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Friday, March 01, 2013

Inflation vs Deflation I

Since I agreed to start the debate, I did not go back and re-read Nate's initial and inadvertent post on the subject to which I linked last week.  This is not a response to that post, but as will soon become readily apparent, is a reversion to the foundation for our difference of opinion.

There are, as those who will recall my pair of YouTube videos on the subject, a variety of definitions of inflation.  The Neo-Keynesians alone have no less than five: theoretical, official, textbook, practical, and core.  It's not necessary to get into any of them now, however, because they all eventually point to the same subject, and ultimately, the same question: what is money?  This is the crux of the matter, because despite the various opinions concerning the subject of inflation, what it is, and precisely what causes it, there is no extant theory of economics that takes serious exception to Milton Friedman's statement that "inflation is always and everywhere a monetary phenomenon", the outdated and long-disproven Keynesian notion that it is a phenomenon somehow inversely related to unemployment notwithstanding.

In reviewing the various definitions of money and looking at everything from Richard Cantillon to the three major current schools, Samuelsonian, Friedmanite, and Austrian, it rapidly became clear that the Austrian School economist, Joseph Salerno, had already walked the path that I was beginning to tread in his excellent paper "Two Traditions in Modern Monetary Theory: John Law and A.R.J. Turgot", which is the first essay in his book Money, Sound and Unsound.  In this essay, Salerno shows that there are fundamentally two competing ideas about money, neither of which are even remotely new, as both monetary doctrines predate Adam Smith.

Of the first tradition, which dates back to John Law, Salerno writes:
In 1705, Law published his principal work on money, entitled Money and Trade Considered: With a Proposal for Supplying the Nation with Money. Law’s “proposal” was intended to provide his native Scotland with a plentiful supply of money endowed with a long-run stability of value. The institutional centerpiece envisioned in Law’s scheme resembles a modern central bank, empowered to supply paper fiat money via the purchases and sales of securities and other assets on the open market. Also strikingly modern are the theoretical propositions with which Law supports his policy goals and prescriptions.

Law initiates his monetary theorizing with two fundamental assumptions about the nature and function of money. The first is that if money is not exactly an original creation of political authority, it ideally functions as a tool to be molded and wielded by government. Law believes that the State, as incarnated in the King, is the de facto “owner” of the money supply and that it therefore possesses the right and the power to determine the composition and quantity of money in light of the “public interest.”

Writes Law:All the coin of the Kingdom belongs to the State, represented in France by the King: it belongs to him in precisely the same way as the high roads do, not that he may appropriate them as his own property, but in order to prevent others doing so; and as it is one of the rights of the King, and of the King alone, to make changes in the highways for the benefit of the public, of which he (or his officers) is the sole judge, so it is also one of his rights to change the gold or silver coin into other exchange tokens, of greater benefit to the public.…

Translating Law’s statement into modern terms, money is an “instrument” that is or should be deliberately designed to achieve the “policy goals” considered desirable by political money managers and other government planners.

Law’s second basic assumption is that money serves solely as a “voucher for buying goods” or an “exchange token.” Thus, for Law, “Money is not the value for which goods are exchanged, but the value by which they are exchanged: The use of money is to buy goods and silver, while money is of no other use.” In other words, money is a dematerialized claim to goods having no valuable use in itself.
It is more than a little startling to read Law's statements, particularly in light of the smug, self-satisfied way we hear the same sentiments echoed more than three hundred years later by those who think themselves clever for realizing that money has no intrinsic value, and therefore, cannot possibly serve as a store of value in its own right, as it only possesses the exchange value conferred upon it by the power of the State.

Salerno notes that the Law monetary tradition is the dominant one, and comments: "The neo-Keynesians, monetarists, and supply-siders, differ among themselves in important areas of theory and policy, but all share most of Law’s fundamental ideas about money."  He goes into some detail concerning the primary factors the three schools share concerning money and monetary policy, which include:
  1. Money as a policy tool
  2. Money as an exchange token
  3. Stabilization of the price level
  4. The resource costs of a commodity money
  5. The supply of money as a political monopoly
I will not go into detail to support Salerno's conclusions, but a brief glimpse at the most influential textbook in modern economic history, Paul Samuelson's Economics, should suffice to prove that they are fair and accurate.

"There are two distinct functions of money: as a medium of exchange and as a standard unit of value....  We may summarize our analysis of the use of money by listing its two essential functions: (1) as a medium of exchange and (2) as a standard unit of account or common denominator of values."
- Economics, pp 57-58
The second and competing monetary tradition traces back to Turgot, the man whom Joseph Schumpeter and the Austrian School tend to regard, with Richard Cantillon, as the true father of modern economics, whose rightful place in the history of economic thought has been usurped by Adam Smith.  Of the Turgot tradition, Salerno writes:
Turgot flatly rejects Law’s primary contention that money is merely an exchange token, whose supply must be manipulated by the political authorities in order to achieve selected policy goals. According to Turgot money is essentially a medium of exchange and the unit in which relative prices are expressed: “These two properties, of serving as a common measure of all values [i.e., the unit in which all prices are expressed] and of being a representative pledge of all commodities of a like value [i.e., the medium of exchange], include all that constitutes the essence and utility of what is called money.…”

As Turgot points out, however, these two functions of money can only be performed by an article which is already widely used, valued, and exchanged under barter: “… all money is essentially merchandise. We can take for a common measure of values only that which has a value, and which is received in Commerce in exchange for other values: and there is no pledge universally representative of a value save another equal value.” Since money thus necessarily originates as a useful commodity from within the market economy itself, Turgot emphatically denies the possibility that “a purely conventional money” without a pre-existing purchasing power can be imposed from outside the market. According to Turgot, “It is not in virtue of a convention that money is exchanged against all other values; it is because money itself is an object of commerce, a part of wealth, because it itself has a value, and in trade all values are exchanged against equal values.”
 So, the primary factors of money in the Turgot tradition are:
  1. A medium of exchange
  2. A unit of expression
  3. An object of commerce i.e. an exchangeable good
  4. A tool of economic calculation
  5. An intrinsic store of value
Having laid out the two primary definitions of money, I now turn it over to Nate to declare which of these two competing traditions he holds to be money, or if he has some third definition of money he believes would be better utilized concerning this debate.

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186 Comments:

Anonymous map March 01, 2013 3:31 AM  

Turgot is actually correct. In fact, Turgot's argument is implicitly recognized by the US Treasury when it designs and issues new bills.

Why, for example, does the dollar bill generally look the same from generation to generation? Why don't we have red, blue, or white dollar bills and all kinds of random images? It would aid against counterfeiting, for example.

The design does not change because the dollar has intrinsic value. And this intrinsic value is the image of dollar that allows it to be a medium of exchange and a store of value.

Anonymous Toby Temple March 01, 2013 3:33 AM  

Time to prepare the popcorn!!!

Anonymous Peter Garstig March 01, 2013 4:19 AM  

Glad you started it with the definition of money. I've long suspected (without actual prove) that bith inflationists and deflationists are correct.

Once the definition is cleared up, it should be apparent if debt is money or not, which seems ro be the disagreement between those 2 schools.

Anonymous Krul March 01, 2013 4:42 AM  

From Bloggerblaster:

For example... what is money? I know... you're thinking dollar bills and coins. Yes and no. Money is an exchange medium that is used to complete a transaction. The critical characteristic of money is that it does not require any additional transactions to satisfy the terms of the exchange. You got your money... and that's good enough. Lets look at gold for example. Gold is money. It always has been money. You want some of my cattle... you give me a small amount of gold... and we're done. Modern cash is similar. You give me cash.. I give you a cow or two... we're done. Cash is money.

What about debit cards? I swipe your debit card... I give you cows... we're not done. Your bank has to send money to my bank. That's an additional transaction. Debit cards aren't money. Same for checks. Checks aren't money either. They are IOUs for money.

Diamonds.. Silver... Paper... Copper... all of these things can be money... if they are employed to complete an exchange.

Anonymous zen0 March 01, 2013 5:31 AM  

Why, for example, does the dollar bill generally look the same from generation to generation? Why don't we have red, blue, or white dollar bills and all kinds of random images? It would aid against counterfeiting, for example.

Interesting, but not applicable to all countries. Canadian authorities have been messing with the money's colour and images for decades, both bill and coin.

That which used to be bills are now coins ($1 & $2), and the penny has recently been discontinued.

Bills have recently been produced of polymer with metallic features.

Anonymous Koanic March 01, 2013 5:41 AM  

It seems to me that money is always 1, 2, 4 in Turgot, and should be 1-5, but is not with govt fiat money. Thus money is liquidity, and liquidity trades at a premium, and sound money is Turgotian.

So it seems Vox is already offering Nate an opportunity to screw himself by false dilemma.

But Nate appears to have already screwed himself, by his binary conception of transactional completeness, which ignores the many shades of grey in liquidity, and thus denies the moneyness of debt and other instruments. It seems perfectly obvious to me that credit expansion expands the money supply massively, creating inflation, and thus contraction must reduce it massively, creating deflation.

The credit expansion would run out of physical cash, except for the Fed at the center which extends credit to banks against bank assets at lower rates and prints money to fulfill the demand.

Also, Nate's concept of transactional completeness completely breaks down in light of the intertwined financial complexity of major interactions. What happens with transactions that never unwind? Or take many many steps to reach a point recognizable as unwinding, and only partially?

