Building Utopia

Utopian Payment Model

When citizens are independent and self-sufficient, they will be able to satisfy their own needs and wants to the best of their abilities. But, when citizens are unable to satisfy even their essential needs, they are clearly not independent and self-sufficient. This chapter introduces and discusses at length the Utopian Payment Model. Utopian Payment Model is the primary mechanism of a Utopian society to assist those citizens who have difficulty in fulfilling their own essential needs. Such citizens need help before they can be independent and self-sufficient. They need help so that they can get to a position of helping themselves. This is the way by which an ideal society helps their citizens become independent and self-sufficient, and later help them stay that way.

Goals and Overview

A need is that thing which when not satisfied causes harm. A want is that thing which when not satisfied causes disappointment. Being independent and self-sufficient means that one should be able to plan for and take care of one's own normal expenses. At the core of normal expenses are expenses for satisfying needs. Needs are generally satisfied by buying products and services. If there is a need that is of such great importance that if it does not get satisfied, it would cause great harm, then such a need is called an "essential need". When we are trying to make our society a Utopia, we should assist those citizens who have difficulty in fulfilling their own essential needs.

We could refer to those products and services that are typically used to satisfy essential needs as "essentials". We could also officially classify such products and services as "essential". When we are using the term essential or essentials, we are referring to such products and services. Usually, the provider of the essentials is either a for-profit business or a business that provides the essentials at-cost. Regardless of which kind of business provides the essential, the point is that the price of the essential can be considered to be the "full price" that one would have to pay for the essential if one were to not ask for a subsidy or a charity or a free social service.

When buying essentials, individuals must pay because they are expected to be independent and self-sufficient and hence must bear responsibility for their expenses.

Some essentials are expensive and some are not. Some people have vast amounts of wealth and others don't. When an individual is considering a purchase of an essential at full price, either that individual has money far in excess of the full price or that individual has insufficient money to pay the full price and still continue buying other essentials. That is, either the individual can afford to pay for that essential or that individual has affordability problems.

When an individual is fully independent and self-sufficient, he or she does not need any assistance in satisfying his or her normal needs, which also include the essentials. Such a fully independent and self-sufficient citizen should not get any monetary help in satisfying his or her normal essential needs.

When an individual is not fully independent and self-sufficient, he or she needs assistance even for satisfying his or her normal essential needs, and he or she should get this assistance. The amount of assistance given should be arrived at after considering the "level of independence and self-sufficiency". Since we are discussing money and providing monetary assistance, in this context, the citizen's wealth is used as an indicator of that citizen's independence and self-sufficiency. For a citizen, that citizen's level of independence and self-sufficiency is based on that citizen's typical wealth and the average wealth of all citizens.

Thus, a citizen with wealth that equals the average amount of wealth is considered fully independent and self-sufficient. A citizen who has wealth more than the average wealth is considered to have a level of independence and self-sufficiency greater than that of the citizen with average wealth. A citizen who has wealth less than the average wealth is considered to have a level of independence and self-sufficiency less than that of the citizen with average wealth.

When a citizen buys essentials, there is a full price associated with those essentials, and that price must be paid to have those essentials. If a citizen is poor, then some essentials may be unaffordable. A person's affordability depends on the person's wealth and the price of the essential. The first goal of the Utopian Payment Model is to make the price that a citizen pays for essentials, a fair representation of that citizen's affordability. This goal is to be achieved by asking the citizens to pay a part of the price of essential goods, and the remaining part is paid by society. Society is willing to provide that assistance because individuals may be in different stages of achieving independence and self-sufficiency for their own needs. Those who are not fully independent and self-sufficient are given due credit for being partially independent and self-sufficient, and are also provided assistance to the extent that they lack it.

When buying essentials, the amount that the citizen pays depends on his or her wealth. We will use the typical wealth of that citizen rather than the citizen’s actual wealth at the point in time that he or she buys such essentials. This is because typical wealth represents the general standard of living of citizens.

The Utopian Payment Model also deals with situations when a citizen requires an essential in far greater amounts than what is considered normal. This greater need implies greater cost. The "normal" expense on essentials is determined using an average spending on essentials. Thus, there will be citizens incurring less than normal expenses on essentials and there will be citizens incurring more than normal expenses on essentials. The variability in need to spend on essentials would mean that some citizens may spend slightly lower or slightly higher than normal, some citizens may spend much less or much more than normal, a few citizens may need to spend an insignificantly small portion of what is considered as normal and a few citizens may need to spend multiple times of what is considered normal.

