What Is a Time-Based Currency?
Time-based currency is a type of money where the value is based on units of time, rather than being backed by some precious metal or by a government's fiat capacity to levy taxes. The idea is that labor-time can be reduced to a standardized unit of economic value that can then be used in exchange.
- A time-based currency is a form of money whose value derives from a standardized unit of labor hours worked.
- The management and issuance of time-based currency is achieved through dedicated time banks that maintain a ledger of transactions and the money supply.
- The idea that labor-time is a fundamental source of economic value has been around since at least the 18th century, when early economists like Adam Smith, David Ricardo, and Karl Marx each proposed a labor theory of value.
- Time-based money is not common; however, some examples such as Ithaca HOURS exist on a local or community scale.
Understanding Time-Based Currency
Currencies have historically been based on concrete or intrinsic value measures. For instance, throughout history gold or silver coins were valued for their metal content, and for many decades the value of the U.S. dollar was based on the value of gold where Congress mandated the weight in gold for which one U.S. dollar could be redeemed. Today, the value of the U.S. dollar is based on supply and demand in a free market where dollars are freely exchanged for other currencies, and where most fiat currencies today derive their value from the trust of a government's ability to raise taxes and manage the money supply.
Time based currencies, on the other hand, derive their value from hours of labor worked. Time-based currencies are typically issued and supported by time banks, which are formed by people who wish to create economies based on the principles of mutualism and equality, rather than just profit and loss. The notion that labor-time is a common source of economic value originates from early political economists such as Adam Smith, David Ricardo, and Karl Marx, who all arrived at a labor theory of value (LTV).
How Time-Based Currency Works
Time-based currencies are issued by time banks, to facilitate the exchange of goods and services among the membership of the time bank.
Time banking and time-based currencies require a few extra restrictions to be placed on a currency, in order to protect the values of mutual aid and equality. For instance, let’s say a time bank sets the value of one time dollar at one hour of human labor. Let’s also stipulate that there are two members of the time bank: a carpenter and a doctor. By participating in the time banking scheme, both the carpenter and the doctor agree to provide a certain number of hours of service to the community, and to do so in exchange for time dollars, which they can then trade in for services they need done. Let’s say that the carpenter builds a cabinet for the doctor, and that it takes him five hours. He will earn five time dollars, and be able to use them to purchase medical services from the doctor, even though the carpenter and doctor would earn much different salaries on the open market.
The concept of time banking comes from the idea that the nature of our financial institutions, marketplaces, and currencies actually determine the nature of the societies we live in. When markets are impersonal, and the value of a person’s labor is determined only on what stranger thinks it worth, it can promote a community that is impersonal, and where close bonds are not formed between neighbors.
The concept of time-based currencies has most recently been championed by the legal scholar Edgar S. Cahn, who also co-founded the Antioch School of Law in Washington, D.C. In his book No More Throw-Away People, Cahn outlined four core principles for time banking, later adding a fifth. They are:
- We Are All Assets: Everyone has something to contribute
- Redefining Work: Rewards all work, including unpaid and care work
- Reciprocity: Helping each other build strong relationships and community trust
- Social Networks: Belonging to a social network gives our lives more meaning
- Respect: Respect and dignity are the basis for a healthy and loving community and lies at the heart of democracy
Time Based Currencies in the Modern Economy
Time-based currencies are not common, but can be found among some local currency projects. In 2018, there were around 120 time banks in the United States.
One example is the Ithaca HOUR, introduced in 1991 in the upstate New York town of Ithaca to help spur local economic activity and keep economic value within the community. The value of one HOUR is pegged at $10 and is a time-based currency system where one hour of any work is equivalent to another hour of work. Today, there are over $100,000 worth of Ithaca Hours in circulation.
The Fureai Kippu is a well-known example of a sectoral currency in Japan with the basic unit of account being an hour of service to an elderly person.