Anonymous Roundtine March 01, 2013 5:58 AM  

At the peak in 2007, there were $7 in credit for every dollar of M2. It is still $5.5 in credit for each $1 today.
At the peak in 2007, there were >$35 in credit for every dollar of M1. It is below $25 today.

M2: a measure of the money supply; M1 plus net time deposits (other than large certificates of deposit).
M1: a measure of the money supply; includes currency in circulation plus demand deposits or checking account balances

Nate's definition is even narrower than M1 or M2. Velocity should be off the charts.

Anonymous Josh March 01, 2013 7:00 AM  

The design does not change because the dollar has intrinsic value. And this intrinsic value is the image of dollar that allows it to be a medium of exchange and a store of value.

Given the spectacular failure of the dollar to retain 95% of its value over the past century, there isn't much intrinsic value to be had there.

I think that when people, especially Austrians, talk about intrinsic value, in light of the foundational theory of Austrian economics (all value is subjective), they're really talking about scarcity and permanency. Hence the preference for gold, being both stable and permanent.

Blogger James Dixon March 01, 2013 7:03 AM  

So if I'm understanding the definitions properly, the primary difference in the two definitions is simply whether money is a store of value or not. Both seem to agree on it's other attributes.

Law isn't so much defining money as being controlled by the government as stating that it should be, as the government is acting as the agent for the people. It's a statement of policy, not part of the definition as such. Law is recognizing a simple fact: People will exchange goods and services. if a government provides the mechanism for their doing so, they'll use it. If it doesn't, they'll come up with their own.

It's obvious to anyone who looks at history that government controlled fiat "money" is not a reliable store of wealth, and therefore violates point five of Turgot's definition.

I think that Nate would argue that Turgot's definition is an ideal which can never be fully achieved. Therefore he would exclude point five from the definition of money.

I think I would agree. It seems to me that the primary definition of money is simply point one of Turgot's definition, which is point two of Salemo's. Money is a medium for the exchange of goods and services. Points two through four all are a natural consequence of something meeting the requirements of point one. Point five, while a desirable attribute, isn't a necessary condition for point one to be met.

Time for some popcorn. I've been waiting for this for quite a while. :)

Anonymous Josh March 01, 2013 7:07 AM  

James Dixon,

I would think that point 5 of Turgot is useful for determining the quality of competing monies.

Anonymous A Light Interlude March 01, 2013 7:12 AM  

There was a rash fellow called Nate
Who relished in tempting Fate
In order to flaunt it
He threw down the gaunlet
And challenged Vox Day to debate

Some Ilk had a bad premonition
It would never get past definition
Its now up to Nate
To respond in debate
On the essence of money’s condition.

Blogger tz March 01, 2013 7:27 AM  

I'm sure Natenwill answer 'neither' but clarify his response.

Yet your definitions are money in the abstract. What is in use today everywhere would be Law's definition. Does that make the exchange units 'money' or not?

What of bitcoin which is a series of mathematical rules defining a commodity in the form of numbers with certain hashes? It isn't a government - statuatory law, but mathematical ones.

What makes this fuzzy is the usurpation of Turgot's definition by Laws. People accept 1 oz silver coins (Tolers - dollars), then there is a coinage act, generally sold to protect the people from debasement, but then amended to do the act of debasement.

Even Rome, gold to silver to copper. We had silver certificates.

When the government replaces silver with copper, is that Law or Turgot?

Blogger tz March 01, 2013 7:34 AM  

Note also neither definition discusses credit, however under Law's system, there would be no need for the king to borrow, he could always inflate. Under Turgot's definition, the sovereign would need to obtain the cash through borrowing or immediate (instead of delayed) taxation.

Blogger tz March 01, 2013 7:36 AM  

Are bills of credit - things like warehouse receipts for a commodity or checks "money"? Under either definition.

(I have my own thoughts but as it is a debate I thought the right questions are more important at this point).

Anonymous Stilicho March 01, 2013 7:38 AM  

At the peak in 2007, there were $7 in credit for every dollar of M2. It is still $5.5 in credit for each $1 today.
At the peak in 2007, there were >$35 in credit for every dollar of M1. It is below $25 today.

M2: a measure of the money supply; M1 plus net time deposits (other than large certificates of deposit).
M1: a measure of the money supply; includes currency in circulation plus demand deposits or checking account balances.


And now you have revealed Bernanke's master plan: reduce financial sector leverage by creating more base money and supporting the federal government's transfer of bad debts from the TBTF banks to its own ledger. However, Bernanke's plan has a flaw which he does not and likely cannot recognize: the dollars he creates have no value beyond the momentary willingness of producers to accept them in exchange for goods, services, etc. While the neo-keynesians and monetarists correctly assume that gold has no intrinsic value (while missing the whole point about the subjectivity of value) they incorrectly assume that fiat dollars have intrinsic value. How then, should we expect them to grok the problems with their policies when they think they are replacing bad debts with something of lasting value? Ad in their complete failure to understand that the command and control economy's pricing problem also, or perhaps especially, applies to money and false signals not only permeate, they dominate the markets. All markets. Because all markets, now with steroids!

Anonymous Stilicho March 01, 2013 7:41 AM  

Note also neither definition discusses credit, however under Law's system, there would be no need for the king to borrow, he could always inflate. Under Turgot's definition, the sovereign would need to obtain the cash through borrowing or immediate (instead of delayed) taxation.

Under Law's system the sovereign simply inflates by pretending to borrow from the central bank.

Anonymous sprach von Teufelshunden March 01, 2013 7:46 AM  

So far what is money, I agree with Doug Casey, who points us to Aristotle. The interesting thing here, is that Luther, in his Trade and Usury speaks of the "ancients" and the fact that even they warned us about certain monetary devices and schemes, that even St. Paul makes reference too with "new inventions." That Luther again makes reference to Paul, and one could extrapolate that he is also referring to Aristotle, being that Luther trained as a doctor of theology (and before that, trained in law), was expert in Aristotelian physics. There are few scholars today, that match that kind of acumen, and one will find those mostly at the Vatican, and some select reformed/protestant/evangelical seminaries.

Now on inflation, I believe the "smoking gun" on the fact that we are indeed heading into the direction of massive, runaway inflation (even if one does not wish to call it of the hyper variety) is Bennie Bernanke himself. I will defer to Simon Black for amplification:

"[The Federal Reserve has] 25 years of success in keeping inflation low and stable, not just in the United States but around the world."

Translation: "I have not set foot in a grocery store or gas station in decades."

"The best way to get interest rates up is to not raise them too quickly."

Translation:
"No matter what, I'm going to continue printing money and justify it with puzzling drivel."

"[S]avers have many hats. They may own fixed income instruments, like bonds, but they also may own stocks or a house or a business. . . And those values have gone up, the stock market has roughly doubled, as you know, in the past few years."

Translation:
"In order to not get eaten alive by inflation, I will force responsible savers to assume unnecessary risks in an overinflated stock market that has just now, finally, reached its nominal highs from 2007 thanks to my money printing."


Personally, I fail to see what productive use of a discussion on inflation vs. deflation is to most, except that maybe post-collapse it would be more appropriate for the purposes of guarding our posterity. For the immediate time-frame of most concerned, we need to keep our eyes on the ball, and prepare accordingly for the near future at hand. We are in the process of experiencing a paradigm shift. [1]




------------
[1] The aforementioned link to Heneghan, speaks more to secular/temporal solutions. This itself will produce a shift, as all shifts in time, are of the financial axiom. At the same time, we must also consider the spiritual matters, taking place on the same exact stage.

Redefining Anti-semitism (certainly covers the spiritual, but also amplifies that facts of current and past financial histories. One extrapolates from this, just who this Bennie Bernanke really is.)

ISON (definitely portends spiritual matters from the perspective of a trained scientist) [ref: 02-21-13 with Peter Kling]

Exo-Vaticana (A financial solution is certainly at hand, that may well begin to alleviate 100 years of damage. However, something else is also about to happen)

Anonymous Stilicho March 01, 2013 7:52 AM  

^^should be "Because all markets use money...now with steroids!" you get the point.

Anonymous Asher March 01, 2013 7:53 AM  

I don't see much of a functional difference between the two definitions. How are either of these definitions used to model behavior?

Blogger Nate March 01, 2013 7:54 AM  

"Also, Nate's concept of transactional completeness completely breaks down in light of the intertwined financial complexity of major interactions. What happens with transactions that never unwind? Or take many many steps to reach a point recognizable as unwinding, and only partially?"

Those are not transactions. they are bets. When the bets are complete... then and only then does a transaction take place. Tell ya what... grab a derivative and go down to the dollar general and use it to buy some milk.

Then come back and tell me its money.

Anonymous Josh March 01, 2013 7:59 AM  

Dread:

the final implementation of the Wanta-Reagan-Mitterrand Protocols aka the bilateral tax agreement between the IMF, the U.S. Treasury and Austrian banks will take place within hours

Seems like it's put up or shut up. It says "within hours." So, when this does not happen within hours, will you shut up about it?

Anonymous Asher March 01, 2013 7:59 AM  

My guess is that hyperinflation of fiat money represents a behavioral loss of confidence in the functionality of the issuing entity.

Anonymous Josh March 01, 2013 8:00 AM  

Those are not transactions. they are bets.

You need more coffee. They can be both.

