The problem with Brunnhuber's idea is that it needs AI to function. That's not sustainable or resilient solution. AI requires enormous complexity and is energy intensive. I think that there is much simpler and better solution proposed by Ellen Brown Public Banking Institute. Why is public banking good? Because it prioritizes public utilities that prevents rentier class to gain undeserved profit and allows productive economy to develop. Why, and how, is rentier class killing western societies? That is explained in books by Michael Hudson.
Kudos for mentioning Michael Hudson. He is getting a bit long in the tooth and struggles for words on his podcast interviews, but he is still full of good ideas.
A case can be made that China is far, far ahead of the US on AI because of the greater number of high voltage transmission lines. I don't like AI myself and I don't use it in my writing. It is like having an e-bike where you don't have to pedal at all.
Brunnhuber's idea is just tweaking a failed System. Until you walk away from state-level society, these tweaks will proliferate AND do nothing to prevent civilization's downward spiral towards collapse. Those of us working on alternatives for nearly 60 years are now "pulling in our horns," waiting for the collapse of western civilization. But we continue to build SML solutions while we wait. Solutions that work short-, mid-, and long-term. The classic example is sustainable gardening. Right now I don't have a fertilizer problem because of cover crops, green manures crops, niche market synergies, etc.
And for all of you commenters who buy into the Martenson false dichotomy of problems vs. predicaments - DON'T BOTHER. I wish I didn't have to pre-empt stupid comments by ill-informed trolls, but it is what it is. Some of us are doing real work instead of trying to make money on consulting.
As there are power elite puppeteers with strong influence on politics, it is highly unlikely that a two tiered system will be employed in most countries. China seems to be the most capable of running their economy for national profit, but there is corruption in the system, and huge wealth gaps. Externalities such as pollution are high, but being addressed to keep them from destroying the economy. In other words, they will tolerate it as long as mass dieback doesn’t seem likely.
Hayek's real insight in "The Use of Knowledge in Society" is about consequence. Prices work because there's a feedback loop of profit and loss that filters out bad information over time. The actors who get the signals wrong suffer for it, and that's what keeps the system oriented toward reality. When a price signal is manufactured through legislation or, in this case, an earmarked currency, it bypasses that filter entirely. It enters the market looking like real information but it was never tested by anything. Nobody lost money on it.
That's the deeper problem with Brunnhuber's proposal. The Hayek objection isn't just "who has all the data" or whether a central planner can collect enough of it. It's that manufactured signals actively corrupt the discovery process by rewarding people who can navigate the artificial architecture rather than people who produce real value. Once you separate the signal from the consequence, the whole system starts orienting toward the artificial layer rather than toward reality.
You can see this already in how tax codes, healthcare billing, and regulatory compliance have created entire industries whose value exists only inside the artificial architecture.
A parallel currency that can't flow freely through the normal pricing process isn't supplementing the market. It's adding noise to the signal system that the market depends on to work.
You expressed Hayek's insights correctly. They are a version of the ideas by the founders of economics -- they correctly saw it as an ecosystem in which "money" was the equivalent of food. So, an ecosystem allocates food efficiently, an economy allocates resources efficiently when measured in monetary units.
Which is fascinating; absolutely. The problem is that an ecosystem has no such thing as "ethics," equivalent to thinking long term. An efficient ecosystem has no way to plan long-term, except by trial and error: what lasts, lasts. Whad doesn't doesn't. And it is the same problem with the economy. In the purely free-market version, it has no way to plan long term. Yes -- economists know what is a "discount rate" -- but it is a scotch tape patch to cover a huge hole in the whole structure.
The ecosystem analogy is a good one, and I think it actually helps clarify where I'd push back. Ecosystems do plan long term, just not through conscious deliberation. The long-term planning is built into the consequences themselves. A predator that hunts when it isn't hungry, or that over-consumes its prey population, doesn't survive to reproduce. It isn't "planning" in any conscious sense, but the ecosystem selects for behaviors that look like long-term planning because the feedback is real and inescapable. The feedback loop is the ethics.
