Economics Questions

Re: Does Mises's Regression Theorem Require a Minimum Population Size?

Nielsio — Fri, 29 Jun 2012 02:05:18 GMT

http://www.reddit.com/r/vforvoluntary/comments/vrvt8/discussion_with_smiling_dave_about_how_money_works/

Re: Does Mises's Regression Theorem Require a Minimum Population Size?

Smiling Dave — Fri, 29 Jun 2012 01:26:53 GMT

If you want, we can continue here: http://www.reddit.com/r/vforvoluntary/ .

Sure.

Re: Does Mises's Regression Theorem Require a Minimum Population Size?

Nielsio — Fri, 29 Jun 2012 01:11:34 GMT

Smiling Dave,

This forum sucks too much for me to continue a discussion using a lot of quotations. If you want, we can continue here: http://www.reddit.com/r/vforvoluntary/ .

Re: Does Mises's Regression Theorem Require a Minimum Population Size?

Seraiah — Fri, 29 Jun 2012 01:06:05 GMT

Dave:
So many errors in one little paragraph.

You seem to be actively trying to destroy your own credibility in this subject matter.

Re: Does Mises's Regression Theorem Require a Minimum Population Size?

gotlucky — Fri, 29 Jun 2012 00:44:08 GMT

Smiling Dave:

A Swiss cheese is riddled with holes, but it's not 100% holes. The story of wampum is riddled with legislation, but it served as money when there was no legislation, too. Thus legal tender laws can't explain those parts.

Best. Counter. Ever.

Re: Does Mises's Regression Theorem Require a Minimum Population Size?

Smiling Dave — Fri, 29 Jun 2012 00:40:41 GMT

What you quoted is riddled with legislation.

A Swiss cheese is riddled with holes, but it's not 100% holes. The story of wampum is riddled with legislation, but it served as money when there was no legislation, too. Thus legal tender laws can't explain those parts.

On top of that, Wikipedia says: "Wampum are traditional sacred shell beads". To consider something sacred means you value it as a consumer.

As a consumer to consume, but the article says explicitly that the Indians did not use it as a medium of exchange with each other. After all, Mises posits, [unlike what the bitcoin crowd seems to think he said], that all money has to begin with value to consumers. So there is no contradiction to Mises there. And of course, I doubt the Dutch settlers would give it any value as a sacred bead, as consumers. They had other sacred knick knacks. And yest, as time went on, those things started being worth something to the Dutch as well, even when there were no legal tender laws about them.

And then it says: "As Native Americans became reluctant to exchange pelts for the shells, the shells lost value". If anything, all this seems to illustrate my (and what I think is) Menger's theory.

Not sure what you see here. It conforms to Mises' theory as well. If anything, it might contradict your theory, if the legal tender laws where still in effect when this happened.

Maybe I'm missing something. I understood your theory to be that money starts off as a commodity, then acquires more value when legal tender laws give it usefulness. I've heard Austrians [=Peter Schiff] say that legal tender laws give value to otherwise useless stuff, if only because you need some of it to pay your taxes. So the way i see it, Mises would agree that legal tender laws have a part in giving stuff exchange value above and beyond their intrinsic, industrial value.

But he seems to say that legal tender laws are sufficient, but not neccesary, to do that. The extra value can arise with no legal tender laws at all, merely because the commodity became popular as a medium of exchange. And my understanding is that you disagree with that. No legal tender laws, no washee. Andthe history of wampum seems to deny that.

I wonder also about cigarettes in prisons, which it seems is used as money there. Maybe some unfortunate with experience can tell us if the value of cigarettes was more in prison than in the outside world. If yes, they would also be a counterexample.

Re: Does Mises's Regression Theorem Require a Minimum Population Size?

Nielsio — Thu, 28 Jun 2012 23:50:19 GMT

Smiling Dave,

>What makes you think Mises and R. forgot about legal tender laws?

They forgot about them in relation to valuations in indirect exchange. The fact that they think they need to answer the question of 'regression' (of circularity) at all means they're not thinking in terms of speculation on direct use, which is where you would describe the power of legal tender laws.

>I offer wampum as a counterexample. Wikipedia seems to be saying its value was not dependent on legal tender laws always and only:

What you quoted is riddled with legislation. On top of that, Wikipedia says: "Wampum are traditional sacred shell beads". To consider something sacred means you value it as a consumer.

And then it says: "As Native Americans became reluctant to exchange pelts for the shells, the shells lost value". If anything, all this seems to illustrate my (and what I think is) Menger's theory.

Re: Does Mises's Regression Theorem Require a Minimum Population Size?

Smiling Dave — Thu, 28 Jun 2012 23:27:01 GMT

And Mises' Regression Theorem could be applied to any currency whose purchasing power far exceeds what it would be expected to achieve if introduced into a free market absent any tampering. Since "excessive" subjective valuations can't occur between two people, nor can currency exist, at least three people must be involved to apply the Regression Theorem.

So many errors in one little paragraph.

Re: Does Mises's Regression Theorem Require a Minimum Population Size?

Smiling Dave — Thu, 28 Jun 2012 23:24:10 GMT

Neilsio,

What makes you think Mises and R. forgot about legal tender laws? Mises mentions them in 6 places in HA, Rothbard in one. [I'm going by the indexes to their books].

