A Possible Extension to the “Kula Ring” Solution/Theory

Malinowski’s study became the subject of debate with the French anthropologist, Marcel Mauss, author of “The Gift” (“Essai sur le don,” 1925).[2] Since then, the Kula ring has been central to the continuing anthropological debate on the nature of gift giving, and the existence of “gift economies.~http://en.wikipedia.org/wiki/Kula_ring

The author has been thinking about today’s “Oil” climate and economic outlook in relation to the Kula Ring explanation proposed by Nick Szabo. Szabo explains that in a chain of islands a specific currency system seemed to have arisen simply out of the value of a certain island participating in the trade previously. A sort of pressure or incentive builds up since such a significant amount of efficiency is gained from the last island to join in the trade (thus completing the Kula ring).

Today’s oil industry is reminiscent of this.  Certainly the whole world would benefit, if for example, Canada’s Oil could be more efficiently exported to either the US or China and/or both. Its been long known that US Oil consumption has caused them to rely heavy on foreign policy in this regard. In this light Keystone XL pipeline project seems like a no brainier, yet seemingly there has been nothing but stalling and political posturing.

The Kula trade was organized differently in the more hierarchical parts of the Trobriand islands. There, only chiefs were allowed to engage in Kula exchange. In hierarchical areas, individuals can earn their own kitomu shells, whereas in less hierarchical areas, they are always subject to the claims of matrilineal kin.

The author would like to offer a possible explanation.

Like the Kula situation, Canada is in a unique situation, that causes it to be in a spot where making “credible bluffs” becomes more profitable than actually finally completing the “Kula Ring” it proposes.  By playing both sides of conflict, between US and China, Canada stands to gain from other benefits while it negotiates which trader route it will participate in. No wonder China gave Stephen Harper a panda bear, its something that the US cannot give!

Then some interesting observations arise.  This perfect spells out the incentive for a new technology to emerge, since there is no competition of the ring until the last participating party has enough incentive to participate.  For example, in the case of the Kula Ring, it might be something like the invention of faster boats, that starts to lower the possible value the last island can “extort”.  There are different possibilities as to the cause of the end of such “extortion”, but it seems likely that such a bubble must be created and eventually popped by some equilibrium of the value of extortion and the emerging of a technological solution to “de-throne” the extorter. Or in other words as the incentive to extort declines they will eventually complete the ring because the cooperative gain becomes worth at least as much as the extortion process.

The Kula ring spans 18 island communities of the Massim archipelago, including the Trobriand Islands and involves thousands of individuals.[3] Participants travel at times hundreds of miles by canoe in order to exchange Kula valuables which consist of red shell-disc necklaces (veigun or soulava) that are traded to the north (circling the ring in clockwise direction) and white shell armbands (mwali) that are traded in the southern direction (circling counterclockwise).

It will be interesting ultimately to see what happens with the Keystone decisions (Obama’s veto?) since oil prices are so low and expected to stay low and so there is no longer the same magnitude of incentive.  But what is also interesting, if the author conjecture is sound, is that it is exactly this phenomenon of oil cartel formation that has largely caused the economic incentive for the creation/adoption of bitcoin.  There might be other interesting comparisons such as the relationship of the first Transcontinental Railway in the US to the creation/completion of the Panama Canal. Certain “lulls” in these projects might be better explainable in terms of this Kula Ring phenomenon.

Among other observations, we might expect then that at certain events in time like the completion of the kula ring, there may then have been a lag time between the “extortion” period and the full effect of the benefits of the completion of the ring.  And then very soon after a period of accelerated growth where both a new transport or transaction technology has emerged with the simultaneous completion of a new trade network.

This  writing may outline a certain point that has not been realized or observed, that “gift economics” to some extent might emerge in the way the Panda was gifted as described above.  There is an interesting possibility then that Counter rotating currencies of the Kula Ring some how arose from selfishness rather than a kind of logical realization of the benefit mutual benefit of trade.

If the opening gift was an armshell, then the closing gift must be a necklace and vice versa. The exchange of Kula valuables is also accompanied by the trade in other items known as gimwali (barter). The terms of participation vary from region to region. Whereas on the Trobriand Islands the exchange is monopolised by the chiefs, in Dobu all men can participate.

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