Time as Economic Unit: Intervals of Certainty

The recently proposed Libra currency also provides a useful way of conceptualizing time value as an economic unit. Like Libra currency, a formal means of time arbitrage would function both as a unit of exchange and of account. As a unit or medium of exchange, one unit of time purchases another, and the process is additionally backed with monetary representation for time value as a standardized commodity. As a unit of account, the economic time of each participating group would be fully accounted for, in a recorded continuum of coordinated services exchange.

However, the adoption of Libra as a new form of international currency, is by no means certain. In particular, as JP Koning emphasized, its unit of account is structured so that owing one's friend five Libras isn't the same as owing five dollars.

The most interesting thing to me about Facebook's move into payments is that rather than indexing Libras to an existing unit of account, the system will be based on an entirely new unit of account...Libra will be not just a new way to pay, but also a new monetary measurement.

Since Libra would be created from a basket of international currencies, not only is a Libra approximation of five units different from five dollars, it would fluctuate in ways which the user can't readily determine. Alas, as Koning explained, this could be a weakness for the new currency, since users would lose "intervals of certainty" in their spending patterns. Otherwise, the money in our wallets is fortuitously indexed to how store owners set prices. Incidentally, store prices are somewhat sticky, in part since price stickiness is reassuring to consumers. As to how intervals of certainty benefit retail in general:

It's a helpful fusion. Monetary economists call this a wedding of the medium-of-exchange and unit-of-account functions of money.

Facebook has an ambitious goal to create a monetary unit which could function globally. But will it prove feasible? What would it add to existing payment systems which they presently lack? And more specifically to the purpose of this post: Since I've also suggested time value as an economic unit in its own right, what issue would it address in terms of intervals of certainty?

Indeed, there could actually be a greater need for time as a unit of account, than what Facebook seeks. At issue is that while many time based service prices are also sticky, there's a different rationale for sticky markets which correlate with the income of high skill time based product, as opposed to the retail price stickiness which allows consumers to better manage (some) spending patterns.

Hence intervals of certainty aren't the same for time based product as for other goods and commodities. Yet time as an economic unit, could prove useful in the sense of bringing greater intervals of certainty to consumer management of high skill time based product. While it would be a slow process to build reliable local equilibrium for mutually desired spending patterns, the process could eventually pay off in the long run. Through the sharing of information re current aspirations and responsibilities with all members, participating groups would gradually create intervals of certainty for time based services, allowing each individual to manage their own time scarcities accordingly.

Why do today's high skill service offerings suffer from intervals of certainty problems? Many service providers need pricing flexibility because it is difficult to determine revenue sources in specific periods. Much of the resource capacity which compensates aggregate time value for high level skill, relies on skills arbitrage in secondary markets. Consequently the potential for full monetary compensation of high skill become saturated before all providers are represented. Just as this is a problem in specific time periods, it presents issues for supply side market capacity as well.

Small wonder it is difficult to rely on transparent services pricing, since secondary markets fluctuate according to the revenue creation of primary markets in current periods. Nevertheless, the overall lack of certainty for spending management is more of a problem for lower income levels, than for higher income levels. Hopefully, time arbitrage could eventually help to address this problem.