Money as a Crusoe Concept

Money as a Crusoe Concept
(c) Copyright 2005, 2008 by Michael E. Marotta
mmarotta-at-emich-dot-edu

(These comments came from a series of posts I made in early 2005 to
www.solohq.com, now called rebirthofreason.com. Based on replies –
objections, mostly – I posted another version to The Molinari
Institute group discussion on Yahoo at http://groups.yahoo.com/group/molinari-institute/
What follows is a narrow presentation of the basic claim. I am
expanding the thesis for more formal presentation in an acadmic
venue.)

Economists generally recognize money as a social good, required for
trade. Money is any means of indirect barter. From that, money is
also a store of wealth and a unit of account. However, alone, on an
island, Robinson Crusoe would need money.

Money's primary attribute is that it is a store of value. This is what
allows money to be a unit of account and a medium of exchange. On his
island –in the Defoe story, actually – Crusoe's primary money was
food. If he could store food, his labor could be invested. When he
discovered that he had accidentally sowed wheat which “took” he was
overjoyed.

Historically, in fact, wheat (not gold or silver or even cows) was the
first form of money. In other times and places, stone arrowheads --
which require significant effort -- would be a form of “money” not for
trade – there is little evidence of that – but as a store of labor for
the individual who makes it.

As a store of effort, money then becomes a medium of exchange. It is
also possible to “exchange” with yourself across time. Crusoe can fish
today and catch more than he needs. Some he can dry. The chum he can
bury to improve the soil into which he will plant wheat later. Thus,
in planning and carrying out plans, Crusoe can engage in economic
trade with himself across time.

Planting today means harvesting tomorrow, but should Crusoe plant?
Should he catch fish or look for coconuts? What Crusoe does on an
island is determined by how he values his time and the return on it.
Therefore, Crusoe needs bookkeeping of some sort and that means that
he must have a unit of account. He must have money as a conceptual
construct, some way to count and account meaningfully across
activities and commodities. Money is a tool for quantifying choices.

There are many kinds of money and almost anything can be money. He
might calculate in terms of wheat because it is useful, divisible and
easy to store. He might think in terms of hours, the one value over
which Crusoe has the most control. Whatever conceptual tool Crusoe
uses to quantify his choices, that is his money.

Rather than being a social convention, money is an artifact of
individual effort, thought and reward.
-30-

On Oct 12, 8:03*pm, Mike Marotta wrote:
Money as a Crusoe Concept
(c) Copyright 2005, 2008 by Michael E. Marotta
mmarotta-at-emich-dot-edu

(These comments came from a series of posts I made in early 2005 towww.solohq.com, now called rebirthofreason.com. Based on replies –
objections, mostly – I posted another version to The Molinari
Institute group discussion on Yahoo athttp://groups.yahoo.com/group/molinari-institute/
What follows is a narrow presentation of the basic claim. *I am
expanding the thesis for more formal presentation in an acadmic
venue.)

Economists generally recognize money as a social good, required for
trade. *Money is any means of indirect barter. *From that, money is
also a store of wealth and a unit of account. *However, alone, on an
island, Robinson Crusoe would need money.

Money's primary attribute is that it is a store of value. This is what
allows money to be a unit of account and a medium of exchange. On his
island –in the Defoe story, actually – Crusoe's primary money was
food. If he could store food, his labor could be invested. When he
discovered that he had accidentally sowed wheat which “took” he was
overjoyed.

Historically, in fact, wheat (not gold or silver or even cows) was the
first form of money. In other times and places, stone arrowheads --
which require significant effort -- would be a form of “money” not for
trade – there is little evidence of that – but as a store of labor for
the individual who makes it.

As a store of effort, money then becomes a medium of exchange. *It is
also possible to “exchange” with yourself across time. Crusoe can fish
today and catch more than he needs. Some he can dry. The chum he can
bury to improve the soil into which he will plant wheat later. Thus,
in planning and carrying out plans, Crusoe can engage in economic
trade with himself across time.

Planting today means harvesting tomorrow, but should Crusoe plant?
Should he catch fish or look for coconuts? What Crusoe does on an
island is determined by how he values his time and the return on it.
Therefore, Crusoe needs bookkeeping of some sort and that means that
he must have a unit of account. He must have money as a conceptual
construct, some way to count and account meaningfully across
activities and commodities. *Money is a tool for quantifying choices.

There are many kinds of money and almost anything can be money. He
might calculate in terms of wheat because it is useful, divisible and
easy to store. *He might think in terms of hours, the one value over
which Crusoe has the most control. Whatever conceptual tool Crusoe
uses to quantify his choices, that is his money.

Rather than being a social convention, money is an artifact of
individual effort, thought and reward.
-30-

Your logic is falty, your assumptions are shaky and your conclusion is
erroneous.

In article
,
Voltronicus wrote:

On Oct 12, 8:03Ýpm, Mike Marotta wrote:
Money as a Crusoe Concept
(c) Copyright 2005, 2008 by Michael E. Marotta
mmarotta-at-emich-dot-edu

(These comments came from a series of posts I made in early 2005
towww.solohq.com, now called rebirthofreason.com. Based on replies ñ
objections, mostly ñ I posted another version to The Molinari
Institute group discussion on Yahoo
athttp://groups.yahoo.com/group/molinari-institute/
What follows is a narrow presentation of the basic claim. ÝI am
expanding the thesis for more formal presentation in an acadmic
venue.)

Economists generally recognize money as a social good, required for
trade. ÝMoney is any means of indirect barter. ÝFrom that, money is
also a store of wealth and a unit of account. ÝHowever, alone, on an
island, Robinson Crusoe would need money.

