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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."
That is correct. Never, under any circumstance, should you drink the saltwater!
Do you like German cars?
It is actually an essay on economics, and makes some very good points. It uses the Gilligan's Island as an example, because it's very obvious to many, and all the economic factors are known to all the readers.
The essay then goes on to discuss Swiss Dinara and Saddam Dinars which are both very much real, and quite comparable to money on the TV show.
I think the headline does a real disservice to the author of the essay.
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Everyone knows. Cash is king! (even if you can't do a damn thing with it:-)
09 F9 11 02 9D 74 E3 5B - D8 41 56 C5 63 56 88 C0 45 5F E1 04 22 CA 29 C4 93 3F 95 05 2B 79 2A B2
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
If they can do this, surely there's someone publishing a paper on "How to make a geiger counter from coconuts". At least I hope they are...
...but after a few paragraphs I couldn't stop thinking about the most important Gilligan's Island question: Ginger or Mary Ann?
Using Gilligan's Island as an example is a "hook" to draw the reader in, just as the mods conflate opinions into their descriptions of a story. The real story is about how people react to new monies being introduced, especially when one regime is replaced by another. The article cites, for example, the practice of US soldiers distributing $20 bills into Iraq in place of the existing Dinars, but people not only kept using the familiar currency but the Dinar doubled in value as compared to the dollar in spite of it no longer being an official currency. Except in the case of truly "breathrough" innovations, the tried and true usually wins out over the new (and presumably intersting) until there's a critical mass using it. Research shows that the point at which a new innovation takes over is around 25% of the available market (which is why the iPod has begun to pop up so widely; people who aren't early-adopter techie types are seeing enough of their friends using them to get over the inertia of not being the first to use something.) So, this is an article about people using familiar currency over new currency; it juat happens they chose a TV show for their hypothetical example rather than making one up out of whole cloth.
I'll bet he could have bought a lot of these.
Yeah, it's off topic, but so is the original post. So there.
Greed: Thurston Howell the Third, obviously.
Sloth: Mrs. Howell, rarely saw her lift a finger.
Pride: The Professor, had a bit of a superiority complex with his prized intellect.
Lust: Ginger, duh.
Envy: Maryanne, secretly covets Ginger's beauty/talent.
Wrath/Greed: The Skipper, he's both fat and mad all the time so he easily fits into representing both sins.
Gilligan? He's the Devil who is always wearing red, and always finding someway of foiling their attempts to get off the island virtually every single episode.
Obviously, the castaways believe they will one day be rescued. If they can do odd jobs for Mr. Howell in the meantime and he pays them money for doing those jobs they can keep the money and then spend it once they are rescued. In fact, in the end they were rescued and were able to use the cash that Mr. Howell had paid them to bring him coconuts and shit.
So all this guy's meanderings about governments and the true value of money are just a load of bullshit.
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.
Their point is that fiat currencies are subject to abuse as they are not secured to a physical entity which limits its growth.
Note that for for one hundred years prior to the existance of The Fed, the purchasing value of a dollar was virtually unchanged!
Post Fed, post gold standard, post secured currency, the value of the dollar's purchasing power has dropped 97%. With Greenspan's current uber-loose credit scheme and our fractioanl reserve (aka fractional safety) banking system, this has vastly increased the amount of money circulating even in the last decade, secured now mostly by residential real estate.
that if Gilligan's Isle was real that money really wouldn't be that wortwhile and the group would very quickly revert to a barter system. And I think we all know what services Ginger and Mary Ann would provide in return for a coconut radio or firewood...
Contrast that with gold coins, which have an intrinsic value outside of the currency (its value in gold).
Ah, but Gold suffers the same problem as fiat money.
It only has a value because we agree that it does.
When you get right down to it the only things that have REAL value are the things required to support life.
Air. Food. Water. The land required to create food. Sunlight.
Other than that, everything else is negotiable.
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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.
It's a "social Science" because they follow the scientific method as well as they can, but it's nigh unto impossible to actually perform meaningful experiments in economics above the micro- level (unless you're a world oil power, in which case you can experiment with demand-curves all you want). That's one of the weaknesses of the scientific method when applied to things above the biologcal scale - you can come up with the hypothesis, you can even come up with the experiment - but for it to be meaningful, you'd have to persuade a few thousand people to take part without modifying any other elements of their behavior. Tough for them.
