Learning Exchange 03

In certain circumstances, as I suggested in a previous post, learning is a commons. Exploring this notion might provide useful insights for learning in the future. I also introduced an example of three women who are members of a hypothetical learning exchange.

In the present post I’ll explore one way that the transactions in a learning exchange might occur. Recall that everyone in a learning exchange is a learner, both a teacher and a student, both a buyer and a seller.

For ease of discussion let’s assume that Alice, Barbara, and Cathy belong to the Boston Learning Exchange (BLE), and that this is a group of about 100 professional women in the Boston metropolitan area. The women in BLE treat their aggregate learning as a common resource for the benefit of all members.

Let’s see how that might happen. Table 1 shows 9 exchanges among Alice, Barbara, and Cathy. Obviously the exchanges among the entire BLE membership would be considerably more complex, but these 9 transactions serve to demonstrate the basic ideas involved.

Table 1: Transaction History

Transaction	Seller	Buyer	Price	Description
1	Cathy	Alice	50	HTML5 video tag
2	Alice	Barbara	100	Intro to GIMP image editor
3	Cathy	Alice	50	h.264 and ogg theora codecs
4	Barbara	Cathy	75	Intro to SQL utilities and resources
5	Alice	Barbara	25	Image editing examples
6	Alice	Barbara	25	Image editing exercises
7	Cathy	Alice	50	Codecs and browser support
8	Barbara	Cathy	75	Deciphering database architecture
9	Cathy	Barbara	50	Overview of web site design

In transaction 1, for example, Cathy introduces Alice to the HTML5 video tag. The sale price is 50 units. In this case Cathy is the teacher/seller and Alice is the student/buyer.

The BLE uses a currency system that is complementary to the national currency. There are many examples of such local currencies in operation throughout the world (see resources below). One prominent example is the Swiss WIR, a business-to-business currency created during the Great Depression of the 1930′s and in continuous use since that time.

No physical exchange of currency actually occurs in the BLE. The seller in any exchange always sells on credit to the buyer. In transaction 1, Cathy (the teacher and seller) extends 50 units of credit to Alice (the student and buyer) so that the transaction can occur.

But the really interesting aspect is that the buyer never actually pays the seller directly. The seller extends credit to facilitate a transaction and receives similar credit extensions when she wants to learn. In a properly managed learning exchange, the total credit outstanding at any one point in time is small compared to the total credit ever extended. It’s a case of “what goes around, comes around” that naturally modulates the credit actually outstanding.

Exchange systems like this are called mutual credit clearing systems. It sounds kind of strange, but watch what happens through a series of exchanges in a credit clearing system. Table 2 shows the results of the 9 transactions.

Table 2: Credit Clearing and Money Supply

Trans. No.	Alice			Barbara			Cathy			Total Cleared	Money Supply
	Sell	Buy	Balance	Sell	Buy	Balance	Sell	Buy	Balance
1	0	<50>	<50>	0	0	0	50	0	50	50	50
2	100	0	50	0	<100>	<100>	0	0	50	150	100
3	0	<50>	0	0	0	<100>	50	0	100	200	100
4	0	0	0	75	0	<25>	0	<75>	25	275	25
5	25	0	25	0	<25>	<50>	0	0	25	300	50
6	25	0	50	0	<25>	<75>	0	0	25	325	75
7	0	<50>	0	0	0	<75>	50	0	75	375	75
8	0	0	0	75	0	0	0	<75>	0	450	0
9	0	0	0	0	<50>	<50>	50	0	50	500	50
Totals	150	<150>	0	150	<200>	<50>	200	<150>	50

In the first transaction, Cathy sold 50 units to Alice. The bookkeeping debits Alice 50 and credits Cathy with 50. The column labeled Total Cleared is the total amount of credit ever extended in the system. Because it is the initial transaction, that number is 50 units in transaction 1. The column labeled Money Supply is the total amount of credit outstanding in the system. This, too, is just 50 units in this first transaction. The columns labeled Balance provide the cumulative total balances for each individual.

In transaction 2, Alice introduces Barbara to the GIMP image editor. The price of this transaction is 100 units. The bookkeeping debits Barbara 100 and credits Alice 100. Alice’s cumulative balance at this point is 50, Barbara’s is -100, and Cathy’s is 50. The total amount cleared in the two transactions is 150 (ie, 50 in transaction 1 + 100 in transaction 2). The money supply, however, is 100 because only a total of 100 units of credit is still outstanding (the money supply is the sum of all positive cumulative balances).

Note that the money supply fluctuates near zero and sometimes may actually reach zero, even though the total amount of credit ever extended continues to grow. This is a feature of credit clearing systems of complementary currency. Here’s how Thomas H. Grecko Jr, one chronicler of these systems, describes it:

A credit clearing association is based on an arrangement in which a group of traders, each of whom is both a buyer and a seller, agree to allocate to one another sufficient credit to facilitate their transactions among one another. … In such a system, the total amount of credit outstanding at any point in time can be thought of as the money supply within the system. [1]

Credit clearing systems treat credit as a form of commons. As such they are not immune from a series of problems that Elinor Ostrom and others have documented. Not the least of these is the free-rider problem where one person takes from the commons but does not give to it. Trust and reciprocity are critical components in governing a commons, so it’s important that members have rules to deal with these situations.

In my next post on learning exchanges, I’ll return to Ostrom’s empirical and theoretical work that provides design principles for successfully managing a commons. These principles are not prescriptive. Each situation is best treated as unique. As I said previously, it’s messy but very real and quite hopeful.

Notes:
[1] Greco, Thomas H. 2009. The End of Money and the Future of Civilization. White River Junction, VT: Chelsea Green Publishing Company. [Note: Table 1 and 2 above are modeled after an example provided by Greco on pages 132-133.]

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If you’d like to explore complementary currencies in more detail, here are places to start. I found The Money Fix video both entertaining and helpful, although you’ll want to devote 1+ hours of peace to view it.

Complementary Currency. [Wikipedia].

Community Exchange System
“The Community Exchange System (CES) is a community-based, global trading network using a money other than our familiar national ones — an alternative, parallel, local, community or complementary currency system. In short, the CES is a new money system.”

Complementary Currency Resource Center
“The Complementary Currency Resource Center is a international, multi-lingual non-profit organization with the goal of providing free knowledge, resources and assistance in the building of an economy of social and economic solidarity and appropriate development.”

New Currency Frontiers
“We invite you to explore innovative interpretations of money, economics and society which are resulting in a new way of thinking about our future. You will find pieces of the puzzle on this web site to understanding the next economy.”

Time Banks
“For every hour you spend doing something for someone in your community, you earn one Time Dollar. Then you have a Time Dollar to spend on having someone do something for you. It’s that simple. Yet it also has profound effects. Time Banks change neighborhoods and whole communities. Time Banking is a social change movement in 22 countries and six continents.”

Main Street Cash
“Local sustainable economies add safety and security to our world. A number of groups and individuals across the country and around the world are working towards smaller sustainable economies. The tools used for local economies can include a local community currency. Our blog hopes to bring quality information to those looking at local currencies, sustainable economies and even new open source digital currency.”

The Money Fix
“THE MONEY FIX examines economic patterning in both the human and the natural worlds, and through this lens we learn how we can empower ourselves by redesigning the lifeblood of the economy at the community level.”