Economist Tom Greco on reinventing money


29 May 2007 |
View all related to Local Money | Money

Community and monetary economist Thomas H. Greco, Jr. gives a presentation in Sebastopol, California about creating alternative currency and exchange systems.

Greco is also a writer, networker, and consultant, who, for almost three decades, has been working at the leading edge of transformational restructuring. A former college professor, he is currently Director of the non-profit Community Information Resource Center, a networking hub, which provides information access and administrative support for efforts in community improvement, social justice, and sustainability.

He is regarded as one of the leading experts in monetary theory and history, credit clearing systems, complementary currencies, and community economic development. He is author of many articles and books, including Money: Understanding and Creating Alternatives to Legal Tender (Chelsea Green, 2001).

AudioEconomist Tom Greco on reinventing money (audio) (length 39 min): download, stream

"that may be correct in theory but not in practice"

For the sheer breadth of this vision I applaud this effort. There are hidden potentials that need to be explored and Tom Greco has developed some of those potentials.

I would like to suggest four obvious problems for community money schemes that Tom Greco did not fully address (at least in the audio clip above).

These are:
1. Given the importance of having stable institutions (say, a grocery store which all members of the community have trust in) as the basis of a stable community money scheme, we should be aware that the concentration of power in the hands of strong local businesses can also distort the power relations in the local community inordinately around a particular broker. Mr. Greco did mention mining communities issuing money redeemable in the company store as an example of exploitation of this principle. Whatever model of local currency is submitted I would suggest needs to address this possibility. When you have a currency that is issued or "pegged" to the stability of a certain industry in a region (say timber in the pacific northwest), it tends to produce a concentration of power. The question for any theory of community money is how to mitigate these dangerous concentrations. People do vote with their feet (Or hands) as the case may be. One way to solve for this is to insure that the trusted central institutions which function as brokers or guarantors of the community's currency are subject to democratic control--such as through some systems of collective ownership.

2. The problem of freeriders. In Greco's presentation the problem of freeriders was not addressed other than through (I think) a stipulated accountability system where one's credit can be revoked in an instant. But the community monetary system proposed by Greco requires tremendous civic virtue on the part of the individuals in the system. This has hidden possibilities, especially when civic virtues are integrated into the exchange of goods such as when citizens agree to ascribe value only to certain kinds of goods and do, as a matter of principle, exclude other goods from valuation. Trustworthiness of individuals is therefore at a premium and a face-to-face credit system may have good moral consequences for the individuals and the community as a whole.

3. Efficiency. In the Federalist Papers, Publius makes clear that under the Articles of Confederation regional currencies created complications in interstate commerce that would be mitigated by a federal monetary system.There are efficiencies to be gained by a larger monetary system. The argument for community based monetary systems should recognize problems of coordination and efficiency in relation to the total package of goods available in the global marketplace--or at lest those which the values of the commmunity (and I assume they are strong values) wish to pursue through global trade.

4. There is an issue of fairness. If the lowest and youngest workers in the community money scheme are lead to believe that their labor should be expended upon the development of capital within the community money scheme, there is that much less in the way of real dollars that he or she is earning. Rich in community, but poor in relation to the goods of present society made possible by the utility of the standard currency. Some way of redeeming coupons for real dollars may be a way to offset this unintended consequence for the worker, particularly those who have less goods than other members of the community.

Great line of thinking, though, Tom.


We must move much faster, into implementation.

OK, now we have all this terrific knowledge. Hundreds of very bright people, thinking about the critical problems with today's money, and today's money-intermediated economy.

What I've learned from reading Tom's books, and Riegel, Lietaer, and other books, is that we're spinning our wheels, i.e., not getting traction or forward motion, by our analysis and descriptive efforts. We are educating a lot of people, including ourselves! But we are not getting anywhere. Our ideas are lost in the vast river of noise and cacophony, most of it guided by far larger organs of belief and propaganda and desire in the pulpit, the media, the schools. 4 million people enter the US population, every year, 4 million turn 18, 4 million turn 65, 4 million die. We are not in a static population but a river.

To have any hope at all, of success, we must move to an implementation that is scalable to encompass the entire global economy. It must be implemented in software, in hardware, and use the internet. It must reflect user's inherent, individual freedom rather than guiding or controlling it. The ideas in this paragraph are NOT new or unique. I am talking about the principles of Internet, itself, such as the end-to-end principle. and the fact that code rules. 

In my view, the evolution of computing and Internet has been profoundly shaped by the fact that they were designed and built by large institutions. Not a single electron flows or is switched, other than to make computers work in universities, governments and large corporations. That's fine, as far as it goes but all our computers and networks were designed with final control resting in the server and router-- not the end user. And this can be overcome fairly easily--as it is, so often by hackers.

I happen to believe it's possible to manufacture, at low costs, simple handheld signing devices that cannot be hacked. Sorry, Bruce Schneier, sorry Avi Rubin and other cryptographers, promoted into prominence by corporate media to convince us, a secure computer cannot be built. And that we must rely on centralized money, etc. 

The foundation of individual sovereignty, is power in the node NOT the server.
The foundation of credit is reputation. Reputation is impossible without a reliable signing device.
The foundation of reforming our group organization is multiparty contracts, in groups of 3 or more. The foundation of multiparty contracts is the same as bilateral contracts-- it is, the history, the reputation, the track record of your co-workers, in provable, empirical reputation history.

Todd Boyle
.....  Whatever happened to Phil Zimmerman??  and where is Robert Hettinga when we need him? We hardly knew ya...



 I don't know that we do, as a matter of fact, have grounds to implement a programme as broad as you apparently suggest "moving" on. You seem to be arguing for a virtually make believe system of blackberries and palm pilots and virtual credit. Get real, man. Check your head. Ledger theory?

Alright, you've had your Robespierre moment. Back to work.


Power in the node


'power in the node' is a tenant of the chaordic concept. The Internet is a classic example of a chaord; so is the original VISA International. See the Chaordic Commons at Tom Greco is familiar with the Chaordic Commons.

Tom Sherlock