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It is possible for a society to live without any form of currency within our current capitalistic system?

I imagined a large city situated on the ocean that is independent from all existing nations. One could think of it as some kind of social experiment or forerunner. Its inhabitants have everything they need for living: food, water, a place to work and a place to live. Everything with a decent amount of luxury and technologically up to date. The city itself is like every other city, it has all facilities a normal city requires, although the criminality rate is really low.

Everything was built to be environmentally friendly and self-sustaining, at least in terms of energy and water. Cars are not used, transportation is done by environment-friendly public transportation and bike. Food is produced in form of fish, other oceanic food and small amounts of cereal products grown in hydroponic labs. Parts of the harvests and the other produces of the city are being used for trading. So although the inhabitants of the city don't need any form of currency (except for favours between humans maybe), the city itself has a certain amount of money used for trading goods for other goods so that the city can thrive in a society that is normally driven by money.

The inhabitants are all relatively cultivated so things like vandalism are no problem. Insurances are mostly rendered unnecessary and medical care is free.

Could this system work out?

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    $\begingroup$ You are basically asking if complete socialism is possible. $\endgroup$ – A. C. A. C. Jul 24 '17 at 19:21
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    $\begingroup$ The word "currency" does not mean "money". $\endgroup$ – AlexP Jul 24 '17 at 19:24
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    $\begingroup$ Someone already wrote a book about such a society on an island. en.wikipedia.org/wiki/Utopia_(book) $\endgroup$ – Bindelstif Jul 24 '17 at 23:29
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    $\begingroup$ @MeltingDog Except as soon as you define a value for the service whatever units that value is in is essentially a currency. $\endgroup$ – John Jul 25 '17 at 0:14
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    $\begingroup$ What is your precise definition of "currency?" In most of our lives, we can rely on normal simple definitions of the word, but when you start talking about trying to do away with all forms of currency, the semantic start to get more demanding. As an example, do you consider the cigarettes used in exchanges in POW camps to be currency? (most economists do) $\endgroup$ – Cort Ammon - Reinstate Monica Jul 25 '17 at 1:03
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I assume that the question is about a society which does not use money and not literally a society without a currency of its own, because the literal question is trivially true; there are numerous small states which don't have a currency of their own and use some other state's currency (usually U.S. dollars or Euros), not to mention the 19 member states of the Eurozone. Some European countries are moving (slowly) towards phasing out the use of cash and using bank cards for all payments.

Of course it's possible, if they like living in the Stone Age

Now, societies with no money were once the norm, up to some three thousand years ago, and here and there in remote places there are still uncontacted tribes which don't use money. The current economic orthodoxy considers that the basic problem with a society that doesn't use money is that its economy is either extremely slow or extremely distorted.

The fundamental problem of economy is the allocation of scarce resources. Say both Mr. Aleph and Mr. Bet want to build new houses; suppose that they already have the land, and they need the bricks. Now, if there are enough bricks in stock at the brick-maker, there is no problem, they both go and get the bricks they need. But normally brick-makers don't keep stocks of bricks; so either Mr. Aleph or Mr. Bet will have to wait, or, if they don't want to wait, must import some bricks from another town, using up resources such as transport capacity and brick-making capacity. In a society which uses money the problem is easily solved by letting Mr. Aleph and Mr. Bet compare the utility of the bricks to each of them by bidding on the bricks and possibly paying more for the imported bricks; but in a society which doesn't use money, how can the Supreme Allocating Intelligence optimize the allocation of resources?

In Marxian terms, the price is the monetary expression of value. With no money, there is no price and there is no way to find out the true value of a brick for Mr. Aleph and for Mr. Bet. The problem of determining the allocation of resources when there is no market is what doomed the planned-economy experiments in the Soviet Union and other such places.

But what if they don't want to live in the Stone Age

... and they absolutely don't want to use money?

There is no easy way out. As far as I know there are only two plausible solutions:

  • Build a post-scarcity economy. There is an abundance of everything. (How can there be an abundance of desirable land, of servants, or of paintings by Old Masters is left as an exercise.) If there is an abundance of everything then of course that money is useless.

  • Use a computer-controlled generalized barter system. I want a room for two weeks in a hotel on the beach; the company which owns the hotel wants a piece of land in the mountains; the Universal Barter Clearing Computer will find a chain of transactions, whereby I will perform 100 hours of tutoring in elementary physics for Mr. Gimel's son, Mr. Gimel will design half a dozen new dresses for Ms. Dalet, Ms. Dalet supply sixteen grosses of eggs to Ms. He, Ms. He will paint eleven motor-cars for Mr. Vav and so on, until finally Mr. and Ms. Tav will give the hotel company one fifty-fourth of their share in a desirable lot in the mountains.

