Zelizer's Theory of Money and the Case of Local Currencies

In this paper I consider Zelizer's theory of money in a market setting. Do people create and use market money to express social values? Local currencies, which circulate in competition with national currencies in local economies around the world, provide the case studies. I survey the research literature on local currencies and find important limits on Zelizer's theory for market money. While people create and use local currencies for both economic and noneconomic reasons, most people stop using them when economic benefits are not realized. Sustained use of local currencies is uncommon. The few successes are limited in scope, and such successes cannot simply be credited to commitment based on social values. I briefly discuss policy implications of this finding for community currency as a development alternative.