A newsletter of simple
ideas #11 -- February 1999
Barter 201: A Simple Economy
In November's issue, I wrote a bit about barter basics. This month, I will cover a bit more about "barter theory" and then go talk about barter or skill-swap organizations and alternative economies. These provide a "next step" in making trades easier.
Barter Theory
The most basic form of exchange is when one person gives something to (or does something for) another person. Let's say my friend Karen tries to give me an extra ergonomic keyboard she has lying around the house because she's tired of it sitting around. Coincidentally, I actually want an ergonomic keyboard, so I accept the offer. This kind of exchange is called a "single coincidence" exchange. This is the kind of exchange that Free Market started out to encourage. (By the way, this single coincidence exchange is exactly what happened--I'm typing this article on the keyboard in question!)
A more complex exchange happens when two people trade things. Let's say I want to teach my friend Loren some American Sign Language (ASL) in exchange for him drawing up plans for the house I'm going to build. In order for this exchange to work, he has to want to learn ASL (one coincidence) and be willing to draw the plans (a second coincidence). Therefore, what most people think of as bartering is really arranging "double-coincidence" exchanges. These are more difficult to do.
There are more complex trades. For example, I might help Heather by giving her a personalized "creating your future" workshop, in exchange for her giving that rain jacket she found when she moved to Tom, so that Tom can give me his fleecy pullover. A triple-coincidence exchange.
Money As A Solution
This is why money was invented. In many cases, it's easier to use a "blank" item as a means of exchange than it would be to set up multiple-coincidence exchanges for everything we needed. Money started out just representing something real, like little figures of cattle made of gold. Three such figures could be redeemed for three cows at any time. It's easier to carry little figures than it is to carry cows. As time went on, money became more and more abstracted until now a dollar isn't inherently worth anything. It simply allows us to measure the relative value of what we trade with it (read Your Money or Your Life for more on that idea).
Money As A Problem
Money has some problems as a means of exchange in the system we use now. There's only so much of it, and if you don't have enough, you can't make an exchange with it. Not a very good measure if you can run out of it. As one piece I read put it, you've never heard of a carpenter stopping his project because he ran out of inches.
Because of this scarcity, we have our modern economies. Places and people that have money (companies, employers, and so forth) can demand that we do unpleasant things in order to get some of these units of measurement that we depend upon so much. The scarcity of money is what helps people believe that it's worth something. If gold were as common as lead, it wouldn't be coveted as much as it is.
Barter As A Solution
The benefits of single- or double-coincidence exchanges is that you can do away with money. Well, you might be better served to save the money, and just do away with its function as a measure or means for trade. Trading your unwanted goods with those who want or need them decreases waste and increases recycling. Actually interacting with other people strengthens human bonds and builds community. It allows those who are between jobs to both be of service and get what they need. It can help to equalize the status of a group by allowing everyone to participate on level ground. And, if the worst really does come to pass, bartering is Y2K-proof. The financial systems of the world could collapse and you could still trade piano lessons for your neighbor's bumper crop of organic veggies. You can use your push lawnmower on all the lawns in your neighborhood (getting a good workout to boot!) and get fresh-baked bread, a haircut, the use of a kayak, and a hiking buddy.
Hey, but what about all that complexity of finding someone to trade with? That's where exchange networks and supplemental economies come in.
Exchange Networks and Supplemental Economies
People have created systems designed in such a way as to retain the benefits of bartering, while minimizing the problems. The most basic is something that helps people find the coincidences. It could be in the form of a list (like Free Market) or a database or the "Free" box outside of a book shop or thrift store.
Time Dollars. The next step adds some kind of unit of measure. Fremont Time and other "time dollars" systems use time as the unit of measure. They work off of the assumption that an hour to you is the same as an hour to me. The system works best with services rather than goods, but it is a simple one. If one person does something for another person, he or she gets "paid" with units equal to the number of hours put in. The exchange is recorded in a central location--on index cards, on a computer, or wherever. The person who received the service has time-dollars deducted from her account, and the person performing the service has them added to his. It's a simple way to measure exchange. Of course, there's still the question of whether an hour of surgery is really the same as an hour of house-sitting.
Ithaca HOURS. The problems of fairness and bookkeeping were solved by people in Ithaca, NY, when they created Ithaca HOURS. One HOUR is equal to US$10. They printed bills and got local businesses to accept them. It's just like money that can only be used in Ithaca, NY. This is great because it encourages local industry, can be used for services and goods, and you don't have to report to the central office every time you make a trade. Of course, its drawback is the same as money--there's only so much of it, and somebody has to manage how much of it there is in circulation.