Both of these solutions have dark spots, where the theory isn't yet well formed. One of those is public goods, such as infrastructure.

  • There cannot be a surfeit of infrastructure, because one kind of infrastructure competes with another; for example, there cannot be at the same time an abundance of roads, of houses, and of parks; they all compete for the land.

  • The generalized computer-mediated barter system has trouble allocating resources to the development of infrastructure, because the perceived utility of infrastructre is fickle. Today I want more motorways, tomorrow I may want more cycle-paths, the day after tomorrow I may want more personal public transport. Infrastructure takes time to build, and is not well-suited to point transactions.

Rejoice, for you have ample work to do

Designing a society without money is both a perennial dream and a difficult problem. You may chose to think deeply about this society and describe it in detail; your work may become as famous as the Utopia of Thomas Morus or as Campanella's City of the Sun.

Or you may chose to go the Star Trek way: just assume that the society works somehow and concentrate on the story. Have you ever seen anybody use any kind of money in Star Trek? Only the despicable Ferengi; and, exactly as in the question, the Federation maintains some reserves of gold-pressed latinum specifically to trade with them. (See also the learned comment of @hszmv.)

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    $\begingroup$ There was at least one race of aliens (the Bolians) that have a banking system. It appears that in Star Trek, the Federation is less like the USA and more like the EU, but leaves the currency to the individual member states (we do see human merchants and the Federation is said to do buisness with the Ferengi). Only Earth and Risa are explicitly shown to not have money. $\endgroup$ – hszmv Jul 24 '17 at 20:43
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Short Answer

No, not really

Longer answer

There will be scarcity. I can think of several things in your city that there would be a limited supply, such prime apartments, more than the current allotment of a certain type of food, construction material, access to power, works of fiction, the cooking of a chef, or the art from an artist.

Economies pop up anywhere where there is scarcity. In prisons, where food, shelter, clothing, and medical care are provided free of charge, the inmates trade for a myriad of things (often using cigarettes as a means of exchange.) In online games, the coin of the game has real-world value and is exchanged for real-world goods and services.

Economics is the study of human behavior in producing and allocating scarce resources. Currency is just a tool. We use it as placeholders for exchanging value. Without currency, people would resort to barter. Currency makes trading easier, more flexible and faster.

Free everything would result in the Tragedy of the Commons, where people use a free resource to the detriment of everyone.

Also, you have the problem with work ethic. If everything is provided for free, there is no reason to work other than for fun. Sure, some people would work for free, but ask yourself if you'd go into work if there are no consequences to staying home? If not many people work, who will operate the food and energy production facilities which undergird the society? If these facilities are not manned, the city falls apart, and nobody eats. Therefore, the rulers would have to employ some form of coercion to keep the city from plunging into chaos.

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Unique experiences

How do kids get the new Justin Bieber or Katy Perry CD?

Even if we handwave things such that they have the latest and best technology (itself questionable), we still have to explain how they avoid people trading for the things they don't have. We can even get around CDs. Maybe the government pirates them or buys them.

But how do they keep people from trading for the truly unique? Only Ariana Grande can headline an Ariana Grande concert. So unless the city has some way of hiding the entire outside world from the youth, they will want those live experiences. And of course, they need money to buy them.

Technology

The concept of a single city that is much more advanced than the rest of the world is common in fiction, but it is not really feasible. One reason is that if it existed, it's too easy for the technology to spread out from it. But a bigger problem is that progress doesn't work that way.

One country, much less one city, doesn't dominate progress overall. There are economies of scale to production. These mean that it is much easier to locate Google and Yahoo in Silicon Valley. Or General Motors, Ford, and Chrysler in Detroit. But there are limits to production. The local universities can't specialize in both Computer Science and Mechanical Engineering. They have to pick one. So Detroit and Silicon Valley remain separate. Michael Porter calls these technological or business clusters.

A parallel idea is the single brilliant inventor who is equally good at computer programming, civil engineering, and pharmacology. Single people aren't even that dominant in any one field these days. Real progress is made by the interaction of large numbers of groups.

Anyway, by random variation, a good number of the brilliant people who can headline progress are going to be found in the larger population outside the one city. Unless the city has some way of pulling them away, it isn't going to be able to maintain dominance for more than a generation or two, even if we handwave achieving that dominance in the first place.

