There is already a substantial literature about the baby-sitting coop model, so the description here will be terse. We have N couples scattered through a large city, all with very young children. These couples aren't rich, and they don't want to pay hefty fees for baby-sitting to perhaps unreliable teenagers. So they form a coop, and coupons are issued to each couple, each coupon worth an hour of baby-sitting time. We'll also suppose that there are no transaction costs: there is an E-mail list, so everybody gets to know right away who needs a baby-sitter for whichever night, and there is no problem getting from one couple's apartment to another.

Each couple is issued C coupons at the beginning, and the question is: how big should C be?

Let's suppose that C is very small. Let C be absurdly small, say C = 2. It is clear that with such a small issue only very rarely will any couple wish to go out. To have to be back within 2 hours, and then be broke? Although a lot of sitters will be available, there will be very few purchasers, and there will be almost no exchange of coupons. There are too few coupons for economic activity to take place. The coop is coupon-poor; they are in a recession.

Let's go to the other extreme. Let us suppose that a very large number of coupons is issued, say C = 100. Wow! everyone is coupon-rich. Everyone can go out a couple of times a week, to 5-hour parties; and after a month one will still have lots of coupons. The average couple will think: since we're so rich, we won't have to worry about taking any baby-sitting jobs for several weeks! "Where shall we go this evening?" They pick a movie, put out a call for a sitter . . . and of course they get no reply, for everyone has the same thought: no need to do any sitting for a while. And again economic activity is stultified, for there is too much "money". Coupon-rich ain't good either.

So, what is the appropriate value of C to make the coop work, with couples able to go out fairly often, and able to recoup their supply of coupons fairly easily? This isn't easy to say. The answer clearly depends on the sociology of the group and probably would have to be worked out by trial-and- error.

Let's go back to the C = 100 scenario. I and my wife are desperate; we've got to get to this important party/conert/ lecture. So I put out on the E-list: "Who will baby-sit for us, for four hours, for 10 coupons?" If there is no response, I could go to 15 coupons, enough for five parties. Pretty soon other people get the idea, and social activity in the coop revives, for people are now paying, say, three coupons for an hour of baby-sitting. Thus inflation comes to be in our baby-sitting economy. The one "good", an hour of baby-sitting, needs more "money" to buy it, a direct consequence of the excess of "money"/coupons in the society.

[ There is one potential hitch in this "inflation" scenario, arising from a feature of the model itself. It is: there is no _greed_ in this model! There is no incentive for any couple to corner the market. All of these couples are, realistically, not affluent; they are upwardly mobile, they need their rest. Even if they had, somehow, free baby-sitting, they still would not go out every night of the week for five hours. Thus one can question whether the desire to get extra coupons, in the scenario leading to inflation given above, is realistic. ]

What economic adjustment can creative couples make in the coupon-poor situation originally contemplated, where C = 2? This seems to be more difficult. I suspect that, gradually, small cabals of members form, who trust each other enough to informally issue each other IOUs for one of their precious coupons. Perhaps they could pool their coupons into a coupon-corporation, with vested shares, and "coupon-cents" issued. I don't know of any "automatic" response to overcome the problem of too little currency, such as the inflation response that automatically occurs in the C = 100 case.

Finally, a most important lesson to be drawn from this examination of a "mini-economy": the operative quantity to be got right is C, the amount of coupons _per_ _family_. Economies are _hurt_ by consideration of the _total_ amount of money that exists in a society(N*C in our baby-sitting example). Having money based on a physical standard, such as wampum, or tobacco, or Gold, is not going to work very well, since the amount of such a standard is incompatible with the obvious need to get the amount of money per economic unit "right". In our baby-sitting example, what "right" is is fairly clear. We in the larger world have, alas, no agreement about what "right" could, or should, mean.