Anonymous Josh March 01, 2013 8:02 AM  

My guess is that hyperinflation of fiat money represents a behavioral loss of confidence in the functionality of the issuing entity.

Hyperinflation is primarily a political, not economic, event.

Anonymous Stilicho March 01, 2013 8:03 AM  

Sprach, we're veering OT here, but do you actually believe that Lew (and Obama) want to end the Fed?

Blogger tz March 01, 2013 8:05 AM  

At the top younlist 5 definitions by the Keynesians. Yet they aren't definitions as much as the context in which something is defined.

I tend to use any piece of furniture as a chair or table, but does it make them into a chair or table.

Put another way, are we defining the platonic form or what people are actually doing things with? Platonic money may or may not be subject to platonic inflation, but this is the identical problem with Nate's definitions.

In Euclidean space, triangles sum to 180 degrees. But are we talking Euclidean space?

Neither side of the debate has established the equivalent - in what context are we defining 'money'? How are we using the word?

So now there are three "definitions" for the same word, Nate's, Law's, and Turgot's. But are they talking about the same thing or in the same context or different things (which may overlap) in different contexts?

For Nate, if I understand his definition correctly, the only important aspect is the exchange, so it would be both or neither Law and/nor Turgot.

I will also add a note on Law's definition using his highway example. The King has no power to build a road in the air or through solid rock, he needs a bridge or tunnel. It might be argued that the king has similar powers to define money but can't revoke mathematics. For example, our constitution specified gold and silver, but not tin, lead, mercury, copper, or anything else as money. Is that limitation what Law was aiming at (and the controversy in the 1870s and later about no silver coin during the Comstock lode)?

Anonymous Asher March 01, 2013 8:06 AM  

@ Nate

If I were walking home from the store with a gallon of milk and walked past you and you offered me that derivative for my milk I'd take it in a second. Then I'd walk back to the store and buy another gallon with dollars.

The reason that store won't take your derivative is due to transactions costs, notthat the derivative isn't money-like.

Anonymous Josh March 01, 2013 8:09 AM  

I don't see much of a functional difference between the two definitions.

Law's definition leads to inflation, credit bubbles, and exacerbations of the business cycle because the money supply becomes a political tool.

Turgot's doesn't.

Blogger tz March 01, 2013 8:10 AM  

Tell ya what... grab a derivative and go down to the dollar general and use it to buy some milk.
Then come back and tell me its money.


I did. Visa, Mastercard, Discover... Or even a check.

Anonymous Koanic March 01, 2013 8:10 AM  

"Tell ya what... grab a derivative and go down to the dollar general and use it to buy some milk.

Then come back and tell me its money."

I will get the same reaction if I try to use Renminbi or gold coins. Does that mean that these aren't money, either?

Anonymous Asher March 01, 2013 8:11 AM  

@ Josh

That's correct. Hyperinflation is mostly involving sentiments about a political system.

@ tz

Yeah, neither definition seems to have much to do with modeling behaviors.

Anonymous Josh March 01, 2013 8:12 AM  

Sprach, we're veering OT here, but do you actually believe that Lew (and Obama) want to end the Fed?

Dude, it's the aliens...

Anonymous Asher March 01, 2013 8:17 AM  

@ Josh

Politicians are not motivated by economic theories but by power - they mayuse economic theoies to justify their actions but that is all they're doing. The point is that the metaphysical definitions of money, in themselves, are not theulitimate cause of any policy choices, regardless of what anyone says.

Anonymous Josh March 01, 2013 8:18 AM  

Yeah, neither definition seems to have much to do with modeling behaviors.

That's not really the point.

Have you read much of Austrian business cycle theory? The ability of the Austrian school to explain business cycles is rooted in some level on the second definition of money.

Blogger Nate March 01, 2013 8:19 AM  

"I did. Visa, Mastercard, Discover... Or even a check."

No mate... you did not. You bought it with dollars. Visa... or the check... was just the hand that moved the dollars to the seller.

If you really think you can buy something with a check... consider the fact that bouncing them is considered theft in every state of the union.

That's because checks aren't money. The transaction isn't complete until the seller actually gets his money.

Anonymous Asher March 01, 2013 8:20 AM  

@ Josh

Would any politician in Weimar Germany hve been able to explicate Law's definition of money? Hell, I'd be surprised if even one coul offer a working definition of money, at ll.

Blogger Nate March 01, 2013 8:22 AM  

" The point is that the metaphysical definitions of money, in themselves, are not theulitimate cause of any policy choices, regardless of what anyone says."

Gravity doesn't cause one to leap off of a building. It just helps him reach the ground.

What causes the policy choices is irrelevant. What influences the effects of those choices... is everything.

You should be able to see how the different characteristics applied would lead to different outcomes of various political choices.

Anonymous Roundtine March 01, 2013 8:23 AM  

And now you have revealed Bernanke's master plan

This is why I say the Fed can continue QEIII/IV in the current form for about 10-15 years, assuming no GDP growth and no major deflationary events. For the ratio to get down to pre-bubble levels, there is a long way to go since fedgov is keeping total credit growing slightly. That's not how long I think they'll actually run it for, other events will intervene, but the hole is massive. This is where I disagree with the Schiffs in timing: they see money supply in a vacuum and constantly forecast the inflationary surge. Ultimately, I suspect he will be proven correct, but not yet.

Blogger Nate March 01, 2013 8:25 AM  

"The reason that store won't take your derivative is due to transactions costs, notthat the derivative isn't money-like."

No.

the reason is... they have no idea what the hell it is... if its real... or if it has any value at all. They have no idea how to use it to complete a transaction... so they cannot use it as money.

Amusingly... in your analogy... the derivite would be barter.

Blogger tz March 01, 2013 8:25 AM  

Visa... or the check... was just the hand that moved the dollars to the seller.
The dollars don't move that fast. A check needs to be cashed. A derivative can be turned into dollars too.
Oh, and I used to have a Visa denominated in Pounds Sterling - it was accepted at the dollar store so no dollars came from me. Canadians here with credit cards and checks (maybe traveler's checks) have their stuff accepted too.
And the seller may never get his money, he might endorse the check over to someone else.

Anonymous Asher March 01, 2013 8:28 AM  

@ Josh

It's entirely the point - a definition is worthless if it isn't explaining behvior - and, yes, I hae read a great deal of litereature on the business cycle, Austrian and otherwise.

the Austrian school has an excellent critique of government intervention but it doesn't have much of an explanation of why large scale governmental intervention happens in the first place.

Anonymous Roundtine March 01, 2013 8:31 AM  

Nate,

What do you do with perpetual credit, such as money markets? These I assume are not money under your definition, yet people almost never demand final payment, except in 2008 when the whole system was threatened with deflationary collapse.

Anonymous Stilicho March 01, 2013 8:37 AM  

the Austrian school has an excellent critique of government intervention but it doesn't have much of an explanation of why large scale governmental intervention happens in the first place.

So write Vox a letter and maybe he'll give you a post on that subject. Here, today, we're dealing with the nature of money and the inflation/deflation debate. Your issue is about the nature of man.

Blogger Joshua_D March 01, 2013 8:40 AM  

Asher March 01, 2013 8:28 AM

the Austrian school has an excellent critique of government intervention but it doesn't have much of an explanation of why large scale governmental intervention happens in the first place.


Large scale government intervention happens for the same reason that everything else happens - personal self interest.

The people we call "the government" have a self interest in intervening to "benefit" themselves or their handlers.

Blogger Joshua_D March 01, 2013 8:42 AM  

Koanic March 01, 2013 8:10 AM
"Tell ya what... grab a derivative and go down to the dollar general and use it to buy some milk.

Then come back and tell me its money."

I will get the same reaction if I try to use Renminbi or gold coins. Does that mean that these aren't money, either?


I would also like you to answer this question, Nate.

Anonymous Despair March 01, 2013 8:45 AM  

I've been waiting for this for years!

After this is concluded, I hope Vox will finally give us his full beliefs on the trinity. Another topic where he has teased us, without fully fleshing it out.

Anonymous fred March 01, 2013 8:46 AM  

Re: the argument of whether debt is money...

My understand is that in the FedRes system money begins as bonds sold by the Fed. Isn't it therefore backwards to describe debt as money when in reality money is debt? AFAICS that makes the two the same for all intents and purposes.

Anonymous Asher March 01, 2013 8:47 AM  

@ Nate

the reason is... they have no idea what the hell it is...

This is a a type of transaction cost. Google assymetry of knowledge and transaction cost.. i'd provide a link but I'm on my phone. Stores are set up to make a profit. Even if you brought in a derivTive worth 1k and tried to buy a gallon of milk that $997 margin would be cancelled by the costs associated with ascertaining the dollar value of that asset within that particular organization.

However,s omeone with a knowledge of financial derivatives wouldn't incur the same transaction costs and would exchange a gallon of milk for that derivatiive in a second. If I were a cashier at safeway and you came in with a derivative valued at $1k I would hand $20 to a coworker on brek and tell them to buy me a gallon of milk for me and keep the change. I'd be up $980, they'd be up$17 andyou'd have your gallon of milk.

It's jut transction costs.

Anonymous Despair March 01, 2013 8:49 AM  

As the liberty dollar or NORFED experiment showed, some will accept silver without even knowing exactly what it is. The weight and the shiny surface was enough to get many to accept it. Thats why for a while there, they said to, "Just do the drop".

