Davis Dollars

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davisdollarslogo.png

Phone
(530) 213-3312
Website
[WWW]http://davisdollars.org/
Established
Founded 2008; currency and website launched 2010
Founder
Nicholas Barry
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Davis Dollars is a [wikipedia]community currency that encourages people to spend locally and get to know each other. It can be spent at some businesses (see the list below), and can also be used to buy or sell goods and services from individuals.

They are spent just like US Dollars, except that you know that when you spend Davis Dollars, they'll keep on circulating within Davis, benefiting Davisites and Davis businesses.

Davis Dollars is a program run by the Davis Empowerment & Community Organization, or Davis ECO.

Check out their (soon to be) monthly Davis Dollars Craft Fair!

  1. Businesses Accepting Davis Dollars
  2. How to get Davis Dollars
  3. How to spend Davis Dollars
  4. How Businesses can use Davis Dollars
  5. Internships
  6. Media

Businesses Accepting Davis Dollars

5front.jpg 10back.jpg 5back.jpg 10front.jpg Below you will find the [WWW]businesses that accept Davis Dollars.

How to get Davis Dollars

fmtabling.jpgNicholas Barry tabling at the Davis Farmers Market

There are two ways to get Davis Dollars:

  1. Earn Davis Dollars - for example, by [WWW]listing services or goods you can provide on the Davis Dollars website

  2. Exchange US Dollars for Davis Dollars (at $1.00 per Davis Dollar):

    1. Visit the Davis Dollars team at the Farmers Market (they're there every Saturday and Wednesday)

    2. On the [WWW]Davis Dollars website.

    3. From the Davis Food Co-op, which accepts and sells Davis Dollars. (Some other businesses that accept Davis Dollars may also sell you some Davis Dollars, but the Davis Food Co-op is the likeliest bet since they'll likely have the most on hand.)

Earning Davis Dollars contributes quite a bit to the community by providing more services or goods to other people. But buying Davis Dollars can help the Davis Dollars economy if there aren't enough circulating already - and, of course, if there aren't enough circulating around, you may find it easier to buy Davis Dollars than to earn them.

How to spend Davis Dollars

You can spend Davis Dollars on services and goods offered by other Davisites - for example, those listed on the [WWW]Services page of the website, or on the bulletin board the DD folks display when they're at the farmers market or on campus.

You can also spend Davis Dollars at some local businesses that accept Davis Dollars (see the list above).

Spending Davis Dollars at a business also makes it easier for businesses to accept Davis Dollars (since businesses can get $0.95 per Davis Dollars. Furthermore, they get $0.97 per DD if they exchange 250 DDs or more, or $1.00 per DD if they exchange 500 DDs or more.). So your purchase can encourage businesses to continue to support the community by accepting Davis Dollars.

How Businesses can use Davis Dollars

Businesses that accept Davis Dollars can use their Davis Dollars in several ways:

  1. Spend them on services the business needs (e.g. website work)

  2. For a sole proprietorship, the owner can use the Davis Dollars for personal purposes

  3. Sell Davis Dollars to people who want to buy them

  4. Exchange the Davis Dollars back to the Davis Dollars organization for $0.95 per Davis Dollar. Furthermore, they get $0.97 per DD if they exchange 250 DDs or more, or $1.00 per DD if they exchange 500 DDs or more.

Internships

Davis Dollars offers internships in a variety of fields (contact the Davis Dollars organization for more information):

Davis Dollars has offered internships to over 65 interns since 2009.

Media

Comments:

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How does this relate to Davis Community Currency?

2010-08-13 22:58:00   Davis Community Currency was someone's proposal that, to my knowledge, was never really pursued. I speak to a lot of people around town who mention various attempts at different times to start community currencies - it's obviously an idea that's in the air. Good to know lots of people are thinking about it! —NaBarry (See my current profile here: NicholasBarry; in order to meet wikispot's Full Name policy, I no longer use NaBarry, though the account still exists for the sake of recordkeeping.)