Being independent and self-sufficient also means that one should be able to plan for and take care of occasional and moderate increases in need for essentials. However, when a citizen's need to spend on essentials goes far beyond what is considered as normal for that citizen, then this citizen could easily land in financial trouble because of the abnormally large need for the essential. Any society that aspires to be a Utopia should mitigate this risk of "abnormally large need to spend on essentials" for its citizens. The second goal of the Utopian Payment Model is to limit the total cost that any citizen has to pay for his or her essentials to twice what is considered normal for that citizen. Society should achieve this goal by bearing increasingly larger proportions of the above-normal costs of essentials as costs continue increasing. Thus, in a year, the citizen should have to pay no more than twice the normal amount for that citizen.

This limit would allow every citizen to plan for and provide for such increases in the need for essentials. This limit would also provide citizens with the assurance that every citizen can rely on the society for help when the citizen encounters a situation of abnormally large cost of essentials. An ideal society is willing to bear abnormally large costs of essentials when its citizens face such a situation.

Up until this point, we have been discussing essentials as a whole. However, different essentials have different characteristics, uses and intensity of their needs. These differences need to be sufficiently accounted for.

Many essential products and services can be naturally grouped together in categories. This discussion is not about any specific essential, and hence is not about any specific category of essentials. We will discuss specific categories of essentials in separate chapters. Here we merely recognize that essentials can be naturally grouped into categories.

For the purpose of the Utopian Payment Model, such a natural grouping is the unit for determining the "normal spending" for that category. The concept of "normal spending" is not for an individual essential product or an individual essential service. Similarly, the concept of "normal spending" is not for all essential products and services considered together.

Some categories of essential are such that when the need for that essential rises, it can rise enormously. It could even be hundreds of times larger than what is considered normal; for example: healthcare. There are also some categories of essentials where, even when the need for that category of essential rises for a specific individual, there is a natural upper limit to how much that specific individual will require; for example: food. These are the categories where this natural upper limit is no more than about 10 times the normal usage of that essential.

Imagine that there is a category of essentials where, in the judgment of all citizens, the natural upper limit is just twice the normal. Now imagine that a specific citizen desires to spend more than twice the normal amount for buying products and services in this category. Since it is our judgment that the natural limit is twice the normal amount, we should let the citizen pay as per the Utopian Payment Model for his or her expenses up to twice the normal. That is, society bears part of the cost of such purchases depending on whether the individual needs assistance. If this individual intends to buy products and services beyond twice the normal, we should treat any such purchases by that citizen as his or her wants - not needs and hence definitely not essential needs. Hence, when the purchases of this citizen go beyond twice the normal, the citizen should bear the entire cost of that purchase.

Imagine that there is a category of essentials where, in the judgment of all citizens, there is no natural upper limit - this could happen. In these cases, all spending by any citizen in this category is allowed and paid using the Utopian Payment Model.

Thus, there could be a spending limit for each category of essential up to which such spending can be paid using the Utopian Payment Model. Any spending beyond that limit cannot use the Utopian Payment Model.

The Details

This section formalizes the concepts and outlines the system that is required to implement the desires and ideals expressed in the goals and overview section about the Utopian Payment Model

This section provides details of all the important aspects of the Utopian Payment Model. All these details are required to fully describe the model and appreciate its utility in routine cases and also in the edge cases. When a person encounters the need to use the Utopian Payment Model, he or she does not need to remember all the details - he or she just needs to know the overall idea.

First, we ask the government to establish a system to categorize everything that can be bought by individuals into some kinds of conceptual categories. For example, these categories could be healthcare, education, groceries, household supplies, vehicles, entertainment, etc. This system of categorization is based on the "kind" of that product or service from the consumer's point of view. The system of this categorization, should allow citizens to participate, eventually the top level categories would be mostly settled. These categories could be whatever citizens think is logically correct classification. It is useful to keep the number of such top level categories low enough so that every citizen can know and comprehend what each one means.

