What are Token Economies?
A Token Economy is a system of behavior modification through positive reinforcement derived from the principals of operant conditioning.
The shorter more practical explanation is kids do the thing they will be rewarded for and earn tokens (points, chips, tickets, etc) that they can exchange for something they want.
A token economy is a system where something, a token, represents a unit of value that can be exchanged for an item or service equal to the value of tokens exchanged. Really if you think about it, it's basically any non bartering economy as pieces of paper and coins are simply the tokens we use.
Token economies are based on principals of operant conditioning and the work of BF Skinner. Skinner studied and wrote about behavior modification through the use of consequences and reinforcement.
He and others also showed how to best use reinforcement by trying the different possibilities of reward structure. For example, giving the same reward every time or varying it and giving the reward every time the behavior is performed or randomly.
This is not to be confused with classical conditioning (think Pavlov’s dog) in that operant conditioning deals with voluntary behavioral change while classical conditioning deals mainly with physical response such as salivating at a food festival.
KidsMakingChange.com

History of Token Economies
Token economies as they are thought of with regard to motivating behavior modification were first used in formalized studies by Teodoro Ayllon starting back in the 1960’s. He worked with mental health institutions and prisons to test these systems with great success in changing behavior. These models have evolved over time and are regularly taught in psychology and early education classes.
Token economies are used in many environments from schools to individual households. They have been advocated for children with ADD/ADHD, Autism spectrum disorders and children with developmental disorders.
These programs work with “normal” children as well. In fact, it has been proven to work with adults as well. Most adults in the United States participate in some form of token economy that rewards certain behaviors weather it be a credit card point system or frequent flyer miles or one of the many, many incentive programs in existence.
Future of Token Economies
As token economies or reward systems have grown in success in popularity for adults because of the profit gained from the changed behavior, the lessons and best practices will no doubt benefit non commercial programs.
While there is a tremendous amount of literature advocating the use of positive reinforcement and token economies for behavior modification in children, there are very few actual systems on the market to help parents and caregivers.
While running a token economy program can be highly successful, it can also be highly complicated and time demanding. Clearly token economies will be utilized to an even greater degree for adults and to a greater degree for children in school and home settings as we figure out ways to make it easier and more practical to run them.
Definitions:
Main Entry: to·ken economy
Pronunciation: 'tO-k&n-
Function: noun
: a system of operant conditioning used for behavior modification that involves rewarding desirable behaviors with tokens which can be exchanged for items or privileges (as food or free time) and punishing undesirable behaviors (as destruction or violence) by taking away tokens
Merriam-Webster's Medical Dictionary, © 2002 Merriam-Webster, Inc.
Reference:
Token economy. (2007, May 30). In Wikipedia, The Free Encyclopedia. Retrieved 20:11, August 9, 2007, from http://en.wikipedia.org/w/index.php?title=Token_economy&oldid=134551181
B. F. Skinner. (2007, August 7). In Wikipedia, The Free Encyclopedia. Retrieved 20:13, August 9, 2007, from http://en.wikipedia.org/w/index.php?title=B._F._Skinner&oldid=149760020
Operant conditioning. (2007, August 1). In Wikipedia, The Free Encyclopedia. Retrieved 20:14, August 9, 2007, from http://en.wikipedia.org/w/index.php?title=Operant_conditioning&oldid=148520625
token economy. (n.d.). Merriam-Webster's Medical Dictionary. Retrieved August 09, 2007, from Dictionary.com website: http://dictionary.reference.com/browse/token economy
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