Does anyone know of any work (either by an Austrian or non Austrian) that attempts to derive the value of money in terms of amount of some produce or an amount of hours worked. Perhaps something along the lines of, if there are X dollars in total in the society and (other things defined...) then on average each dollar will buy Y hours labour.
As an illustration, here is my own formulation: Imagine a very simple society in which there is only one commodity: sandwiches. Everyone in the land grows the ingredients for their sandwiches in their gardens. Often they will exchange sandwiches with their neighbours just for variety. There is no money in this society only barter. But then one day the king of the land says "I've just invented something I'm going to call money. It consists of metal coins called shekels. I will give everyone in the land 1000 shekels and from now on bartering is banned. All exchanges must be via the medium of exchanging shekels. What's more, nobody is allowed to eat their own sandwiches." The question now is: how many shekels will a sandwich cost? It may well be that on day one, people will not have a clue and all sorts of silly prices may get paid... but presumably over time the price will gravitate towards a certain value. What will that value be?
mickanomics:Does anyone know of any work (either by an Austrian or non Austrian) that attempts to derive the value of money in terms of amount of some produce or an amount of hours worked. Perhaps something along the lines of, if there are X dollars in total in the society and (other things defined...) then on average each dollar will buy Y hours labour.
Unfortunately value does not have any direct relation with the number of labor hours that goes into making a product or service. So, you search will be vain.
mickanomics:As an illustration, here is my own formulation: Imagine a very simple society in which there is only one commodity: sandwiches. Everyone in the land grows the ingredients for their sandwiches in their gardens. Often they will exchange sandwiches with their neighbours just for variety. There is no money in this society only barter. But then one day the king of the land says "I've just invented something I'm going to call money. It consists of metal coins called shekels. I will give everyone in the land 1000 shekels and from now on bartering is banned. All exchanges must be via the medium of exchanging shekels. What's more, nobody is allowed to eat their own sandwiches." The question now is: how many shekels will a sandwich cost? It may well be that on day one, people will not have a clue and all sorts of silly prices may get paid... but presumably over time the price will gravitate towards a certain value. What will that value be?
And I keep wondering how this paragraph in any way illustrates the case you put forward in the first paragraph. Please explain.
Prashanth Perumal: mickanomics:As an illustration, here is my own formulation: Imagine a very simple society in which there is only one commodity: sandwiches. Everyone in the land grows the ingredients for their sandwiches in their gardens. Often they will exchange sandwiches with their neighbours just for variety. There is no money in this society only barter. But then one day the king of the land says "I've just invented something I'm going to call money. It consists of metal coins called shekels. I will give everyone in the land 1000 shekels and from now on bartering is banned. All exchanges must be via the medium of exchanging shekels. What's more, nobody is allowed to eat their own sandwiches." The question now is: how many shekels will a sandwich cost? It may well be that on day one, people will not have a clue and all sorts of silly prices may get paid... but presumably over time the price will gravitate towards a certain value. What will that value be? And I keep wondering how this paragraph in any way illustrates the case you put forward in the first paragraph. Please explain.
Me too. Also it seems like this is an awfully violent set of assumptions.
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David Z
"The issue is always the same, the government or the market. There is no third solution."
Prashanth Perumal:Fine now?
That formulation suffers from the same sort of problem. I don't think LvM would have pronounced the problem impossible to solve, if it were that easy.
Prashanth Perumal:And I keep wondering how this paragraph in any way illustrates the case you put forward in the first paragraph. Please explain.
I guess the ultimate question I want to answer is "how much do things cost", and I'm not talking about "right now" and "in dollars" because the answer would be too easy (I'd just look at the prices in the shops and I'd have my answer). What I mean is the more general question "how much would things cost, given a currency system X, and at time T". This question would be my ultimate aim, and I can see a path to getting there, but just for now I'm going to create a drastically simplified form of this question and try and answer that (a journey of a thousand miles has to start with a first step). That simplified version is my "sandwich society" question.