Next, we ask the government to establish a system to classify everything that can be bought by individuals based on a qualitative judgment of the potential use of that product or service. Thus, the tags in this way of classifying are: essential, optional, undesirable, luxury, etc. Citizens have an important role in making this classification happen. Note that a single top level category could have within it things classified as essential or optional or luxury. Only the products and services that are classified as essential qualify for the Utopian Payment Model.

We ask our government to set up an infrastructure to account for everything that individuals buy. This spending data is necessary to implement the Utopian Payment Model.

Every top level category needs to either have a "limit for spending" or should be marked as "unlimited spending". If a top level category is marked as unlimited spending, then every spending on essentials in that category qualifies for the Utopian Payment Model. If a top level category has a limit, then as long as a citizen's spending on essentials within the category is within the limit, it qualifies for the Utopian Payment Model. The spending limit for essentials within each category is determined automatically. This section is not intended to dive into the full and exact details of such an algorithm, but here is the intuitive outline:

  • The algorithm uses actual spending data of all citizens on all products and services that have been classified as essential. Every individual's spending in the last year is known. For each category, we know the average spending in that category, and we also know the average spending of the top 10% of the spenders in that category, and we also know the average spending of the top 5% of the spenders in that category.

  • For a category, if the average spending of the top 10% of the spenders in that category exceeds 10 times the average spending across all citizens, then the category experiences lop-sided spending needs and hence no limit is placed on such a category.

  • For a category, if the average spending of the top 10% of the spenders in that category is within 10 times the average spending, then the average spending of the top 5% of the spenders is used as the limit for spending for that category.

Of course, citizens do not have to rely on an automated system. Some categories may be permanently marked as unlimited spending categories - as we will see in the upcoming chapters. Some categories may have limits explicitly set by citizens. This specific case of explicitly setting limits may be required only when the Utopian Payment Model is newly introduced and citizens are of the opinion that they need to exert explicit control over the limit - for whatever reasons they deem appropriate. As we use the Utopian Payment Model, we will realize that automation can do the job well. In fact, whether we explicitly set limits or mark categories as unlimited spending, the automated system will always tell us what limits it would choose, and we can compare its choices with ours to better guide us in how to go about setting these limits.

Next, every manufacturer of an essential product, every provider of essential services and every seller of essential products and services is regulated. These regulations include the following:

  • Permissions to manufacture or provide or sell the essentials.
  • Establish standards for the products and services.
  • Inspections to ascertain that the products and services meet the standards.
  • Set acceptable price ranges that can be charged for these products and services.

Thus, new products and services definitely do not start as essential. As citizens start expressing their opinions, some new products and services may seem to be essential. At this stage, products and services are either not candidates for being classified as essential or are potential candidates for being classified as essential. Potential candidates eventually get accepted as candidates for being classified as essential. Formulation of regulation of these products and services begins at this stage. Any producer of such products and services must participate in the regulation making and get ready to abide by those regulations. Eventually, the formulation of regulations is complete, and a date is set as the beginning date for compliance with regulation. After this date, those products and services are regarded as essential and must comply with the associated regulations.

Next, we ask our government to account for the wealth of every citizen and provide us with the "total wealth of all citizens" and the "average wealth of citizens". Further, we need the concept of "typical wealth of a citizen". Every citizen has a different amount of wealth, and this wealth varies on a daily basis. So for any single citizen, what is his or her wealth on any typical day? We can consider the average of the citizen’s daily wealth over the past year. We would call this average the typical wealth of the citizen. For a specific citizen, his or her typical wealth represents the general standard of living of that citizen.

We know the total spending on essentials in any time frame. We are particularly interested in knowing the spending on a per-year basis. Using this information, we can compute the per year average spending by a citizen on essentials. We will denote this value as "AVGspend". Note that this value is an average across all citizens. For our greater understanding purposes, we could also express the annual spending as a percentage of total wealth.

When a citizen buys some essentials, it could be his or her first time in the year, or it could be the fifth, or it could be the tenth time in the year. This citizen may have bought no essentials in the year so far, and hence spent nothing up to that point in time. This citizen may have bought essentials several prior times in this year, and those essentials would be worth some amount of money. Let us call this the year-to-date spending of this citizen, or in short, "YTDspend". When a citizen buys some essentials, there is the need to pay for it. We will call this the new spending of this citizen, or in short, "NEWspend".

