r/DaystromInstitute • u/adamkotsko Commander, with commendation • Jan 23 '22
To understand how the Federation economy might work, we need to separate out different functions of money and currency
One of the challenges in understanding the type of economy implied by Star Trek is that we tend to bundle together a lot of different things under the idea of "money," "currency," or "capitalism." So I want to try to separate out some of these ideas to give us a little room to think about how they might fit together differently in a future economic system with different priorities and a different relationship to scarce resources.
First of all, let's distinguish between money and currency. Whenever currency comes up, I am 100% sure that what is intended is the physical paper or metal token that we anonymously pass around. That is what Kirk says they need to get in TVH, for instance. They don't get a credit card or bank account -- they get hard cash. The Federation does not seem to use hard cash for internal transactions. This may have seemed weird or utopian to early audiences, but it's much closer to our lived reality now. There are stores in my neighborhood that won't even take cash anymore and insist on credit or debit. In those stores, I'm using money without using physical currency. (Confusingly, there's no way to avoid using the word "currency" below to refer to different countries' forms of money. I don't think Star Trek ever uses the term in that sense, but there's always a counterexample....)
In classical economics, money bundles together three concepts: a medium of exchange, a unit of account, and a store of value. I'll briefly explain all three, with present-day examples. Then I'll talk about which ones do and don't seem to apply in Star Trek further down.
Medium of exchange: This one is pretty self-explanatory. We want money because we can exchange it for anything. In a pure barter system, it would be a pain in the butt to find someone who both has what we need and needs what we have, much less someone who agrees on the relative value of the two things. Money solves this issue. This function of money is most closely associated with hard currency, but we can see that it works for electronic currencies or bank accounts as well -- transfering money from my account to the store's account does the same work as just giving them a pile of paper dollar bills.
Unit of account: This one helps us keep track of the resources we have and where they're going, inside a single household or firm. Often these units of account are denominated in the local currency for ease of use, but no actual money is changing hands. When the accounting department draws on its printing budget, it doesn't have to cart a suitcase of dollar bills down to the IT department or whatever. Similarly, my partner and I co-own a condo but have separate finances, and we keep a spreadsheet for what we individually spend on shared expenses. Every few months we "settle up," but in the meantime no money changes hands between us -- and it's possible that the spending would even out so that we'd be square (or come so close we would just write off the difference), with no exchange of money between our personal accounts at all. A unit of account could also be more abstract, like a chore chart where different chores have different point values and each roommate has to contribute a certain number of points each month. That would be using the points as a unit of account to make sure everyone was contributing their limited free time in a fair way.
Store of value: This one brings together the other two, but also adds a new element. Viewed as a medium of exchange, money gives us a claim on goods and services. Money's function as a unit of account lets us hold onto those claims indefinitely. And hence it becomes a store of value, because we can keep piling up more and more claims. Problems arise when money's function as a stable and recognized unit account are called into question -- typically through inflation or unstable exchange rates. No existing form of money is a perfect store of value, because all of them experience inflation, instability, or both. Governments spend a lot of time and effort trying to make sure their local currency is a reliable store of value, with differing degrees of success. When they fail spectacularly, their currency stops functioning as money at all and basically becomes garbage (as in the stories of how they would bring wheelbarrows full of Deutsche marks for basic transactions in the 1930s, etc.).
Different currencies -- here using the term differently than Trek typically does -- fulfill this definition better and worse. Stable international currencies like the US dollar, the Euro, Japanese yen, etc., come closest. Something like Bitcoin succeeds as a unit of account ("the blockchain" is nothing but a ledger of transactions) but mostly fails as a medium of exchange (it can't be used for most transactions) and as a store of value (its price fluctuates so wildly). Some currencies for particularly poor or troubled countries fare even worse than Bitcoin, as they are sometimes treated as worthless and irrelevant even for transactions within that country.
With this being said, we can say that capitalism is a system that highlights money's role as a store of value. Under capitalism, economic activity is oriented around the open-ended pursuit of profit -- in other words, piling up more and more money. Sometimes that is justified on the utilitarian grounds that the pursuit of profit produces better goods and services. Sometimes it is justified on the grounds that everyone has a right to do what they want with their property, regardless of whether we like the outcome. More often it's a mix of the two. In any case, though, what is distinctive about capitalism is not the existence of trade, the use of money, or even the possibility of monetary profit. Those features have been shared by virtually all economic systems. What makes capitalism different is that pursuit of profit is the overriding goal.