The same mechanism operates in a genuinely free market. Actors who systematically discount the future at the expense of their customers, employees, or the commons eventually lose customers, talent, or legal standing. What looks like a "no long-term planning" problem is often actually a consequence of the distortions we both identified: manufactured signals that let actors externalize costs without facing them. The discount rate isn't a patch on a market failure, it's a symptom of a price system that's already been corrupted by the very interventions Brunnhuber wants to add more of.
I posit that it is only the powerful elites, and that the control-narrative that we make such decisions based upon virtuous and worthy goals is a lie, Plato's "noble lie".
Electronic money is seen to be under central-control in a way that physical money never was. Russia, Iran, Venezuela and ohters have had their money deactivated, which makes the money of remaining holders more valuable.
Jimmy Carter's study group declared the US to be an established oligarchy on July 30, 2015.
It is somewhat more overt now.
The primary deciders are those in power. What appears to be "corruption" is merely the exercise of their power covertly, while pretending that the control-narrative of representative democracy is actually operational.
An interesting read. In essence though, it seems to me that China's two-tier system was just a means to manage vastly different scales of transactions.
Also, do we not already have a two-tier currency system? Commercial banks, through loans (which must be repaid), create the money for commerce, production, business and mortgages and so on.
Governments, through their central banks create the money for state spending. Once upon a time that meant, in the west, investment in research, infrastructure, public health and education. That all changed with the adoption of neoliberal economic polices, shoe-horned in when the industrialised west ran into recession and stagflation largely as a result of the 1970s oil crises in which the Arab oil producing states quadrupled oil prices at a time when there was no spare oil production capacity outside of OPEC.
Governments can "borrow", but government bonds are in essence term deposits which have the very unusual properties of being both tradable and almost zero risk (there is no way except voluntarily that the issuer of a currency cannot pay any debt in that currency). Governments can also issue their own currency ("print money") but this is voluntarily (and politically) restricted to crises like COVID, financial crises and war.
The deeply and widely held misconception that governments must borrow money or tax their citizens to fund their operations, that governments are just like households and must therefore balance their budgets or run out of money - as championed by Margaret Thatcher - is politically useful if you want to impose austerity, privatise public assets and generally trickle (or flood) up wealth.
This is not to say that governments can issue currency freely - the constants are the resources available that government spending can activate (labour, materials etc) and managing the risk of inflation.
Contrast the UK's pathetic efforts to build a short high speed rail line, eventually abandoned because "we can't afford it", with China's construction of thousands of kilometres of high speed railway.
Finding the money to address poverty, climate change and a host of social ills is not the problem. Brunnhuber's proposal does make sense more as a means of addressing critical global issues, but there is strictly nothing other than political will stopping coordinated international government action (except for the power of corporate and oil state lobbies and the US) to do this, nor tis there anything other than political will stopping governments addressing domestic social and industrial issues.
Here's Richard Murphy on the brief moment the BBC admitted its failure of journalism and thus complicity in perpetuating the government as household myth:
Great book review. Goodness me, discounted goodness-flow! Might be better than price-discovery by the market which is how global energy and material flows presently operate under some kind of control, flows however having a short time horizon for 'risk' of unavailable stocks. A lot to think about.
Arguably there is a fundamental problem if we confuse goodness with utility. It is probably impossible to quantify 'utility', which gives sociology a headache? I think you are right to prefer robust boundaries.
Also, I envisage difficulty if we move robust boundaries out from our species to take in the considerable sentience embodied in non-human life, let alone the complex intelligence of ecological systems. A great deal more to think about.
My guess is that we remain in a hyperbolic highly experimental phase, (interesting maths for weighting constraints, boundaries, limits etc.) and it matters most what happens every year at the National People's Congress in the Great Hall of the People, and how this might fan out in international institutions, e.g. with luck the United Nations.
Love it Ugo. So many layers of course including regenerative and doughnut economics! I d like to connect it with our interview. x
The problem with Brunnhuber's idea is that it needs AI to function. That's not sustainable or resilient solution. AI requires enormous complexity and is energy intensive. I think that there is much simpler and better solution proposed by Ellen Brown Public Banking Institute. Why is public banking good? Because it prioritizes public utilities that prevents rentier class to gain undeserved profit and allows productive economy to develop. Why, and how, is rentier class killing western societies? That is explained in books by Michael Hudson.