Anonymous Asher March 01, 2013 8:53 AM  

@ Stilicho

Discussions of "the nature of 'x'" are worthless if they're not modeling behavior and function. Since money is something created by men any discussion of the "nature" of money is going to involve the nature of man.

Blogger Nate March 01, 2013 8:54 AM  

"And the seller may never get his money, he might endorse the check over to someone else."

And when the check bounces its still theft... so its still not money.

Your credit card isn't money either. the seller didn't accept your credit card. He accepted an IOU from Visa.... which he took on faith that would be converted to actual money.

Anonymous Asher March 01, 2013 8:55 AM  

@ Despair

That's a great handle. All we need is someone going by the handle "Look on ye mighty ..."

Blogger Nate March 01, 2013 9:02 AM  

"I will get the same reaction if I try to use Renminbi or gold coins. Does that mean that these aren't money, either?"

As I have said over and over... a thing can be money in one exchange and not money in another exchange.

Gold coins are referred to as money... because they have been used for exchange literally throughout all of recorded history.

Let me put it another way.

If you paid me for my milk with a gold coin... would the transaction be complete? Yes.

If Asher paid me for my milk with a derivative would the transaction be complete? No. I would have to go through the process of converting the derivative to actual money... for example... it could be fraudulent... it could be totally worthless... its like a lottery ticket. That is why it is barter. Unless it can be shown that the Milk and the Derivative were of similar value and that value was represented in the exchange... and the exchange was completed... then the derivative was not acting as money. It was either a very cumbersome IOU... or it was barter.

Anonymous Asher March 01, 2013 9:02 AM  

@ Nate

What percentage of checks written are bounced? You're discourse still isn't about modeling behavior.

Anonymous VD March 01, 2013 9:07 AM  

Everyone, please remember that Nate is debating me, not you. He can certainly answer your questions if he wishes, but he does not have to do so. Only his official response on his blog will count with concern to the debate.

Trying to skip ahead is unlikely to accomplish much, as it is important to get clarification of the basics before leaping to the conclusions. Demanding "but what about Euro-denominated money market checking accounts" is very unlikely to do anything but muddy the waters.

Anonymous VD March 01, 2013 9:10 AM  

Since money is something created by men any discussion of the "nature" of money is going to involve the nature of man.

And Asher promptly demonstrates that he doesn't understand the relevant issues as he tries to steer the discussion to his one and only subject.

You're not a part of this one, Asher. You are also ludicrously wrong. Plastic is also created by men and everyone understands the definition of plastic without delving into the nature of man.

TL;DR: Shut up, Asher.

Anonymous fred March 01, 2013 9:13 AM  

@Nate "Your credit card isn't money either. the seller didn't accept your credit card. He accepted an IOU from Visa.... which he took on faith that would be converted to actual money."

Krul similarly quoted you at March 01, 2013 4:42 AM:

"What about debit cards? I swipe your debit card... I give you cows... we're not done. Your bank has to send money to my bank. That's an additional transaction. Debit cards aren't money. Same for checks. Checks aren't money either. They are IOUs for money.

Diamonds.. Silver... Paper... Copper... all of these things can be money... if they are employed to complete an exchange."

How is then Diamonds et al any more - or less - money than a CC? If I need to pay my taxes you can give me boatloads of gold but until I conduct an additional transaction it helps not at all in paying my taxes. Only FRNs will do that. In fact the CC is a better facilitator than gold in that regard. In fact a cow purchase only works if the seller actually sees value in the diamond or whatever. The only universal medium of exchange is coins and green paper - which all starts as debt in the form of a bond.

I realize that you said "can be money" in that quote but in this example, and by your definition (of not needing an addition transaction), the CC "can be money" equally with gold. That definition, while conducive to your position, sure seems to have some holes in it.

Anonymous OK March 01, 2013 9:14 AM  

It seems that most of this is complicating the issue.

The important question is, will the United States Dollar lose purchasing power?

The answer is yes.

Anonymous fred March 01, 2013 9:15 AM  

@VD "Everyone, please remember that Nate is debating me, not you."

Sorry. I didn't see that until after I asked the question.

Anonymous VD March 01, 2013 9:19 AM  

It's fine to ask questions, Fred. I'm simply pointing out that Nate can ignore them if he wishes in this particular case.

Anonymous Koanic March 01, 2013 9:20 AM  

"As I have said over and over... a thing can be money in one exchange and not money in another exchange.

Gold coins are referred to as money... because they have been used for exchange literally throughout all of recorded history."

The absurdity is your condition of transactional acceptance at point x to qualify as money. So if I am standing on a deserted street corner with a suitcase full of USD, I have no money because there's no one to make a transaction. After all, it's a simple matter of distance with you - there are places where Renminbi and gold coins would be accepted. But apparently anything out of arm's reach doesn't count. Or perhaps money only exists at the very nanosecond of exchange, in which case it could be accurately said at any sufficiently precise moment that no money exists anywhere. Behold, I HAVE PROVED DEFLATION!

I win. Nate slipped on my peanut shells whilst entering the arena.

Anonymous Asher March 01, 2013 9:21 AM  

@ Vd

Seriously???

Who discusses the "nature" of plastic? It's idiotic comment like that by smart men ike you that demonstrate the worthlessness of metaphysics.

Frankly, I cannot remember te last time I witnessed such a gaping chasm between intellectual ability and manifestidiocy.

When we discuss the "nature" - notice the scare quotes-of money we are talking about how human beings behave, I.e. the nature of man.

I wo't be able to give you a more detailed response than that at this moment as I'm on my phone.

Anonymous VD March 01, 2013 9:27 AM  

Asher, what part of "YOU ARE NOT INVOLVED" do you not understand? I don't want "a more detailed response from you". I don't want any response from you. This discussion does not involve you.

Shut up, Asher.

Anonymous Josh March 01, 2013 9:29 AM  

Aspie gonna aspie

Anonymous Asher March 01, 2013 9:36 AM  

@ Nate

a thing can be money in one exchange and not money in another exchange.

This is a haping hole in your theory - You need to provide some explanation of when something is money and when it is not money.

If Asher paid me for my milk with a derivative would the transaction be complete?

Of course the transaction would be complete. If I were to go somewhere else and exchange that derivative for dollars that would be an entirely different transaction.

Unless it can be shown that the Milk and the Derivative were of similar value a

Uh-oh. SOmeone just abandoned the so-called "subjective theory of value". This is where metaphysics leads - you end up contradicting your own premises.

Blogger Nate March 01, 2013 9:36 AM  

"I win. Nate slipped on my peanut shells whilst entering the arena."

I should translate this...

"I'm probably tall enough for this ride... but rather than actually trying to understand the concepts involved... I'm going to make an idiot of myself by demonstrating that I have no idea what anyone is actually talking about... and then proclaim my intellectual superiority."


Ladies and Gentlemen... I give you the Ultimate Midwit.

Anonymous Koanic March 01, 2013 9:37 AM  

It is not man, but woman to whom the nature of plastic is related.

Speaking of which, let's apply Nate's technique to the obesity epidemic. The human body is 60% water, and water is not fat, hence the fat are merely overhydrated.

Blogger Nate March 01, 2013 9:38 AM  

"
Uh-oh. SOmeone just abandoned the so-called "subjective theory of value". This is where metaphysics leads - you end up contradicting your own premises."

No Asher... no on abandoned anything. Like Koanic you're just demonstrating that you don't understand the discussion.

Either try to follow along... or...

Shut Up, Asher.

Anonymous Asher March 01, 2013 9:40 AM  

@ Vd

This is your blog. I respect that.

I will leave you to your metaphysical drooling, which has nothing to do with human functioning.

I will come bck when you and Nate are done drooling all over the internat.

Blogger Joshua_D March 01, 2013 9:49 AM  

Nate March 01, 2013 9:36 AM
"I win. Nate slipped on my peanut shells whilst entering the arena."

I should translate this...

"I'm probably tall enough for this ride... but rather than actually trying to understand the concepts involved... I'm going to make an idiot of myself by demonstrating that I have no idea what anyone is actually talking about... and then proclaim my intellectual superiority."


Ladies and Gentlemen... I give you the Ultimate Midwit.


I guess I'm a midwit as well, because you're definition of money seems to fall very short. You keep switching between calling something money and barter and not money, based on your perception of when a transaction is competed and when it isn't.

Like someone said in an earlier thread, you have invented Schrödinger's Money. ;)

You say something is money if it can be used to complete a transaction, but you also have a specific idea of what "complete" means, so I think you'll need to expand that definition more.

Anonymous Josh March 01, 2013 9:52 AM  

It seems like Nate's definition (if he going to sick with that in his response post) is simultaneously too narrow and too broad.

Blogger Joshua_D March 01, 2013 9:53 AM  

or "clarify" your definition a more.

Anonymous Toby Temple March 01, 2013 9:54 AM  

Let me put it this way.

You have a house and the title deed of the house.

Is the title deed of the house the house?

You have a debit card and you have $30,000 cash in the account.

Is the debit card the $30,000 cash?

Anonymous Koanic March 01, 2013 9:58 AM  

"I'm probably tall enough for this ride"

So... a midwit is someone intelligent who decides to mess with you. Got it.

Anyway, everyone knows money = women - power.

Oh snap, metaphysics! He didn't!

Anonymous Godfrey March 01, 2013 9:59 AM  

Does fiat “money” have intrinsic value or acquired value?

