Mar 172009

Over on the Devil’s gold post, commenter Revolution Harry questions fellow commenter Ian B’s assertion that ‘getting more stuff is a Good Thing':

Economic growth on its own is fine, though I take issue with your idea that ‘getting more stuff is a good thing’. Depends on the ‘stuff’.

Ian B’s riposte is a thing of sheerest beauty:

No it doesn’t. People getting more of what they want is a Good Thing, period. If you have more stuff than you want, fine, get rid of it or even better give it to me. If you think there is some kind objective method of deciding what stuff people should have, and that they shouldn’t be allowed to have stuff that others decide they shouldn’t have, then I think that’s reprehensible.

Getting more stuff is what the western world and free markets are all about. Stuff is great.

I concur wholeheartedly: Stuff is great.

I must say also that the discussion taking place over that particular post is possibly one of the most interesting I’ve read in a good long while. I highly recommend it.

My own view of ‘money’ has always been extraordinarily simplistic. As I understand it (and please, no flaming: I admit in advance to ignorance and silliness), this is sort of where money comes from:

I make baskets. You make shoes. We decide, mutually, that two of my baskets are worth one pair of your shoes. When I need shoes, I give you baskets according to this formula, and the same holds true when you need baskets – you give me shoes.

Mordred breeds cows. You need Mordred’s cows to make your shoes; Mordred needs my baskets for feed. I give Mordred ten baskets; he gives you one cowskin; you give me five pairs of shoes. So far, so good.

But I don’t need all of these shoes, or at least not at the moment, and you need more cowskins than Mordred needs baskets from me. Not to mention that there’s also Lancelot the chicken-farmer, Guinevere the prostitute, and Gawain the lumberjack to add into the equation, which makes it all hopelessly complicated.

So together we agree upon a unit of substitution for all of this stuff, and call it a squeed. Every item we produce is worth so many squeeds – perhaps my basket is now worth 10sq. Now, however, I decide I’d quite like not only a pair of shoes, but also a half-hour with Guinevere. So I sell my baskets for 11sq – after all, I’m the only basket weaver in town – pocket my 1sq profit, and save it up to pay Guinevere 5sq for my half-hour on Thursday. Then Guinevere spends 3sq on a handful of eggs from Lancelot, and saves the remaining 2sq toward a nice pair of shoes.

The situation becomes even more complex, however. Supposing Mordred puts his prices up too, because he also fancies Guinevere and wants to purchase some of her time. Realising that she’s now in demand, she too can charge more. What if another basket-weaver arrives and sets up shop? Not everybody can weave baskets, true, but lots of people can be prostitutes – so Guinevere’s prices might come down again when Elaine comes onto the scene. All of these things change the value of my baskets, as well as how much my squeeds will buy me.

Finally, and most importantly, what is a squeed, and how many are there? If the supply is finite, it will recirculate stalely amongst the community and quickly accumulate in certain spots like scum on a pond; if it is possible to increase the supply, that too will affect squeedal value and the price of goods. Ideally, squeeds should be an item we can’t really use (why waste something useful?), and relatively rare, although not too rare; also, a squeed should be something we can get more of, but not easily. Gold is, therefore, a good substance from which to make squeeds.

On the other hand, gold is heavy, and the village over the hill uses it for roofing tiles. They might come and forcibly relieve us of the contents of our over-burdened pockets! Better to agree on an amount of gold to represent 1sq, create a worthless (to the other village) paper 1sq note, and keep all of the gold squeeds in a safe place, like under the mattress. As long as we always have enough gold to back up most of our paper squeeds, we should be fine.

And there, my friends, we must cease Bella’s Theory of Money, because we enter the world of fractional reserve banking, which is where my limited and child-like understanding of the monetary system ends. I hope you have enjoyed today’s episode of Arthurian Village Economics.

UPDATE: Ian B continues froody:

And thirdly, it is common to glibly say we’ve had enough growth now and we bally well ought to stop. Well, you might think you’ve got enough stuff, but I haven’t got enough stuff and the average subsistence farmer in Africa hasn’t got any fucking stuff at all, and it is reprehensible to tell him he can’t have any because of an imaginary infinitude on a misunderstood graph. We have vast potential for improving our productivity, absolutely vast. We’ve only been in the industrial revolution for about three centuries, not even that. There is shitloads left to discover and invent. How dare you tell people on the breadline they’re rich enough?