Kudos for mentioning Michael Hudson. He is getting a bit long in the tooth and struggles for words on his podcast interviews, but he is still full of good ideas.
A case can be made that China is far, far ahead of the US on AI because of the greater number of high voltage transmission lines. I don't like AI myself and I don't use it in my writing. It is like having an e-bike where you don't have to pedal at all.
Brunnhuber's idea is just tweaking a failed System. Until you walk away from state-level society, these tweaks will proliferate AND do nothing to prevent civilization's downward spiral towards collapse. Those of us working on alternatives for nearly 60 years are now "pulling in our horns," waiting for the collapse of western civilization. But we continue to build SML solutions while we wait. Solutions that work short-, mid-, and long-term. The classic example is sustainable gardening. Right now I don't have a fertilizer problem because of cover crops, green manures crops, niche market synergies, etc.
And for all of you commenters who buy into the Martenson false dichotomy of problems vs. predicaments - DON'T BOTHER. I wish I didn't have to pre-empt stupid comments by ill-informed trolls, but it is what it is. Some of us are doing real work instead of trying to make money on consulting.
Boy, this one is super-dumb. Who makes the categories?
Have you been following the Minnesota fraud scandal? Money only doled out by the virtuous?
An example. https://empathy.guru/2025/12/29/psychopathic-manipulation-a-case-study/
As there are power elite puppeteers with strong influence on politics, it is highly unlikely that a two tiered system will be employed in most countries. China seems to be the most capable of running their economy for national profit, but there is corruption in the system, and huge wealth gaps. Externalities such as pollution are high, but being addressed to keep them from destroying the economy. In other words, they will tolerate it as long as mass dieback doesn’t seem likely.
Just my opinion.
Hayek's real insight in "The Use of Knowledge in Society" is about consequence. Prices work because there's a feedback loop of profit and loss that filters out bad information over time. The actors who get the signals wrong suffer for it, and that's what keeps the system oriented toward reality. When a price signal is manufactured through legislation or, in this case, an earmarked currency, it bypasses that filter entirely. It enters the market looking like real information but it was never tested by anything. Nobody lost money on it.
That's the deeper problem with Brunnhuber's proposal. The Hayek objection isn't just "who has all the data" or whether a central planner can collect enough of it. It's that manufactured signals actively corrupt the discovery process by rewarding people who can navigate the artificial architecture rather than people who produce real value. Once you separate the signal from the consequence, the whole system starts orienting toward the artificial layer rather than toward reality.
You can see this already in how tax codes, healthcare billing, and regulatory compliance have created entire industries whose value exists only inside the artificial architecture.
A parallel currency that can't flow freely through the normal pricing process isn't supplementing the market. It's adding noise to the signal system that the market depends on to work.
You expressed Hayek's insights correctly. They are a version of the ideas by the founders of economics -- they correctly saw it as an ecosystem in which "money" was the equivalent of food. So, an ecosystem allocates food efficiently, an economy allocates resources efficiently when measured in monetary units.
Which is fascinating; absolutely. The problem is that an ecosystem has no such thing as "ethics," equivalent to thinking long term. An efficient ecosystem has no way to plan long-term, except by trial and error: what lasts, lasts. Whad doesn't doesn't. And it is the same problem with the economy. In the purely free-market version, it has no way to plan long term. Yes -- economists know what is a "discount rate" -- but it is a scotch tape patch to cover a huge hole in the whole structure.
Long story, would deserve much more reasoning.
The ecosystem analogy is a good one, and I think it actually helps clarify where I'd push back. Ecosystems do plan long term, just not through conscious deliberation. The long-term planning is built into the consequences themselves. A predator that hunts when it isn't hungry, or that over-consumes its prey population, doesn't survive to reproduce. It isn't "planning" in any conscious sense, but the ecosystem selects for behaviors that look like long-term planning because the feedback is real and inescapable. The feedback loop is the ethics.