Blogger Joshua_D March 01, 2013 10:02 AM  

Nate March 01, 2013 9:02 AM

If Asher paid me for my milk with a derivative would the transaction be complete? No. I would have to go through the process of converting the derivative to actual money... for example... it could be fraudulent... it could be totally worthless... its like a lottery ticket. That is why it is barter. Unless it can be shown that the Milk and the Derivative were of similar value and that value was represented in the exchange... and the exchange was completed... then the derivative was not acting as money. It was either a very cumbersome IOU... or it was barter.


I don't think something being fraudulent would have any impact on whether it is money or not. Fraud is fraud whether you are selling a fake Rolex or giving someone fake $100 bills.

But, I pretty much agree that a CD isn't "money," but not because you claim is can't complete and exchange, but rather because a CD isn't divisible into smaller units or widely accepted as money.

However, a CD could easily complete a transaction between two people.

Anonymous Salt March 01, 2013 10:10 AM  

That's because checks aren't money. The transaction isn't complete until the seller actually gets his money.

What's money?

Anonymous Toby Temple March 01, 2013 10:15 AM  

What's money?

On layman's term, the paper that has numbers with currency symbols and the signatures of the heads of states and the head of central banks.

A check is basically something that will ruin your day whenever it bounces.

Anonymous Salt March 01, 2013 10:27 AM  

@Nate If you paid me for my milk with a gold coin... would the transaction be complete? Yes.

If Asher paid me for my milk with a derivative would the transaction be complete? No.


Therein lies a real problem. Asher may say the transaction is complete as one thing was exchanged for another. It is only you, Nate, who says otherwise. Using your rubric, exchange a gold coin with me for milk and I would be correct in saying the transaction would not be complete as gold is not acceptable as payment of tax; It would require conversion to FRN first.

Gold's historical use as money is irrelevant if it is not the current medium of exchange capable of use in paying taxes or commonly settling debts. This is not to say gold is not a store of wealth as it most certainly is.

Blogger James Dixon March 01, 2013 10:30 AM  

> I would think that point 5 of Turgot is useful for determining the quality of competing monies.

Agreed completely. But quality is not necessarily a defining characteristic. A poor quality wrench brought for $1.95 from Walmart is still just as much a wrench as a much higher quality one bought from a specialty retailer. It's not as good a wrench, but it's still a wrench.

However, I should note that to be useful as a medium of exchange, the item has to keep it's value for at least a limited time. Anything which drops in value by 50% overnight isn't going to be very useful as a medium of exchange, and will eventually be abandoned. So anything used as money has to have some minimal store of value. It just doesn't have to be long term.

Anonymous tungsten March 01, 2013 10:31 AM  

Nate, will you be posting your responses to Vox on his blog or on your own blog?

Anonymous Tallen March 01, 2013 10:35 AM  

Looking at Law's ideas and Turgot's, it looks like comparing the two is like comparing apples and oranges. The summary of Law describes what money can be used for (or perhaps: should be used for, is used for, must be used for?). Whereas Turgot's explanation states what money is. How do you compare the two? They don't even seem mutually exclusive.

Anonymous The One March 01, 2013 10:46 AM  

@Salt

Why does taxes come into play? There are many places without a sales/income tax and therefore it would be irrelevant if gold could be used to pay taxes or not. A transaction is completed between two parties, not three.

Ability to pay taxes with is not a defining characteristic of money.

Anonymous Other Josh March 01, 2013 10:48 AM  

We're only in the first round and this is already entertaining!

Anonymous The One March 01, 2013 10:48 AM  

Tung, NAte's own blog will feature the actual response.

Anonymous Stilicho March 01, 2013 10:54 AM  

Anyway, everyone knows money = women - power.

Four things greater than all things are,—
Women and Horses and Power and War

Anonymous Salt March 01, 2013 11:04 AM  

@The One

It's not about A transaction is completed between two parties, not three, which is not necessarily the case.

It's about, what is money?

Blogger foxmarks March 01, 2013 11:07 AM  

I have a tendency to read the correct definition of “money” as the one I prefer. But what I think doesn’t matter. What does matter is the definition that applies best across an economy. In other words, what functions as “money”, or which definition best models our behavior?

I am biased toward Turgot, as I consider “store of value” and essential aspect of money. But as was pointed out earlier, there is no modern currency that has been an effective store of value. And therefore any derivative of currency (eg; debt instrument) is not a store of value, and cannot be money under my prejudice.

At the micro level, people do use currency as a short-term store of value. It may not be an *effective* store of value, but if we are trying to model or predict micro choices and aggregate them into a macro description, I suspect the best definition of money includes a variable time component.

Anonymous Josh March 01, 2013 11:07 AM  

Are gift cards a form of money? I would say yes.

Anonymous Salt March 01, 2013 11:09 AM  

@Josh

Is a gift card redeemable in the same specie it was acquired with?

Anonymous The One March 01, 2013 11:13 AM  

@Salt

And I am saying the ability to pay taxes with it is NOT a defining characteristic of money, which is what you seem to be implying.

Anonymous Josh March 01, 2013 11:14 AM  

Is a gift card redeemable in the same specie it was acquired with?

I would assume so, but I'm note sure: like Walmart in Canada and the USA.

Anonymous The One March 01, 2013 11:15 AM  

@Salt

Depending on the gift card, yes. In the past I have used visa gift cards to make deposits into online poker accounts, than I may request a withdrawal. This obviously doesn't work for brand name gift cards

Anonymous Salt March 01, 2013 11:17 AM  

OT but hysterical... Bloomy speaks....

“We are spending money we don’t have,” Mr. Bloomberg explained. “It’s not like your household. In your household, people are saying, ‘Oh, you can’t spend money you don’t have.’ That is true for your household because nobody is going to lend you an infinite amount of money. When it comes to the United States federal government, people do seem willing to lend us an infinite amount of money. … Our debt is so big and so many people own it that it’s preposterous to think that they would stop selling us more. It’s the old story: If you owe the bank $50,000, you got a problem. If you owe the bank $50 million, they got a problem. And that’s a problem for the lenders. They can’t stop lending us more money.”

http://politicker.com/2013/03/mayor-bloomberg-dont-panic-about-the-sequester/

Blogger foxmarks March 01, 2013 11:17 AM  

Gift cards had an expiration date and/or a built-in loss of value over time. When they lose value, is that inflationary or deflationary? Can “money” expire?

Anonymous The One March 01, 2013 11:18 AM  

Yea, I got a loan for a 32oz soda, but once Bloomberg outlawed those, I was debt free. Thanks Bloomie!

Anonymous Salt March 01, 2013 11:20 AM  

Is a gift card redeemable in the same specie it was acquired with?

I would assume so, but I'm note sure: like Walmart in Canada and the USA.



Cool. Might I use my Wal-Mart gift card at J.C.Penny?

Anonymous Josh March 01, 2013 11:30 AM  

Cool. Might I use my Wal-Mart gift card at J.C.Penny?

No. But you can't use gold there either.

Anonymous Salt March 01, 2013 11:40 AM  

@Josh

Exactly. Now, why not?

Anonymous The One March 01, 2013 11:41 AM  

It seems to me if an item is used by x amount of people for money, it becomes money. Gold isn't taken in stores, you have to exchange for FRN's. But FRN's aren't taken in stores in Europe, you have to exchange them for Euro's, yet most would say FRN's are money. Gold is money to the Ilk. Gift cards are money to the employees of the store where the gift card is from, etc, etc.

Blogger James Dixon March 01, 2013 11:51 AM  

> Bloomberg: "And that’s a problem for the lenders. They can’t stop lending us more money.”

Bloomberg ignores the fact that when a problem becomes big enough, it's dealt with. Sooner or later, the lenders will decide to write off their loses. I'm not going to even try to predict when, but it's going to happen.

Anonymous bob k. mando March 01, 2013 12:10 PM  

somehow, today's Penny Arcade strip seems relevant to the question at hand:
http://www.penny-arcade.com/comic/2013/02/29


Tycho thinks a currency which has devalued ~95% in the last 100 years is 'real' money.

multiple layers of funny there.

Anonymous Josh March 01, 2013 12:16 PM  

Can “money” expire?

Yes, if you consider its purchasing power eroding to nothing expiring.

The money may not expire, but its utility can.

Anonymous Athor Pel March 01, 2013 12:21 PM  

" The One March 01, 2013 10:46 AM
...
Ability to pay taxes with is not a defining characteristic of money.
"



It isn't the ability to pay taxes in dollars, it is the requirement to pay taxes in dollars. You and I are only able to clear a tax debt by using dollars.

The requirement is there to create the subconscious impression that dollars have all the characteristics of more traditional harder currencies. Which is fair when the tax levying government also sees itself as the controller of the money supply.


Blogger tz March 01, 2013 12:30 PM  

Of course if you think FRNs might be money, the way to deflate is to only accept the notes only up to a specific date and not newer ones (much as Euros printed in Germany seem to be of more value).

Blogger tz March 01, 2013 12:31 PM  

I now turn it over to Nate to declare which of these two competing traditions he holds to be money, or if he has some third definition of money he believes would be better utilized concerning this debate.

I've already noted I've read Nate's definition of money (and should avoid the temptation to attempt to elaborate here, I posted my dissent in the other threads), and it corresponds to neither Turgot's nor Law's definition.

To repeat and clarify on Law's definition, it does NOT imply fiat currency, at least not directly in the quoted text.

