longer paid 195 US dollars a month to the Lindens for the use of land they bought under the old rule? What if the rate was reset for an island's rent/tax to 175 US dollars (and scaled down all the way to the first tier following the basic free 512 M). Would that be a possible solution?

What if the focus on taxation or land ownership matched the capitalist market in our real worlds? Cigarettes and Tobacco are taxed higher than almost any other consumable good. Economics say that people will pay higher prices for vices. Are there some arenas of greater value and some we could consider vices in SL? I'm judging no one, but are there lines that could be drawn?

What if items were taxed, a percentage of goods sold, traded, or exchanged for cost, rather than charging a monthly land fee? Or a combination could work as well. What if land tax occurred, in a nominal degree, so that for instance an island owner paid 100 US dollars a month, and agreed to 7 percent of all profits made on goods traded or sold on their island?

There are many forms of capitalism, and truly in our first life, no country exists truly devoid of a socialist influence. The attempt to take subsidies out of the equation could have positive affects and negative affects. There are many ways corporations are run and nations are run that succeed. If LL is a big business, and wishes to keep its stock holders balanced and blessed, then perhaps consideration of several alternatives to accompany some of their recent decisions may be useful in their success rate.

An economy does not work without supply and demand, consumer and provider. LL has a relationship with everyone who signs on to join their cyber universe. LL has a longer relationship with older partners. LL has a stronger relationsihp with larger partners. In any economy there will always be minnows and sharks. The way a corporation deals with large spenders and small spenders is never equal. The plan for the survival of the overall economy depends on all, however, leaving minnows and sharks of vital interest to make the world spin, and continue on a successful path.

My two cents, or Lindens, as it were,
Caryn

What was that middle bit again?

In any world economy it's not just about companies and shareholders. and/or government determining economic direction. There is one other very important factor to take into account in any economy of supply and demand in RL -- you cannot have demand or supply without the currency to pay for it.

The income and investment currency needed to create a living is based upon many workers being paid for their enterprise. The corporations paying the workers for their enterprise benefit by selling these "goods/services" at a higher cost than it took to produce, thus they are rewarded for their enterprise. Advertisers come along and make these "good/services" necessary to us, or in other words they create WANTin us - not that they actually do anything in a real work sense though LOL.
Thus it came to that supply and demand is created with all the middlemen involved.

Without a sound employment policy any economic policy becomes redundant - unless employment is increased and there is minimal unemployment, you do not have a sound economic policy for all. IF LL wants to have "economic policy and act like a government, then where are job creation policies? More ppl employed in SL to earn money by producing goods/services will create the funds for those ppl to go out and be able to fund their sl desires.

Note that most govenrments provide for those who have most need (the poor) whilst at the same time trying to encourage enterprise and wealth increase for those who invest (the rich/coprorations) which helps the country gain wealth. To keep this balance is what governments have used taxes, ideally to provide for people friendly policies and those things which we as individuals cannot provide but need.

IF you restrict the amount of money ppl have to spend and then increase the costs of speding it, and you base SL too much on RL economics then all the FUN will leave. If we are forever worrying about paying land tier, not having enough to buy even the most basic plot of land or ahouse and furniture etc. or the big ones - skins, clothes n shoes - and end up having to pay to go out to clubs n like as well, when SL becomes too much like RL what reason do we have to be here?


dana
On a very big soap box too

Didn't read the whole thing... but just the numbers...

1. True. Steady decline
2. Yup
3. Dwell incentive, developer incentive, and bonuses just didn't work as a social tool for promoting all aspects of SecondLife. If you're new to SL and all you see in the top 10 positions are camping chairs... are you really going to stay in SL upon that first impression? These tools only represented a small slice of SecondLife.
4. I don't feel angry, inflamed or anything of the sorts. I think this is a long overdue change, i'm not the only one who thinks this way either.

Very true. I joined SL a few days ago, and while browsing the events list for the first time I was admittedly disappointed to see that most of the listings revolved around seXXX, FREE(!)MoNeY Casinos!... and a mysterious thing referred to as 'camping chairs'. It was kinda like looking through a spam filled inbox...(I spose the camping chairs are the equivalent of "Get Paid to Surf the Net" spam?)

I have nothing against sex, gambling and..err..camping. But then, these things alone would not be enough to induce me to take fully part in an online community. The things that *do* attract me are mainly based upon engaging content and social interaction with other community members.

From a newcomers perspective, I think the idea of taxes is worth consideration. Having a tax rate which is calculated in proportion to each members' revenue seems more logical than having a default fee based upon land ownership alone.

Also, part of the revenue derived from taxes could be redistibuted within the community to provide an incentive for content-creators and people who provide valuable services like public spaces and events. Respected and longstanding community members could be in charge of distributing the incentives, this would help ensure that these bonuses are going to the right places, and hopefully would help reduce abuse of the system with things like camping chairs.

anyway, it's just a couple of thoughts I have on the economy....

We already pay taxes, as land tier, more than 200% of the value of the land every year.

I was under the impression that Caryn was proposing a tax system that also took into account business revenue instead of basing it solely on land?

Than again, it's 2AM in sydney. I'm prolly too tired to be reading and posting about economics

LOL good point

No, they were removed to make SL less like a capitalist economy and more like a pure communist economy.

Seriously.

A capitalist economy has a variety of markets, and capital investment is rewarded. In a communist economy the workers control the means of production and everyone's needs are satisfied by the state.

In SL, the primary rewards for capital investment were Dwell and DI. There's no capital investment involved in production of material goods (in fact the workers control the means of production completely) and the state (Linden Labs) not only satisfies all your needs... it even provides a little spending money on top of that.

SL is pure communism, baby. It's all about wealth distribution from the landlords to the workers.

But with one tiny change they'd have done it perfectly. Just quit counting Basic traffic, and the income from camping balls woudl drop to a few percent of the total, while the income from almost every other attraction that drew a mix of basic and Premium accounts would have jumped as the share that went to camping balls was redistributed.

If you want my opinion, LL's failing economy is not about whether its a capitolist or a communist economy(truth is its both). But a Government that doesnt accept their own currency, well, thats a VERY BAD sign. It would be like having to change US dollars into Euros inorder to pay your US Federal Taxes. Which is exactly what we HAVE to do to "earn" our tier. Infact, I think I'll open a new thread about it.

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This is a flawed economic premise. Countries that declare old debts null and void invaribly have bad economies for years after doing so.

The most often cited examples -

After the american revolution many wished to default on the fledgeling countries old debts - it was Alexander Hamilton and those who agreed with him who argues that they must not. Old debts were honored and the US economy after the Revolution steadily grew.

After the soviet revolution the soviet government declared the Russian empires debts void. This helped stagnate their economy. The Soviet Union was unable to borrow money. This made industrialization extremely difficult without capital investiment. Stalins Solution - sell the food his own people needed to survive , killing millions of the Soviets Citizens to fund the Soviet Unions industrail growth.

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6 months or more back someone has a thread that was about the fact that Second Life should be called over , and they should declare Anshe Chung the victor and start eveyone over from scratch.

while it was amusing the whole basis is sort of silly. Basically people dont like how others have become sucessful and want to start where "the playing field is level"

However - there is no barrier to starting your own business in Second life literally you can open a store front up for 512L$ and 9.95 tier fees.

even in a massive "reboot" where everyone started from scratch the content providers and other enterprising people would still rise to the top financially. And many consumers with large inventories would be hurt since they would have to rebuy everything.

Mod +1 Insightful.