Money's primary attribute is that it is a store of value. This is what
allows money to be a unit of account and a medium of exchange. On his
island ñin the Defoe story, actually ñ Crusoe's primary money was
food. If he could store food, his labor could be invested. When he
discovered that he had accidentally sowed wheat which ìtookî he was
overjoyed.

Historically, in fact, wheat (not gold or silver or even cows) was the
first form of money. In other times and places, stone arrowheads --
which require significant effort -- would be a form of ìmoneyî not for
trade ñ there is little evidence of that ñ but as a store of labor for
the individual who makes it.

As a store of effort, money then becomes a medium of exchange. ÝIt is
also possible to ìexchangeî with yourself across time. Crusoe can fish
today and catch more than he needs. Some he can dry. The chum he can
bury to improve the soil into which he will plant wheat later. Thus,
in planning and carrying out plans, Crusoe can engage in economic
trade with himself across time.

Planting today means harvesting tomorrow, but should Crusoe plant?
Should he catch fish or look for coconuts? What Crusoe does on an
island is determined by how he values his time and the return on it.
Therefore, Crusoe needs bookkeeping of some sort and that means that
he must have a unit of account. He must have money as a conceptual
construct, some way to count and account meaningfully across
activities and commodities. ÝMoney is a tool for quantifying choices.

There are many kinds of money and almost anything can be money. He
might calculate in terms of wheat because it is useful, divisible and
easy to store. ÝHe might think in terms of hours, the one value over
which Crusoe has the most control. Whatever conceptual tool Crusoe
uses to quantify his choices, that is his money.

Rather than being a social convention, money is an artifact of
individual effort, thought and reward.
-30-

Your logic is falty, your assumptions are shaky and your conclusion is
erroneous.

Care to offer a correction?

On Oct 13, 6:01*pm, Slime Lowlife wrote:
Care to offer a correction?- Hide quoted text -

For the OP to opine that a modern day Crusoe would need money just
shows how capitalism has destroyed his mind.

In article
,
Voltronicus wrote:

On Oct 13, 6:01*pm, Slime Lowlife wrote:
Care to offer a correction?- Hide quoted text -

For the OP to opine that a modern day Crusoe would need money just
shows how capitalism has destroyed his mind.

The issue would appear to be how one defines "money". Marotta seems to
define it as the value of the productivity of labor. This allows him
to say that money is not some social construct, but possible to define
even in a "society" of a single individual, like Robinson Crusoe stuck
alone on his island.

I think that this definition is at best incomplete, & that money is
indeed a social construct, in that its value is derived from what OTHER
folks think of your labor (or what you produce from it). Since you
disagree with Marotta's contentions as well, it's tempting to suggest
you may be on my side of this issue.

But it's impossible to say, as your only remarks have been to dismiss
his arguments out of hand, & attribute his conclusions to mental
defects. I had been hoping you would point out where his logic was
faulty, & what a better set of assumptions would be.

On Oct 18, 10:21*am, Slime Lowlife wrote:
I think that this definition is at best incomplete, & that money is
indeed a social construct, in that its value is derived from what OTHER
folks think of your labor ...

Well, Slime, since you asked for a civil discussion and did not get
one, allow me to reply now.

There is no doubt that money is a social utility. My essay only
developed a different starting point, with the individual. Similarly,
would Robinson Crusoe need language, if he had no one to communicate
with except himself? Would he need morality, or could he do "whatever
he wanted" without consequences? In all three cases while the tool is
social to us, each serves the individual.

For another analogy to explain why I would bother with the question,
consider geometry. It began as a strictly empirical solution to a
specific problem: periodic flooding of the Nile erased boundery
markers. However, we learn geometry as a rational endeavor, beginning
with axioms and postulates and proving theorems. From that, it is
possible to consider n-dimensional geometry, the rules for
understanding things we cannot draw. We might allow that such
theoretical mathematics has no real, empirical component. However,
historically, we have found applications for such fancies. The
electricity in our homes can be described using functions that include
the "imaginary" square root of minus 1.

So, too, with numismatics do seemingly theoretical fancies have
realworld consequences: by what standard does a coin graded Poor-1
sell for a mere 1/70th of a coin graded MS-70? Are the coins of Hutt
River Principality really "coins" or to be a "coin" must the object
come from a government that is recognized by the US government?
(Sellers of HRP coins were closed by the Federal Trade Commission on
the grounds that the objects could not be "coins" and thus the
advertising was misleading.) Here on RCC are unproductive exchanges
over the collectibility of counterfeits, as by definition, counterfeit
money is not money and (more to the point) is unlawful to possess,
even though in colonial America counterfeit British coins circulated
openly as money.

Yet another analogy: aviation. For thousands of years, we dreamed of
flying "like birds" and even attempted ornithopters to imitate them.
When flight was invented, it came first as balloons and then as craft
with only the grossest similarities to birds, who have neither
propellors nor jet engines. Flight was possible only when someone
thought the problem through from the very beginning, not in imitation.

On the basis of those considerations, I wondered if Robinson Crusoe
could use money -- as he used language and morality.

I agree that this is only a partial answer. We do have a serious
social utillity for money. But that, too, is only a partial answer.
What if "no one" values your money? What if you plant a garden and
cannot sell the produce? Is the time a deadweight loss like digging a
hole and filling it up? Do the unsold vegetables have -no- value?

It's a funny thing about money and collectors, but the worthless
currency of a failed government now sells for more than it bought when
the issuer was solvent I just paid $45 for 150 stock certificates
that are otherwise perfectly worthless. How do you explain that?

So, what -is- money? To figure that out, I started with the simplest
case, one person alone.