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Monetary Theory and the Great Capitol Hill Baby Sitting Co-op Crisis: Comment
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1977
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Splendid OrganizationPolicy AnalysisPrice ControlsMonetary PolicyMonetary TheoryEconomicsPublic PolicyInternational Monetary SystemFinancePublic FinanceMacroeconomicsEconomic PolicyPublic EconomicsMonetary UnionWashington D.c.BusinessCurrency CrisisMicroeconomicsFinancial Crisis
Two of Washington D.C.'s most splendid institutions-the Board of Governors of the Federal Reserve System and the Capitol Hill Baby Sitting Co-operative-are currently fighting their own separate battles against the scourge of inflation. Neither seems to be winning. Whatever the lessons of the board's experience, the lessons from the co-op's are clear. (1) The co-op has been increasing its money supply (scrip) per capita, by running budget deficits, and this has generated inflationary forces. (2) However, the main commodity this money buys is baby-sitting time, and the price of baby sitting is constitutionally pegged at one unit of for every one-half hour of baby sitting. Hence, this system of price controls means the inflationary pressure does not drive up the scrip-price of baby sitting, inflation is suppressed, and shortages are found. (3) The political process of rectifying the situation holds little hope. Few members see the problem as fundamentally monetary, but instead believe others are not doing their part in removing the shortages. For the uninitiated, it may help to know that there are several forms of babysitting co-ops. One popular form is the bookkeeping system. In the most rudimentary version, members earn one credit for each hour of sitting, and lose one credit for every hour someone tolerates their kids. A co-op at this stage develops rules-for fairness, usefulness, for expediency-and to make the thing go at all. For example, people want to go out on Friday and Saturday more than on other days. Either there are rules-If you go out on weekends, you must sit on weekends-or there are rewards-Time-and-a-half on weekends. And, of course, there must be rules to keep people from moving away when they're down on hours. The major alternative to the bookkeeping system, if there are many people involved, is a scrip system-the is pieces of heavy paper. In the Capitol Hill Baby Sitting Co-op, a splendid organization to which we belonged for two years, a