The Simple Economic Model explores the behaviour of human trading systems which seek to maximize idleness. The only 'good' being produced in these economies is idle time. Although the participants in these economies make and sell physical tools, the only effect of these tools is to reduce necessary work time.
The Model Scenario
All the human members of the trading community are assumed to be as physically active during their idle time as they are while working. They expend energy at a constant rate. This rate is equal for all members.
The circumstance envisaged for this economy is a primitive condition in which each member of the community performs each day enough work to maintain themselves for another day. Precisely what this 'basic' work is made up of is not defined, but it can be taken that they each spend some time each day collecting and eating food in the locality in which they live. In the absence of tools, it is assumed that they take all day to perform this work - but this assumption can be changed.
Each member of the community is able to make a useful tool of some sort. Toolmaking is performed in the time left each day after basic self-maintenance work has been done. The tools take some amount of time, C, to make, and when used they reduce the amount of basic work done per day by an amount DV, and they have a total value V, such that the lifetime of the tool is V/DV. V, DV, and C vary with each tool. These tools may be thought of as knives, without which cutting fruit from trees, or opening those fruits, takes longer. They might be poles which enable fruit to be dislodged from trees without the need to climb them. They might be bags which allow more fruit to be carried. The time saving that these tools provide is independent of each other. That is, the daily time saving for someone who possesses a set of tools is simply the sum of the time saved per day by each tool.
Although it is possible that there could be tools which reduce the time cost of producing tools, at the outset the only tools available are ones which reduce the time cost of basic self-maintenance.
The Model Money System
Each toolmaker tries to make enough tools to meet demand, and he sells his tool for a price, P, which represents some amount of time. These prices are fixed.
Buyers of the tools use a form of currency to purchase tools. Buyers are able to issue IOUs wich are promises to perform some hours or days of work to whoever presents them with IOUs they have issued. That is to say that when a man buys a knife, he gives the knifemaker IOUs equal to the price asked for the knife. At some point in the future, the knifebuyer will be required to perform work for whoever presents him with IOUs he has issued.
All IOUs have equal value, because each man is equally fit to work at any task as all others, and each man keeps his promises. Thus IOUs can be swapped for each other. A man can buy tools using IOUs he has received from other men.
Each individual is the source of his IOUs, and also the sink to which they return. In principle, therefore, given some sort of lag between issuing IOUs and redeeming them, there should be some more or less constant number of IOUs in circulation.
Model Goals
What happens in this kind of simple economy is studied primarily by building a simulation model, in which each individual is given a set of tools, and each day goes out and uses these tools during his basic self-maintenance work. In the time remaining at the end of the day, each individual spends some amount of time making tools, possibly buying labour to help. Tool sales are taken to be instantaneous. The simulation model simply goes through, day by day, finding out how much work is done, when new tools need to be made and bought. It keeps tabs on each individual.
The primary goal of the model is to discover, given some set of tools and prices, whether this trading system stays in existence or collapses, and whether the amount of money (issued IOUs) in the system stabilizes or rises or falls, and what levels of idleness results overall, and for each individual member.
After this, it is possible to explore what happens when goods are free, and prices are zero.
Also an attempt can be made to find a set of prices (just prices) at which all individuals are equally idle, and a set of prices at which one individual is completely idle, and all the rest are busy all day (unjust prices).