Time banking - economics of sharing economy - pondering Time Republik

Recently at Decentral Vancouver we had a visit from folks from Time Republik, a time banking platform for a sharing economy. We discussed their project, as well as had some talk about the economics aspects of our modern capitalistic economy in comparison to the sharing economy of Time Republik. While I believe the project is very interesting, some assumptions made by this platform as well as LETS, a similar project, appear to fall apart under more scrutiny. I would like to discuss some of the points mentioned with you. But first...

What is Time Republik?

Time Republik is a time banking platform. The basic idea behind it is to create a community economy based on hours of one's time, rather than a national currency. Users of the system would earn time credits by offering their services to the community, and spend those credits with anyone else on the system by paying for their services. In this regard, it operates a bit similar to LETS, except using a different unit of account.

With that information, lets jump into some interesting discussion.

Time is for services

It appears that Time Republik was designed to be mainly used for services, rather than goods. I might mow your lawn for an hour, and in exchange I could have someone help me do my taxes for an hour. While this is all well and good to start, if the time units are going to become a currency, people will want to pay with them for goods as well.

Just like Charlie Shrem illustrated in his blog post, people will make anything that has the properties of money (fungibility, durability, etc.) into money if the need arises. The same principle will apply to the time units. A soft drink might cost a minute, while a car might be worth a few years. I suppose if a system like this would take off, we might see an economy similar to the one found in In Time (perhaps shy of people dying because they ran out of time).

1 hour = 1 hour

Another core principle of the Time Republik strongly held by its developers is that one hour of anyone's time is equal to one hour of anyone else's time. In other words, one hour of raking the leaves is equal to one hour of a doctor diagnosis, or an hour of consulting with a lawyer.

In general, this system is too idealistic if people have any free choice.

First of all, any economic system wants to eliminate or at least limit the free rider problem - you want to punish people that slack off and don't do their jobs too well. If I was to pay for an hour of mowing my lawn and someone did it so carelessly as to leave patches of tall grass everywhere, I would want to have some sort of recourse against them. This is easily done with some basic reputation system, similar to eBay or Amazon.

However, if we introduce reputation into the system, it will lead to another problem - work is no longer fungible. If I have the choice between a few people to do the same job, I would naturally pick the one that is best rated, all other things being equal. Because everyone thinks the same, the demand for highly rated people goes up, and soon there is more demand for them than they can supply. At that moment, they can start charging a bit more for their services, thus lowering the demand down to the point where the supply and demand are equal again. It might be 1.1 hour units per hour of work, perhaps 1.5, 2 or more.

The only way to address this issue would be to force the labourers to be fungible. It could be achieved by a chat-roulette-style system - you choose what job you need done, while the system assigns you a labourer that can do that task at random. However, this brings us back to our free rider problem yet again...

Currency should be local

This concept was strongly expressed in our Decentral chat with the folks from LETS, but was also present in the discussion with Time Republik. The idea is that both of the systems want to create a local economy by creating a currency that should not be traded for other currencies, because that would defeat the point of the system. If a local currency is tradeable on a global marketplace, it stops becoming a local currency and the money leaves the community.

This concept isn't new - pretty much every company hosting MMO games has to address this issue. This is true for CCP and EVE Online, as well as Blizzard and World of Warcraft. If there is no white market for your currency, there will be a grey or black market to fill that void.

While in the old days it might've been enough to print some local paper money that nobody outside of a given area would be interested in to reign in how far the money travels, with today's seamless global Crypto 2.0 systems like Ripple, any currency deployed on that system gets turned into a global currency as soon as someone puts up a trade for it. Money knows no boundaries, and it will find its value.

Distribution problem

Another problem of bootstrapping an economy is how you distribute the currency units. At the moment, Time Republik gives anyone that signs up for their system a few free hours they can spend on the system. While it's a good start, the system might quickly be exploited by mechanical turk-like networks. In the long run, some different token distribution method would need to be devised.

A possible solution to the problem might be to start everyone with zero hours and let them earn the tokens from other people in the network. To add more tokens to the network, Time Republik could organize some projects to benefit the community that anyone could participate in - social media campaigns, cleaning the parks, charity work, etc. This would mean that every hour in the system came from an hour of work and give it some underlying value.

That being said, it is understandable from user experience perspective that a system allowing you to instantly dip your toes in and start spending in the new economy is much more welcoming than the one that requires you to earn your money first.

Money can't buy trust

Another point in our discussion was the idea that money can't buy trust. Thinking about it initially, it seems obvious - giving someone money doesn't make them become your friends and all that. However, if you pause and think about it, maybe there is some way money can buy you trust?

Say I want to borrow your bike for a few hours. If I'm your friend, that's not an issue - you will gladly borrow me the bike, since you know that in the past I could be relied to take good care of borrowed items and return similar favours. If I'm a stranger, you can't really say if I'm an honest or dishonest person, so you would be understandably unlikely to let me borrow your bike.

However, what if I offered you a security deposit for that bike? If I deposited with you more than it would cost you to replace that bike and you were free to use that money for any repairs to the damage I might've caused, you would be more likely to lend me the bike. A similar situation could arise if I had some money reserve at a third party and would agree to put it in escrow with a trusted third party.

While this might not really be a way to buy or earn trust, it can be a useful enough proxy when we're talking about business arrangements.

Conclusions

While Time Republik looks like a really interesting project needed for social change, creating a new economy without understanding how the current model works or without thinking like a malicious person bent on abusing the system can leave a lot of gaps that would need to be filled at some point.