To go back to the roads, if an enemy is attacking, it is often a good idea to destroy the roads, bridges, and tunnels while retreating instead of leaving them there for the enemy to use.

Particularly 5. The supply of money as a political monopoly. This can be interpreted either as to have whatever whim be used as the supply, or something like defining "fraud" in the law - what actions or cases are criminal or civil fraud and which are not? Government has a monopoly definition on (positive) law, by definition. It can be based on Natural Law or Whim. I pointed to the lack of a silver coin during the Comstock Lode as perhaps an error but possibly proper exercise of the power (bimetallism v.s. Gold standard) as to what Law might have been getting at. It can be a usurpation or tyrannical to debase or issue fiat currency. If you are implying that there is no limit to government's ability to redefine money, I think it goes beyond what Law is saying, almost to a Hobbesian view.

Anonymous Jack Amok March 01, 2013 12:34 PM  

Law's definition leads to inflation, credit bubbles, and exacerbations of the business cycle because the money supply becomes a political tool.

Turgot's doesn't.


That's endowing Turgot's theory with magical powers.

The problem with Law's definition is that it explicitly encourages governments to mess around, which given human nature is a recipe for disaster.

The problem with Turgot's definition is it is really just Law's definition with one very dubious claim added to avoid inflation. The dubious claim is that money is 3. An object of commerce i.e. an exchangeable good, of which 5.An intrinsic store of value is a corollary. Goldbugs are extremely fond of these two points.

The problem is, unless you're making electrical components or jewelry, gold and silver really have no "intrinsic" value. What they have is a traditionally accepted value. That tradition may be older and stronger than the tradition of inputing value to US Dollars, but it's not fundamentally different. Both types of money find their source of value in the expectation that random strangers will share your valuation.

This is the hamsterizing of Tugot's definition. It's not without value, since it explicitly delegitimizes the government monkeying that Law encourages, but it doesn't prevent it. The real improvments from Law to Turgot boil down to this:

1. The King should not use the money supply as an instrument of policy, but rather should attempt to keep it stable and predictable.

2. To encourage #1, money should use the strongest traditions, the ones least suseptible to manipulation by the King.


Anonymous Josh March 01, 2013 1:17 PM  

The problem is, unless you're making electrical components or jewelry, gold and silver really have no "intrinsic" value. What they have is a traditionally accepted value. That tradition may be older and stronger than the tradition of inputing value to US Dollars, but it's not fundamentally different. Both types of money find their source of value in the expectation that random strangers will share your valuation.

As I previously said, I think that intrinsic value is really just a shorthand for scarcity, permanency, etc. that's what makes gold useful as a currency.

Anonymous Godfrey March 01, 2013 1:25 PM  

Ultimately, doesn’t nearly everything merely possess subjective value?

Anonymous Josh March 01, 2013 1:36 PM  

Ultimately, doesn’t nearly everything merely possess subjective value?

Yes. The supply demand curve is ironclad.

Anonymous marenostrum March 01, 2013 1:41 PM  

In university I was taught in microeconomics course that money has the following functions:
- measure of value
- means of exchange
- payment instrument
- saving tool
- universal money
The last is not so clear.
This is some combination between Turgot and Law.

Blogger James Dixon March 01, 2013 1:48 PM  

> No. But you can't use gold there either.

Actually, you can. If you take a one ounce American Eagle gold coin into Walmart, they will take it at its face value of $50.

> ... that's what makes gold useful as a currency.

It's also easily malleable and doesn't tarnish.

Anonymous WaterBoy March 01, 2013 2:06 PM  

Enjoying this discussion considerably. Thanks to (almost) all for your insights.

Anonymous WaterBoy March 01, 2013 2:37 PM  

Asher: "Discussions of "the nature of 'x'" are worthless if they're not modeling behavior and function."

Vox: "And Asher promptly demonstrates that he doesn't understand the relevant issues as he tries to steer the discussion to his one and only subject...TL;DR: Shut up, Asher."

Asher: "Frankly, I cannot remember te last time I witnessed such a gaping chasm between intellectual ability and manifestidiocy."

Vox: "Asher, what part of "YOU ARE NOT INVOLVED" do you not understand? I don't want "a more detailed response from you". I don't want any response from you. This discussion does not involve you. Shut up, Asher."

Asher: "I will leave you to your metaphysical drooling, which has nothing to do with human functioning. I will come bck when you and Nate are done drooling all over the internat."

Asher, this is not the first time such an exchange has gone on between you and others on this forum. Nor, unfortunately, do I suspect it will be the last. You're apparently an intelligent person, but always seem to be missing the salient meta-point. So if I may make a suggestion, it would be this: Why not write Vox directly via email if you wish a discussion with him along those lines, rather than continuously trying to remake this forum into your image of how it should be?

Now, Vox may or may not respond to you with anything more than another, "Shut up, Asher". But at the very least it would do a courtesy to the other forum participants to not have to deal with your repeated attempts to remake it into your own image.

Your cooperation would be greatly appreciated.

Anonymous Josh March 01, 2013 3:34 PM  

It's also easily malleable and doesn't tarnish.

That's what I meant by permanency. Gold stays around.

Blogger foxmarks March 01, 2013 3:42 PM  

Silver has intrinsic value in its ability to kill vampires and werewolves, too. That used to matter more than it does today…

Blogger James Dixon March 01, 2013 3:44 PM  

> That's what I meant by permanency.

I'll accept that, Josh, but it's not obvious, so it bears repeating anyway,

Anonymous Asher March 01, 2013 4:20 PM  

@ waterboy

I enjou discussing topics I find interesting. Vox has two options: banning me or responing to my points.

When we talk about "money" we are talking about how human beings behave and that entails a discussion of human nature. Vox knows this, however, he seems so wedded tometaphysics that he refuses to bring the discussion about "the nature of money" into a discussion of how humans behave.

What's bizarre is that Vox frequently makes very penetrating posts about human behavior - then he ruins it all by devolving the conversation into metaphysical mumbo-jumbo. Drop the metaphysics, it detracts from the blog.

but always seem to be missing the salient meta-point. S

There is no "meta-point, it simply doesn't exist and I've never seen one made on this blog. In my experience, all "meta" is just another way of saying "I don't want to argue for my positions.

If Vox doesn't want to argue for his positions then he's welcome to ban me.

Anonymous Asher March 01, 2013 4:27 PM  

@ waterboy

Nate is not very smart. I would be generous if I were to say that Nate is 2 SD lower than I IQ-wise. That said, I can still learn from Nate, he can teach me things.

Now, let's hypothesuze that Vox has an IQ 1 SD above mine. His attitude is that he has nothing to learn from me and that is what the greeks called hubris. Vox's general attitude is that no one has anything to teach him that he couldn't figure out better on his own, no matter how smart or informed they are.

Vox makes many brilliant insights but he is probably the single most arrogant personon the right I've ever encountered and it detracts from his insight.

Blogger James Dixon March 01, 2013 5:03 PM  

> Nate is not very smart. I would be generous if I were to say that Nate is 2 SD lower than I IQ-wise.

You might be being generous, but I doubt you would be correct.

> His attitude is that he has nothing to learn from me

His attitude is that you've not shown that he has anything to learn from you.

> Vox's general attitude is that no one has anything to teach him that he couldn't figure out better on his own

Being taught does not equate to learning. Vox may learn better on his own than being "taught" by others.

Anonymous Asher March 01, 2013 5:22 PM  

@ James Dixon

His attitude is that you've not shown that he has anything to learn from you.

There's a word for that: arrogance. I am quite certain that there is a vast range of things of which I can learn from Vox.

Being taught does not equate to learning. Vox may learn better on his own than being "taught" by others.

Lol. You contradict yourself in two sentences. Human beings are social creatures and the subjects discussed on this blog mostly relate to human things. All learning exists in relation to others. Vox did not originate ever single idea he has ex nihilo, he synthesized them via his social relations.

It is you who are conflating "being taught" with "learning". I am not trying to teach Vox anything but to have a conversation with people on interesting subjects and debate them where I think they are wrong.

I have learned things from others just by walking down the street and overhearing a conversation or even by observing body language and trying to figure things out about that person.

Vox's general attitude is one of supreme arrogance and it detracts from the analysis of his many insightful posts.

Anonymous Asher March 01, 2013 5:36 PM  

@ James Dixon

You might be being generous, but I doubt you would be correct.

I have yet to see even one thing Nate's said that rises above mundane observationand he often gets things laughably incorrect.

For example, his claim that trading a gallon of milk for a derivative wasn't complete because no "money" had traded hands. Obviously, when I receive the derivative and go trade it for dollars that is an entirely different transaction. Since the entire conversation is about money this is just question begging and it's evidence of a lack of intelligence that he couldn't foresee that obvious implication.

My guess is that Nate's IQ is right around 100 and that makes mine more than 2 SD higher than his.

Anonymous Asher March 01, 2013 5:59 PM  

@ James Dixon

Look at my observation that any discussion of "the nature of money" is going to obviously include a discussion of the nature of human beings. This is because money is something created by human beings to facilitate human functioning. Talking about money without referencing how human beings behave is about as fruitful as discussing how many angels can dance on the head of a pin.

Now, when I made that observation I was not trying to "teach" Vox but it is an obvious point that most freshman in philosophy with an IQ of 115 would see. And it would be an abvious objection in the conversation even if Vox had an IQ of 215. The history of human intelligence is one littered with very smart people vigorously arguing for very stupid ideas.

