A Weird Case of Social Fiat Economics

For the last few days I have been at 29c3, the 29th annual installation of the Chaos Communications Congress, a hacker conference in Germany where people talk about issues as far flung as cooking, mobile phones, cryptography, psychology, European Politics and romance poetry. It would be anybody’s first mistake to assume that these things have nothing in common, or to make assumptions about the culture that decides to amass in the thousands to discuss them.

However, this culture has historically been very male dominated. The reasons for this are numerous, and generally stem from the longstanding misunderstanding in human societies that tinkering, thinking about hard problems and drinking copious amounts of beer is something that only men should do, and women have historically been marginalized in the hacker community, with associated misogyny and harassment. It’s a sad reflection that a group of intelligent people who spend their time fighting for human rights and freedoms should fall victim to such a base social stigma.

On the bright side, it has been getting better: awareness of equal rights and feminist values is increasing, the gender balance at hacker conferences has been leveling out, and people are increasingly taking issues such as harassment seriously.

This last issue has however, during 29c3, caused a pretty terrible situation, which, when viewed from above in economic terms, is both amusing and fascinating, and contains a deep lesson that we really need to learn about economics of social fiat.

The organizers of 29c3 decided that in order to deal with the problem of harassment, they would adopt an Anti-Harassment Policy, which would in part be governed by a group of Anti Harassment Angels who hover around, answer calls to a certain DECT number and a local GSM number, and generally aims to resolve conflicts. This constituted a structure for dealing with harassment which is generally considered to be legitimate within the scope of the conference, and people took seriously.

Simultaneously and independently, a group of people decided to introduce so-called Creeper Cards, an invention originating at DefCon, an American hacker conference which has been, as I have heard it, a much worse conference in terms of harassment in the past. These cards come in three kinds, green, yellow, and red, and represent a market mechanism for signalling dissatisfaction or satisfaction with particular actions. At DefCon, during the opening event, one card of each kind is put on each seat, making for a relatively small total economy of creeper cards which people could hand out to offensive individuals.

These two anti-harassment mechanisms reflect differing ideologies which are predominant in the American and European hacker scenes, respectively. The European approach reflects a European collectivist stance of creating a centralized mechanism to arbitrate in conflict issues, whereas the American approach reflects an American libertarian stance of creating a market mechanism to regulate conflict.

Only, at DefCon, the Creeper Card market was strictly bounded as a multiple of the number of seats in the main hall, whereas the group that decided to introduce them at 29c3 was unaware of the effects inflation could have on the market mechanism they were choosing to deploy, so they flooded the market with thousands of creeper cards, leading many people to end up with dozens of them to begin with.

Now, let’s introduce some basic economics before we continue.

First, Gresham’s law states that “When a government compulsorily overvalues one type of money and undervalues another, the undervalued money will leave the country or disappear from circulation into hoards, while the overvalued money will flood into circulation.” Now, Gresham’s law was built in a statist context, so we need to start by replacing the government with a form of social legitimacy. Originally, the law only applies when there is an aspect of compulsority, but that compulsority is equally effective if it is generated as result of social fiat as when it is generated by hierarchical authority. So we can restate this more simply and more accurately as: When two types of equally legitimate money coexist in an economy, the worse kind of money will drive the better kind of money off the market.

For instance, you might have one type of “currency” which is a collectivist arbitration committee, and another type of “currency” which is a market of creeper cards. Social fiat – which is to say, the collective understanding of the attendees of the conference – caused both types of “currency” to be considered legitimate.

Secondly, when you increase the availability of a currency without increasing the total value of the economy, the value of each unit of currency goes down. This is a simple supply-demand issue: when the money supply increases without the demand for liquidity increasing, the price drops.

So, when you have a “currency” which is used in a social network to denote dissatisfaction, and the availability of “dissatisfaction tokens” is massively greater than the real potential for dissatisfaction within the group of people, limited strictly by the size of the conference and the general inability of such a large group of people to conduct tens of thousands of acts of harassment over the course of a week, the value of each token is very low.

And therein lies the problem. Social fiat enforced the legitimacy of both the creeper cards and the conflict resolution team, but the creeper cards were massively undervalued due to them having been dumped onto the market in the thousands, causing a relative overvaluation of the conflict resolution team, which effectively drove them off the market. The valueless creeper cards, when played out between individuals, were signalling various levels of dissatisfaction, to levels as ludicrous as not having bought a beer for an interlocutor, while the seriousness of engaging the conflict resolution team was so high that people who genuinely felt harassed were dissuaded from actually seeking assistance.

The net result of this was that the group who wished to reduce harassment by introducing the creeper cards actually made harassment into a far more severe problem than it would have been if they had not introduced the creeper cards, and boom, we learn a fascinating lesson about how currencies of social fiat function.

On the bright side, this episode has led to a lot of interesting discussions about harassment that might otherwise not have happened, and I think generally speaking people have had a pretty good time at 29c3. I know I have.