Time Banking: Bringing Back Barter

In a recent post, we talked about the nature of social capital. Here, we discuss a related concept. Time banking is a great way to build your social capital as well as do something you feel good about.

In 1980, a man named Dr. Edgar S. Cahn suffered a massive heart attack. He was 46. Recuperating in the hospital and “feeling useless,” he dreamed up Time Dollars as a new currency to provide a solution to massive cuts in government spending on social welfare. The concept of Time Dollars recreates humanity's first system of commerce. Before there was a gold standard or fiat money, there was barter. In its original form, it was trade in the most literal sense of the word. Person A would give person B one cow in exchange for, say, ten bags of grain. There was no currency and no inflation, and the exchange rates were determined through haggling. Time Banks, which trade in Time Dollars, put a modern spin on the same concept.

The basic concept is that all hours are created equal. A hair stylist's hour of work is equal to a babysitter's, and both of those are equal to an hour spent helping someone with their garden. In a specialized society like ours, each person trades primarily in one skill. Suppose the auto mechanic wants to go to a two-hour concert. Using a time bank, he can "debit" his account two Time Dollars for the tickets, as long as someone who can get him the tickets also participates. At a later date, he can perform two hours' worth of mechanical work for another participant of his time bank, at which point he will have paid his debt.

Most time banks are local organizations. They are found all over the world with several websites dedicated to directing users to time banks in their area. Timebanks.org, a sort of directory, advises that the optimal size for any one bank is under 150. Since every time bank relies on mutual trust, keeping the numbers small keeps things personal without a whole lot of unscreened strangers. It also makes it easier to track everyone's time dollar accounts.

What kind of experiences do people have with time banking? Loretta B., a guest writer at my favorite personal finance blog, Get Rich Slowly, writes:

"When my Dad died, my yoga teacher from the timebank came and stayed at the house during the funeral. She removed all the medical equipment, restoring the house to normal. Others served food and cleared up at the luncheon after my Dad’s funeral. I cannot tell you the relief I felt having people I could trust take care of that for me, and financially, I would not have been able to afford the luncheon any other way."

Time banking is an exciting concept for many reasons. When Dr. Cahn concieved the idea, he imagined it being used for social welfare programs, a sort of volunteer effort with rewards. That potential is just now being recognized. Since this is a "pay it forward" system, it's more than just another charity effort. People who use a service from a time bank are called upon to offer their own services to others. This creates a ripple effect and keeps the system from being a handout.