Local Money Flows - Multiplier Chocolate Coin Demo

Local Money Flows - multiplier chocolate coin demo

Time

10 - 15 minutes

Materials

37 chocolate coins

3 glasses (or transparent jars)

Set up

· Ask for six volunteers from the audience and divide them into two groups of three on either side of you.

· Explain that this is a fun way to look at the multiplier effect, which helps us identify how much income is generated for a community from a source of income

Localton

· Identify the first group as Localton (or whatever you want to call it) where everyone spends 80% of their income locally

· Give the first person 10 chocolate coins, representing £10 of income into the community

· Explain that the person with the coins then spends money on allsorts (a lot of these ways will have been identified earlier, so rather than spending time generating answers, I usually just say allsorts to move things along)

· On average, about 80% of that spending is local, so they should hand 80% of their income over to the next person; restate for the group that this means the person is handing over £8 or 8 chocolate coins to the next person the 2 remaining coins should be placed in one of the glass jars which is the non-local jar and can be set to one side of the two groups or held by the facilitator or another participant.

· Explain again that that person also spends on average about 80% locally, so they hand 80% of their income onto the next person; explain that since 80% of 8 is roughly 6 coins (it is actually 6.4 but for hygiene and convenience round down), restate that person is handing £6 or 6 chocolate coins over to the next person 2 remaining coins should again be taken away and put in the non-local jar

· If the group is bright and energetic, then you let them make these calculations so it’s more participative, but you have to feel that out and just do the maths for everyone if that’s not the case

Leakyville

· Now switch to the other group, who you call Leakyville (or whatever) because everyone in that town spends only 20% of their income locally

· Explain that again we are starting with the same amount of income into the community, and hand over the £10 or 10 chocolate coins to the first person

· Explain that again that person spends on all sorts but that only 20% is spent locally, which means that person gives the next person £2 or 2 chocolate coins and 8 remaining coins should be taken away and put in the non local jar.

· Explain that the next person spends 20% of their income, which is 40p, but we’ll round that to 1 chocolate coin and 1 remaining coin should be taken away and put in the non-local jar

The multiplier jars

· First, ask all participants to put all their remaining coins in your glass jar that you were using for the non-local spending

· This is the key learning aspect of the demonstration

· On a table in front of both groups (or near them), place two transparent vessels

· One represents the multiplier effect for Localton and one for Leakyville

· Key explanation: The multiplier effect measures how much income is generated for a community based on an initial investment; people often get confused and look at the two groups and say ‘But they’ve got 6 coins left and they’ve got 2; isn’t that what we’re talking about’. No, what is left is not the same as the multiplier effect. Again, the multiplier effect measures the income generated on the path from the first person to the last person. We add all the income up that was generated along the way to come up with the multiplier effect.

· Start with Localton and state that we’re going to calculate your multiplier effect

· Ask the first person to state how much income they received (they should reply £10)

· So ask them to put 10 chocolate coins in their multiplier bowl, taking the coins from the common pot (the one they just put all their coins into)

· Then go to the next person and ask that person how much they received as income (they should reply £8)

· Ask that person to put 8 chocolate coins in the multiplier bowl

· Then ask the same of the third person and have them put in 6 coins

· Then contrast this with Leakyville by going through the same steps

· Note: The best vessel will show the difference in volume of coins between Localton and Leakyville

FYI, we tried doing the multiplier part alongside Localton and Leakyville as they went through spending. This is an alternative. I prefer the strategy above because I felt there was a bit of a risk of too much going on at once. But, you can try both out and see the reaction.

Counting the multiplier effect

· Explain that we can probably see the different in the multiplier effect just by looking at the two bowls, but let’s do a quick count

· Turn to Localton and ask them to consider how much their multiplier effect is; coach them if needed with adding together 10+8+6=24; explain the maths to the group

· Turn to Leakyville and do same (10+2+1=13)

· Identify the difference and explain relevance and potential impact