First-in-Class Simulation Model Illustrates Economic Democracy, End of Poverty

HOUSTON, TEXAS—How will global society solve poverty, deepen democracy, and raise the trillions of dollars needed over coming decades to address climate change, infrastructure repair, education, and other problems? A new computer simulation study published in the International Journal of Community Currency Research illustrates how a novel economic framework could help cities and local regions lead the way by transforming their economies into democratic decision-making systems.

"The world faces serious—even potentially catastrophic—social, economic, and environmental challenges," says John Boik of the Principled Societies Project, author of the study and of Economic Direct Democracy: A Framework to End Poverty and Maximize Well-Being, the book on which the study is based.

"Economic systems in use today are failing to steer us toward decisions and actions that promote community well-being and sustainability," he says, "but humans are quite capable of designing new economic systems that can better serve our needs. We have the tools, need, and imagination."

This is not utopian thinking, according to Boik. "It's nuts-and-bolts scientific innovation for the 21st century."

As described in the study, a Local Economic Direct Democracy Association (LEDDA) is a membership-based community benefit association open to local residents, businesses, schools, nonprofits, local governments, and others who voluntarily choose to participate.

The LEDDA framework serves as a secondary layer of organization on top of an existing city or regional economy. It represents a synthesis of ideas from buy local, invest local, local currency, open source, open government, participatory democracy, socially responsible business, smart cities, and related community development, knowledge transfer, and decision-making initiatives.

Georg Mildenberger, PhD, head of research at the Heidelberg Centre for Social Investment and Innovation, who was not involved in the study, calls the model "a jump forward in using modern tools of economic analysis to explore innovative systems that might one day replace capitalism as the dominant paradigm."

He cautions that the study is just a beginning. "But if subsequent modeling and pilot trials suggest that similar results can be achieved in a real LEDDA," he adds, "new doors to the transformation of society could open."

Boik also emphasizes caution. "The model is illustrative, not predictive," he explains. "It describes how currency circulation in a LEDDA is supposed to work." He views the agent-based, stock-flow consistent model as a steppingstone toward more sophisticated versions.

To give some indication of potential impact, inflation-adjusted mean and median family incomes of members increase by more than 260 percent over the course of the 28-year simulation period. All gains are directly due to the LEDDA. Full employment is achieved in the county of 100,000 adults, and poverty is eliminated. More than two billion in zero-cost financing is channeled annually to local businesses, nonprofits, schools, and public service agencies.

Local schools, charities, and other types of nonprofits especially benefit; the nonprofit sector doubles in size during the course of the simulation.

For more information visit the Principled Societies Project website.

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