For some reasons, Stack Exchange became its own country and decides to use its reputation system as the official currency. What would be the advantages and the disadvantages of such a system in comparison with current monetary systems?
Your question is similar to this real-world one, which asks how we could take a system like Bitcoin, but issue new currency when people do something more useful than bitcoin-mining. Someone else already mentioned Cory Doctorow’s fictional Whuffie.
The new currency would have a lot of the same problems as Bitcoin, one of which is that nobody is managing the money supply, and having the right quantity of money, avoiding massive inflation or deflation, turns out to be important. StackExchange the country might work around this with some Modern Monetary Theory: instead of controlling the source of money, it could control the money sink: that is, tax everyone’s reputations not in order to fund public expenditures, but in order to prevent inflation. If there’s a risk of harmful deflation, it might temporarily grant a bunch of bonuses just to get more currency out there. This mechanism might also be a way to achieve what some real-world scrips have tried to: encourage people to spend it quickly instead of hoarding it by having it expire. Or just increase or reduce the point values of upvotes arbitrarily, although this would create resentment.
Most other details of economic policy depend on StackExchange the country and its balance of trade. If there’s a central bank that collects reputation, purchases foreign-exchange reserves, and uses them to maintain a peg against the dollar (for example), then reputation becomes dollars by another name, except that the benefits of seigniorage go not to the government, but to users who ask and answer questions. They effectively have jobs working for the government. That seems as if it would be vulnerable to cliques, but it makes more sense than giving it to people who own gold or silver mines. Only, dollars wouldn’t have the same unpredictable, unavoidable taxation needed to make the system work, so everyone would want to convert their reputation into dollars immediately, and the system would not be stable.
One wrinkle is that there isn’t one kind of reputation: there’s World-Building reputation, TeX reputation, StackOverflow reputation, and so on. It would probably be impossible to maintain a single exchange rate between these; some would have more rarity and utility than others.
If the exchange rates are allowed to float, reputation would not be a good store of value. (Bitcoins are mainly useful, compared to other currencies, as a way to get around Chinese currency controls.) Someone would need to want to buy it for its value not to collapse, and StackExchange right now would need to import just about everything. So the idea is only viable if people need to buy about as much reputation as people want to sell: this could happen if StackExchange sells as many services to the outside world as its citizens import, and the people buying answers need to buy rep using dollars or euros to pay for them. Then, those dollars and euros could be used to buy imports without the whole shebang becoming dangerously unbalanced.
Along the way, “reputation” would completely lose all connection to your actual reputation on StackExchange and just become a measure of net worth.
One disadvantage is that it would tie monetary gain to hive mind thinking.
Say you live in an area where the majority of people see women as second class citizens.
If you get up and say "You know, I think women should be treated as equals, and get to drive cars and own property" you'd get down voted all over the place and there goes your life savings.
This could be an advantage if the current popular opinion is one you agree with, but even then it could discourage people from thinking new things that they believe might be controversial at first.
It also gives trolls to much power over you.
Also, people who are charismatic and good at communicating will do better than those that aren't as strong in that area.
Something similar to this is the reputation system in the book Down And Out In The Magic Kingdom by Cory Doctorow, where they are essentially post scarcity, except in service related areas, so they are able to make it work.
The more you help others, the higher your reputation, and the higher your reputation score the more likely people are going to want to help you. If you start freeloading then your reputation will suffer, and you'll have to work harder to get it back.
Pro's: it would be costless to mint new currency. Also, people would be paid for their knowledge and skill, just like in the real world.
Cons: Rampant inflation. In just a few hours, someone can earn hundreds of reputation from a smart question.
Interesting wrinkle in this problem: What about hive-voters? Say an organization of, say, 10,000 people form up and upvote all of each others questions and answers, they will be insanely rich in a matter of minutes.
It's pretty bad.
It cannot be exchanged between users except for a complex system of bounties. It can't be exchanged against other currencies, complicating imports and exports. And loses its value by the minute. The central bank can't control the hyperinflation. Etc.
Currencies only have value as long as people trust they have value. You wouldn't accept a dollar if you don't believe you won't be able to buy anything for it. So, the risk? People will stop believing that somebody would accept it as a currency. It is kind of self-fulfilling prophecy.
There would be several difficulties with that system. For one, every citizen in the country would need to have access to Stack Exchange to gain money and survive. Also, I would imagine this could lead to massive inflation because high-rep users with 20k rep and more. In a way, your idea doesn't make sense because when you award a correct answer with 10 reputation, where does the rep come from? Not from your rep account, and not from their rep account, so from the government? Or maybe some higher being? If it was the government, soon, citizens would be far richer and thus more powerful than the government, so no matter which way you look at it, this potentially catastrophic idea would lead to civil war and tremendous loss of life.
It's far too easy to hack.
You only need a valid e-mail address to create Stack Exchange account.
If gaining points was valuable, you could create 21 accounts, have them ask and answer questions and upvote each other's answers and questions. If each fake provides 5 answers and the fakes upvote them, they all jump to 1000 rep overnight, even without any real humans liking them.