A citizen of average wealth would be expected to take responsibility for his or her essentials, and on an average this amount is AVGspend. So every average citizen should be willing to accept responsibility for up to AVGspend. A rich citizen, that is a citizen who has wealth greater than the average wealth, is expected to be able to afford more than the citizen having average wealth and hence is expected to take responsibility for his or her essentials in amounts that are larger than AVGspend. A poor citizen, that is a citizen who has less than the average wealth, is expected to be able to afford less than the citizen having average wealth and hence is expected to take responsibility for his or her essentials in amounts that are lesser than AVGspend.

Thus, for a citizen who is about to buy essentials, we need to adjust AVGspend based on the typical wealth of that citizen to determine the actual “normal” value of spending for this citizen on essentials. To do that, first, we find the ratio of the citizen’s typical wealth to the average wealth of all citizens. For a rich citizen, this ratio will be much greater than 1. For a poor citizen, this ratio will be smaller than 1. For a citizen who possesses about average wealth, this ratio will be close to 1. Then, we multiply AVGspend by this ratio to get a number that represents wealth adjusted average spending for that citizen or in short "ADJspend".

When a citizen is about to buy essentials, we need to verify if the citizen is eligible to pay for those essentials using the Utopian Payment Model. If the essential that the citizen wishes to buy is in a category marked as unlimited spending category, the essential is eligible. If the essential is in a category that has limits and if the citizen currently has spent less than the limit, then the new proposed buy is eligible, otherwise not eligible for paying using the Utopian Payment Model. There is a minor edge case where the citizen has spent close to the limit and the new purchase will put the citizen's spending above the limit, and in this case only the amount that is still within the limit is eligible to be paid using the Utopian Payment Model. Thus, after these decisions are made (and they are made by computers), and if the proposed purchase is fully eligible to be paid using the Utopian Payment Model, we (that is the computers) proceed to compute the amount that the citizen pays and the amount that the society pays. In case the proposed purchase is not eligible or only partially eligible, then the citizen may choose to not make the purchase or still make the purchase by paying for the non-eligible part fully. Note that most reasonable purchases will never encounter the limits when the limits are set reasonably. Note that these spending limits are for paying using the Utopian Payment Model. Citizens are free to spend however much they desire without using the Utopian Payment Model. The limits apply when a citizen uses the Utopian Payment Model, which is implicitly asking for help from the society, and hence some top-level categories may have limits on receiving help from society.

When a citizen buys essentials and pays using the Utopian Payment Model, society expects that citizen to take full responsibility for expenses up to the wealth adjusted average spending. After that, society will share the expenses in some specific proportion. For this, the precise rules are as follows:

  • If YTDspend + NEWspend is less than or equal to ADJspend, then NEWspend should be paid by the citizen.

  • If YTDspend + NEWspend is greater than ADJspend but less than or equal to twice the ADJspend, then half of NEWspend should be paid by the citizen and the other half should be paid by the society.

  • If YTDspend + NEWspend is greater than twice ADJspend but less than or equal to thrice the ADJspend, then a one-fourth of the NEWspend should be paid by the citizen and the rest three-fourths should be paid by the society.

  • If YTDspend + NEWspend is greater than thrice ADJspend but less than or equal to four times the ADJspend, then one-eighth of the NEWspend should be paid by the citizen and the rest seven-eighths should be paid by the society.

The pattern of these rules continues forever using factors of one-sixteenth, one-thirty second, one-sixty fourth and so on. There is no upper limit to the actual spending.

These are the rules that detail the exact sharing of the cost between the citizen and the society. In the context of who pays for essentials and how much, these rules draw the line between what an individual pays and what the society pays.

It is possible that the YTDspend + NEWspend may not fit exactly into one spending band indicated by the above rules. This can be easily dealt with by splitting the NEWspend into two parts such that YTDspend + first part of NEWspend fits in a single band. Then we deal with the payment of this first chunk, update the YTDspend and then proceed to the second chunk. If the new YTDspend and the second part of the NEWspend does not fit into a single band as per the above-mentioned rules, then split the second part of NEWspend again and repeat the payment process. This is just computation and can be easily automated.