2009-07-19 16:28:54   Here's the tax implications [WWW]http://www.irs.gov/taxtopics/tc420.htmlJohnHumperdinkle


2010-11-02 21:36:14   The problem with Davis dollars is the exchange rate. Let's say I buy 10 Davis Dollars. As a consumer, I pay $9.50 according to their pricing. I go to my downtown business and buy 10.00 worth of goods (we'll pretend these are non-taxable items at a local grocers) and I go on my merry way. Now the grocer, who obviously needs the actual cash to pay for the goods and not Davis Dollars goes to exchange them for cold hard American currency. Guess what, there is a 1.00 exchange rate fee. So now, the grocer is actually LOSING $1.00 on each 10.00 transaction. Does not work for the businesses, no matter how good it is for the consumer and for the community and will fail because of this.

It has to be profitable. It is not. End of story. —Wes-P

* One Davis Dollar is worth One Dollar, so long as it is kept in circulation and spent within the community, as opposed to cashing it in for USD. In the example above, if the grocer can transact with another local business for goods or services that he needs, the money is worth exactly the same for him as the goods he gave for it. The trick is to have enough local businesses accepting them to make it possible to get what you need. The whole point of a community currency (as I understand it) is to keep the money circulating with the community. Turning it in for USD takes it out of circulation. It is (of course) necessary to have USDs to pay vendors and deposit into your bank, but the goal is to keep spending within Davis. JeffSimons


2012-09-21 12:41:04   Davis Dollars are the perfect illustration of how ignorant people are of basic economics. The premise behind Davis Dollars is that money will stay within the Davis community and to further that goal, a discount is provided for people to enter the market for Davis Dollars.

However, the first important detail to keep in mind is that the issuing entity is in fact going to function like a clearing house as people buy Davis Dollars or sell them back for USDs. This means that the real money used to fuel the program is actually not bound to Davis at all. Once customers swap their USDs for Davis Dollars, the issuing entity can (and most likely does) deposit this into a bank or credit union revolving account, where it will be controlled largely by the bank or credit union fund manager.

Now of course the operating principle behind something like this is to encourage the patronage of local businesses, and the Davis Dollar is designed to subsidize the cost of patronizing a Davis business by lowering the price for the customer. However, those of you who remember how to count will no doubt realize that this is not a sustainable system. If customers purchase 100 DDs for $95, and then businesses accumulate 500 or more DDs, they can sell them back for a full $500 (at least according to this page), or a $25 loss for the issuing entity. If the issuing entity limits exchanges to USDs to 95 cents (thus 500 DDs would yield $475), then this functions as a tax on the very businesses who are intended to receive a benefit from the program.

Then there's the issue of crowding out existing spending. If the only people who buy Davis Dollars are in fact the most loyal denizens of Davis who always patronize Davis establishments, then the program does nothing except consume resources and manpower as an endless stream of transactions are conducted for absolutely no increase in productivity (or in economic terms, WASTE).

The coup de grace of this whole fantastically horrible enterprise comes in the form of price distortion. Even if the program magically increases business revenue without bankrupting itself, it has to confront the fact that it is acting as a market subsidy, and thus preventing the market from functioning properly. The Davis Dollars and their discount incentivize customers to not go to businesses in Woodland, Dixon, or West Sac. If Davis Dollar holders find the discount worthwhile, they will continue to purchase goods and services in Davis, even if they are inferior. This is because they are receiving an incentive to do so. However, this means that inevitably businesses will arrive at a new equilibrium and incorporate the subsidy into their gross margins, either reducing quality or raising prices because the demand curve has shifted favorably towards them. This results in Davis being a worse place for nonresidents (or short term residents, like the 30,000 students that comprise the backbone of the local economy) to purchase goods and services because without the Davis Dollars, local businesses will be either too expensive or too inferior to bother with. Ultimately that hurts local businesses more than it helps them because a narrow customer base is usually not a path towards fiscal health.