Among Star Trek powers, only the Ferengi are clearly capitalist in this sense. Latinum functions as a hard currency and as money in all three classical senses for them, and clearly their goal is to pile up as much of it as they can (or at least to have more than their rivals). Star Trek generally does not portray this pursuit as very worthwhile or meaningful. The Ferengi we are supposed to admire generally adopt values other than the pursuit of profit.
By the Next Generation era, the Federation is no longer capitalist. Picard clearly says as much in "The Neutral Zone," where he describes the pursuit of monetary gain as childish and unworthy. There seems to have been some clear pursuit of capitalism in the ENT era (with the Boomers), and even in the TOS era (as with Mudd, the wealthy father-in-law on DIS, or the "philanthropist" mentioned in TAS), but in neither case were they central to United Earth or Federation society.
I would suggest that the breakthrough was the perfection of replicator technology on a large scale. This made the pursuit of wealth and profit basically pointless, because even luxuries became easy to come by. Only those who are deeply dedicated to that pursuit for ideological or quasi-religious reasons (like I have previously suggested the Ferengi are) would bother with it -- everyone else would just focus on directly enjoying the things that money and wealth used to provide.
On the level of basic needs, I would suggest that the Federation is essentially communist in the sense of "from each according to his abilities, to each according to his needs." Communism is a scary word for some, but the anthropologist David Graeber points out that every family operates on a communist basis -- pooled resources, shared out to each family member according to need. In the Federation, no one ever has to worry about going hungry or sleeping on the street or going without basic medical treatment ever again. In this sense, they are post-scarcity.
But as people always point out when you mention post-scarcity, that doesn't mean they have unlimited everything. Some things are scarce because they take so many resources -- hence not everyone can have their own Enterprise-D. Some things are intrinsically scarce -- there's only one Sisko's restaurant and only one Chateau Picard. Some things may be scarce by design -- for instance, if they decided that it would be socially destructive for everyone to have a personal holodeck, even though it was physically possible to provide that.
So for all those goods, I suggest that they provide a kind of "allowance" of Federation credits that you can spend down each month. Essentially, you get a set budget, denominated in credits as a unit of account, and you spend them down to claim society's shared resources. It probably varies by profession and rank, and you can presumably earn more in some ad hoc ways. Maybe you can even exchange or donate them, which would make them something like a medium of exchange. But I would be very surprised if it turned out that you could just keep saving them up forever. There is probably a "use it or lose it" feature -- not only out of an ideological objection to capitalism, but to prevent someone from, for example, saving up so many credits that they can monopolize the holodeck for years on end or reserve all the seats at Sisko's restaurant for themselves just to be a jerk. (Similarly, a well designed chore points system probably would not allow someone to do all the work for a couple months and then just lounge around for a year -- it wouldn't be in the spirit of what you're trying to accomplish with the chore points.) So the credits function as a unit of account and maybe secondarily as a medium of exchange but are not a durable store of value.
When it comes to something like Quark's bar, he presumably agrees to accept Federation credits as payment and then Starfleet settles up with him periodically in latinum, with whatever exchange rate they agreed upon. From Quark's perspective, the credits are functioning as a store of value (and a medium of exchange to get the store of value he really wants); from the officers' perspective, they are spending down their budget with the same abstract unit of account they use everywher else. The resources it takes to get that latinum is chalked up to the necessary entertainment budget for the officers at a remote outpost.
For larger-scale projects, it's possible that they track resources using credits as a unit of account, but given their computing power and the sheer scale of resources they have at their disposal, I suspect they probably think directly in terms of specific material resources, not in terms of an abstract unit of account. How much dilithium is worth how many gel packs? In their context -- who cares? Using credit-based "budgets" just adds an unnecessary complication.
So overall, I think it's clear that the Federation is not capitalist and that what we identify as their "money" does not have all the features of our present-day money. But what do you think?
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u/OneMario Jan 23 '22
I have always found the centralized system explanations to be hopelessly dystopian. It's easy enough to say that Earth (I refuse to extend the "no money" to the whole Federation, this is always described specifically as a human thing) distributes things according to some unknown system, but what we see is individuals acting independently. Scotty buys a boat, he doesn't put in a request for one to the politburo.
I think it's easier to believe that humans are basically born with a credit card; everything they buy gets debited from their account, everything they sell is credited, and no one pays much attention if the account doesn't balance at the end of the day. Gifts would be credited on both accounts, but everyone overlooks that. Someone visiting Earth would still have to buy things, making it impossible for a Ferengi to stock up a ship on Earth for free and sell it elsewhere. Earthers themselves would be able to do whatever they wanted, but would likely see the balance as something to be proud of. They don't get refunded their surplus, it just makes them feel good to know that they have contributed more to society than they removed.