Does that help?
ok enjoy your model building. just dont expect it to mean anything when you are done. cya in 50 years.
Where there is no property there is no justice; a proposition as certain as any demonstration in Euclid
Fools! not to see that what they madly desire would be a calamity to them as no hands but their own could bring
mickanomics: I guess the ultimate question I want to answer is "how much do things cost", and I'm not talking about "right now" and "in dollars" because the answer would be too easy (I'd just look at the prices in the shops and I'd have my answer). What I mean is the more general question "how much would things cost, given a currency system X, and at time T". This question would be my ultimate aim, and I can see a path to getting there, but just for now I'm going to create a drastically simplified form of this question and try and answer that (a journey of a thousand miles has to start with a first step). That simplified version is my "sandwich society" question.
Again, if you are simply looking for a model that takes set of preferences, each associated with an agent, and a given endowment of money and assets, then there are many, many versions of this that have already been explored. It's a tradition with a very long history and many variants, going back to Walras. I won't give any specific references, since a quick search on google scholar will give you some papers.
Check out my blog at Kaleidic Society!
mickanomics:What I mean is the more general question "how much would things cost, given a currency system X, and at time T".
Are you trying to predict how human beings would act in the future? That's impossible to know.
ziragt:I won't give any specific references, since a quick search on google scholar will give you some papers.
Well this has been my problem all along - I'm generally pretty good with google, but I have no idea what to search for - I don't know what this problem is called :-(
By the way I want to make it clear what I'm not interested in. I'm not interested in papers which are about the relative price of one type of good compared to another. I'm also not interested if the currency is gold or otherwise non-fiat. I'm also not interested if the paper is only about changes in price over time. I'm only interested in papers about how goods attain their nominal price in the first place.
mickanomics: I'm only interested in papers about how goods attain their nominal price in the first place.
marginal pairs, lol.
Prashanth Perumal:Are you trying to predict how human beings would act in the future? That's impossible to know.
Here's my prediction about your behavior: I predict that you will not commit suicide in the next 5 minutes. If I get a reply I'll know I was right :-)
nirgrahamUK:marginal pairs, lol.
Please stop lol'ing at me, are you a child?
Saying "marginal pairs" is insufficient to solve the sandwich society problem.
mickanomics:Here's my prediction about your behavior: I predict that you will not commit suicide in the next 5 minutes. If I get a reply I'll know I was right :-)
You might be right with this kind of predictions 99 out of 100 times. How do you make the same thing happen within a real economy with people buying and selling goods? And what's the purpose behind your attempt to predict human behavior?
mickanomics, what you're proposing sounds to me to be something similar to what Enrico Barone proposed in the calculation debate. Barone assumed he had all information required, like for example: consumer preferences, available factors of production, etc., and with all this he could solve the calculation problem by sorting out the differential equation that brings about the best possible allocation of available resources. Okay, it's possible to have the best allocation of resources when you have all required data, but the problem is in the real world you don't get so much data. The best one can do is trust the pricing system, with all it's defects and let entrepreneurs do the job of producing and allocating resources.
mickanomics:I'm only interested in papers about how goods attain their nominal price in the first place.
I reiterate, nominal prices depend on the preference scale of consumers. It's merely an application of the subjective theory of value.
Prashanth Perumal:How do you make the same thing happen within a real economy with people buying and selling goods?
Well its tricky and I won't be 100% accurate - its just a matter of degree.
Peter Schiff is forever making predictions about what people are going to do in the future, would you criticize him for that?
Prashanth Perumal:And what's the purpose behind your attempt to predict human behavior?
I'd prefer to say model rather than predict, because in the most part the behaviors involved in my sandwich society are simply the types of behaviors that one could have observed in real people every day for millennia. For example people tend to seek food when they are hungry. Is that really a *prediction*?
The purpose of my modelling of peoples behavior is to anser the sandwich society question.
I've got to get back to work right now...
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