Worse still, the price distortion can have the effect of producing long term inefficiencies in other sectors of the Davis economy. For example, if a local plumber uses his Davis Dollars to purchase accounting services from a local accountant, he will receive a discount. However, the local accountant could be inferior to one found in nearby Sacramento. This inferior accountant could fail to notice a deduction or mischaracterize an asset, forcing the plumber to pay a higher tax rate, which not only results in less money staying in Davis, it results in the plumber not being able to reinvest in new equipment to serve customers faster or better, or hire a second hand.

I am a big fan of civic engagement and investment, but sometimes meaning well is not doing well. —Rightyo


2013-03-01 13:03:44   The davisdollars.org website is no longer functioning so I'm wondering if they're still active.

I think the community currency idea is great and can add a lot to a local economy, but the
Davis Dollars implementation has a serious problem in that each local currency dollar must be
backed by an actual dollar before it is used. This means that the currency cannot create additional
money circulation in the community. In effect, having to pre-buy the currency just represents an additional
step to a local purchase. It's just a subtitution step.

It would be more effective for Davis Dollars to be able to act as a fiat currency. A fiat currency is
a currency based not on a backing resource, like gold or dollars, but one based on trust.

This could be done by changing the model such that Davis Dollars (DD) are releaesed to users on the
promise of support for the currency rather than on actual investment. Say, for example, that someone promises
to support the currency for $100. This entitles them to $100 DD which they can spend how they choose.

The backers don't have to come up with money unless there is a redemption request. They may never have
to come up with the money. So why isn't this a Ponzi scheme? What stops everyone from backing the currency
for a million dollars and redeeming it? This is where the trust comes in. The backers of the currency
must be seen as people with the financial means and character to back their pledge of support. They
should be stable people within the community, people with long standing local businesses.

The currency operates on the faith that these trusted people will step up and back the currency if they
are called to. This means the currency takes on a deeper community function, as a form of local pride and
honor. The currency needs to be treated with respect by its users. With no police agency to prevent counterfeiting
and manipulation, large DD transactions with strangers should be discouraged as it best it will trigger a
large currency redemption, which will reduce the amount of currency in circulation. At worst it could
be a counterfeiter or someone seeking to exploit a flaw in the system. This underlines the point that
a local currency is intended for local exchanges between parties who know each other, or have a close
indirect relationship (e.g. friend of a friend). Sellers must always have the right to decide on how
they will accept DD on any transaction.

The benefit of running the system this way is that the currency can float free of an actual parked
financial asset. A sum of local currency can be manufactured that can buy goods and services that is in
addition to what is available in the national currency. The amount of this float will have to managed
of course to the level that the local economy can support. Users of the currency should work to discourage
actual fund redemptions, where someone comes to the central DD authority to exchange DD for USD,
by handling them internally whenever possible. This protects the backers from getting called to support the
currency and protects the floating circulation, as redemptions reduce the float. For example,
the Davis Coop could try to return DD as change rather than redeem them for cash.

The last step towards building the value of the currency is to have something that makes people
to want to accumulate it. Normally this would be a tax but since this isn't possible we could substitute
occassional community events in which only DD are accepted for admission. DD could be purchased at the
door (which is yet another way to handle fund redemptions) for those who don't have them.

Anyway this is just a start. The implementation of this would obviously be challenging, but by backing the
currency based on the trust of stable, well known, local individuals and institutions who are personally
only committed to small amounts of backing funds (<$100), an effective new set of local money can be created
for local transactions only.

In fact, as I think about it the advantage of backer based system is that backers are encouraged to
spend DD within the system. If you are a backer you are encouraged to spend your DD back in the DD because
any redemption you make is going to mean backers will be called to support the system. This is a feedback
system that will encourage transactions rather than redemptions, which is what we want to see.

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