If we were to reimagine states beyond the nation-state paradigm currently dominating — and we need to in order to avoid eminent crises — we should redefine the underlying systems of a state. I have introduced the risks inherent in the current currency markets, as well as the opportunity digital currencies present for achieving a true relation between transactions and money in the last two stories, “Burning a Nation’s Cash” and “National Currencies Need Not Be a Ponzi Scheme”.
I revisit the concept of macroeconomics to give it a more thorough definition. One characteristic of defining the economy with such fluidity as this paradigms allows is the possibility of defining diffuse borders. This would serve us well when we tackle the practicalities of reinvented modern states in the future.
Let us consider how a state could evade the inf and def to achieve lation, getting the wheel neutrally. Tracking transactions alone is not sufficient, as traders’ margins could mask inflation, whereas regions of sparse data could drive deflation. Thankfully, we have already introduced the mesoeconomics, economics at a scale bridging the micro and the macro.
This is an opportunity to consider a quantitative definition of the mesoscale. A shortcut for defining entities in a mesoeconomy could be entity with the smallest number of participants exceeding the number of external transactions, or the largest number of participants for which the number of external transactions exceeds that of the participants.
Practically, this is like considering the economy as a graph connecting the “individuals” — mathematical, and human — and clustering into circles such that edges crossing circle boundaries are external. This ensures all individuals belong to exactly one entity.
It also provides a heuristic optimum, where we consider large enough or small enough entities do not carry intermediate number of transactions. The only builder in a distant rural area might be as large an entity as a company with a near monopoly on airplane jet engines. A skilled craftsman in a busy industrial zone might attract as much clients as an SME, and exert the same level of influence over the overall market.
We arrive at the study of mesoeconomics by considering entities which preserve the details of the other scales while constraining their corner cases. Different entity sets could be arrived at depending on where you start clustering. This doesn’t matter for now. Let us assume we are able to effectively reconsider the entity an individual belongs to, in time, to avoid disputes.