Balancing The Two Systems
IN THE INTRODUCTION WE discussed how, in order to maximize their material wellbeing, a small group of people would want both to organize their private activities and their group activities efficiently. This is relatively easy with ten people but becomes exponentially harder as a group scales up in size.
Two different systems emerged to overcome the difficulty of scaling-up private and group coordination and make modern economies. The horizontal (credit-money) system serves to allow the Islanders to coordinate their private activities more efficiently. The vertical (government tax-credit; “crusoes” on the Island) system both allows public projects to be coordinated more efficiently and these in turn also amplify the productivity of the private system.
A third goal, directly related to the two systems above, would be to make sure that the group are not wasting available resources, reducing everyone’s wellbeing below what it could be. Let’s consider this third point in greater detail…