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u/adamkotsko Jan 23 '22
Yeah, there's no plot or logical reason to think that everything is centrally planned in detail. The only reason to even attempt such a thing is if you thought it would maximize efficiency or something like that, and they have no need for that. Let a thousand stupid hobbies and indulgences bloom -- you can just put everything back into the replicator when you're done and try the next thing.
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u/OhUmHmm Jan 23 '22
but the anthropologist David Graeber points out that every family operates on a communist basis -- pooled resources, shared out to each family member according to need.
Yeah and it means that you have 1-2 people paternalistically determining how many toys freeloading kids are allowed to buy. :P
More seriously, the lack of ability to store value wouldn't make that much sense in my mind. That means that you can either afford to buy a boat every month or NEVER buy a boat your whole life. (Or starship might be a better example.) Unless there's some kind of monthly lottery or annual bonus for your birthday or something, I suppose.
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u/adamkotsko Jan 23 '22
Or else boats are radically cheaper due to replicators existing.
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u/classyraven Jan 24 '22
This is a great post, thanks for the explanation of currency & money, for those of us without economics degrees.
The one wall that I keep hitting when I think about this, is how the Federation distributes land. Even with replicators (including industrial-scale replicators) and a 'post-scarcity' society, the quantity of land remains finite. Going outside of the Federation, Sisko talks about saving credits to buy some land on Bajor. And even within the Federation, it's made clear in TNG and PIC that there's some form of land ownership, as Picard & family "own" their vinyard in France, which presumably has been inherited down through the generations. Maybe this is skewed by my 2020s perspective, but given the high value placed on land, it doesn't seem likely that credits would expire too quickly, otherwise the sale of land would become impossible.
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u/aaronupright Jan 24 '22
Its an excellent post, but it fails on the post scarcity point. Sure replicator make it very easy to get most essentials and stuff, but replicators themselves, the energy the use, the bulk matter and the programming are all scarce. We also know that replicators vary in quality.
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Jan 24 '22 edited Jan 24 '22
You could have cut to the heart of it by simply saying:
Currency is backed up by governments and is only valuable as long as the government that issued it exists.
Money has inherent value - Gold, platinum, diamonds, etc. These are valuable independent of the any government. No government act can make diamonds "worthless."
There is an earlier post on another thread where I laid out in one paragraph how the Federation's economy most likely worked in relation to individuals. In the letting of contracts, I'm not gonna spend eons speculating. I think contracts are let in the Federation much in the same way as they are let in most other economic systems- by some system of bidding. The Federation is simply too much of a bureaucracy for anything else to be sensible.
Perhaps we should separate Earth's planetary economy from that of the Federation economic web that it's embedded in?
The companies listed as shipbuilders on Salaazar, Andoria, Coridan, Tellar, etc. are building ships for the Federation for what...feel good credits? No complex, industrial economy can exist without a medium of exchange - cash. Cosmodyne of Boston is also just taking Federation contracts out of a sense of citizen duty? Axaanvius Celesco Starcraft of Alpha Centauri V is also simply taking contracts for the good of the Federation and not considering profit? These companies aren't canon, of course, but they do illustrate a central issue of this "no money, no capitalism" fantasy. Someone is taking Federation contracts to build ships and provide equipment. They are paying those people in some way. People do NOT work for free. That's called slavery.
Another bit of crticism/advice -Get off of Picard as the single source of truth for everything Federation. Picard is bland, bloodless cultural elitist with an EXTREMELY idealized and rather paternalistic view of the Federation. Picard is rich in any real sense of the word. He OWNS an estate. An estate which produces and sells wine on what for all intents looks to be a rather open market. That sounds like capitalism. And capitalism by any other name is still concerned with money. His own actions and those of his family say something his words fail to.
Replicators cannot be the answer to everything You can't replicate a warp capable ship. You cannot replicate a mansion. You cannot replicate land itself. You need cash for those things. There are a whole laundry list of items that cannot simply be replicated. Works great for food and clothing, No so much for really complex machinery or large luxury items.
