Are BerkShares and Other Local Currencies Effective?

METABOSTON - Local activists in the Berkshires created a local currency called BerkShares
to encourage the local economy. Tim Harford questions whether they do any
economic good but thinks they may build community ties:

"The real benefits, if they exist, are not economic but social, and best
explained not by an economist like me but by a sociologist such as Ed Collom
of the University of Southern Maine.

Collom's work looks, at first glance, like bad news for the
community-currency movement. He has found, for example, that most currency
schemes in the United States last only a few years before collapsing. The
ones that thrive are in places which already have strong, liberal,
middle-class communities, such as Portland, Ore., or Ithaca, N.Y. In the
Rust Belt areas that would seem to need them more, they have not taken root.
The schemes take a lot of effort to set up: Brixton LETS, for instance,
remains nascent.

But despite the obstacles, Ed Collom is convinced that local currencies can
strengthen neighborhood ties and allow people to make friends: They are a
focal point for the community-minded, even when they do not last."

Tyler Cowan thinks more of the idea arguing that "private currencies can
serve as a form of price discrimination. By accepting private currency from
your local customers, and indeed only your local customers, you can charge
them a lower net price and without being very public about it."