I was recently invited to appear on radio to give an economist’s perspective on the costs and benefits of local exchange trading schemes (LETS), which are alternative currencies that circulate around a small community. This made me scratch my head a bit. I could not think of any real benefits, but then I couldn’t really think of any serious costs, either.
Advocates of community currencies argue that they have social, economic and environmental advantages. BerkShares, which organises a local currency in Massachusetts, claims that the currency helps businesses to connect with their customers, and strengthens the regional economy by favouring locals. In the UK, “transition towns”, which are seeking to use less oil, are exploring the environmental benefits of local currencies.
The common-sense economic case for these currencies was summed up for me by John Walker, acting treasurer of Brixton LETS in London: “They’re more appropriate for local communities, because the money doesn’t drain out of the local community.”
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