Designer Currencies and Behaviour Change

At Feasta, we started using the term ‘Designer Currency’ in 2011, partly as a reaction to what we thought were unsatisfactory adjectives (complementary, alternative, community), but mainly to underline the fact that no currency is a ‘neutral facilitator of exchange’ as imagined by orthodox economics, and that therefore currencies can be legitimately designed to promote specific outcomes, values and behaviours. We named our Facebook Currency Activists Community accordingly in January 2012 [1] and sketched out some early thinking in ‘The Lot of the Currency Designer’ a paper presented to the International Social Transformation Conference in Split in July 2012 [2].

A delegate to the recent Community Currencies conference in The Hague proposed that changing behaviour should be the ‘fourth function of money’, so it may be timely to explore the implications of this line of thinking a little further.

This article considers three particular questions: i) How are values implicitly embedded in a currency? ii) If objectives are made more explicit, who defines those values and how are they validated? iii) What type of explicit behaviours might currencies reasonably promote? and then revisits the core function of means of exchange in the light of this analysis.

Implicitly embedded values

We can best explore the ways that value-sets may be embedded implicitly in a currency by looking at the negative effects associated with fiat currencies. A good starting checklist of these effects might be: boom & bust; growth fetishism; wealth concentration/ inequality. (A more complete review might include the devaluation of social capital and excessive short-termism.)

To unequivocally establish the relationship of each of these effects with the existing money system, we would need to first establish a correlation between money attributes and the relevant effect, and then show causation. Such rigour isn’t possible in what is effectively a money-monopoly where one type of currency predominates. However each of these postulated effects has been extensively written about and will be written about more. For this article we will restrict ourselves to a qualitative precis of the nature of each connection.

Boom & bust
is seen by orthodox economists as a natural phenomenon – the ‘business cycle’. Insiders make profit from appreciating assets during a boom; sell out ahead of the bust using privileged information; and buy up assets cheap in the fire-sales that accompany the bust. All of these financialised gains do nothing to create real wealth; they merely redistribute wealth, from the outsider to the insider. The issuance of money by commercial banks is based on sentiment. They operate as a herd, each bank with its hands on the shoulders of its fellows, thereby multiplying any discerned changes in sentiment. The effectively unlimited amounts of currency available for banks to issue creates bubbles; the herd mentality accelerates both the boom and the bust. An argument is made that bubbles have always occurred. Maybe so, but credit bubbles or house price bubbles tend to affect almost everyone and cannot be compared to tulip-mania; and the misallocation of loan capital into asset purchases has created bubbles orders of magnitude bigger than we have ever seen before.

Growth Fetishism. The creation of almost all money as interest-bearing debt results in a need to grow exponentially. Some mitigation is provided via defaults, but continual growth is required in order to repay the increase in debt due to interest. That any form of infinite growth is possible on a finite planet is impossible. The tendency is to target short term returns. A money supply which incorporated a proportion of non-interest bearing money would lessen the need for growth and remove the pressure for artificially measured growth and the over-reliance on GDP as a measure of progress.

Wealth concentration.
Interest is a rent of the capital loaned to those with insufficient funds by those with excess funds. By definition it must therefore redistribute wealth from the rich to the poor. From the lender’s perspective this capital rent has been seen as remuneration for delayed spending. If the lender is a self-made man maybe this argument carries some merit; but loans may be made out of inherited ill-gotten or fortunate gains; or by banks that have been given the right to issue interest-money and have never earned the advanced funds. In those cases the rationale disappears entirely. The lender need do nothing but wait for the interest to roll in (and pursue delinquents); the borrower must back themselves to create a return faster than the interest builds. The increased inequality that this usury creates was historically recognised via periodic debt jubilees (write-offs and write downs), but modern society is averse to this measure. The myth of the American Dream – guaranteed advancement for anyone prepared to work hard enough – must not be allowed to obscure the injustices associated with the monopoly of interest-bearing finance.

So the common links are the control of issued money by an oligopoly of commercial banks with no strategic interest in the allocation of capital and no natural right to profit from the interest paid; and the interest device itself which implicitly values the transfer of wealth upwards and undifferentiated growth (the ‘ideology of the cancer cell’).

Explicit Values: who decides and validates?