Drugs

A significant driver of criminal activity is drugs. Addicts naturally want them. Society doesn't want people self-harming by taking inappropriate amounts. Criminals exploit that.

Star Trek

Another answer compares this to the Star Trek economy. However, this is less plausible than Star Trek. Star Trek requires only that there be some system that obviates most kinds of work. This doesn't even allow for that. If it did, then this wouldn't be just one city. It would be the entire world.

This kind of system is not competitive with other systems. That's not really a problem in Star Trek. It's easy enough to do advanced science that a relatively small number of people can drive progress. In our world that takes a large support system. I.e. money, personnel, resources, etc.

This wouldn't be a risk-taking system. There is no benefit to risk. This will lead most people to choose the safe route. But progress is made by people looking at the one-in-a-hundred chance. Sure, it's usually wrong. But sometimes it's right. The problem here is that in an egalitarian society, the risk takers never aggregate enough resources to take real risks. It's no accident that Federal Express and Amazon.com were founded by people whose families were already rich.

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They don't exist on the scale of cities but communes do exist.

The key point to their continued existence is they have to be trade value neutral with the rest of the world after including things like the exterior government. Practically this is often accomplished in part by members (or their ancestors) having been successful in the larger world before joining the commune and it might also be helped by turnover; new people bringing in more assets than leaving people take out.

Your city would need to be at least trade neutral with the rest of the world, and capable of maintaining peace with its neighbors. To do this either it must be self sufficient and poor enough that it doesn't attract military attention or rich enough that it is a valuable trading partner.

A family is typically run on these lines, with the balance of money to the outside world being important, but the work being done inside doesn't have strict accounting.

There are many criticisms of scaling this up, and most center on jerks or slackers. If there is a jerk or slacker in your community you spend effort dealing with them that could be better spent being productive either directly for self-sufficiency or to maintain your external trade balance. If you are running a surplus extra non-productive effort eats into it. If you try to remove the weak link it creates dissension or precedent which can destroy the community. Jerks and slackers seem to become more common as groups grow larger.

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    $\begingroup$ Vatican City (not really a city) might be an interesting case. There is nothing to buy there anyone would buy twice, and I bet anyone living there would be given them the first time if they asked. $\endgroup$ – user25818 Jul 24 '17 at 21:42
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Before modern currency was in widespread use there was something called Barter system in which if you needed something which somebody else had then you would give something you possess in exchange for that. It sounds simple and worked for much of human history but it had many drawbacks because of which modern monetary system became widespread. And Barter system is perhaps the closest a society can get to not using any currency and even that system was not very efficient. So in short no it is not possible to have a completely currency-free world no matter how cultivated its people are because it is simply not practical. Some form of currency system would be required and efficient one as well.

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You are asking "Can we build a post industrial Communist society"?

It is certainly possible, but there is a number of limitations.

First, your scenario implies that all basic necessities would be provided automatically. So, the people can do nothing and still have food to eat and place to live.

Second, there must be strong safeguards for social stability. No individual, or group of individuals can be allowed to gain power over other people. In modern capitalist society, "money is the power". While this mechanism has its drawbacks, when coupled with a strong legal system, it works. In current and former quasi-communist and socialist countries, power struggles often resulted in a downfall of the whole system.

Third, there must be some non-monetary system of remuneration. Apart from most basic needs, there are many others that can not be fully automated in foreseeable future, like healthcare and education. People must have incentive to actually do some work. Also, there would only be a limited supply of imported goods. So, we need some system of "credits" that would allow the people to buy those goods.

Forth, this society has to trade with the outer world. While this trade could be monopolized by the government, your society can not be immune to the monetary issues present in outer world, like fluctuations in the prices of commodities. You society has to sell something in order to buy something.

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    $\begingroup$ isn't "credits" exactly like currency? Any material or non-material thing that is used only to buy stuff is technically a currency... $\endgroup$ – Doomed Mind Jul 24 '17 at 19:55
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    $\begingroup$ Not necessarily. Currency has many functions, this credit system can have only a limited function. for example, people would not be able to transfer credits to each other. $\endgroup$ – Alexander Jul 24 '17 at 20:08
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    $\begingroup$ @DoomedMind, If a currency or money isn't provided by the society, individuals will create one. As mentioned in another answer, that happens in prisons. $\endgroup$ – ShadoCat Jul 24 '17 at 22:16
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You are talking about the implausible Star Trek Federation lack of economy.

