PRF. Predistribution of Economic Rents
... How can a market neutralize economic rent (ECR) and negate opportunity costs (NOC).
Markets can never be perfect, how do we account for unearned income?
To overcome the effect of economic rent our money will give preferred stock in an account to anyone that transfers money into an account. We call these Prefs.
As an example, A father goes to buy a gallon of milk from the grocery store. The gallon costs $2. He transfers $2 to the grocery store account. The grocery store give the man a gallon of milk and two shares of Prefs in the grocery store's account.
When the Grocery store's account demurrages, a portion of the demurrage will go back to the man's account. In this way, if he paid an economic rent of $.02 cents because the store was closer to home, he will make up the economic rent overtime.
The man may owe only a very small percentage of the prefs in the account, but eventually, cash will be returned to him. We will discuss and analyze the flow of cash in this way later when we prove out that this works in our financial models.
Modern digital money allows us to do this. Paper dollars would never be able to give us this functionality.
Let us look at the effect of this transfer of prefs to the man:
- The man may eventually recoup his payment of an economic rent.
- The man is now 'invested' in the success of the store. The better the store does, the sooner he will recover his economic rent.
- The man has dispensed with $2 that he would have to pay demurrage on if he had not spent it. He likely would have spent it quickly anyway to avoid this charge, so he benefits from delaying his pay back of the economic rent to the future.
Let us take a look at it from the view of the store:
- The store had to give up a piece of preferred stock. This is a piece of artificial capital and cost the store nothing to produce.
- The store's cash was going to demurrage anyway, it is agnostic to the receivers of the demurrage.
- The adverse effect to the store is that if it holds the man's cash forever, it will eventually all demurrage away. This is highly unlikely.
We call this a 'predistribution' because the store's account must 'demurrage' all of its holdings in the account before it can accept another payment or pay cash out of the account. We call this the 'catch up'. All accounts must 'catch up' before they:
- Receive Pref payments from the demurrage of other accounts
- Pay cash to another account.
- Whenever dictated by the rule of law. We suggest at least monthly.
Give preferred stock to anyone who sends money to an account. Pay a portion of the demurrage of that account out to the holders of prefs in that stock on a regular basis.
The predistribution of economic rent leads to the diminishing value of future economic rent (DER) and is made possible with the public ledger (PLG). Control the recursive nature of predistribution of economic rents using the Principle of First Pref Payment (PFP). Prevent the devaluation of prefs using Statutory Theft (STH).