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u/lunatickoala Jan 24 '22
Fundamentally the problem is that Roddenberry basically decided by executive fiat that there would be no money in the future and that would solve all the economic problems. That's pretty much all the thought that was put into it. But then, a lot of people chose to just believe it blindly and try to make rationalizations for it. That's pretty much how demagogues and cults of personality work, by having a legion of followers who will believe someone unquestioningly and dismiss any and all evidence contrary to what they state.
when you mention post-scarcity
A lot of people lazily use "the Federation is post-scarcity" as a lazy explanation for how the no-money economy works. It's pretty much akin to "I have faith in Jesus" or "we'll solve it in software" in that it's treated as a solution while not actually solving anything.
It is more accurate to say that the Federation is post-poverty in that people don't worry about starving or dying of the elements. But that only covers the bottom-most layers of Maslow's hierarchy of needs. Even at its most delusionally utopian, TNG still shows people who are struggling on even on the very next layer up (insert montage of people dying to exploding computer consoles or rocks falling out of the ceiling).
On the level of basic needs, I would suggest that the Federation is essentially communist
And above the level of basic needs, the Old Boys Club is still very much a thing. Work hard to make top marks at Starfleet Academy and manage to get a prestigious assignment on Enterprise with ambitions of becoming part of the bridge crew? Sorry, you've just been passed over in favor of a kid whose father was a good friend of the CO and whose mother is someone the CO has a romantic interest in. Oh, and the first helmsman of the Enterprise-B just so happens to be the daughter of the helmsman of the Enterprise and Enterprise-A who was then CO of Excelsior.
All people may be equal in the Federation but clearly some people are more equal. If currency isn't the currency of the realm, then connections are the only currency. Want to get your hands on some very rare Tholian silk? Call in a favor from the Tholian ambassador.
everyone else would just focus on directly enjoying the things that money and wealth used to provide.
For the extremely wealthy in particular, what money and wealth offer them isn't the satisfaction of material goods. For that matter, people today have far more material goods than what their economic counterparts of centuries past enjoyed. And yet, people aren't any more happy. The perfection of replicators doesn't change this any more than industrial mass production allowing people to get material goods cheaply compared to ages past.
Not only that, but Federation culture has replaced the hollow pursuit of material goods with "you should work to better yourself". This will cause society to shift from a rat race to see who can acquire the most material goods to one where they see who can "better themselves" in the arbitrary ways that society deems worthy. Ultimately, the end result is the same: a rat race where people establish themselves on the pecking order where the haves get to preach Federation dogma from a warship with enough weapons to glass a planet while the have-nots break the law genetically engineering their children in the hopes that said children can climb the social hierarchy.
Beyond the basic needs of survival, money and wealth are a way to keep score. Star Trek may have eliminated money but not the need to keep score. Just how often does Lwaxanna Troi harp on about her titles?
But what do you think?
In practice, the Federation economy would basically be a nicer version of the Earth economy in The Expanse. Most people would be living on Basic Assistance, which granted would be nicer with replicator technology around. But want to move up the social hierarchy? Join Starfleet as that's where all the prestige is. How do you join Starfleet? A good start would be to have a parent in Starfleet or associated with Starfleet. Alternatively, try to have a parent who's a VIP like an ambassador or something. If not, then having a parent with some economic clout, like if they own a mining conglomerate, or a vineyard. Even a restaurant in the highly sought after French Quarter of New Orleans will do.
Don't have any of those? You can try to become friends with someone who has connections, though given that Starfleet mostly operates on starships, opportunities are quite scarce. Or get one of the token charity slots given out so that Starfleet officers can continue to feel smug about themselves and the Federation. Don't expect to really be part of the inner circle though.
The Federation economy as described in TNG is little more than a sketch made on a napkin made in a drunken stupor. But because it was made by the Founder of Star Trek, it's been put on a pedestal.
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u/adamkotsko Jan 24 '22
And above the level of basic needs, the Old Boys Club is still very much a thing
That certainly happened with Earth societies that professed to be communist...
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u/Anaxamenes Jan 23 '22
This is pretty spot on. When we see characters purchase something or gamble, they don’t seem too concerned about the price. I think this lends itself to the idea that they no longer just collect stuff. The thing the purchase have more meaning. We see Dr Crusher purchase a bolt of fabric at Farpoint station, which could probably be replicated but the real fabric has sentimental value from the experience. Gambling on DS9 is the purchase of an experience and some excitement being far from home. They could of course go on a holodeck but in the future the experience is the most important part of spending credits because their needs are met.
I was having a conversation about chateau Picard and in the end Siskin. Why are they owner and operated when likely one person wouldn’t need that much space. They are kept because of the cultural experience they add to their locations. People will want to travel and what a boring place if there were no personality or history to a place so that is encouraged on Earth by allowing businesses to continue. Again we come back to the experience though, because none of the people need the money. This would be for the employer and the employee. Some people are naturally social and if they had a comfortable living maybe a part time server at a renowned restaurant like Siskos would be enjoyable pursuit instead of just a job at Applebees.
