The story
History
The co-op was founded in the late 1950s, and as of 2017 continues to operate. In 2010, there were twenty families in the co-op (down from its heyday of 250 families). Some of these are second-generation members of the co-op. It is open to new members.
Members naturally left the co-op as their children grew up, but many continued to work together in various organizations. In 2007, a number of the now elderly former co-op members from the 1960s and 1970s were involved in founding the Capitol Hill Village, an organization dedicated to helping elderly people continue living at home by providing a support community. The organization is modeled after Beacon Hill Village in Beacon Hill, Boston, and while it involves elements of mutualism, it is dues-paying and involves external parties.
Some additional details:
The co-op grew from 20 families in the early 1960s to more than 200 in the early 1970s.
By the early 1970s the co-op was geographically split in two—north/south or east/west.
In the 1960s the position of secretary rotated monthly. This was seen as an onerous task, which is why it was rotated, and entailed taking babysitting requests, matching sitters with requests (hence being on call at all times), and balancing the books.
Double time was paid after midnight and between 5 pm and 7 pm (during supper time).
Time-and-a-half was paid for later hours.
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The currency issued by the co-op, called scrip, was in extremely high demand, at least at some points, with a former member being quoted as saying "Oh my God, you would kill for scrip.... You would sell your children for scrip."
Cooperative system and history
The co-op gave each new member twenty hours' worth of "scrip," and required them to return the same amount when they left the co-op. Members of the co-op used scrip to pay for babysitting. Each piece of scrip was contractually deemed to pay for half an hour of babysitting. To earn more scrip, couples babysat other member's children. Administrators in the co-op were responsible for various tasks, such as matching couples needing a babysitter with couples that wanted to babysit. To "pay" for the administrative costs of the system, each member had an obligation to contribute fourteen hours' worth of scrip a year (i.e. 28 scrip). Some of the administration's scrip went to administrators to be spent and some was simply saved.
At first, new members of the co-op felt, on average, that they should save more scrip before they began spending. So they babysat whenever the opportunity arose, but did not spend the scrip they acquired. Since babysitting opportunities only arise when other couples want to go out, there was a shortage of demand for babysitting. As a result, the co-op fell into a "recession". This illustrates the phenomenon known as the paradox of thrift.
The administration's initial reaction to the co-op's recession was to add new rules. But the measures did not resolve the inadequate demand for babysitting. Eventually, the co-op was able to alleviate the issue by giving new members thirty hours' worth of scrip, but only requiring them to return twenty when they left the co-op.
Within a few years a new problem arose. There was too much scrip and a shortage of babysitting. As new members joined, more scrip was added to the system until couples had too much, but new members were not able to spend it because no one else wanted to babysit. In general, the cooperative experienced regular problems because the administration took in more than it spent, and at times the system added too much scrip into the system via the amount issued to new members.
Hypothetical resolutions
The co-op's problems occurred because of two issues: the scrip's value was fixed, and the ratio of scrip to couples was volatile. The cooperative could have made the ratio of scrip to couples fixed, by adjusting the amount of scrip entering the system via new members and leaving the system via couples choosing to leave the co-op. In addition, it could have let the scrip value adjust so that couples were paid more scrip to babysit when the supply of babysitters was small, and less when the supply was large.
Bill Mitchell criticizes the suggestion that price flexibility alone would resolve the demand problem. He notes that a fall in prices would reduce the price of babysitting. This, of course, also means that the amount of scrip received for babysitting would also be less. Thus, since parents made less money, even as the supply of babysitters decreased, because of less incentive to babysit, the babysitters would not become wealthier.
The traditional neo-classical response to this criticism, given by Pigou, is that the effect of cheaper babysitting prices is rather a redistribution of wealth from couples with little scrip to those with more, which will encourage persons who have saved in the past to spend more.
Mitchell criticizes this because, he asserts, the falling wages of babysitters only solves the problem if it reduces the desire of couples to save, which is not supported by any research. The only effect of falling wages would be to increase the real value of nominal contracts. In other words, couples would have to spend more time babysitting before they acquired the amount necessary to leave the cooperative. Mitchell concludes that the problem is greater aggregate desire to save than can be funded by existing administrative debt, and that the solution is thus either to reduce (desire for) savings or, more likely increase spending by simply issuing more scrip.
From Wikipedia’s article on Capitol Hill Babysitting Co-op, shared under CC BY-SA 4.0.4