I love vegetarians - some of my favorite foods are vegetarians.
Or maybe it's not so odd...MMORPGs are the most likely exposure /.ers have to widespread currency exchange, I guess.
He decided to just watch the government, and kind of scale it down to size, and run his life that way. --Laurie Anderson
So this is what people with advanced degrees in economics do with their time! I could have been writing papers about Gilligan's Island instead of coding until 3am. Boy did I pick the wrong degree or what????
I Am My Own Worst Enemy
The essence of scientific knowledge is its testability. One could create a complicated system of numerology (fortune telling) that required years of calculus. Wouldn't make it science.
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I always chuckle when I read a story about the riches that could be generated from asteroid mining. Let's assume that I snag an asteroid and recover several thousand tons of gold and platinum. What is that going to do to the market price of gold and platinum?
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if this had really happend.
any decent thinking man would have, forced thurston howell to sign over his money to them, and then berried the asshole. clubbed of killed all of the other men and tied up ginger and marianne for use as alternate sex slaves.
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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Only a libertarian would overlook that Gilligan's Island is actually an allegory for a communist society. Odd, you say? Let's discuss: On Gilligan's Island, the Howell's, in all their pomp, bring all their money on a three hour tour. It's value on the island: worthless. But, they drape themselves in their mainland social positions and, as a result, become the buffoons of the show. The Professor controls knowledge on the island. There is no place for religion. Only fact, logic, and above all else, science. The skipper drives the capitalist machine on to the rocks, destroying it and becoming the *real* side-kick of the *supposed* side-kick: Gilligan. Look closely at their relationship. And whose island is it? That's right, it's Gilligan's Island. The everyman. The lowest person in the social order on the boat, that day. Yet, the centre of the island, clad in communist red, once they shipwreck. The commonman now reigns. And Ginger and Mary Anne? Well, even communists like chicks. /. that!
Heh, it's interesting that this was posted now. I just changed my .sig a few days ago to touch on this topic. I'll repeat it here in case I someday change it:
.92 of an ounce, plus .08 ounce of copper, in the form of a coin. The .08 was, in essence, the coinage fee.
"US Dollar, n: A politician's promise to pay nothing on demand."
This is one of the few government promises you can be ABSOLUTELY CERTAIN will be kept.
What the article is talking about is, indirectly, that the paper money you use every day has no inherent value, so why on earth would anyone accept it as money? A currency that is unbacked by anything, but is decreed by law to be a medium of exchange, is called a 'fiat currency', because it obtains its value from executive fiat (decree). Basically, the government is forcing you to accept the US Dollar at gunpoint. If you do not, they can arrest you. (seriously, they can!)
At one time, money was mostly gold, and to a lesser degree, silver. The way it basically worked was this: you, the gold miner (or perhaps, trader with foreign gold currencies), brought your gold to the government mint. In exchange, they gave you a certain number of gold coins, less some percentage to cover the costs of coinage. Gold must be alloyed with other metals, generally copper, to have enough hardness to last through day-to-day wear, and coins were rated based on their 'fineness', or how much actual gold they had in them. Offhand, I think an 8% copper mix was fairly common, and I believe it was often the case that a 1:1 trade was executed; for every ounce of gold you brought in, you received
Well, over time, monarchs and governments figured out that they could increase that percentage a very great deal; for every one ounce of gold they took in, they only had to give out, say, half that much gold, if they mixed in enough copper. Historically, this has been a major sign of economic distress, sometimes presaging the complete failure of the government. Henry VIII is often cited as an egregious example; his 'silver' coins were actually copper with a very thin coat of silver. The high points would often wear off, leading to his nickname of 'Old Copper-Nose'. He did terrible damage to England's economy through this practice. There is a specific word for this form of taxation, but I cannot remember it or find it with Google right now. But it is very, very lucrative; the more you debase your currency, the more of the real value in the economy you can extract through deceit. Over the long haul, the strongest economies were always the ones with the strongest currencies, likely due to the fact that more of the money stayed in the hands of the population. A hidden tax is still tax, and taxes are bad, on the whole, for an economy.