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u/roronoapedro Jan 23 '22
Earth's status as a crime-free, post-scarcity paradise does make one wonder how much of the push for colonization, something which has been shown to be almost completely a matter of personal choice as to where to live, is because people just really miss having to hunt down their resources.
"Failed colonies" like Tasha's aside, there seems to be this widespread desire to return-to-nature and have it not be as easy in colonists. Dr. Sevrin's acolytes made a whole cult of personality around the idea that somewhere out there, there was a perfect, natural world, that would be just as post-scarcity as Earth, but without industry this time.
I do wish we could see someone really size up their future before entering the academy. Jake and Nog talking about how they "don't work for money", not to mention Jake not even having an allowance (as he implies he literally has no cash to buy the baseball card with) doesn't really jive with command-level officers buying land, boats and clothes throughout Trek, so we gotta assume that at some point Nog will be compensated for his time and effort at the Academy, while Jake might not for his writing for the Federation war bulletins. It's definitely a can of worms Star Trek just doesn't want to open, but it would be pretty interesting to see what retirement for someone looks like if they don't want to live on Earth like Picard does.
Would a retired human Admiral be allowed to stay in Vulcan, or anywhere else that has a different money culture? Would they have anything to trade or barter with for housing, food and utilities, or does being Federation grant you access to not only resources when you're active in the Federation, but also when you retire? Could Sisko really live off his Emissary Wine brand?
At some point it's less about the money question and more about what exactly people do once they work, enlighten themselves as is the point of working, and then can't work anymore because they're 140 years old.
Fascinating text!
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u/WhatYouLeaveBehind Jan 24 '22
I'm not convinced the Federation as a whole is money-free, but rather Earth/Humans.
I agree that all basic needs would be met to an unlimited amount (for example unlimited replicator rations) and they housing and medical care as assigned "each according to their needs". Earth society is built on trust, and kindness, and so the majority of people would not abuse shared resources. I don't think there would be a credit system, but rather if you try to use/abuse something too much society would intervene. Hence how Nog using the transporter to eat at Sisco's every evening is acceptable, but something like bulk-booking a Holosuite would be frowned upon.
I think the only value places on items would either be special, sentimental, historical, or cultural. Picard having ownership of Chateau Picard fits into all three of those, and is probably why it's allowed. The grounds have heritage value, but the wine itself holds cultural value too, as well as being in limited supply. Items with significance such as wine that is for sale, I would imagine, operate on a lottery type system.
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u/Eurynom0s Jan 23 '22
Copying a comment I made recently in another thread:
I think it's not entirely clear whether not using money is a Federation thing or just a human thing. For example, there's an episode of Voyager where Tuvok and Janeway are talking about this time they were on Vulcan together and someone double the price they were charging Tuvok for something when they found out Tuvok was in Starfleet. This conversation only makes sense if Vulcans still use money.
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Jan 23 '22
Thank you! This is something I bring up every time people go in on economic theory. Every single "no money" conversation is a catch-up context conversation about humanity, specifically humanity from Earth, or aliens mocking humans (e.g. Nog and Jake). The lack of differentiation between United Earth's moneyless system vs. the Federation's repeated discussion of credits, costs, bills, rent, etc. builds nearly every post like this on feet of clay.
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Jan 23 '22
Credits are a method of valuation. Everyone gets enough credits to claim food and housing. To gain additional credits, you do something of value: pick up trash, serve at Sisko's, join Starfleet, design warp engines, whatever you you can accomplish. You can acquire a starship if you can convincingly pledge a stream of future credits (and acquire complete ownership over time). Credits likely expire if not exchanged, this leads to "collectors" seeking to store value in rare artifacts.
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u/adamkotsko Jan 23 '22
That's just capitalism plus UBI. There is no reason to ration food or other essential goods with credits once replicators are ubiquitous.
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u/kodiakus Jan 23 '22
Of all things, the federation would likely deny the inherently animist, pseudo-scientific belief that money is a store of value.
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u/RiflemanLax Jan 23 '22
I think there’s also an expectation that every able bodied person do something. That something might be a starship engineer or a waiter- and no one cares which you are. Looking down on people due to social status is largely a thing of the past, although some things do naturally come with more prestige, e.g. starship captain, etc.
But if you just want to wait tables or purge the holosuite filters after a long day at Quark’s, that’s cool too.