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Incentive Systems

Why Incentive Systems Are Better Than Coercion

This is an opinion editorial by Mickey Koss, a West Point graduate with a degree in economics. He spent four years in the infantry before transitioning to the Finance Corps.

Dutch Farmers are out in strength as a new pollution policy is expected to cause one in three livestock farmers in the country to lose their businesses. While I think we can all agree that less pollution is better, the proposed solution doesn’t even fix the problem, it just moves the pollution somewhere else. The only thing the Netherlands seems to actually be reducing is domestic food security at the expense of their farmers.

Fiat society breeds fiat mindsets; fiat mindsets breed fiat solutions. If we can’t see the problem anymore, then it must have been fixed, right?

You Can’t Solve Low Time-Preference Problems With High Time-Preference Thinking

The government wants farmers to reduce pollution stemming from animal waste. An admiral goal — a low time-preference goal. I don’t think anyone would disagree with this policy in principle. The unreasonable timeline, however, seems to be a coercive measure to force these farmers out of business.

Will Dutch animal product consumption go down based on this legislation?

What will happen to emissions now that animal products presumably have to travel further to reach markets?

What does the government think about animal waste in the locations from which the Netherlands will need to import their goods now?

It’s hard not to think that decisions like this weren’t really thought out on a long time horizon. Fiat currencies lack scarcity, the absence of which obscures the idea of trade-offs. In a system without scarcity, people are tricked into thinking they can have their beef and eat it too; if I can’t see the poop, then it’s no longer a problem.

Incentives Are Stronger Than Coercion

The view of animal waste is flawed. As mentioned, this doesn’t even fix the problem, it just exports it.

Beyond domestic food security and the second highest agricultural exports in the world, what if the Netherlands was also exporting a potentially valuable and renewable energy source?

In 2021, the BBC ran a story about a farmer who was using an anaerobic digester to produce methane, and in turn, used that methane to generate electricity and mine cryptocurrencies.

This is an inventive system that can truly allow for environmental goals to be achieved. Under the current regime, waste products are nothing more than an inconvenient and expensive cost of business.

By transforming your waste into an asset and potentially diversifying income streams, farmers are incentivized to be better stewards of animal waste. Every ounce of poo not properly gathered means a leak in your energy system; a system that is less efficient than it could be. With the war in Ukraine forcing Germany to turn back on their coal power plants, why would anyone want to waste a precious and renewable energy resource?

Stop Opting For Fiat Solutions

I’m not going to try to calculate the elasticity of Dutch demand for meat, assuming prices will rise at least a little bit through the necessity of importation. It doesn’t take a rocket scientist, however, to see that this decision makes pollution worse, not better. If demand is even close to where it is prior to the decision, emissions are added to the system via importation supply chains.

Just like using the money printer to paper over mistakes, this decision simply moves the problem out of sight and out of mind.

Only through the adoption of incentive systems rather than coercion systems can long-term problems truly be solved.

Only through the adoption of a bitcoin standard, can governments and individuals change their mindset to a truly long-term perspective. Trade-offs can only be understood in a system with scarcity and free market signals. Fix the money, fix the world. Now let’s go monetize some poop.

This is a guest post by Mickey Koss. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc. or Bitcoin Magazine.

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