Now, consider what we have now. Instead of anyone doing (a great deal of!) work to mine gold or some other metal out of the ground, instead, the governments of the world can simply wave their hands and create new currency at will. This is absolutely wonderful for the governments in question, because it allows them to extract, at zero cost, value from their own, and other economies. By printing up bills marked '100', they can extract 10 times as much value as from bills marked '10', at zero extra cost. The US is taking huge advantage of this; we are importing vast quantities of goods from all over the globe, and in exchange we're shipping back worthless green paper, to the tune of over a billion dollars a day. This is great for us, but foreign readers... you and your countries are being RAPED. If you think the US is hated now, wait until the world figures out out just how bad it's been rooked.
As a quick aside, I got my very first 'flamebait' mod awhile back for observing, in a discussion about using ink-jet printers to print money, that of COURSE the government hates that! They don't want anyone muscling in on their turf. Printing fifties on your inkjet and spending them
Within the science of economics, fiat means "having no intrinsic value."
"The word fiat, IIRC, comes from the Italian word for "in faith."
Sorry, fiat means the same in economics as in regular English: by degree. It is from a Latin word, 'fier', meaning 'to decree'. It has a slightly negative connotation in English, showing the essay author's bias when he uses it to refer to the fact that U.S. Federal Reserve Notes are legal tender. His bias is completely exposed when we find that the two outside sources referenced are 1. Ludwig von Mises, the economist whose works were used to found Libertarianism and 2. Murray N. Rothbard, the founder of Libertarianism
The essay is rife with flaws from the mainstream economic point of view; its Libertarian slant is hard to wade through. I hate loaded language like 'fiat money' used to refer to legal tender. Just for fun, I'll address one point. Pointing out all the problems would make a good final exam essay at Bachelor level econ class:
The what-if example about the Professor deciding to make money leaves completely misses the point. Here's the way that would need to play out: The Prof would have to offer some kind of service or good that at least one of the other residents of the island wanted. In order to perform that service or hand over that good, the Prof would declare that he would only accept genuine ProfLeaves. In order to get ProfLeaves in the first place, the other resident(s) would have to perform a service or provide a good to him. The Prof can simply demand that others accept for no reason but that's not practical.
This is typically (note: 'typically' is not 'always') how currency gets its start; the government issues the money in return for services and goods from the citizens. The govmt declares that it will be demanding payment in its money as a tax payment. Soon, the money is in general circulation, as somewhere along the line, most of the participants are needing to pay for taxes and the government, as the largest purchaser and provider of new money, can set prices and supply.
For US Currency, it wasn't always legal tender. Indeed, many states and banks issues their own money. This caused a lot of confusion. Imagine travelling to another state and needing to change your money. A major reason the Europeans adopted a common currency is to make trade so much easier. In the US, to cut out all the confusion of all the competing currencies, the Federal government made Federal Reserve Notes legal tender. This means that you can print up your own JoeBucks but can't legally require anyone else to accept them. If they do, that's fine, if not, you have to pay in Fed Notes.
Money, per Mises, is the most marketable commodity. If you know you can trade seashells for what you want, you will sell your goods for seashells. If enough people do that, seashells become money. (and past a certain point, a form of money is essentially inevitable, because of the network effect.) The network effect is powerful, and it would be likely to shore up a commodity that somehow lost some of its value, but if it lost enough value, then a new form of money would arise. Belief alone is probably not enough to hold money together.
Fiat money is a hijacking of that natural process to give the government a great deal more control over the economy and a nearly-infinite ability to tax, without approval or even KNOWLEDGE of the people being taxed. Past a certain point, this will destroy an economy, of course, and cause the failure of the government. And last I checked, central planning of an economy was not a very good idea; the more control goes into the hands of a few people, the less well things tend to run.
Money needs to be both a store of value and a medium of exhange. We're doing fine on the exchange part, but we're failing dismally on the store-of-value front. See my signature.
I have a BSc in a real science (Physics) and have taken more than my fair share of Economics classes. You could use lots of very complicated math to describe love, but that does not make it any more scientific.
I haven't seen the finale yet.
Which is precisely why Austrian-school economists (the Mises Institute is dedicated to the study of Austrian-school economics) and Libertarians derisively refer to dollars as "fiat currency." Prior to Nixon's 1971 withdrawal of the U.S. from the Bretton Woods agreement, U.S. Dollars WERE redeemable for gold (at least for settlement of large international transactions). Since then, the dollar has been essentially nothing more than a glorified IOU (like all other currencies in the world today).
