Interesting, I had no idea the USSR did that. I knew relying on powerpoint presentations for history class wasn’t the smartest move on my previous professor’s part…
Well, check this out. It might be that my memory’s failing me regarding the USSR, but I’m pretty sure it’s mentioned somewhere about half-way in.
-Jon
This may be an idea usually propagated for by socialists but actually it is not all bad.
It’s main problem is obviously that 1 hour of lawnmoving for instance has nowehere near the same value as 1 hour of surgery.
Thus it can never work as a common currency. However it can work very well in limited use in small areas, where people have a need to trade services and are unable to do it as effeciently as in a large city (where labour money wouldn’t be an option).
They have a similar currency on one of the islands of the coast here where I live. They use it along side normal currency.
They all still have there regular jobs and incomes from those, but when it comes to the plumber helping his neighbour out after work, taking care of the neighbours garden while they are on the mainland and stuff like that they use this time-based currency.
Used in such a fashion it works. That is to trade of work workhours so to speak in a community that is isolated and higly dependant on everyone on the island helping out with what they are good at cause bringing a large company from the mainland to do the job is expensive. Also most of the people living there will know eachother very well but not quite well enough to just give up there work freely and hope there friends will return the favour as you can with close friends. So asking for time-currency could simply appear more friendly then taking payment in actuall money for helping out your friends.
More importaintly though it has the added advantage of evading taxes that normally would have to be paid on all regular income from proving these services for your neighbours. It’s just a way of keeping track of trading favours, rather then taking payment in government currnecy for each favour and paying tax on it.
Obviusly if you ask them they will deny that the sole purpose they have it is to evade taxes and start jabbering something about the community spirit…
Sure. Neighbors don’t want to bother each other with favors, so this system removes the constrains because everyone feels they have something to offer in return. I think however there could be a better system than this. As I read somewhere, they have an exchange rate to the dollar and that’s how the money is introduced to the economy [1]. I guess that you could also introduce it by having the central bank lending it with zero-rate interest: bad creditors, those that wouldn’t provide their work in exchange for those hours, wouldn’t be able to loan more money.
Anyway, maybe it could work better if this money was born out of the market… Everyone would be able to issue their money; mine could be “1 hour of BlackSheep’s fenomenal massages”. So, if I needed something, and the other guy was interested in my massages, I’d issue him 1 hour of mine. This would just be a mere barter arrangement. But, the same way money is born out of goods in the market (since a lot of people like strawberries, people start treating them as money because they trust they can exchange something they like for it), money could also be born out of services (most people like my massages, so they start using them as money). You could have institutions that exchanges the different hour money in circulation, like we do for currencies…
Dunno. Just trying to get something sound out of this money, because right now, as money is injected into the economy, you’ll eventually have too much supply for it than demand, and since prices can’t adjust, you’ll never be able to meet the two… I don’t see how this Ithaca money is sustainable at the long run otherwise – I guess it will always have to be something very much in the margin. Possibly, I guess the central bank could reduce the supply of money by lending with interest rates, when it becomes a problem.
[1] by the way, it also said you had to pay IRS on exchanges with this money. A google search confirms it:
«Relevant officials have been contacted and confirmed local currency is a legal tender, as long as it does not look like dollars and as long as denominations are at least $1.00 in value, and that it is regarded as taxable income.»
Edit: the exchange rates for the time money would of course have to be fixed for time parity, otherwise you would introduce prices… The capacity of those with trustful money to issue it would be contrained the same way gold banks used to: the fear that people would try to redeem them if they lost confidence.
I think this could work on a small scale. It seems to have worked with Josiah Warren’s shop http://en.wikipedia.org/wiki/Cincinnati_Time_Store
There isn’t a lot of juice to that article, but the picture says the money isn’t transfareable, so it can only be spent back in the store. The supply of money makes a little more sense here: you do some work for the store, you got notes on the ammount of time you spent, that serve as a discount for the goods (it’s a retail store, so the discount is the fraction of cost associated with the labor employed by the store: I guess some goes to the inventory guy, other to the one that took care of the warehouse and etc, but it isn’t well explained how the time is evaluated for the producers part).
That first Josiah Warren article doesn’t seem very informative to me either. Anyway, this is definitively a different system than the Ithacas one. It is a centrally planned system, not a de-centralized market one that the Ithacas seem to promote.
By the way, I’m pretty skeptical this has been that successful. I mean, why was the store closed? The guy went for another project, big deal, nobody wanted to continue it? Or open another store in face of all the success – it says they stole customers and all…? And why is there no mention of when the initial investment was paid off? Anyway, it claims it was successful because:
«The fact that prices for goods rose the more time a customer spent with Warren resulted in very efficient transactions. Warren said that he was doing more business in one hour than normal businesses do in one day, leading him to close shop part of the day to rest.»
ROFL. So they managed to cut the prices of goods associated with retail because they didn’t need as many people to attend the customers since they wanted to get to the bill as soon as possible. Of all the costs of retail I fail to see how this is the most relevant, and oh boy, I’m opening a store in Cincinnati if even a small store if there’s such demand for small shops. 
Shop owners I know are pretty worried about doing the shop schedule, to not fail the customers, but not this ones; they just open the doors when they wish, and immediatly an array of customers tries to do their business as soon as possible.
There’s nothing wrong with trading goods for labor, however labor cannot work as money. The reason money works is that it is exchangable, but If I trade someone an hour of work for a service, that person can’t trade my hour of work to someone else, such a circumstance would be rediculous. Say I want to import some foreign product with the hour I was traded, it would not work.