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The Monetary Economics of Thurston Howell III
DLWormwood writes "In what has to be the Strangest... Essay... Ever... The libertarian Ludwig von Mises Institute website has posted an essay which goes way too in-depth over the topic of why the castaways of Gilligan's Island used Thurston Howell III's 'worthless paper' instead of gold or seashells."
So here is some caches...
: www.mises.org/+&hl=en
: www.tvtome.com/GilligansIsland/+&hl=en
http://216.239.59.104/search?q=cache:f9Bdhed8_h8J
http://216.239.59.104/search?q=cache:8-dfbA5SWVwJ
Also i have to say this is a rather strange artical. I've taken a quick look at it and if im honest, im totally lost!.
P.S. Sorry for the untidy formatting, its late at night.
- http://www.milkme.co.uk
The Monetary Economics of Thurston Howell III
by B.K. Marcus
[Posted August 31, 2004]
Gilligan's Island is now out on DVD, reawakening the unanswered questions of childhood: why does the Skipper let Gilligan help with anything when he knows he'll just screw it up? Why did the movie star take a day cruise in an evening gown? Why did two of the richest people in the world board a dinky boat with the hoi polloi instead of leasing a private yacht? And why do any of the other stranded castaways treat the millionaire's government money as valuable while stuck on an island where no such government can enforce its value?
Because it's just a dumb TV show.
But that last question stuck with me. Would fiat dollars be treated as valuable without the government around to enforce its fiat? My impression in childhood was that money belonged to the government, was inextricably bound to the government, and we, the citizens of the government, were just using the money "on loan" so to speak. This impression came not only from the look of the money itself, but from American history, as children's cartoons had communicated it to me. (One Scooby Doo episode ends with the hidden "treasure" turning out to be a case full of hoarded and now worthless Confederate dollars.)
A Brief Monetary History of Gilligan's Island
In early episodes, we see Mr. Howell hiring various services from other castaways. We eventually learn he's been writing checks on a mainland (and therefore inaccessible) bank. This works while the group consider their condition temporary, but the checks are quickly devalued and eliminated when the castaways begin to prepare for the possibility of an indefinite stay on the island.
In Episode 9, "The Big Gold Strike," Gilligan and Mr. Howell find a gold mine on the island, which Howell convinces Gilligan to keep secret from the others. By the time everyone learns about the mine, Howell has already taken the lion's share of the most easily accessible gold. He'd like to hoard it for himself, but the other castaways begin charging him for their goods and services. Soon everyone has a small fortune in gold, which they all try to smuggle aboard a tiny escape raft. Their collected wealth, of course, ends up at the bottom of the lagoon.
In later episodes, monetary exchange takes place in US paper currency. Was it impossible to recover the gold from the lagoon? Perhaps the writers found it more convenient to deal in the money the television viewers themselves were most familiar with. We might dismiss this as economic naivete on the part of the writers, but recent history provides evidence that fiat paper can, in fact, outlive its government. Not only that, but post-fiat money -- dead government currency -- can out-compete American greenbacks!
Undead Money
After the invasion of Iraq, there was no more central bank printing dinars and no more Iraqi government to put the fiat behind its fiat currency. The American military started handing out US$20 bills and expected the Dinar to fade from existence. Instead, to the chagrin of the occupation force, the Dinar's value doubled against the Dollar in two weeks. Statues of Saddam Hussein were being toppled, but his face was still on the preferred currency, and gaining in popularity. Some saw this as patriotism: a silent protest by the occupied population against the invading force. But we need only look further north, to the Kurd-controlled areas, to find a more economic explanation.
After the first Gulf War, Iraq changed its currency from the so-called Swiss Dinar to the more recent Saddam Dinar. When a government changes its fiat currency, it announces a transition period during which the old bills can be brought in and exchanged for the new. After the window closes, the old notes are declared worthless.
To no one's surprise, the rebel Kurds did not visit the Iraqi government to make such an exchange. They just kept using the old money. It was familiar, hard to counterfeit, and in its post-fiat status,
Read the following to learn more.
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The word fiat, IIRC, comes from the Italian word for "in faith." You're taking it on faith that the $20 bill you slap into a stripper's t-back, for example, is actually worth $20, even though you will never see the gold that backs up that $20 bill.
Economics is one of the social sciences. Given the amount of math one has to take to earn a BSc in Economics, it deserves its status as a branch of science!
Acutally, fiat is straight from Latin, where it means "let it be." Fiat money is used as money because of governmental decree (or fiat), as opposed to commodity money (e.g. gold) which arises from the market.
Nope. It's latin. Third person present subjunctive of "to be". You could translate it as "let it be so," essentially what the Government says when it declares special paper to be worth something.
I'm in agreement with you. After all, the 1913 Webster's dictionary defined a dollar thusly (a definition created in 1792 with the creation of the US Coinage Act, I believe): 1. (a) A silver coin of the United States containing 371.25 grains of silver and 41.25 grains of alloy, that is, having a total weight of 412.5 grains. Previous to 1837 the silver dollar had a larger amount of alloy, but only the same amount of silver as now, the total weight being 416 grains.
There is a difference between "insightful" and "inciteful" other than spelling.
What is interesting is that younger Greenspan was quite a passionate advocate of the gold standard, see, e.g., his essay in this book (scroll down couple pages to the TOC).
