The following is a guest post from Philip from Weakonomics, a personal finance blog focused on the intersection of Main Street and Wall Street. According to him, he's usually sitting at the corner throwing rocks at traffic behind the fence of anonymity.
I'm looking staring at my grandfather's guitar. He gave it to me because the arthritis in his hands keeps him from enjoying it anymore. I know a chord or two, but in order to really pick up on it I need regular, structured, lessons. There's a problem though, I don't want to pay for them. I'm cheap and don't have that kind of discretionary income right now.
Perhaps I could find a guitar instructor willing to barter. What can I offer this person? Dog sitting, financial planning, running buddy, (basic) cooking lessons, computer help? That's about all I've got. So even if I find a willing barterer, I have to be able to meet their needs as well. My odds of finding such a symbiotic relationship aren't good, and the time I would spend finding one wouldn't justify the monetary benefit.
But if we were both members of a time bank, this wouldn't be a problem at all. I don't need to help the guitar instructor, I just need some time dollars to cash in.
What is a time bank?
A time bank is a centralized reciprocal service community where everyone is of equal value. You volunteer your time to assist with any listed need and you receive time dollars as payment. It doesn't matter if you're a lawyer or a bus driver, you are paid the same. Here's how I might be able to get some time dollars and get my guitar lessons.
I can search my local time bank listings for any needs I might be able to fill. Perhaps someone is new to town and wants someone to run with and show them to good jogging spots, or maybe someone is going on vacation and needs a dog sitter, or perhaps someone wants to start a blog and needs help getting everything up and running. These are all services that I can offer. For the example, let's say I apply for the job to help set up a blog and the person accepts. That weekend I go over to their house and we register a domain, sign up for hosting, and I introduce them to WordPress, themes, and plugins. The whole process takes us three hours.
These three hours are now my currency and kept at the time bank. I can use them to get services I may need like moving help, drafting a will, or guitar lessons. We all know I'm after those guitar lessons, if there is someone registered with the time bank offering guitar lessons we've got a match! Let's say over the next few weeks I have three 1-hour lessons. That guitar instructor would now have three time dollars and perhaps more if he/she works with other time bank members.
How do you keep track?
While earning your time dollars usually requires you to be out in the real world, the banking can be all electronic. Some larger time banks employ administrators full-time to keep things running smoothly, in other instances a volunteer could do it, perhaps earning time dollars for the work.
Any catches?
If one service were to be seen as more valuable than another, the risk for a monetary value being assessed arises. Doing so sets the time bank up for a situation where services rendered must be taxed. Nothing is perfect. However every problem has a solution. For time banks to work you have to assume everyone's contributions are of equal value. One hour of work equals one time dollar.
Time banks also must have a certain scale in order to maintain some kind of sustainability. If you only have the same 10 people involved it's possible many of them either won't have something to contribute or something to gain. I would estimate you need at least 50 enthusiasts for the time bank to last. But with 50 people you're going to need a tracking system, which will likely cost money. The economics of administration may outweigh the benefits.
How to Find A Time Bank
So where do we find time banks or learn more about starting one? The best resource out there is timebanks.org. There are books, articles and websites all listed here. They also have a directory of TimeBank USA member banks and non-member time banks with contact information. Sadly there isn't one around me, but I'm not opposed to starting one. I really want guitar lessons.
What a fascinating entry!
However, wouldn't it be simpler to be paid in regular money? Since, effectively, you're replacing one form of payment for another?
Posted by: Eugene Krabs | May 28, 2009 at 09:09 AM
Reducing everyone skills to equal value for the betterment of society? One word . . . Communism.
We already have a perfect medium for exchanging time value for services, money.
Posted by: Traciatim | May 28, 2009 at 09:17 AM
I had no idea something like this existed and it's brilliant! My wife has been bartering for years. She is a music teacher and sometimes her students are able to afford the lessons and she's figured out ways to make it work. It's usually babysitting for our daughter. Regardless, it's always been a win-win. I hope this is the wave of the future (or reclaim of the past) because we are in a heap of troube with this economy. Obama promises us he'll lead us out of it but it seems to be getting worse than better. And, traciatim, communism? Really? America has a history of bartering and it's usually when things are going south...like...now? If it works why put it down? There's no insurance things will turn around quickly and if people are able to continue their standard of living through bartering I think that's great.
Jerry
Posted by: Jerry | May 28, 2009 at 09:49 AM
I agree with the previous posters to some degree, but the point about avoiding taxes makes it more appealing. As long as it isn't run by the government and there is still a monetary system to fall back on, I think it could work at small, but not too small, scale.
Maybe off topic, but it reminds me a little of those towns that print their own currency to encourage local buying. Are those taxed?
Posted by: Andy | May 28, 2009 at 09:49 AM
The IRS got involved in this in the 70's (I think). Pretty much killed it, as the lawyer's time is (supposidly) worth more than a laborer's time.
Death and taxes,
Posted by: Al Howard | May 28, 2009 at 12:09 PM
I can see some friction happening when one person feels that their services are more valuable than another person's. A system of credits could be established which would make the system more equitable, even if taxes would have to be paid. Intriguing post. I'll have to check out your site.
Posted by: Corporate Barbarian | May 28, 2009 at 12:14 PM
If someone doesn't think its a fair trade then they simply shouldn't don't do it. Equity problems wouldn't exist in such a volunteer system. It isn't setup to force a brain surgeon to trade surgery for lawnmowing.
Posted by: Jim | May 28, 2009 at 01:39 PM
A lawyer's time IS much more valuable than a laborer's time. A physician's time IS much more valuable than a secretary's time. The cost of entering those professions (legal/medical) is great. Time bank sounds like an awful idea.
Everyone's contribution is of equal value? Please. That's worse than "everyone wins and gets a trophy" in little league.
This smacks of socialism.
Posted by: Ben | May 28, 2009 at 01:43 PM
Oh, Lord, not the "socialism" canard ("socialism! BOOO!!! OOGAH! in your CLOSET! gonna GETCHA!") again. Voluntary private cooperation is socialism now? They must play the Internationale at barn-raisings, huh?
I think the time bank is a nice idea in theory, but I'd be leery of involvement just because my memory is that it is relatively easy to run into tax consequences.
Posted by: Sarah | May 28, 2009 at 03:27 PM
I like the idea. It's like an extension of your network.
Posted by: F | May 28, 2009 at 04:13 PM
The calls for socialism and communism may be a bit of a stretch. I can't speak for time bankers, but I don't think the idea is to REPLACE money as a medium for exchange, it is there to help smooth the bumps. Not everyone has money at any give time, it is a finite resource. Time is infinite.
It's true a doctor or lawyer's time is worth more than a bricklayer, but does a doctor or lawyer ALWAYS charge for their services? No. Sometimes people do things out of the kindness of their hearts. This system wouldn't work if there wasn't a desire to help the community.
You're not going to see me write my elected officials to institute an official time bank, I've got more capitalist blood in me than anyone here, but there is a place in our society and economy where everyone's work is worth the same.
Posted by: the weakonomist | May 28, 2009 at 11:25 PM
As for the tax consequences, so long as no monetary value is assigned to the time dollars you're good. This is why a doctor or lawyer's time cannot be worth more than a bricklayer's. The site has more resources and there are contacts to learn more about the system, including taxes.
Posted by: the weakonomist | May 28, 2009 at 11:26 PM