Comments on: What babysitting can teach the world

By: Barry G

Barry G — Mon, 09 Jul 2012 11:49:10 +0000

I can’t believe Tim is perpetuating the ridiculous Krugman babysitting nonsense. Krug has been peddling this confused analogy for almost half a century (literally). It’s even included in the second chapter of his new book that just came out a month ago…and it’s just as bunk as it was all those decades ago.

See here:

http://www.economicpolicyjournal.com/2012/05/in-review-paul-krugmans-new-book.html

By: Gerard McGlew

Gerard McGlew — Sun, 01 Jul 2012 14:39:34 +0000

@Ivan re -ve Interest
Saving for your retirement will get quite difficult. As will putting money aside to replace your car when becomes uneconomical to repair in 2 years time. Or what about saving for a house, to be able to buy without the extortionate interest rates charged for 100% mortgages.

You would drive everyone to buy as much as possible on credit, and larger items on HP. No thank you. Some of us attempt to live within our means.

By: Marcus Linder

Marcus Linder — Thu, 28 Jun 2012 23:17:36 +0000

It seems to me that the co-op story mostly exemplifies the problem with price regulations alternatively too large smallest denominations of a currency. If the price for one night’s baby-sitting could have dropped to one tenth of a token, I believe that it is very likely that more people would have started to go out again. In fact, I believe that the “arithmetic” of price decreases would quite similar to the addition of new tokens by the central administration (if proportionally distributed). From that perspective, it seems to me that the main argument for adding tokens to the system would be if prices/salaries were sticky in the downwards direction, due to some social norms or so called psychological reasons.

By: MCK

MCK — Mon, 25 Jun 2012 13:05:19 +0000

You might be interested in this commentary on the baby-sitting co-op:

http://betweenthebalancesheets.wordpress.com/2011/10/05/the-lessons-of-the-baby-sitting-co-op-reconsidered/

The gist is that the mechanics of the story show that the distinction between monetary policy and fiscal policy is less obvious than some would have you believe. Fiscal surpluses created the problem and tax cuts solved it.

By: Bruce McAdam

Bruce McAdam — Mon, 25 Jun 2012 11:27:57 +0000

I was part of a local currency system that never needed to print any money, because the total value in circulation was zero. At the end of every accounting period (monthly, I think) all members had to be within a specified margin of zero (either credit or debt). The ‘central bank’ could adjust the credit/debt limit, but never had to pretend it could create new wealth out of nothing.

By: Jennie France

Jennie France — Sun, 24 Jun 2012 20:11:56 +0000

Another, more charming (and earlier)version of the analogy is the Restaurant Government is Walter Pene du Bois’s The 21 Balloons. If you’re a foodie, you will enjoy the concept.

By: Nick

Nick — Sun, 24 Jun 2012 10:10:18 +0000

The story is too artificial mainly because the system is closed. In the real world everyone wants Germany to spend rather than their own people

By: Julien Couvreur

Julien Couvreur — Sun, 24 Jun 2012 09:49:56 +0000

The coop story is such a flawed analogy. A few points:
It’s voluntary (not fiat money), which allows for competing currencies.
It just happens to not be very fungible (there is no tenth-of-a-scrip), which is a telltale sign of a bad currecy choice.
The story does not tell how the new scrip where injected in the system. Money is not neutral, such details matter.

By: Ray Perkins

Ray Perkins — Sat, 23 Jun 2012 11:30:12 +0000

We were members of a baby sitting circle for many years and we never experienced any of the difficulties mentioned here.

Our was a large circle that comprised many sub-circles of friends and acquaintances, who would, as a first preference, sit for each other, but step out of the sub- circles as needs be. People borrowed tokens, bought tokens and forged tokens – all things prohibited under the rules, but from what I read here, possibly a good thing and an example of the black market compensating for weaknesses in the main market.

Our circle was not policed at all, if it had of been, it may not have worked.

By: Ivan Jordan

Ivan Jordan — Sat, 23 Jun 2012 11:24:15 +0000

Thanks Rory. Oh dear can’t stop thinking about this.

So, in my imaginary new economy, money in current accounts has a +ve interest rate for 30 days, and a -ve rate thereafter.

So you can buy something this month but you might not be able to afford it next month.

If you forget to spend, after a few months the bank removes the money and invests it for you in an R+D / healthcare / environmental based investment fund.

The beauty of this is that to people who can not afford to save (pensioners, students etc) it makes NO difference. Whereas people who can afford to save will be incentivised to either a) spend b) invest in healthcare/r+d/environmental funds (greater good investment) c) take their chances and invest in traditional funds that will need to perform VERY well, as they will not be protected from -ve interest. This will have a knock on effect as fund managers are incentivised to only go with schemes that bring a general good.

What you can not do in my scheme is leave your money in a hole in Switzerland.

This attempts to unify rational thinking for the individual with rational economic policy for wider society.

Somebody please shoot this down, I am architect not an economist.