Hayek in the Machine

Medium: Nanoeconomics is about human-machine exchange, and machine-machine exchange. It is the economics of distributed ledgers and artificial intelligence, of object-capability programming and cybersecurity, of ‘central planning’ in the machine, and of ‘markets’ in the machine.

As we’ve come to understand blockchains and other distributed ledger technologies as an institutional technology, we’ve also learned that not only can blockchains coordinate and govern decentralised human economies (as governments, firms and markets do) but they can coordinate and govern decentralised machine economies (or human-machine economies).

This extends what Hayek called catallaxy — the spontaneous order of the market — from the market coordination of human action to the coordination of human-to-machine and machine-to-machine economies.

Nanoeconomics is not a new idea. In their Agoric papers published in 1988, Mark Miller and K. Eric Drexler developed the idea of a computational system as a space for economic exchange. The development of object-oriented programming has created software agents, which vie for scarce resources in the machine. But right now, these agents are governed through planning, not markets. Miller and Drexler suggested an alternative: a market-based computation system. In this system:

“machine resources — storage space, processor time, and so forth — have owners, and the owners charge other objects for use of these resources. Objects, in turn, pass these costs on to the objects they serve, or to an object representing the external user; they may add royalty charges, and thus earn a profit.”

With global computers like the smart-contract platform Ethereum we now have the bones of such a market-based computational architecture.

Interesting post from Chris Berg, Sinclair Davidson and Jason Potts of RMIT Blockchain Innovation Hub in Australia and Bill Tulloh from Agoric.

Comments

The money in this nanoeconomy is based on compute cycles?

Artificially wasted compute cycles....

The whole thing reads like an advertisement for "blockchain because reasons!"

A distributed, cryptographically verifiable ledger can be useful. But it's not Universally And Generally Useful For Everything.

"machine resources — storage space, processor time, and so forth — have owners, and the owners charge other objects for use of these resources. Objects, in turn, pass these costs on to the objects they serve, or to an object representing the external user; they may add royalty charges, and thus earn a profit."

At a course grain, of course we've had this for a long time (networks and servers have owners and charge based on usage (e.g. Amazon charges Netflix for their AWS server and bandwidth usage, Netflix, in turn, charges end-users and pays content-providers). But at the fine grain of individual software objects within a large system, the bookkeeping/transaction costs would overwhelm any potential benefits.

Yeah kind of wanted to say something similar.

"Central Planning" works really well at the machine level -- there have been generations of algorithms all designed to optimize the computational throughput of processors.

EG, all of these https://en.wikipedia.org/wiki/Cache_replacement_policies

I don't really see how (at least at the machine or hardware level) adding the computational complexity of assessing ownership and costs at the hardware level is an improvement on, say, fifo cache replacement policy. The core issue is that (as you said) the cost of implementation (in cycles, transistor hardware, or whatever) more than negates the value of gains.

Clearly there's a point between "meta economics" and "nano economics" where there's an equilibrium - where 'central planning' and 'decentralized market control' are equally effective, but I'm in agreement that it is highly unlikely to be anywhere close to the hardware level.

I am sympathetic to your effort Alex, but I guess I should tell you straight up: While it is useful to develop economics for new technologies, your labor is somewhat at risk for highly speculative Technologies.

The main problem for micro, and now apparently nano, payments has been that the computation necessary for security has exceeded cost of payment. And even then security has been a bit of a mirage. It's the same problem as:

The advertising industry has been living a lie

You can't secure a system paying pennies, because it costs more than pennies to do it.

Blackchain itself only worked when it tied very high investment to very high speculative returns.

Very good point!

"Blackchain itself ...."

That's an amusing typo.

If it's not already some rapper's handle, it should be.

It is actually what speech-to-text came up with and I did not notice to correct. There were two words. I made that change without noticing the a versus o.

How much is your annual premium for malpractice insurance, Alex?

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