The same mechanism operates in a genuinely free market. Actors who systematically discount the future at the expense of their customers, employees, or the commons eventually lose customers, talent, or legal standing. What looks like a "no long-term planning" problem is often actually a consequence of the distortions we both identified: manufactured signals that let actors externalize costs without facing them. The discount rate isn't a patch on a market failure, it's a symptom of a price system that's already been corrupted by the very interventions Brunnhuber wants to add more of.
Thank you, Ugo.
Who exercises agency in finance?
I posit that it is only the powerful elites, and that the control-narrative that we make such decisions based upon virtuous and worthy goals is a lie, Plato's "noble lie".
Electronic money is seen to be under central-control in a way that physical money never was. Russia, Iran, Venezuela and ohters have had their money deactivated, which makes the money of remaining holders more valuable.
Jimmy Carter's study group declared the US to be an established oligarchy on July 30, 2015.
It is somewhat more overt now.
The primary deciders are those in power. What appears to be "corruption" is merely the exercise of their power covertly, while pretending that the control-narrative of representative democracy is actually operational.
An interesting read. In essence though, it seems to me that China's two-tier system was just a means to manage vastly different scales of transactions.
Also, do we not already have a two-tier currency system? Commercial banks, through loans (which must be repaid), create the money for commerce, production, business and mortgages and so on.
Governments, through their central banks create the money for state spending. Once upon a time that meant, in the west, investment in research, infrastructure, public health and education. That all changed with the adoption of neoliberal economic polices, shoe-horned in when the industrialised west ran into recession and stagflation largely as a result of the 1970s oil crises in which the Arab oil producing states quadrupled oil prices at a time when there was no spare oil production capacity outside of OPEC.
Governments can "borrow", but government bonds are in essence term deposits which have the very unusual properties of being both tradable and almost zero risk (there is no way except voluntarily that the issuer of a currency cannot pay any debt in that currency). Governments can also issue their own currency ("print money") but this is voluntarily (and politically) restricted to crises like COVID, financial crises and war.
The deeply and widely held misconception that governments must borrow money or tax their citizens to fund their operations, that governments are just like households and must therefore balance their budgets or run out of money - as championed by Margaret Thatcher - is politically useful if you want to impose austerity, privatise public assets and generally trickle (or flood) up wealth.
This is not to say that governments can issue currency freely - the constants are the resources available that government spending can activate (labour, materials etc) and managing the risk of inflation.
Contrast the UK's pathetic efforts to build a short high speed rail line, eventually abandoned because "we can't afford it", with China's construction of thousands of kilometres of high speed railway.
Finding the money to address poverty, climate change and a host of social ills is not the problem. Brunnhuber's proposal does make sense more as a means of addressing critical global issues, but there is strictly nothing other than political will stopping coordinated international government action (except for the power of corporate and oil state lobbies and the US) to do this, nor tis there anything other than political will stopping governments addressing domestic social and industrial issues.
Here's Richard Murphy on the brief moment the BBC admitted its failure of journalism and thus complicity in perpetuating the government as household myth:
https://www.youtube.com/watch?v=MdVRFYDsyNU
UCL paper on the self-funding state:
https://www.ucl.ac.uk/bartlett/sites/bartlett/files/the_self-financing_state_an_institutional_analysis_of_government_expenditure_revenue_collection_and_debt_issuance_operations_in_the_united_kingdom.pdf
Great book review. Goodness me, discounted goodness-flow! Might be better than price-discovery by the market which is how global energy and material flows presently operate under some kind of control, flows however having a short time horizon for 'risk' of unavailable stocks. A lot to think about.
Arguably there is a fundamental problem if we confuse goodness with utility. It is probably impossible to quantify 'utility', which gives sociology a headache? I think you are right to prefer robust boundaries.
Also, I envisage difficulty if we move robust boundaries out from our species to take in the considerable sentience embodied in non-human life, let alone the complex intelligence of ecological systems. A great deal more to think about.
My guess is that we remain in a hyperbolic highly experimental phase, (interesting maths for weighting constraints, boundaries, limits etc.) and it matters most what happens every year at the National People's Congress in the Great Hall of the People, and how this might fan out in international institutions, e.g. with luck the United Nations.