Allocs are a digital post-scarcity currency used on Earth. They are distributed primarily through a universal basic income (UBI) large enough to lead a good life, especially as many public and even private services are free. A person can receive an enhanced Alloc income for "productive" work such as scientific research or military service, as determined by Governance.
Colony worlds generally use their own currencies instead.
Allocs are economically inefficient in several key respects, and would not be sustainable in any modern-day economy. Even in the post-scarcity economy of Earth, AIs are crucial to maintaining their integrity.
Context of Earth's Society
Unemployment is TtS is sky-high, in excess of 50%. Most of the 50% who do work aren’t paid decently–they work mostly because they want to. With AIs and automation, the economy doesn’t need more than a small percentage of the most skilled workers to produce what everyone wants. Allocs and the economy in general are designed to keep demand up (by giving everyone enough money to live comfortably), and to prevent those few skilled workers (or worse, a capital-owning leisure class) from turning into a new hyperclass.
An important takeaway: Ryouko's family is quite unusual in that, by Volume II, every member has a well-paying job.
Most real-world currencies experience "inflation", where the prices of goods and services increase over time. In other words, the value of the local currency decreases over time. However, Allocs in To the Stars instead experience "deflation", where their value increases over time.
An Alloc's value is tied to the Nominal GDP (NGDP) of Earth, as a sort of NGDP voucher redeemable for some fraction of Earth's productive output. As Earth's NGDP grows year-to-year, a single Alloc's value increases in proportion to it. Without price controls, the prices of goods and services would thus decrease over time. This constant deflation would, normally, have several negative effects:
- Deflation disincentivizes spending. Spending an Alloc today means forgoing value you would have had in the future. This lowers overall demand in the economy.
- Deflation disincentivizes banking and loaning. Banking interest rates would naturally be negative, meaning Allocs you put in a bank would lose value, and banks would refuse to loan Allocs unless the return is expected to be higher than NGDP growth. This stunts business development.
- Deflation increases inequality. Both debts and stored cash increase in value, hurting the poor and helping the rich. This hurts social cohesion and long-term economic growth.
To mitigate these tendencies, Governance has implemented several measures:
- Expiration. After a certain period of time, an Alloc "expires" unless it is spent, which resets its expiration date. This is possible because Allocs are entirely digital.
- Governance control of banking. Governance will store and loan Allocs even when it is not in the best interests of its balance sheets.
- Price controls. See #Price Stability.
Expiration, and other concerted efforts by Governance to keep inequality low on Earth (particularly strict controls on returns from investment), outweigh the inequality-increasing tendencies of inflation.
"Speaking of which, I should probably put some consideration into what I should do with my spare Allocs."
and in Chapter 32, where Ryouko says,
"Well, actually, why don’t we go somewhere a bit more upscale for dinner? I’ve got a lot of Allocs now, and I don’t know how to spend it all."
Governance price setters, largely AIs (notably PAL), fix the prices for many goods and services on Earth and resist frequent changes to these fixed prices. This consistency ameliorates many effects of the business cycle, ensuring that the quality of life for those living on Earth does not suddenly degrade. There are significant downsides to this approach, such as long-term mispricing between the relative value of jobs leading to inefficient allocation of labor, but these are absorbed for ideological reasons.
The most important fixed price is 0. While it would be more efficient to micro-price cheap goods such as synthesizer food outputs, large data transfers, or travel in high-traffic areas, humans tend to have irrationally negative reactions to such "nickel-and-diming". Micropricing can significantly lower perceived quality of life despite their minimal impact on "real" quality of life. Thus, for ideological reasons, Governance and even private enterprises absorb the inefficiencies.
Allocs are created with different "classes" which may affect their allowed uses or expiration dates. Allocs may change classes upon being spent, for example when transferred from an individual to a business.
Some very long-term or even indefinite expiration class Allocs exist, but only for use by Governance or favored large organizations.
Saving Allocs is possible via specialized investment vehicles, with restrictions. This is how Ryuoko's parents managed to "save" up Allocs to give to Ryouko at the end of Chapter 14.
Relationship with Other Currencies
The value of an Alloc is very strong against colonial currencies. In general, Governance incentivizes investment and loosens its strict limits on capitalism in the colonies, in order to expedite their growth. The effects can be seen in the story in many places. For example:
In Chapter 5, when Ryouko receives information from the military:
There was an informational guide on Alloc distribution, conversion to local colonial currency, and the investment opportunities she might pursue in the colonies, if desired.
"And make us a tidy colonial profit, I'm sure," Kana said dryly.
She consulted Clarisse quickly. Converted into local currency, the sum was astronomical—she could probably have bought that "nanofabricated jewel" hundreds of times over.
Effects of the Contact War
Recently, basic Alloc distributions have been decreased due to the Contact War. Military requirements given by MAISL have also encouraged PAL to close economic efficiencies, including adjusting job salaries and reducing the number of free goods and services. Governance does this with great reluctance, but at the same time, it prepares for the possibility of even worse circumstances:
Mandatory Session did indeed serve a good purpose, though. Instituted at the start of the current war, it was intended for the eventuality that the war got so serious that the government was obliged to switch the economy from what they called "eudaimonic" back into a scarcity mode. If that ever happened, family Allocs would start being tied to productivity, essentially making productive activity nonvoluntary. And if things truly got bad, they might even have to go back to something capitalistic.