In his research and theoretical work, Hungarian economist Tibor Liska (1925–1994) aimed at working out a socio-economic model where even property would be a subject of competition. His model considers the power of disposal of property as a basic human right, which should be asserted through open competition. In this concept the state plays only background roles, only provides some services to ensure the frame of the competition but has no voice in the operation of the economy. The Liska Tibor College of the Budapest Technical University organized a camp in the summer of 2009 where the simulation of a self-controlled society was running according to the rules of the Liska-model. (The word LisKaLand is a pun, “kaland” means adventure in Hungarian.)
In the camp 82 students were living for 8 days but with the visitors (lecturers, journalists, performers) the practical overall headcount was about 100. The campsite was ideal for the purpose (timber houses, auditorium, sport grounds, outdoor stage) in a forest far from the outside word.
There were programs of high standards (lectures, trainings in daytime; bands, quiz games, parties in the evenings) but the everlasting experience was the functioning of the Liska-model in practice. The students took over as entrepreneurs the kitchens, the buffets, the bars, the sport grounds, the timber houses, the lavatories and all other available things and they set them into operation. Nothing was free off charge. All goods and services could have been sold and bought for the local currency, named Öki.
All citizens of the LisKaLand society got their social inheritance, namely a bank account to cover the cost of living and to be able to enter the entrepreneurial competition. Only half of the deposit (the riskable part) could be used freely while the other half (the non riskable part) was blocked. The interests of the blocked part guaranteed a continuously increasing income. (The base interest rate was 20% per day and only half of the interests of the blocked part could be withdrawn while the rest must have been capitalized.)
After arrival to the camp the enterprise units (firms) came under the hammer on the auction. This was the way to select the first owners. Beside the prepared units anyone could have registered a new firm by paying a minimal registration fee. They took the advantage of creating new firms like: fruit-salad-bar, massage saloon, pollster and others, finally all together 35 firms found owners. The owner could revalue his property any time and he had to pay 8% tax per day after the actual value but he had to sell it on that price if anyone wanted to buy it. There was real competition for the ownership, 26 firms had more (average three) owners in the eight days and three of them had five different owners.
Two “state company” were also working in LisKaLand: the Bank and the External Trade Company. Both state companies were running without real decision making due, only provided services according to their profiles. The state companies were maneuvered by the civil servants, who were the organizers of the camp and they were not allowed to enter the entrepreneurial competition, but they helped others to understand the rules and gave advices when needed.
The bank was a computer program running on a local network. It kept the records of the accounts, handled the monetary traffic and transfers and registered the actual values of the running firms. All transactions were controlled by the players; the bankers only registered the requests and made the adequate accounting. The only decision making task of the bankers was to decide the credit limit if anyone overdrew his account (credit was not available for consumption, only for buying a firm or stocks). LisKaLand was a full information society, all transactions were public; from the bank terminals anyone could retrieve any details of the bank-database, even the personal transactions.
The External Trade Company made the supply from the nearby (10 km) shopping center. Only the public catering firms (kitchens, buffets, pubs and shops) had the rights to post orders to the External Trade Company on the base of the prefixed price list. The prices on that list were in Öki, scaled to the prices of the shopping center, only the alcoholic drinks and tobaccos were more expensive (later for the sake of environmentally sounds the plastic plates and cups too). The prices were changing every day to the effect that the value of the expected orders could not overrun the daily limit of the camp budget. The actual list was ready every day at noon, and the orders were delivered at late afternoon.
The mini society was working wonderfully. The citizens enjoyed the situation. All of them took part in the actions of the firms; most of them were also owner for a while. They had to make a resolution hourly about supply, stocks, marketing strategy, costs, prices, wages and so on. The average age of the players was about twenty but their inventiveness supplemented their inexperience. At the very beginning they interconnected the services. The owners of the hotels (a hotel was made up of three cottages) came to an understanding with the owners of lavatories and the usage of the showers were included in price of the accommodation. Similarly they solved the “breakfast service in bed” and the half pension in cooperation with kitchens and buffets. Pubs and buffets employed agents and it was not easy to avoid the continual offers. They organized parties and quiz games where the entrance fee included a considerable consumption too.
For understanding the substance of the Liska-model the eight days of the camp was definitely more efficient then the one-semester courses at the Corvinus University of Budapest in the last ten years, specially if we consider the fact that many of the students had only misty idea about the conception of Tibor Liska earlier.
The selection system of the model was working perfectly; it verified the expectations about the new form of ownership. This form of ownership (the personal social ownership) is a mixture of private ownership and tenancy, though closer to private ownership. This ensures that the property will be managed by the person who can do it the most profitable way as long as he retains maximum efficiency on the long term. Here only those could remain owners, who were ready to pay more tax then the others. Only those extra profits could take away tax free what others were not able to produce. At the beginning some did not increase the value of the firm according to the profitability to save tax, but they went a mucker since they were overbidden relentlessly.
To overtake a firm was a rather simply procedure. The one who announced to the bank to buy the firm, immediately became the new owner, the bank transferred the purchase price (i.e. the actual value of the firm) from the account of the new owner to the account of the old one. The new owner already could increase (and usually did) the value of the firm. Afterwards with a banker they went to the old owner, informed him about the new situation and he had to decide to hand over the firm or buy it back. If he decided to pass they surveyed the stocks, the new owner paid additionally in supply price and the life could go on.
At the beginning of the camp there were particularly many speculative takeovers with 30-40, even 50% overbid. The first two days 33 overtakes occurred and in 14 cases the old owner bought back the firm and made additional bidding at the same time. The players were quick to understand the matter; from the third day the values of the firms were raised in time. The changing the owners were played down, specially the speculative ones. The handovers by agreement became typical: the old owner first devaluated the firm to the level of the made agreement and the new owner was bidding up after taken over.
This camp was not the first experiment with the Liska-model, but this was the closest to the basic concept. The most relevant difference from the original model was, that here the owners had got less shielding to save their property. The tax to be paid after the property was much higher (8% against the original 1%), so the form of the ownership got farer from private ownership and closer to tenancy. The cheaper is the property tax the greater is the shielding for the owner. On the other hand in the original model this tax is not a real tax as it is paid for the next generation, it has to be paid for the own account, into the non riskable (blocked) part of the social inheritance, which can be used in the lifetime. The basic concept is that the present generation collects inheritance for the next generation. The model allows, even motivates, entrepreneurs to be as efficient as they can be, and at the same time to generate a bigger amount for their own social inheritance account. Though they can use it throughout their lifetime, finally they leave a bigger inheritance to the next generation. This idea about the redistribution among successive generation lost senses in the camp, so here the rational replacement became the real taxation.
The parameters of the Liska-model (interest rate, property tax, riskable rate) are all exogenous variables that is they cannot determined arbitrary, they depend on the environment where the model is operating. It would be hard to explain why just these values were applied but since these values proved to be really useable, it was a lucky choice.
The main theoretical proceeds of LisKaLand was to verify (not prove, since it would need much more experiments) the expectations about the new form of ownership. The 8-days camp justified, that this form of ownership is indeed able to select the right man to the right place without external intervention, on a self controlled way. One might even say that this attitude seems to be the main obstruction of the expansion of this kind of ownership in practice, since possibly nobody wants to give up the control of the selection system.
Tibor F. Liska
September 2009.