On service-based economy

[Ken Avonts]

Honourable deleguates,



I don't really like the way this summit is going to. It's only about virtual goods, and now they're even talking of virtual citizens. In my opinion, then you're not a micronation anymore, but a simulated country.



So, for those who do not want to participate in this virtual-goods-saga, discuss here about the so-called service-based economy.

-----------------------



On the other threads, some interesting things have already been mentioned:



Goods that can be traded: e-mail, webspace, webdesigning, newspapers. These also have specific problems, as always...



Income for the state: founding companies themselves, income tax, profit-tax, idle-capital-tax (see: non-interest based enonomy thread), double-alias-tax...



Problem: when the government gives almost all of the loans to the people, how can they make sure to have enough income to pay them next year, whithout printing new money?

 

Ken Avonts

Regent of the Islamic Republic of
Antverpia

http://users.pandora.be/ir-antverpia

[Sander042802]

I think a combination of virtual goods and "real" goods is cool. That's what our economy is going to I suppose.

	Sander Dieleman Chancellor of the Micronation of Pacary http://www.pacary.tk/ http://www.pacaryforums.tk/ VP of Operations of Bobbesian Airways

Quan nos esteramos reunis, le munde esteras complete de nove - me yup yup - Commander Clark

[HIH Diga Makonnen IV]

Mr. Avonts,

I have to agree with you.  Attera is working on "real" products rather than virtual ones (e-mail, webdesign, newspapers, ect).  We once tried the virtual products route and many citizens became bored with it real quick.  I think that some simulation wouldn't be too bad, but, since I am only the Deputy Economic Minister for Attera, I will follow the lead of my sister who holds the top spot.

She is of the same opinion as you.  She feels that once you go down the virutual products route, you are sliding down the path into simulation and your micronation gradually starts producing more and more virtual products until that's all that is produced.  Mainly it will be for the sake of entertainment value.  If that's what some micronations are about, then, that's great, but that isn't the direction Attera is heading.

Imperial Ras Diga Makonnen IV Co-Regent and Imperial Ras of Attera

[Trevon Andarosel]

The trick for the Government is to not spend more than she gets as income. This is a tricky point, however: a government wants to stimulate the activity of its citizens as much as possible, but if those citizens will not be paid, it's much less likely they will do anything. In the real world, this could lead to growth of a private sector (people will run their own business if they can't get employed by the government). In a micronation this could just as well lead to the departure of citizens:  if they don't get paid, they will move to somewhere were there is "work" for them. Micronationalist are highly mobile, this in contrary to macronational people.



Summarized (and propably skipping some steps) it means that the less services are offered, the more expensive they are. Care should be taken that services don't get so expensive that no-one has enough money to pay for them... There will be a lot of calculation to do for the economics minister.



Trevon Andarosel



 

The storyteller of Ex, Umbagollah


Ilotim ilo arelisin il parduvile arelis te arelisin
The truth is just too true to be true for everyone

[Ken Avonts]

So, a government should offer many services, and pay its employees. But private bussineses, who can pay taxes too, might solve this problem. Any idea how we can encourage private enterprise?

Ken Avonts

Regent of the Islamic Republic of
Antverpia

http://users.pandora.be/ir-antverpia

[Fax Celestis]

=Have the government give a donation to beginning companies.

=Taxes for new companies are lower

=Government creates a few companies, then sets them free, to create competition (you can see this begin, well, sortof, in Delvenus with the creation of the Shatterstar Mercenaries against the existing Gray Wolf Mercenaries).



Just a few suggestions.





And my problems with selling emails and the like:

1. Once someone buys an email or webspace, why would they have any reason to continue paying taxes?

2. This requires actual money...a website, and emails thereof, are not free.

Fenrir screams in icy rage...
Nelig brings an end to age...
Cerberus cries for freedom to roam...
Gormr destroys enemies’ home...
Freki is armed and ready to slay...
Geri does things in his own way...
Roci clamps in awesome bite...
Gyoro kills in darkest night...
Wolven spirit and wolven name;
beware to those of wolvenbane...

[Trevon Andarosel]

A private sector may arise some day in such an economy, either by privatizing government services are by new ventures. However, you need a few services to get the economy started. THe problem with the private sector is that it is hard to estimate who is going to do what. Therefore you need to have a sort of base income for the government and the most safe option is to offer services in the public sector.



With those email stuff, 't is true that it costs real money. Several countries (such as Babkha) have an .org domain with the possibility of accompanying email accounts. Who actual paid for them (in real currency) I'm not quite sure, but it wasn't my intention to link this to the virtual economy.



Once you have, in some way or another, such a .com, .org or whatever, you can offer inhabitants an email account, let's say, me@babkha.org . I know that Babkha offers this service now for free, but you can just as well ask virtual money from the inhabitants, based on a monthly fee.

See also the post by Diga Makonnen's sister:

pub45.ezboard.com/fmicronationalnewsnetwork48264frm6.showMessage?topicID=8.topic



This is of course impossible for countries where no-one wants to pay for a domain name (if I'm not mistaken, it was about $35 for two years).



Trevon Andarosel

The storyteller of Ex, Umbagollah


Ilotim ilo arelisin il parduvile arelis te arelisin
The truth is just too true to be true for everyone

Edited by: Trevon Andarosel  at: 5/23/02 8:57:04 am

[Ken Avonts]

When the webspace is owned by the government, and payed with virtual money, then, when someone stops paying taxes, the webspace will be taken back by the government.



