Saturday, February 2, 2013

Why Communal Finance?

In the modern world, personal finance has become one of those ever more important life skills, ever more necessary for access to education, housing, and retirement.  But realistically, how much financial literacy can the average citizen be expected to have when even experts in business and government often get it wrong?

As for those with the skills and good fortune, eventually one runs into the law of diminishing returns - also known as "Money can't buy happiness".  While the latter statement kicks in only after reaching the upper middle class income range, it does call to attention an important point - that the economic health of one neighbors and friends and the society one lives in is just as important as one's personal financial situation.

Is Wall Street still a necessary evil?
Finance - the practice of deciding where how resources are allocated - is going through an exciting time.  The 2008 global stock market crash and subsequent recession have raised questions on the effectiveness and fairness of current financial systems.

However, technological innovations such as crowdfunding and peer to peer lending have opened up alternatives to the existing bank and stock market model.  Once these new markets grow big enough to carry the borrowing and project financing needs of the economy, Wall Street will no longer be too big to fail.

What is Communal Finance?
In the existing financial system, people who have extra money to loan out or invest give it to experts such as investment bankers or analysts who pick and choose companies to buy or governments to lend to.  Even when people decide to pick stocks individually, it is often based on statistics compiled by specialists.  Doesn't sound very democratic, does it?

Communal finance cuts out the middlepeople, bringing lender and borrower, investor and entrepreneur together.  It's a communal approach to resource allocation that relies on collective wisdom instead of expert knowledge to decide what is worth funding.  Maybe you have a bit of local or personal knowledge that isn't captured in a formula. 

Unlike existing corporate or personal finance, where real companies and real people and real places are reduced to standardized numerical abstractions, communal finance can take in the full richness of the human experience and ultimately make more humane, safer, and more profitable decisions.

Communal finance can take many forms.  It could be thousands of people funding a movie on Kickstarter, providing a portion of a loan to a stranger overseas, or investing in a new local business.

Coming up in this blog:
  • Examples of communal finance websites and projects.
  • Communal finance case studies.
  • Key concepts explained.
  • Musings on the history and future of finance.
Your contributions are wanted!
This wouldn't really be a communal finance blog if it was just me doing the writing.  Got an idea?  Some skills to share?  A project to publicize?  Email me at mail -at -

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