Payments, Cash and Geographic & Economic Mobility

Right now there is a lot of talk about allowing more geographic mobility to enable more economic mobility--in other words, easing immigration restrictions. There is powerful evidence that enabling more migration (internal and external) would be a powerful tool to fight global poverty.

But there is a different kind of geographic and economic mobility that is worth thinking about--the geographic and economic immobility of cash. 

A just-for-fun project to track the movement of specific dollar bills as they move from place to place and person to person has yielded very interesting data on this issue in the United States. Back in 1998 the Where's George project started encouraging people to log the geographic (by zip code) location of their cash before spending it. Later, when someone else logged a specific bill on the Where's George website, both parties could see where the bill had traveled. There have been more than 1 million entries for almost 500,000 individual bills. 

Now all those data points have been brought together by Dirk Brockmann  to produce a map of where cash moves, and where it doesn't. 

The dark blue lines indicate "cash borders"--it's rare for cash to move across these borders. You can read more about the creation of the maps on Robert Krulwich's blog at NPR

The map documents distinct cash economies in the United States. It's strikingly similar to a map based on cellphone calls from a few years ago (also via Krulwich). 

Looking at the two maps together is a powerful reminder that the boundaries of a cash economy are essentially based on who you know. In other words, your ability to transact is limited to your ability to physically interact.

Now the fact is that the United States is significantly more economically integrated than the cash or cellphone maps indicate. There are vast economic connections that a map of cash transactions does not capture—the exchange of value in those connections are handled electronically. Look for a moment at how much smaller geographically the cash economies are than the "real" economy. 

This, I think, is a useful way to think about the value of electronic payments and increasing the mobility of money. Even in the United States, a country known for the geographic mobility of its inhabitants, the cash economy has definite borders. If Americans were forced to live their entire economic lives within these borders, they would be substantially poorer.

If we want to increase economic mobility, than an important step is increasing the geographic mobility of money. Creating an electronic payments infrastructure won’t be the end of regional economies, but it will make the borders of those economies more porous—to everyone’s ultimate benefit.