A .be now costs €12,10. That's not much, is it. Anyway, I wouldn't like to pay it myself... I think you have a point there.



Newspapers are often used in virtual economies. But why would anyone buy a newspaper? I think it will cost more money to the government then they'll earn from it.

Ken Avonts

Regent of the Islamic Republic of
Antverpia

http://users.pandora.be/ir-antverpia

[Trevon Andarosel]

Depends on the price . All you need to do is find someone who actually makes the newspaper, and then mail it to everyone who subscribed.



Trevon.

The storyteller of Ex, Umbagollah


Ilotim ilo arelisin il parduvile arelis te arelisin
The truth is just too true to be true for everyone

[Ken Avonts]

Yes, but how do you get people to subsribe... It's easy to get money to the citizens, but it's very hard to get it back. Maybe, as I already described in the thread of non-interested-based economy, idle capital could be taxed, in stead of being rewarded with interest. In this way, inactive citizens will be filtered out.

Ken Avonts

Regent of the Islamic Republic of
Antverpia

http://users.pandora.be/ir-antverpia

[Trevon Andarosel]

Yes, I think that is necessary indeed. In that case, you can also gradually dissolve the accounts of people who unofficially left without officially confiscating their "possessions" through a difficult procedure.



It's also quite a fair tax: if people don't use the money, they obviously don't need it.



The tricky thing is that people might want to save money for some expensive something (if that's available). Perhaps you can add a possibility for saving and loans, through a bank or through an obligation construction (people lending the government money by buying a kind of governmental shares).



But before working this out, it would be useful to discus first if a short-timed savings mechanism is necessary.



Trevon Andarosel

The storyteller of Ex, Umbagollah


Ilotim ilo arelisin il parduvile arelis te arelisin
The truth is just too true to be true for everyone

[Ken Avonts]

I was thinking of a yearly tax, or maybe 6 months. If people want to save, they will either loose a smaller percentage, or they'll have to invest in buying shares or obligations...



There's still one problem involved in this idle-capital-tax: suppose that the tax rate is 5%, what should be taxed then? The actual amount of capital that is still on the account at the end of the year, or the average-ammount of capital of the whole year. Both have their pros and cons:



- tax at the amount at the end of the year:

one has an amount of €1000, but just before the taxing-date, he buys shares for €900, so he only pays tax on €100, which is €5. Then he sells his shares, and he still has €995 left. When the full €1000 would be taxed, he would have left only €950.



- tax on the average:

one saved an amount of €1200, so he could found a new company with a friend in December. He saved €100 every month. He himself buys shares for €1200. So he'll have nothing left on his account, but still he'll have to pay a tax. 100+200+300+400+500+600+700+800+900+1000+1100+1200=7800. 7800/12months = 650. So he'll have to pay a tax of €32.5. But he has nothing left on his account...

On the other hand, people have to pay taxes, whether they have money left or not. It's the same in macro-nations...



 

Ken Avonts

Regent of the Islamic Republic of
Antverpia

http://users.pandora.be/ir-antverpia

[Trevon Andarosel]

I was thinking about a monthly tax, because a year is a very long period of time in a micronations. I mean, how many micronations do you know that exist for more than two years?



The idle capital tax has to be much higher than 5 %. After all, it's one of the most important sources of  income for a government.

 

I would suggest a tax based on the current capital of a person. After all, if a person buys obligations the government gets money back, although it isn't their own. Still, it must be avoided that a government plunges itself into a large debt to  its own citizens.



Trevon.

The storyteller of Ex, Umbagollah


Ilotim ilo arelisin il parduvile arelis te arelisin
The truth is just too true to be true for everyone

[Ken Avonts]

Yes, but it's no use to have such high taxes, that people have to give 100% of their wages back. To prevent this from being necessary, there should be a big private sector. The idle-capital-tax is not a goal on itself, it's a means to an end. The idle-capital-tax  is meant to encourage people to invest their money in companies, not to provide the government with enough money to pay next year's wages.



By the way, this is in fact an Islamic idea, and in Islam this tax, or Zakaat, should only be used to provide some kind of security system with money. But off course non-Islamic nations can always use the idea of an idle-capital-tax for other purposes...

Ken Avonts

Regent of the Islamic Republic of
Antverpia

http://users.pandora.be/ir-antverpia

[Trevon Andarosel]

The problem is, there isn't a large private sector. It would be good if there was, but micronations are small.



I tried to do some calculations, but this is difficult stuff. However, approximately the private sector must be (1/T * I/E) times larger as the public sector (in money), where T=taxrate, I is government income due to services (not tax!) and E are the government expenses (the difficulties arise when you realize that the income/expenses ration depends on the size of the private sector). So, if the general tax rate is about 30 %, and the I/E ratio is 1/2, then the private sector should be 1.5 times as large as the public sector.



This means (very roughly) that if you have 15 active people in your micronation, you need (roughly, because not all incomes are equal) 9 people running a company, and 6 people remain to run the public services, and the government itself. The wealth tax is not incorporated into above calculations.



That was about the size of the private sector. On to the wealth tax. In my previous post I forgot that there is a certain amount of spare money, initially possessed by the government. For a smooth running economy it doesn't need to stay in possession of the government, so if individual inhabitants save a bit, it doesn't hurt too much. This means, that the wealth tax doesn't need to be as high as I thought.



Trevon.

The storyteller of Ex, Umbagollah


Ilotim ilo arelisin il parduvile arelis te arelisin
The truth is just too true to be true for everyone