Friday, October 31, 2014

Chances for a successful Cashless Society

 There exists a ratio between transactions for legal goods and services and illegal goods and services. Let me represent that ratio for the sake of discussion with a term, the criminality index and represent the term with the following equation:


Where CI equals criminality index and IT equals the value of all illegal transactions and LT equals the value of legal transactions during a given time.

Typically the ratio is less than 1 and approaches equality with 1 as a region increases laws created to prevent goods and services within the population.  Since there will always be a demand for criminal activity unacceptable to the majority of people within the region then the ratio will never equal zero if the period of monitoring is sufficient.

For example there will always be a limited demand for murder for hire; modern societies will always consider it a criminal act, and so the parties to the transaction require cash for the transaction. If actual cash does not exist, then the parties to the transaction barter with goods or services to complete the transaction.

Banning barter only causes the IT/LT ratio to increase and drags people that like to barter for legal goods and services into the region of anonymous activity increasing the camouflage for parties to the original illegal act. The government response actually helps parties to complete illegal transactions by making such transactions less rare.

If a society and its government implement a cashless society then its chance for success rests on the anonymity parties to a transaction experience. Governments that log the parties to a transaction, the amount of a transaction, the location of parties to a transaction, and all other data allowing a forensic transaction analyst to determine if the transaction is a criminal act or not, will cause the cashless currency to fail, and if the government has a high criminality index then the currency will never experience ubiquitous acceptance by a population.

If governments do not log transaction activity then the chance for ubiquitous acceptance of a completely cashless region is much likelier regardless of a regional criminality index.  I say that without proof and make the assumption for two reasons, namely:

1) People recognize that future events shape their future behavior. If government monitors behavior and anonymous behaviors become usual for observers regardless of the criminality of observed activity, then observers cannot notice a change caused by potential future criminal activity.

2)  Non-criminal activity may have consequences for personal reasons such as transponder payment data from a defendant in divorce court that travels on a toll roll to conduct an extra-marital affair.

It does not matter that access to logged data is limited in scope; people react to their perception of potential threats not actual ones; witness the absurd behavior of some US State government officials reacting to health workers returning from countries experiencing Ebola outbreaks.

The chance for ubiquitous acceptance of a cashless society also rests with the criminality index. If laws only exist against assault and theft and there is no monitoring of financial transactions, then people do not care if ultimately prosecutors develop a criminal prosecution by using defendant financial data lawfully obtained with court ordered warrants.

Next Blog: Beyond issued digital currency, beyond push payments, lies a thought payment system

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