If currencies are issued by their users, as envisaged by mutual credit and P2P proponents, then the short answer is that those users can decide on the values they wish to support, and behaviours they wish to encourage; and they assess whether these aspirations are met and when those behaviours are changed. Equally if the currency is issued by a local council or a private organisation, the same should hold – the issuer should set out the required values, behaviours and outcomes, but with regard to the users of the currency. The more explicit the objectives (and the process for modifying those objectives) the easier it will be to build trust in the currency.

But this answer begs the whole question of governance. The key requirement is for forms of governance that facilitate the determination of the value-sets, outcomes and behaviours required and governance that is itself sustainable – in particular governance that prevents ‘capture’ – the takeover of control or subordination of objectives by non-consensual means.

The limitations of the corporation as a governance structure are increasingly apparent – its emphasis on profit as the only real measure and its apparent ability to externalise costs to society. The resulting renewed focus on co-operative structures, CICs, and collaborative models such as VSM [3] is welcome but does not yet appear to have resulted in a consensus on appropriate governance models for Designer Currencies.

Types of Explicit Target Behaviours

The design of Feasta’s proposals for Liquidity Networks (as originally envisaged by the late Richard Douthwaite) anticipated rewarding pro-local and pro-currency behaviours. Pro-currency behaviours might include: joining; first-use; member-get-member; increased turnover and so on. Potential for gaming these outcomes clearly exists and needs to be managed. (Data visualisation techniques are expected to be important in this process). A pro-local value-set is normally manifested in the selection of Preferenced Domain (i.e. the currency aims to operate in a fixed geographic area), through local online directories and so on. Local Economic Development criteria (perhaps informed by local council participation) might surface other desired outcomes – such as the participation of specific types of businesses under-represented in the area. Currencies exchangeable for fiat (such as the UK’s ‘proxy pounds’) face the additional problem of requiring extra fiat financing to pursue this route.

Other types of target behaviours are possible, depending on the values of the currency issuers/ users, for example pro-environmental. The evolving definitions of target behaviours and their unambiguous measurement and reporting are likely to be a key governance function.

Means of Exchange Revisited

Of course, all of these behavioural aspirations will mean nothing if the currency is not fit for its fundamental purpose, which will often be to act as a means of exchange. But exchange what? And between whom?

The potential exists to prioritise some transactions over others. This is already implicit in the idea of a Preferenced Domain (i.e. targetting a specific set of users), but it can legitimately be taken further. For example a designer may want to preference ‘stuff-of-life’ transactions against ‘nice-to-have’ transactions. I have in the past suggested a metric of the ratio between food producer/providers and aromatherapists. While not wishing to impugn the quality-of-life-value of the latter, there is a serious point here, and one which most LETS scheme managers will be well aware of.

Other possible transaction differentiators include financialised transactions vs goods and services and low vs high carbon. Critically, in all cases, a mechanism needs to be embedded in the governance system that transparently rates/ assesses types of transactions and makes the necessary value judgements. It is too soon to ask that these judgements should be based on widely accepted metrics. The governance process needs to just back its judgement and welcome any disputes that occur as a sign of success. And if rewards and incentives are to be provided out of issued currency units, this needs to be managed within the inflation-control of the currency.


Currencies can be legitimately designed to promote specific outcomes, values and behaviours. Explicit statement of those target behaviours can help build a currency’s brand and attract users who share the value-set. The governance process is critical. Transparency and participatory decision making will attract users. All transactions are equal (from an exchange point of view) but some are perhaps more equal than others. Local economic development can be facilitated by Designer Currencies but only if gaps in local supply are identified and addressed as a priority. Data visualisation will help decision making. Digital currencies will evolve quickly, assisted by social media and open source forking. Ground-up money diversity may meet top-down monetary reform somewhere in the middle, but they are best seen as complementary responses.


[3]: Viable Systems Model .e.g. and as applied to another Feasta project:

Featured image: “Exchanging Politenesses at the Approach of a Storm”. Artist: David Marl.
David’s work will be featured in an exhibition at The Slade Centre in Gillingham, Dorset, UK in September 2013.

Note: Feasta is a forum for exchanging ideas. By posting on its site Feasta agrees that the ideas expressed by authors are worthy of consideration. However, there is no one ‘Feasta line’. The views of the article do not necessarily represent the views of all Feasta members. 

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