Are you saying that the added value a money has, besides its intrinsic value, only stems from legal tender laws?

I offer wampum as a counterexample. Wikipedia seems to be saying its value was not dependent on legal tender laws always and only:

Currency

When Europeans came to the Americas, they realized the importance of wampum to Native people. While the Native people did not use it as money, the New England colonies used it as a medium of exchange. Soon, they were trading with the native peoples of New England and New York using wampum. The New England colonies demonetized wampum in 1663.^[9] Meanwhile it continued as currency in New York at the rate of eight white or four black wampum equalling one stuiver until 1673. The colonial government issued a proclamation setting the rate at six white or three black to one penny. This proclamation also applied in New Jersey and Delaware.^[10] The black shells were considered worth more than the white shells, which led people to dye the latter, and diluted the value of the shells. The ultimate basis for their value was their redeemability for pelts from the Native Americans. As Native Americans became reluctant to exchange pelts for the shells, the shells lost value.^[11]

Their use as common currency was phased out in New York by the early 18th century. Shinnecock oral history ascribed the wampum market demise to a deadly red tide that decimated the whelk and quahog populations.

With stone tools, the process to make wampum was labor intensive. Only the coastal nations had sufficient access to the basic shells to make wampum. These factors increased its scarcity and consequent value among the European traders. Dutch colonists began to manufacture wampum and eventually the primary source of wampum was that manufactured by colonists, a market the Dutch glutted.

Re: Does Mises's Regression Theorem Require a Minimum Population Size?

Nielsio — Thu, 28 Jun 2012 22:24:46 GMT

Menger versus Mises and Rothbard on how money works

(Please visit the site to view this media)

Article at: http://nielsio.tumblr.com/post/25583537960/menger-versus-mises-and-rothbard-on-how-money-works

Re: Does Mises's Regression Theorem Require a Minimum Population Size?

Seraiah — Thu, 28 Jun 2012 18:59:36 GMT

Micah71381:
I will admit, this scenario is a bit contrived but I think technically, it would be an indirect exchange if A accepted blue rocks or B accepted red rocks since part of the exchange consists of a good the receiver has no value of beyond a medium of exchange.

This is all well and good, but the definition itself implies three actors. If I could horde an item of anothers to trade back to him at a later date, I could also mine his type of rocks solely for the purpose of trading.

If that's indirect exchange, then there is no direct exchange.

You need at least three actors or the term just isn't useful.

And Mises' Regression Theorem could be applied to any currency whose purchasing power far exceeds what it would be expected to achieve if introduced into a free market absent any tampering. Since "excessive" subjective valuations can't occur between two people, nor can currency exist, at least three people must be involved to apply the Regression Theorem.

Re: Does Mises's Regression Theorem Require a Minimum Population Size?

bbnet — Sun, 10 Apr 2011 06:28:41 GMT

Will work with one rock lover, will work better with many rock lovers.

Re: Does Mises's Regression Theorem Require a Minimum Population Size?

Neodoxy — Sat, 09 Apr 2011 18:05:22 GMT

"Yes, two people have their own subjective preferences, and they could trade goods with eachother which would result in prices, but not a money (which can only arise through indirect exchange)."

I would agree with you but the only purpose to the trader to own the rocks is to exchange them. They become a medium of exchange and therefore can be considered a money.

Re: Does Mises's Regression Theorem Require a Minimum Population Size?

Aristippus — Sat, 09 Apr 2011 06:35:48 GMT

Rothbard: "The tremendous difficulties of direct exchange can be overcome only by indirect exchange, where an individual buys a commodity in exchange, not as a consumers’ good for the direct satisfaction of his wants or for the production of a consumers’ good, but simply to exchange again for another commodity that he does desire for consumption or for production."

In my scenario person A buys a certain quantity of blue rocks, not as a consumer's good for the direct satisfaction of his wants or for the production of a consumers’ good, but simply to exchange again for another commodity that he does desire for consumption or for production.

EDIT: Tex, I'm not sure at what your other criticisms are aimed - all that matters is that A trades red rocks for blue rocks so that he can then trade blue rocks for another good. I brought up that B would lose his supply of blue rocks (due to the closure of his mine and his own consumption of the rocks) to give an explanation of why A might buy blue rocks for indirect exchange. I added other elements (e.g. that they both consume each kind of rock and trade with eachother for eachother's product) so that was less contrived.

Also, I agree the problem is in the definition. Going on what Rothbard says there, my scenario contains indirect exchange - but perhaps it cannot be said to have a common medium of exchange, since only A uses the blue rocks for indirect exchange. I'm still not sure.

Re: Does Mises's Regression Theorem Require a Minimum Population Size?

Micah71381 — Sat, 09 Apr 2011 06:26:17 GMT

The idea was that A wants red rocks and B wants blue rocks. A has no desire to collect blue rocks and B has no desire to collect red rocks. This means that anytime A accepts blue rocks (something he has no desire for) it is solely for the purpose of future purchasing power (medium of exchange). The inverse is true for B accepting red rocks (which he has no desire for outside a medium of exchange).

I will admit, this scenario is a bit contrived but I think technically, it would be an indirect exchange if A accepted blue rocks or B accepted red rocks since part of the exchange consists of a good the receiver has no value of beyond a medium of exchange.