When Vox makes posts explaining and analyzing human behavior there are few in the blogosphere his equal. But when he degenerates into metaphysical nonsense such as "what is the nature of x" it seriously detracts from the value of his blog. He needs to realize that.

Consider my definition of money:

Anything someone holds onto in the prospect of trading it at some point for something else

That's a description of human behavior and not of some Platonic essence. BTW, tz earlier made the observation that Nate is getting into Platonic essences earlier so it's not just me.

Blogger Nate March 01, 2013 5:59 PM  

"I've already noted I've read Nate's definition of money (and should avoid the temptation to attempt to elaborate here, I posted my dissent in the other threads), and it corresponds to neither Turgot's nor Law's definition."

It appears my response is anticipated.

And people.... its not my definition of money. Its Ludwig Von Mises' definition of money. Its Maury Rothbard's definition of money. It is the Damned definition of Money of the Austrian School of Economics.

The fact that you didn't recognize it does not reflect any creative ability or originality on my part.

Regardless... My answer is posted for your enjoyment.

Do your worst.

Blogger Nate March 01, 2013 6:04 PM  

"My guess is that Nate's IQ is right around 100 and that makes mine more than 2 SD higher than his."

Look.

I've got my very own ankle biter.

Anonymous Asher March 01, 2013 6:09 PM  

@ James Dixon

Also, observe that Nate doesn't even seem to fully understand the concept of transaction costs, yet, he's trying to discuss the much harder concept of the money supply.

Anonymous VD March 01, 2013 6:12 PM  

His attitude is that he has nothing to learn from me and that is what the greeks called hubris. Vox's general attitude is that no one has anything to teach him that he couldn't figure out better on his own, no matter how smart or informed they are.

No, his CONCLUSION is that he has nothing to learn from you. This conclusion is based on evidence, experience, and observation. I gave you several opportunities and from them gleaned that you are a careless pedant. You certainly possess information that I don't, but then, everyone does.

Nor is it true that I believe no one has anything to teach me. Quite the opposite, actually. However, I generally prefer to learn via reading, not listening, and very few are capable of staying ahead of me in Socratic-style dialogue. It's not that I don't learn, it's just that I usually only need a few hints to grasp the point.

And people.... its not my definition of money. Its Ludwig Von Mises' definition of money. Its Maury Rothbard's definition of money. It is the Damned definition of Money of the Austrian School of Economics.

(laughs) Wait, what?

Anonymous Asher March 01, 2013 6:14 PM  

@ James Dixon

I've got my very own ankle biter.

And your IQ seems to be right around the average black American. You were the one who began addressing me, not the other way around. I respond to your comment directed at me and that makes me an ankle-biter?

I grew up in a pretty ghetto neighborhood with a bunch of semi-illiterates and some of them were probably more competent to engage in a rational conversation than you.

I'm dead serious about that.

Blogger Nate March 01, 2013 6:22 PM  

And... I didn't put this in my official response of course... but... here.. see this quote from Vox's post...

"I will not go into detail to support Salerno's conclusions, but a brief glimpse at the most influential textbook in modern economic history, Paul Samuelson's Economics, should suffice to prove that they are fair and accurate."

I'm gonna fix that for him. It should read...

"I will not go into detail to support Salerno's conclusions, BECAUSE HE AGREES WITH NATE, but a brief glimpse at the most influential textbook in modern economic history, Paul Samuelson's Economics, should suffice to prove that they are fair and accurate."

Anonymous Asher March 01, 2013 6:35 PM  

@ VD

This conclusion is based on evidence, experience, and observation.

Yet, you don't respond to my direct challenges. Since money is something that humans create to facilitate human functioning how is it possible to discuss money without also discussing how humans use money to function.

Let's take your example of plastic. If all humans instantly died off in a freak accident he leave all sorts of plastic things and things we call money lying around. Now, let's say that some alien civilization discovers earth 100 years later; the function of those hunks of plastic and pieces of paper would be meaningless to them outside of trying to figure out how homo sapiens functioned.

very few are capable of staying ahead of me in Socratic-style dialogue

As you, yourself, already admitted the Socratic method requires patience, something that you do not manifest on your blog, at all. Every attempt I've seen you make at Socratic dialogue devolves into hectoring and calling people stupid by one or two comments.

Myself, I have the patience of Job. I far out-socratic dialogue you, not because I'm smarter than you but because I'm far, far, far more patient than you. And it's not just me. I would guess that the average undergrad philosophy student with an IQ 2 SD below yours would out-do you in the Socratic dialogue.

An excellent example is my attempt in the subjectivity of value discussion to point out that most economists, probably all, would claim that economics is about modeling behavior. Your response that many of the models are poor simply implies they need better models. Your claim was that economics is about "value", whatever the hell that means.

Where that leads is the rabbit hole of Platonic essentialism as opposed to discussing function and behavior.

What I've noticed is that there are two Voxs. The first writes penetrating insights into human behavior. The second goes off into metaphysical handwaving, using large amounts of brainpower. Of all the insightful posts you've made on economics I've yet to see one that requires the "subjective theory of value" to function.

The point is that your blog would be a lot more attractive to those who don't already agree with you on everything if you dropped the metaphysics.

it's just that I usually only need a few hints to grasp the point.

You are incredibly intelligent ... and incredibly dogmatic. That dogmatism makes it necessary to drop a whole truckload of anvils on your head to get you to consider something even slightly differently from what you already hold.

Blogger Nate March 01, 2013 6:57 PM  

"(laughs) Wait, what?"

Ok... Yes... I am GROSSLY over simplifying it...

Do you really think people want to read Mises' for types of money? Their eyes glazed over when you tried to explain SVT for crying out loud.

Anonymous VD March 01, 2013 7:04 PM  

Yet, you don't respond to my direct challenges.

No, I don't. Because you can't keep up and you refuse to admit when you're conclusively proven wrong. You're not stupid, but you have some sort of personal issue that renders you intellectually useless. I test everyone for their intellectual utility when they attempt to engage; you failed each time I did so with you.

Regardless of what you think of Nate's intelligence, dialogue with him is fruitful and intellectually stimulating. Dialogue with you is bound to be circular and pointless. It's little more substantive than discourse with Tad was.

An excellent example is my attempt in the subjectivity of value discussion to point out that most economists, probably all, would claim that economics is about modeling behavior. Your response that many of the models are poor simply implies they need better models. Your claim was that economics is about "value", whatever the hell that means.

That was indeed an excellent example. You showed that you were both ignorant and incapable of following the discussion. If you'd read RGD, perhaps you would understand why your point was not only laughable, but understood and conclusively dismissed by me before you ever visited here.

Economists can play at modeling all the N-body economic problems they want. That will never work, in part due to the problem posed by the fact of subjective value. It's all right there in front of you, but again, you demonstrate that you can't put the pieces together. Which is one of the reasons I ignore your challenges. Because they simply aren't a challenge for me and they won't illuminate things for anyone else.

Anonymous WaterBoy March 01, 2013 7:07 PM  

Asher: "I enjou discussing topics I find interesting."

As do we all. However, your pontificating on how the topic must do this or do that according to your diktats is not a discussion in which anyone else is interested; it is a side-show that derails the actual discussion.

Asher: "When we talk about "money" we are talking about how human beings behave and that entails a discussion of human nature."

You see? There you go again. Your Supreme Being decrees that the discussion must involve human nature, but it doesn't because you declare it so. Like a one-track recording affixed to a Möbius strip.

Asher: "Drop the metaphysics, it detracts from the blog."

Thus It Is So! For the Asher hath decreed it.

Again, dude -- it's not your blog. Just like with the whole "political" thing, you don't get to decide what fits here and what doesn't. And if you find the metaphysics so disagreeable, why do you keep coming back to it?

Asher: "There is no "meta-point, it simply doesn't exist and I've never seen one made on this blog."

*sigh*

See, I told you that you keep missing it. Here it is, spelled out again for you:

THIS IS NOT YOUR BLOG. YOU DO NOT GET TO DECIDE WHAT IS WORTH DISCUSSING AND WHAT IS NOT. SEE RULES #4 AND #11 FOR FURTHER INFORMATION.

Can't make it any plainer than that. If you don't like it, don't participate.

Asher: "I would be generous if I were to say that Nate is 2 SD lower than I IQ-wise."

And I would bet dollars to donuts that he has you beat in Wisdom*. So what?

Man, talk about hubris -- this is a job for Irony Man.

(* Though I will say you two are probably about on par as far as ego.)

Anonymous VD March 01, 2013 7:09 PM  

Ok... Yes... I am GROSSLY over simplifying it.

No, that's not it. What cracked me up is that you knew there was a trap and avoided it, but you didn't see the real one. What you described would have worked too, but this was even more insidious and more like checkmate in two.

I wouldn't have stopped there, of course, but it still should prove informative when I break it out for explanatory purposes later. Anyhow, I'll post yours tomorrow and my next one the following day.

Anonymous Asher March 01, 2013 7:12 PM  

@ Nate

Their eyes glazed over when you tried to explain SVT for crying out loud.

I have never read any economist offering a theory of value, at all, as that's not what they do. It's not that the subjective theory (sic) of value is difficult but that it's entirely irrelevant to modeling behavior.

The eyes glazing over is not due to it's difficulty but to its irrelevance.