WIR. From the first syllable of "Wirtschaftsring" (business circle), the word "wir" in German means "we" or "community." This system, developed in Zurich in the 1930's, was designed to stimulate the slowing economy. Participants deposit an amount into the cooperative's account and get a 5% bonus of interest-free WIR credits. In essence, you could get "free money" by participating--put in 1000 Swiss Francs and you have 1050 francs worth of WIR credit. This system is still in use today, with over 80,000 participants.
LETS--"Local Exchange Trading System." This system is currently tied for my favorite with the Block Barter Bucks, although I haven't read much on the ROCS system, mentioned below. With LETS, the unit is tied to the national currency for ease of reference. One unit is equal to $1. This solves the fairness problem of the Time Dollars system. However, unlike the Ithaca HOURS and the WIR systems, there is no scarcity of units--instead, it uses what is called a "mutual credit system." When you join a LETS, your balance is set to zero. You can spend into debt or earn as many as you want. There is no interest paid or charged on either side of zero. It is up to the individuals to decide what their limitations are. ("Are you kidding? I'm not going to trade with someone that has a balance of negative 1,253 units! You need to give back to the system more before I'll trade with you.") Since no interest is given, there's no reason to hoard the units, which encourages using them. Since you can spend below zero without incurring extra charges, you're never out of "cash." And, you can earn units by doing anything that you want...you don't have to go to your job and work eight hours a day to get them. The only drawback is that it still uses a central office to keep people's totals...so all trades must be "registered" with the record keeper.
Block Barter Bucks. This is the system that I mentioned Vicki Robin was organizing for her neighborhood in January's newsletter. It works essentially like a LETS, only without the central office. Each participant starts with a blank sheet with two grids. The first is labeled "Earned" and the second "Spent." A unit is given the value of $5. Say I do something for Vicki which we decide is worth $10. I would initial two boxes in her "spent" grid, while she would initial two boxes in my "earned" grid. The only potential drawback to this system is that it's easier to cheat. But if you build a trustworthy community, that shouldn't be a problem.
ROCS--"Robust Complimentary Currency System." Like a LETSystem and the Block Barter Bucks, this is a mutual credit system. The units are tied not to a national currency (thus subject to fluctuation of, say, the stock market or inflation, or a depression) but rather to Hours. However, instead of mandating that a lawyer's hour is equal to a fast-food worker's hour, the ROCS Hour is negotiable. The lawyer might strike a deal that his hour of legal council is worth ten Hours from her client. Like I said above, I haven't read too much about this kind of system, so it may become my favorite when I find out more about it.
Whew! That all might have been a bit confusing, but that just goes to show how many options there are for people interested in getting something for nothing (or at least for no actual cash). However, once a system is chosen, it can quickly simplify the bartering process. Rather than "Um, well, I want your water filter, but you don't have a poodle for me to groom" you can say "Hey, I'll give you three Block Barter Bucks for it!" Everyone would always have something to offer or ask for, regardless of what else is being exchanged.
Do any of these systems interest you? Want to see more on one or another? I'm considering trying to set up a more formal exchange network (a LETS or BBB or ROCS, probably) to encourage even more exchange than Free Market has caused. Send me an email and let me know if you'd be interested in joining one, or helping to create one.
Quote of the Month
"Only when the last
tree has died, and the last river been poisoned, and the last fish has been
caught, only then will we realise we cannot eat money."
--Attributed in various
sources to "Black Elk," "Wolf Robe," "A 19th century
Cree Indian," and "Cree Indian saying"
Editor's Notes
Hey, everyone, it's Random
Acts of Kindness Week this second week of February. Go out there and do
something nice for someone--whether you know them or not! (Suggestions:
Give an extra $5 at the espresso stand to pay for the next person's latte. Buy
some carnations and hand them out to strangers on the street. Fill your pockets
with quarters and put them in parking meters as people drive up, or where
parked cars have run out of time. Bake some cookies and drop them off at a
neighbor's place. Hold the door open for someone. Talk to the bank teller or
store salesperson like they're a human being, not a service drone.)
You can contact me with
your submissions, suggestions, or Free Market ads at:
Michael J. Coffey
PO Box 23221
Seattle, WA 98102
(206) 522-6224
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