It might work out if the society was completely isolated and under strict draconian control.

The assumption is that everyone must do some minimum work to get their resources. That is because if no one had to actually work to get their resources, a large number of people would choose to not work. Then there wouldn't be anyone to generate those resources.

So, assuming everyone needs to do a minimum amount of work to get their allocated resources, there are two stagnation issues that I see:

  1. No reason to work: Why do more than the minimum amount of work? Why innovate better ways of doing something? Why create new ideas that would generate more work? There is no personal incentive to grow the society and a strong likely hood that any change will make more work for the individual.
  2. Lack of extra goods as incentive: What if you want more stuff than your personal allocation offers? Currently people steal in situations like that. Also, people trade things they need in a black market to get things they want.

You can solve the extra goods problem by making extra goods available to people who work extra hours, perform unwanted jobs, or take critical function jobs. Are there enough of those jobs for everyone who wants one? Are there enough extra resources to pay for those? If the jobs are limited, how do you decide who gets them? Those handing out the "extra" jobs will have a lot of power.

The only way I see this working is the "human zoo" type of society. This is where one class of society controls all aspects of the other class who have no power. Historically these were called Masters and Slaves. You will probably want to choose different names for the classes to obscure the reality.

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The closest real-world place I can think of is Auroville. There is no effectively no money and no government. It's a pretty interesting social experiment, running for nearly 50 years now, but it's not problem-free. Worth reading up on.

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Yes, of course.

Think of your family. Does your mother pay your father to cut the grass? Does your father pay your mother to have sex with him? Do you give your kids money to lay the table? Do the kids pay the mother to cook dinner or drive them to school? Do you pay your husband or wife to listen to you when you tell them of your day?

Sure, some parents give their kids money when they do household chores, but in most families people cooperate without payment.

Where I live, even villages work that way to some extent. When someone wants to build a house, everyone gets together to build it. And they don't count hours and expect an equal return. It is just what you do, because everyone understands that they are dependent on each other. You can see this generous cooperation everywhere in this world when a disaster strikes. Suddenly it does not matter that time and things usually cost money, and people can create "goods" (material to build a dam) and "services" (the manpower to build it) seemingly out of nowhere.

Many "primitive" tribes live on that principle all the time, where the whole community takes care of the whole community. They hunt together. They farm together. They build together.

And a whole nation or world can work that way, too.

Just think of our (industrial) society without money. Not possible, you say? You are wrong. Goods and services do not simply disappear, if you take away the money that we use to pay for them. Money is a circular thing. You work and produce things that others need to earn the money to buy the things you need. If you delete the money, you can still work to produce the things others need, and they can still work to produce what you need. All you have to do is to keep on doing what you do, and despite the money gone, nothing changes.

But, you say, people won't work, if they don't have to. But of course they have to. If they aren't stupid (and people in small communites easily realize this, indepentend of their individual intelligence), they see that if they want to eat, dress, and sleep under a roof, they will have to work for their food, clothing, and housing. If you don't want to die, you will have to work.

And people actually like to work, too! People are easily bored. So they will do things. And while a few might enjoy to just lie around and watch tv, most people need to do things that give their lives meaning. People like to work in the sense that they enjoy doing meaningful things. Many middle-aged men get a depression when they lose their jobs, it is one of the most common reasons for depression in that age group. And not because they don't have any money. They do. But simply, because their live has become meaningless. And why do retired people do all that unpaid, voluntary work? Because they want to work!

So basically, if you took away the money, maybe people would stop creating much of the superfluous garbage that we use to drive our economy (like a tv in every room of the house or new shoes although the old ones are still good), and some of the more unpleasant things would need a bit of reward (just cleaning your own toilet is not something that all of us enjoy doing unless our new girl-friend wants to visit), but basically we would certainly still want, need, and create everything that makes our live worth living (from food, to clothing, to housing, to entertainment).

The only real changs would be that we would no longer have rich people. Because there wouldn't be anything to hoard and withhold from others.

Yes, there would still be theft and war, because there would still be people who love to take from others. But that's what I said: basically, everything would remain the same.

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    $\begingroup$ That is only possible in a Utopian world where the social bonding is so strong that everyone considers everyone else as a family member. And even then it is so impractical that it will need a whole page to explain that. In families this type of setting is the norm but as number of people grows it is inefficient. $\endgroup$ – Rolen Koh Jul 26 '17 at 6:44

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