At the time of availing these essentials, if the current wealth of the citizen is less than his or her typical wealth, or if the citizen does not have sufficient wealth in “liquid state”, then this citizen may not be able to pay his or her part of the cost of essentials. In this case, the government acts as a lender and gives a credit to the citizen for the part that he or she is unable to pay. This occurs automatically. The given money as credit is recovered from the citizen later. This repayment of the credit is also automatic and occurs whenever the citizen receives money or converts wealth from illiquid state to liquid state. While this giving of credit and its eventual repayment has plenty of details, for now, we will not dwell on them, primarily because it is just mundane accounting, and it can be fully automated.

In this system, the government is responsible for tracking and accounting for all this spending for every citizen. Any spending that the society covers is funded using taxes collected from all citizens. Based on all the information that the government has about the spending, it can estimate the spending needs in the upcoming year and budget for it.

This is the Utopian Payment Model.

An Illustrative Application

To see how the Utopian Payment Model works, we will apply it to the concept of token charge. For illustration purposes, we will consider the token charge for obtaining a passport (either initial or renewal). This is just an illustrative example. When we all consider the question of paying for a passport, we may not consider it as essential - and that is fine. Paying for passports is intended to serve only as an illustrative example and nothing more - this illustration is not intended to imply any judgment about passports as essential or otherwise. But, for the purpose of illustrating, we will consider that paying for passports is treated as essential.

First, we should classify the service that incurs a token charge as essential. That is, we have to classify "obtaining a passport" as essential. Once we do so, the Utopian Payment Model applies to the token charge for obtaining a passport. Further, let us assume that the average wealth of citizens is 100,000. Finally, we have to decide what the token charge should be. We should choose the value for the token charge such that it would seem like a token charge for a citizen who has an average amount of wealth. Let us assume that we have decided that the token charge for obtaining a passport is 100.

Imagine it is the beginning of a year and a citizen wants a passport and hence is needed to pay the token charge. This passport is his or her first purchase of the year. If the token charge was to be paid according to the Utopian Payment Model, a person with wealth of 100,000 would pay 100 as the token charge. Any citizen who is wealthier than the average citizen would also pay 100. However, any citizen who has wealth less than the average wealth, would pay a proportionately lower amount. So, someone with wealth of 10,000 would pay 10 and someone with wealth of 1000 would pay just 1 buck.

If the token charge was to be paid later in the year, then the amount paid for the token charge could be lower, depending on the amount already spent by the citizen on essentials in that year.

In the Utopian Payment Model, for anyone with higher than average wealth, paying for a passport would seem easier than for someone with average wealth, but for anyone with less than average wealth, the token charge has the same financial intensity for that individual as it has for someone with average wealth.

Characteristics and Implications

Every citizen is responsible for his or her normal expenses for essentials. What is normal for an individual citizen is based on what is the average for the entire society, and that average is scaled for the individual based on the wealth of the individual.

Every citizen possesses some wealth because we have wealth redistribution. Every citizen pays for his or her own expenses on essentials from the wealth that he or she possesses as an individual.

As the need to spend on essentials increases, the citizen is still responsible for part of that spending. The reason for this is that the service is being rendered specifically for that citizen, and hence he or she must take part of the responsibility. However, as the need to spend on essentials increases beyond normal levels, society bears a significant portion of these significantly increased costs.

Every citizen is also responsible for a part of his or her expenses for essentials when such expenses go above the normal expenses. However, this system guarantees that, any citizen, in any given year, will not incur a cost that is more than twice the citizen’s normal expenses on essentials, even when unlimited use of some essentials is allowed.

Everything that is deemed essential product or service is subject to wealth adjusted charge on full price - the Utopian Payment Model. No essential product or service is excluded for any reason.

For every citizen, the risks associated with abnormally large costs for essentials are fully and fairly mitigated. When the cost of essentials for a citizen goes beyond the normal affordable levels for that citizen, then that excess cost is treated as common good and paid by the society.

No citizen is dependent on another person for expenses on their essentials. Even a newborn child is independent right from birth when it comes to bearing his or her own expenses on essentials, and is financially no different from a poor adult or poor old person.

No citizen is dependent on any organization for his or her essential expenses.

There is no such thing as "buying an insurance policy to cover expenses on essentials". The concept of selling such kind of "insurance" does not exist, and hence such a business is not permitted.

The Utopian Payment Model should be used whenever an individual is expected to pay for products or services that are classified as "essential". Utopian Payment Model could be used when paying for things that are not essentials, but we need to start using this payment model for at least the essentials.