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A currency to improve healthcare services in Japan
A more successful policy experience with complementary currencies comes from Japan where a system was created to deal with the problem of Japan ’s burgeoning elderly population.  A former Attorney General and Minister of Justice recognized that care for these citizens was placing a great strain on the national social services system and so created an organization to implement a special currency called Hureai Kippu or “Caring Relationship Tickets.”  Similar to the Time Banks found in the UK , the system allows people to accumulate credit-hours in a national healthcare-time savings account for performing services such as grocery shopping or healthcare duties for the elderly.  When that individual with the credits falls ill he or she can draw on their account for health services from another person keen to build credits for themselves.  Or, importantly, credits can be transferred to elderly parents or grandparents in a different region of the country where the children do not live and cannot travel easily to give direct care. 

Leitaer in his book uses this example to show how a currency system can realistically supplement a national healthcare system by facilitating the exchange of civil society’s home care, making it more flexible and efficient.  Caring Relationship Tickets address an identified policy problem that the national system was either too large or rigid to address itself, in this case an overburdened healthcare system and geographic immobility of family-based health support for the elderly.  Today 300 non-profit organisations and many more citizens participate in the exchange system and it is proving an efficient and popular policy tool in meeting public objectives.

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There seem to be at least two reasons why this system has thrived while Hours have lagged: the ease of electronic circulation and the superiority of the service one can purchase with the currency.  First, when an individual performs an hour of healthcare that credit is logged electronically as a one-hour credit for the individual.  There is no paper money to carry around and no awkward, time-consuming double currency transactions to deal with as in the previous example.  Transactions are also eased by the fact that Hureai Kippu are a kind of special purpose money that can only be used to buy one thing, in contrast to Hours which can be used to buy many.  A currency that facilitates the exchange of only one good or service will usually involve fewer complicated transactions than one which facilitates many.

Second, Caring Relationship Tickets are used by a group of people who are defined by their common production and consumption of a particular service, and much less so by their geographic proximity since users may live thousands of kilometres apart.  Ithaca Hours users by contrast live and spend the currency almost exclusively within a few square kilometres.  Private Japanese companies have helped build the currency’s exchange pattern by setting up services to facilitate transfers over long distances, much like the wire transfer services through conventional banks.  Furthermore, Leitaer notes that the elderly who take part in the system actually prefer the healthcare provided by people paid in Hureai Kippu over those paid with the national Yen because they experience a higher quality of care in their relationships with these caregivers (Douthwaite 2000).

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Factors that seem to make complementary currencies fail and succeed
What can we learn from these two examples of public-objective currency systems, and what would it take for them to succeed to the same degree that Tesco’s Club Points have?  We suggest two key design features that should be in place.

First, a complementary currency needs to be credible if it is to enjoy the trust of its users.  Trust drives its constant spending and turnover, and if one person decides not to accept it because they believe they will not be able to spend it, the currency risks becoming quickly valueless.  In this situation people may revert to a mode of economic exchange such as barter which requires less trust but more work for a less accurate, often inconvenient exchange (how many pottery bowls equal how many evenings of babysitting?).  The convenience and accuracy of a currency to facilitate these transactions are predicated on people trusting that it will represent the same amount of value to friends, neighbours, and everybody else involved in the circuit of exchange.

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Second, it must be convenient to use.  One of the reasons Club Points have thrived is that Tesco has embedded their accumulation inside customers’ everyday transactions in national money.  Customers do not have to do anything extra to earn the currency besides continuing to shop at Tesco and letting the cashier beep the card on their keychain at every pass through the till.  The cashier has even been instructed to ask you for your Tesco Card because it is in the company’s interests to gather more sales data.  The transaction cost has been reduced to the time it takes to remove a keychain from one’s pocket and hand it to the cashier.  This convenience contrasts sharply with Ithaca Hours where users need to remember to carry around paper Hours notes, shop at stores that accept them, and make a doubly complicated transaction, all of which is rewarded with no benefit to the currency user other than the knowledge that they may have supported the local economy.

Today we favour national money in our daily exchanges because it is more flexible in what it can buy, more convenient to carry and exchange, more trustworthy, and works in lots of cities and social networks.  These factors are major determinants of a currency’s use and worth, and suggest ways complementary currencies could be improved in a public policy application.  Their over all challenge is to embody value that is specific to a social network or region, but not well represented in the flow of a national currency, and whose monetisation would benefit society in some way.

Next page (4 of 4):
Complementary currencies and the local determination of value

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Further Information
For information on this article contact David Grover on the details below:..