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Questions on Mises X: Now with Current Events Tie-Ins

More Mises. Extra libertarian teaser: Private money!

Now read, already.

Via the excellent (but sometimes NSFW) Towleroad, I found the following:

PROVINCETOWN — A pocketful of pirate “gold” might pave the road to a new form of local currency aimed at stretching residents’ finances and bringing the community together.

The Unitarian Universalist Meeting House is behind the idea — slated to be rolled out on Jan. 15 — to create a local, legal barter currency that residents can use to exchange skills and services. UU Meeting House Rev. Alison Hyder said most people living in town have a skill, resource or interest that could be of use to someone else. By using the paper barter currency, called “dune doubloons,” residents can pay for a pie or putting up storm windows or guitar lessons without using real cash.

Fascinating. Compare Mises' discussion of the demise of an unsound money (TM&C ch 13):

The emancipation of commerce from a money which is proving more and more useless in this way begins with the expulsion of the money from hoards. People begin at first to hoard other money instead so as to have marketable goods at their disposal for unforeseen future needs—perhaps precious-metal money and foreign notes, and sometimes also domestic notes of other kinds which have a higher value because they cannot be increased by the state (for example, the Romanoff ruble in Russia or the "blue" money of com munist Hungary); then ingots, precious stones, and pearls; even pictures, other objects of art, and postage stamps. A further step is the adoption of foreign currency or metallic money (that is, for all practical purposes, gold) in credit transactions. Finally, when the domestic currency ceases to be used in retail trade, wages as well have to be paid in some other way than in pieces of paper which are then no longer good for anything.

The collapse of an inflation policy carried to its extreme—as in the United States in 1781 and in France in 1796—does not destroy the monetary system, but only the credit money or fiat money of the state that has overestimated the effectiveness of its own policy. The collapse emancipates commerce from etatism and establishes metallic money again.

No, the end isn't near. The experiment seems driven less by a fear of worthless dollars than... by what? It's hard to say.

There are also sound reasons to believe that the whole experiment will fail; consider the following:

The dune doubloon program is based on a successful barter system that originated in Ithaca, N.Y., where over 900 participants accept “Ithaca Hours,” the local barter currency aimed at promoting local economic strength and community self-reliance. It also keeps the money “local,” which could be an asset in Provincetown, Hyder said, where people with myriad skills have little to do in the winter.

The theory of comparative advantage suggests quite strongly that there is little to gain in keeping an economy "local:" While locality has a definite emotional appeal, this appeal does not necessarily correspond to any economic benefit, and when comparative advantage comes into play, whatever benefits there are to locality are often entirely swamped.

And then there's this:

The program will kick off with a potluck dinner at 5 p.m. Monday, Jan. 15, at the UU Meeting House, 236 Commercial St. People and stores that sign up for the program will receive $50 in dune doubloons free.

The gold doubloons will be worth $10 and the silver $5. However, the idea is that each hour of service or time spent creating a product is worth $10, Hyder said.

“Everybody is treated the same and everyone’s time is worth the same,” she said.

Question: Supposing that various individuals face various levels of demand for their labor, what is the likely outcome of this setup? It seems plain to me that the uniform wage must disappear almost immediately. That, or the more productive laborers, those whose work is in the highest demand, will find that they can always work for more doubloons -- while those whose labor is less valuable will find themselves unable to participate in the system at all.

So, a question: Why are they doing this? I find the stated reasons puzzling and unsatisfactory. I'm wondering what's going on. Ideas?

Posted on Friday, January 5, 2007 at 7:02 AM | Comments (2) | Return

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