  8 Responses to “Arthurian Village Economics”

  1. “I decide I’d quite like not only a pair of shoes, but also a half-hour with Guinevere …”

    Supposing that eggs at Camelot were worth about the same as those in Tesco, that values her time at £6.50 an hour. And you say Elaine is going to undercut her?

    Memo to self: where did I put that copy of The Time Machine? I seem to remember there was an appendix, with plans and instructions.

  2. I drew a breath, set my teeth, gripped the starting lever with both hands, and went off with a thud. The laboratory got hazy and went dark. Mrs. Watchett came in and walked, apparently without seeing me, towards the garden door. I suppose it took her a minute or so to traverse the place, but to me she seemed to shoot across the room like a rocket. I pressed the lever over to its extreme position. The night came like the turning out of a lamp, and in another moment came to-morrow. The laboratory grew faint and hazy, then fainter and ever fainter. To-morrow night came black, then day again, night again, day again, faster and faster still. An eddying murmur filled my ears …

  3. it IS a good post, and a very good debate going on underneath it, but there’s no way i’m getting involved, my ideas of money are slightly less well developed than yours!
    i did once have a dream in which i came up with a solution involving basing the money on tins of baked beans, but on waking i forgot all the details. bugger.

  4. Bella:

    “So together we agree upon a unit of substitution for all of this stuff, and call it a squeed.”

    It’s even simpler (and less organised) than that. One commodity simply becomes more suitable for indirect exchange than another, mainly owing to the fact that it holds its physical properties better over a longer period. Money is a commodity like any other, it just happens to be useful as a medium of exchange aswell. Bread, beer, meat could all potentially act as “money”, but all would lose their value over a period of time and thus would hinder trade.(In some parts of the world, tea, rice and cloth were used as money because they were easily divisible and kept longer than other money alternatives). Naturally, once one commodity becomes favoured by the market, it assumes a dominant position. No law or agreement is made, it’s just that “invisible hand” working its magic again.

    Paper notes should be viewed as deposit slips. I deposit my 1oz of gold with you, and you keep it in return for a small fee. Even though my gold is physically in your vault, it remains my gold ; no transfer of property has occurred. This means that using my gold to lend to other people or to invest elsewhere is fraud. Once we start issuing deposit slips for gold that doesnt exist…well, you know the rest…

    A small, and rather pedantic point:

    More stuff is not, as Ian B puts it, “a good thing. Period”. And I’m sure he would concur with me in saying that creating more “stuff” in the short term thanks to coercive monetary and fiscal policy is not “good” at all.

    Its not the stuff, or how much of it, but how the stuff is gotten!

  5. Wow, I’m famous! :)

    By the way, this Guinevere, is she pretty..? I’ve got a couple of spare squeed…

  6. To be usable as currency, something needs to be a) scarce and b) fungible. Thus cowrie shells were crap currency because although they satisfied criterion (b) they did not satisfy (a). Currencies based on commodities might or might not satisfy (a), but they rarely satisfy (b).

    Also remember that money is not merely a medium of exchange, but a store of value. Investment and savings represent deferred consumption, which is why inflation is so catastrophic.

  7. Well, I specified that Guinevere’s time is worth 10sq/hour. And a dozen eggs costs 3sq, at a price of 0.25sq per ovum. Thus an egg is worth approximately 1.5 minutes of Guinevere-labour. Not bad, for a pre-industrial society.

    And Elaine doesn’t have to undercut her. Suppose Elaine is a nubile young beauty and Guinevere a raddled old strumpet. If Elaine opens up shop in Camelot and also charges 10sq/hour, Guinevere will have to undercut herself.

  8. @ wh00ps – I’m not sure that would’ve worked anyway, m’dear. The minute some undisciplined person got a bit peckish, you’d lose a part of your cash supply! You would’ve had to destroy all of the can-openers in the world

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