This, combined with out-of-control deficit spending and monetary inflation policies (which essentially constitute a hidden tax on the spending power of working folks), is the cummulative result of almost a century of the dominance of Keynsian economics. Nose around the Mises Institute's site a bit more, folks. It should be an eye-opener.
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She wasn't called Lovey for nothing.
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
You observe a statistically huge number of events and see if the distributions match the theory. Most philosophers of science will, implicitly at least, add "statistical observation" to "controlled experimentation" as the methods of science.
And this differs from the methodology of economics in what way?
There's enough math and computational expertise required in advanced economics to keep any math geek satisfied. It's not a coincidence that large numbers of Physics PhD's are working on Wall Street these days. The cookbook economics you hear on the tube is not the economics being done in research today; it's the economics that politicians and TV newshosts can understand, and communicate in soundbites.
As you alluded, much of basic Econ can be described as a bunch of rules-of-thumb and ad hoc arguments, of the sort, "If we ignore all these things here, and assume that they are constant, we can pretend that this here happens." The problem is that economic systems are complex systems (analogous to the brain's neural network), and can't be modeled well using "billiard ball" physics models. Until recently the only alternative has been to use statistical, "gas law" models and other simplifications of the systems.
Example: a small town may have 1000 citizens, 200 businesses, and perhaps 500 formal and informal groups/organizations. Each of those individuals and organizations has over 1000 'inputs' and 1000 'outputs' - relations with each other and outside entities, that may be considered as economic factors. (Relations may be financial or other.) You have a social network with something like 10^13 relations/interconnections. And that's just a small town or neighborhood.
I'm embarking on a PhD in Econ shortly, after many years in computing, and my math skills are being stretched like they haven't in a long time. Differential equations is a prerequisite for several of the introductory graduate level courses, along with linear algebra and a bunch of statistics and game theory. Thomas Bayes' much appreciated Bayesian Theorem probability is a tool of economists. Vilfredo Pareto (Pareto-optimal" game outcomes) was an economist. Many elements of modern statistics, probability and game theory were developed by economists.
The problem faced by economists has been not that it was too simple, but that the systems under study have been too complex to delve into very deeply until both the mathematical tools and the computational power became available. It was necessary to drastically simplify the models in order to get any sense at all. And, of course, there is a strong philosophical and social-studies thread throughout economics.
Nowadays there is a strong thrust into new approaches to Economics, including complex adaptive systems, agent based systems, Neuroeconomics, Experimental Economics (vis. Vernon Smith, 2002 Bank of Sweden "Nobel" and social network economics.
Often in addition to training and/or experience in biology, physics, systems theory and other disciplines, these approaches require a good understanding of differential equations, comfort in manipulating long chains of partial derivatives, and working with multi-layered irregular networks. Interestingly, even fluid dynamics equations are applicable in some cases.
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The fact that (And I know it's rude but it's the truth) both of them are in posession of the only "currency" that would mean anything to the 4 men on the island. It's between their legs.
Think about it. Gilligan, Mr Howell, the professor and skipper are all going to be interested in one thing before long and honestly, they were probably interested in that prior to ever getting shipwrecked. All four of them hadn't fantasised about banging Ginger or Mary Ann from the moment they stepped onto the boat. Once they get shipwrecked and they've been on the island for a couple weeks it's going to be a question of who's getting laid and not much else is going to matter.
Now obviously Howell is an old dude and his wife is there so he's going to be on a short leash. He'll keep up appearances but you know he's thinking he could bag one of these chicks if he could get away from the old ball and chain. Then again this was before Viagra so maybe not. If this took place today though Thurston would be knocking the bottom out of Ginger. I'm sure he'd go for Ginger. He's rich, she's famous. That's just the way it works.
But say Thurston hadn't the benefit of the little blue pill and was out of the mix. Then you've got Gilligan, the professor, and the skipper vying for two women. One of them is going to end up with the professor obviously because he's the only one of the three available guys who's both height-weight proportionate and not a complete idiot. Ginger probably goes for him and has little trouble staking claim to him.
This leaves Mary Ann to choose between the fat old sailor or the retard. Not a very appealing proposition but she doesn't have to make the choice. Niine weeks and a couple dozen screw ups from Gilligan later he goes looking for coconuts one day and mysteriously doesn't return. The skipper was of course fishing on the other side of the island when it happened and knows nothing about it. In truth though he buried his "little buddy" in a shallow grave so he could claim the sole remaining available piece of tail on the island.
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