[Josiah Warren] tried to test his solution to state-controlled banking: namely, private currency, the right of every individual to issue his or her own money to anyone who was willing to take it. He believed that the issuance of private currency would destroy the perceived injustice of "interest."
To test this theory, Warren opened a retail store called the Time Store, from which he issued "labor dollars." In 1827, the store opened with $300 worth of groceries and dry goods that were offered at 7 percent markup from his cost in order to cover "contingent expenses." Where he made his profit was in selling his labor to customers by requiring them to pay for the time it took him to effect the transfer of goods — that time consisted of the initial purchasing of the good and then its sale. Remember, this was before groceries were prepackaged and preweighed and at a time when it was customary to bargain with the shopkeeper rather than merely to pay a posted price.
In fact, one of Warren's innovations was to post prices for goods. The customer would then pay the price of the goods in traditional money and then compensate Warren for his time with a labor note that promised to give back to him an equivalent amount of time in the buyer's occupation. If the buyer were a plumber, for example, the labor note committed him to render his services to Warren for "x" time units of plumbing work.
Warren's goal was to divorce the price of the goods from the compensation he received — in other words, to establish an economy in which his profit was based on the exchange of time and labor. And, to some degree, he succeeded. A thriving barter community arose and spread outside the radical community, with regular people coming from a hundred miles away to avail themselves of Warren's low prices. Having succeeded, however, he closed the store, because its entire purpose had been to test the theory.
