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?
Mick, values are ordinal, not cardinal. How will you model ordinal values?
If you find something evil that wobbles, push it. - Gary North
nirgrahamUK:emphasis on the word direct
I think you missed a quote or something....
"a wiping out of existing markets and knowledge of money prices would render impossible the direct re-establish ment of a money economy"
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
nirgrahamUK:at game start: i have loads of sandwiches, i cant eat any since they are mine. game over
Its against the rules of the game - I've already explained. You lose.
nirgrahamUK: "a wiping out of existing markets and knowledge of money prices would render impossible the direct re-establish ment of a money economy"
What are you insinuating? That he knew that the XY problem was solvable?
mickanomics: LvM's missed opportunity in a nutshell: I this article it states: "It is obvious that this vitally important problem of circularity (X depends on Y, while Y depends on X) exists not only in regard to decisions by consumers but also in regard to any exchange decision in the money economy." LvM assumed that problems in which X depends on Y and Y depends on X were insoluble and X and Y could not stabilise. But this is not always true. It depends on the nature of the relationships. Take for example X = sqrt(Y) and Y = sqrt(X), you can start with any old values for X and Y then iterate, then the numbers will converge to X=1 and Y=1. Indeed I just wrote a program in "C" to demonstrate it:
LvM's missed opportunity in a nutshell: I this article it states: "It is obvious that this vitally important problem of circularity (X depends on Y, while Y depends on X) exists not only in regard to decisions by consumers but also in regard to any exchange decision in the money economy."
LvM assumed that problems in which X depends on Y and Y depends on X were insoluble and X and Y could not stabilise. But this is not always true. It depends on the nature of the relationships. Take for example X = sqrt(Y) and Y = sqrt(X), you can start with any old values for X and Y then iterate, then the numbers will converge to X=1 and Y=1. Indeed I just wrote a program in "C" to demonstrate it:
The problem of circularity is grounded on praexology! Mises made no such assumption about insolubility on the basis of mathematical grounds. That would be to misconstrue the entire problem under examination, which is exactly what you have done.
If you don’t stop thinking like a Keynesian, you will never understand not only the solution to your problem, but the nature of the problem itself. You have replaced human actors with a computer program. This tells me that the way you treat the problem is to completely ignore everything about the theory of the origin of money and everything about subjective value theory. In other words, typical mainstream garbage.
Sorry for the harsh criticism, but you deserve it after I literally spoon fed you with the solution.
there is no hard problem to solve, since all the variables are dynamic. it all flows from human action (not robot action) i.e. the 'so-called' solution always changes . the best we have is yesterdays market prices, and today we will discover todays. the entrepreneurs will do their things, profit and loss. off we go.
the market is a process.
liberty student: Mick, values are ordinal, not cardinal. How will you model ordinal values?
Mick, answer this question. How will you model ordinal values?
Let's disregard the fact that the model you're building bears no real relation to reality and will likely have highly misleading results.
This is not new. Pick up a graduate level textbook in microeconomics or model building. There are many to choose from. There is no need to reinvent the wheel.
As for Mises not understanding circularity, I find it hard to believe that anyone could interpret Mises in this way. He clearly wasn't trying to refute the fixed point theorem, which you demonstrated, in his writing.
Check out my blog at Kaleidic Society!
ziragt:This is not new. Pick up a graduate level textbook in microeconomics or model building. There are many to choose from. There is no need to reinvent the wheel.
Can you give me a reference to any model in which the value of money gets calculated? I don't beleive there are any.
liberty student:Mick, answer this question. How will you model ordinal values?
I dispute that "values are ordinal". In our heads they are cardinal, the ordinal part simply comes about because one cardinal number is bigger than another. And that's very easy to put in a program:
In 'C' it would be: if (current_desire_for_apple > current_desire_for_banana) { choose_apple(); }
nirgrahamUK:there is no hard problem to solve,
Strange that LvM tried but failed to solve it.
DD5:Sorry for the harsh criticism, but you deserve it after I literally spoon fed you with the solution.
Sorry I don't remember seeing a solution in this thread.
mickanomics:I dispute that "values are ordinal". In our heads they are cardinal
No. They are ordinal. This is your fundamental lack of Austrian understanding rearing its head again.
Praxeology and http://mises.org/Community/forums/t/11561.aspx
liberty student:No. They are ordinal. This is your fundamental lack of Austrian understanding rearing its head again.
In a man's head there will be a degree of desire X for apples and a degree of desire Y for bananas and if X>Y we choose apples. All that LvM siad was that it was too difficult to estimate the size of X and Y so that all that could be deduced from the observation of a man choosing an apple was that X>Y. I don't beleive that LvM actually denied the existance of the cardinal values of X and Y, only that they were difficult to measure/model/calculate. I don't think LvM himself would agree with the statement "values are ordinal".
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