;-)
I was always wondering how could he take his current job...
Paul B.
The whole point of government backed "fiat" money (which was completely missed in the article) is that the supply of money is regulated. Current dollars represent an amount of previous dollars, which represented an amount of gold, which represented an amount of coconuts, which were bartered for fish for cream pies once upon a time. The "fiat" is there to primarily to prevent counterfitting to make sure that the supply remains fairly constant (though gradually increasing over time as more wealth is "created.) The money exchange market (and the market in general, i.e., the price of goods and services, and especially loan interest rates) act as checks that the declared value does not exceed the actual value in previous commodities. Dinars doubled in value because there was a fixed amount (as long as counterfitting did not occur -- which is why it could only continue for a short time) and the quantity of dollars in circulation was rapidly increasing. The "post-fiat" dinars were still directly tied to the dollar (gold) standard but there was a massive influx of gold (greenbacks) at the time, resulting in inflation.
no, within the science of economics fiat means "having value determined by: authorization, command, decree, dictate, dictum, edict, endorsement, mandate, ordinance, permission, precept, proclamation, sanction, ukase, warrant" The word fiat comes from the Latin meaning "let it be done" -- borrowed directly from Genesis in the Bible "fiat lux" = "let there be light"
When I was there the main use I saw for the dinar was selling them to GIs who wanted souvenirs. I figured the rise in price was due to the Iraqis learning what passed as an acceptable price, as well as the Gis realizing that the supply of good-quality bills was diminishing (ie. fixed demand but dwindling supply).
When I left people in the shops were still selling large quantites of former regime currency for prices ranging from $1 per bill to $20 for a bundle of identical bills. There's a good chance I just wasn't in touch with the local economy, but when the locals are consistently selling their old bills for loose change over the course of a year I have trouble seeing their dead currency as picking up value.
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I just remembered the name for taxation through debasement: segniorage. No wonder I couldn't think of it. Not a common word anymore.
[worthless fluff]
After the invasion of Iraq, there was no more central bank printing dinars and no more Iraqi government to put the fiat behind its fiat currency. The American military started handing out US$20 bills and expected the Dinar to fade from existence. Instead, to the chagrin of the occupation force, the Dinar's value doubled against the Dollar in two weeks.
[more worthless fluff]
Why did the unbacked paper do better than the US Dollar? Because the quantity of dinars was relatively fixed, while the supply of dollars grew. The law of supply and demand tells us that, all else being equal, a rise in the supply of a thing will lower the price of that thing. The thing, in this case, is the Dollar itself; its "price" is its buying power, which the Iraqis watched erode drastically within days.
[more worthless fluff]
Contrary to the popular belief, there indeed is no God.
Basically, the government is forcing you to accept the US Dollar at gunpoint. If you do not, they can arrest you. (seriously, they can!)
I'm at least as anti-fiat money as yourself (being an anarcho-capitalist, I do not believe the government should engage in any decrees of value for any item; means of exchange can be developed by the free market), but you are actually wrong on this point. Nobody is required to accept the US Dollar. Unlike taxes, you will not be shot for refusing to particpate. :)
This is actually a common misunderstanding arising from the phrase legal tender. Check out that link and you'll find the following:
Secession is the right of all sentient beings.
Your reasoning is positivist, which is debunked junk. Positivism states that we can only know something is true if we have empirical verification, and that everything else is meaningless. This is inherently self-contradictory, for that very statement can only be taken as an a priori axiom. Except, according to positivists, a priori axioms are meaningless tautologies. So, the question is, how do we know that that positivist statement is in fact true? We haven't verified it by experiments, so according to its own declaration, it is a meaningless tautology.
Austrian economists start from self-evident a priori axioms. These axioms do not need to be empirically verified. Indeed, they cannot be falsified empirically, and can only be illustrated. You cannot falsify the action axiom. You can only illustrate it (indeed, everything you do is an illustration of the action axiom).
I would suggest reading the following papers:- Social Sciences and Natural Sciences. Mises, Ludwig von.
- What is Austrian Economics? Mises.org
- Economic Science and the Austrian Method. Hoppe, Hans-Herman.
- Realism and Abstraction in Economics: Aristotle and Mises versus Friedman. Long, Roderick.
If you want to read more on Austrian economics, the best introduction is Man, Economy, and State with Power and Market. Rothbard, Murray. (MES). Man, Economy, and State with Power and Market was Rothbard's treatise on economics, also intended to be a textbook for introducing students to Austrian economics. Mises, Rothbard's mentor, wrote the great treatise on economics simply called Human Action. Mises, Ludwig von. (HA). Human Action is an extremely important treatise, although it is not as easily understandable as Rothbard's treatise. Rothbard, in his treatise, assumes that readers have much of the knowledge in Human Action, so reading MES is not a substitute for reading Human Action; however, Rothbard corrects Mises on a couple of issues (like monopoly) and expands upon Mises' analysis, exploring new categories.Praxeology and Understanding. Selgin, George.
In Defense of "Extreme Apriorism". Rothbard, Murray.
social sciences can never use experience to verify their statemen
Whoops, I meant the Skipper represents both Wrath and Gluttony. Avarice is synonymous with greed. I just kinda paraphrased it without checking.