Economists, and pretty much everyone else, just assumes that "values" vary across time, place and circumstance and just leave it at that. I have yet to see a behavioral model that requires some "subjective theory of value" as a premise to explain various functions and behaviors.

I cannot understand why people keep citing von Mises as economics as an activity of modeling behavior has progressed since then. Yes, the models failed to predict what has happened but that is largely due to the willful ignorance of human biodiversity - an immigrant from Africa with an IQ of 70 is not interchangeable with an immigrant from Japan with an IQ of 105. That willful ignorance is the single biggest obstacle, today, to understanding the way things work and it is the product of a dogmatic metaphysics that claims that all human beings are the same. The failure of those models has nothing to do with ignorance of the "subjective theory of value".

Blogger James Dixon March 01, 2013 7:20 PM  

> here's a word for that: arrogance.

Only if he's incorrect in his assessment.

> All learning exists in relation to others. Vox did not originate ever single idea he has ex nihilo, he synthesized them via his social relations.

There's this thing called reading, Junior. You may have heard of it. It's not normally considered a social activity.

> It is you who are conflating "being taught" with "learning".

I point out that they're not the same and yet I'm conflating them. Yeah, right.

> Vox's general attitude is one of supreme arrogance...

Yes, it is.

> ... and it detracts from the analysis of his many insightful posts.

The meaning of your statement is ambiguous, but taking what you obviously meant to say, that's a debatable point. It may detract for you, but not others.

> I have yet to see even one thing Nate's said that rises above mundane observationand he often gets things laughably incorrect.

And yet the things Nate says are more reliably correct than the things you say, and even when he's wrong he has good reasons for his position.

> My guess is that Nate's IQ is right around 100 and that makes mine more than 2 SD higher than his.

I've known lots of people like Nate. They have uniformly had an IQ in the 115-125 range. I haven't met Nate in person, so I may even be shortchanging him.

> Look at my observation that any discussion of "the nature of money" is going to obviously include a discussion of the nature of human beings.

The nature of human beings discussion is already contained in the given definitions, Junior. Something can't be a medium for exchange unless people accept it.

> Consider my definition of money: ... Anything someone holds onto in the prospect of trading it at some point for something else

And then your definition ignores that very point. It doesn't take into account that it's not money unless another party accepts it, no matter what the person holding it thinks.

> Also, observe that Nate doesn't even seem to fully understand the concept of transaction costs, yet, he's trying to discuss the much harder concept of the money supply.

Nate understands transactions costs fairly well, as far as I've been able to see. And there's nothing hard about the concept of the money supply. It's a fairly simple concept.

> @ James Dixon ... I've got my very own ankle biter.

For someone with a claimed 130+ IQ, you seem to have a real problem keeping track of who posted what. That wasn't my comment, it was Nate's. I wouldn't claim you're an ankle biter.

Anonymous WaterBoy March 01, 2013 7:21 PM  

Asher: "Consider my definition of money:

Anything someone holds onto in the prospect of trading it at some point for something else.
"


So the pile of scrap metal I have been saving to trade to the scrap dealer for cash is 'money'?

I think you are confusing 'money' with something else, here. Perhaps 'asset'?

Anonymous Asher March 01, 2013 7:34 PM  

@ VD

Because you can't keep up and you refuse to admit when you're conclusively proven wrong

I have one hard and fast rule of commenting: only comment on subjects that I know inside and out. I guarantee you that every single subject I've discussed with you I know an ass-load more about it than you.

An excellent example is your claim that the distinction between rhetoric and dialectic is analytic and not synthetic. An analytic proposition is on that is axiomatically true by definition of its meaning. I doubt there's one philosopher in the past 200 years that would agree that the distinction between those two things is analytic.

Now, that doesn't make you "wrong" but it does place you far afield from what anyone else is saying.

I test everyone for their intellectual utility when they attempt to engage

No, your "tests" devolve into name-calling after one or two disagreeing comments. It hideously detracts from your excellent analysis on many topics and cements dogmatism in the ilk.

You have not even begun to test me. Again, the issue of the analyticity of the rhetoric/dialectic distinction is an excellent example: I tried to engage you and you just didn't respond. You seem to have this dialectic=good/rhetoric=bad notion and it is horribly mistaken. There is no dialectic without rhetoric - rhetoric is a basic function of language.

Nate once commented that I am "just a rhetorical person" and I suspect he got that sort of notion from you. Well, guess what, everyone who communicates with anyone else is a "rhetorical person" since rhetoric is a basic mechanism of language.

Dialogue with you is bound to be circular and pointless.

There is a reason for this: metaphysics. I don't have one that i try to insert into rational discussion. You do. It's fruitless because trying to argue metaphysics is like banging your head against the wall.

If you'd read RGD, perhaps you would understand why your point was not only

If you're talking about his 1934 paper A Reconsideration of the Theory of Value why would I even bother? It was written eighty years ago. It's like discussing human behavior without any reference to genetics. It's not relevant and I highly doubt it has any relevance to modeling behavior.

Economists can play at modeling all the N-body economic problems they want. That will never work, in part due to the problem posed by the fact of subjective value.

This is a critique of macroeconomics. I tend to think that not only is there no such thing as macroeconomics but that the very possibility of such a thing is nonexistent. This is because any attempt to apply the models changes the decision-preferences of the specific actors within the model. It's got absolutely nothing to do with the so-called subjective theory of value.

One problem is that economists like Krugman try to mix normatives into their economic models which renders them useless as models and turns them into ideologies. So what. That's a critique of ideology, not of economics.

Anonymous WaterBoy March 01, 2013 7:34 PM  

The one thing I haven't seen in all these definitions of money -- and it may be because it doesn't apply -- is the concept of standardization; that something needs to be commonly accepted to fit the bill. Gold fits this description (or it used to), and so does US$ (currency and coins). But a derivative as used in the earlier example would not, because it is not commonly accepted. Nor are the store-specific gift cards.

Is this relevant in any way, or way off base?

Blogger Nate March 01, 2013 7:35 PM  

"I have never read any economist offering a theory of value, at all, as that's not what they do. It's not that the subjective theory (sic) of value is difficult but that it's entirely irrelevant to modeling behavior.

The eyes glazing over is not due to it's difficulty but to its irrelevance."

Asher... have you considered the remote possibly that every comment made here is not directly referring to you?

We are all well aware that you are certainly your favorite topic. You are however, considerably less interesting to others. Thus... one may logically conclude that sometimes... people may post about something other than Asher.

Well.. I mean... people besides you that is.

Blogger Nate March 01, 2013 7:37 PM  

Waterboy
Turgot's characteristics describe something that would be widely accepted by its very nature. So its sort of an understood characteristic. That is to say... if it met all of Turgot's other qualifications... it would be easily and widely accepted.

Is that fair?

Anonymous WaterBoy March 01, 2013 7:39 PM  

Vox: "If you'd read RGD"

Asher: "If you're talking about his 1934 paper A Reconsideration of the Theory of Value why would I even bother? It was written eighty years ago. "

He's referring to his own book, The Return of the Great Depression.

Blogger Nate March 01, 2013 7:42 PM  

"No, that's not it. What cracked me up is that you knew there was a trap and avoided it, but you didn't see the real one. What you described would have worked too, but this was even more insidious and more like checkmate in two.

I wouldn't have stopped there, of course, but it still should prove informative when I break it out for explanatory purposes later. Anyhow, I'll post yours tomorrow and my next one the following day."

If I have inspired such a devious ploy... then rest assured no one will enjoy its springing more than I... save only perhaps you.


And what a bizarre format this is taking on.


Do you suppose we should've nominated judges? I rather think the whole judging process turned into a clusterfutastrophe last time... so honestly I think we're better off letting the readers draw their own conclusions.

Anonymous WaterBoy March 01, 2013 7:42 PM  

Nate: "Is that fair?"

Absolutely, thanks.

Anonymous Asher March 01, 2013 7:48 PM  

@ Nate

In a comment discussing a particular subject every comment is fair game to everyone else. Yes, every comment you make here is open to my response, just as every comment I make is open to your response. That is how the agon works.

Every single comment here is *about* everyone interested in the discussion.

Blogger James Dixon March 01, 2013 8:01 PM  

> Do you suppose we should've nominated judges?

Lord no. We remember how well that worked last time.

> Every single comment here is *about* everyone interested in the discussion.

Junior, the fact that you are free to comment about another comment doesn't make the comment about you.

Blogger tz March 01, 2013 8:09 PM  

@Nate - you seem to be stating your definition of money is LVMises'. I would like some quotes, references, and expositions if you don't mind as I got a different impression.

Do you really think people want to read Mises' for types of money?

Yes, if you and/or Vox are going to refer to his definitions, and in general if those present wish to follow.

Blogger Nate March 01, 2013 8:12 PM  

TZ... mate... I don't doubt you would want to read mises. Normal human beings with IQs somewhere below the 160s tend to find Mises... a little... oh how do we put it...

challenging seems a bit mild.

Blogger Nate March 01, 2013 8:31 PM  

To answer your question though... Mises spent whole volumes defining money. He broke it down into 4 categories... one of which... (and I suspect this is the trap Vox thinks I didn't avoid) is what he calls "credit money".

That said... I have a few quotes that I fear I must hold in reserve in antipation of what Vox thinks is a trap I didn't see him set. (in reality is was a trap set before he wrote a single thing, all he has to do is make use of it. Fortunately I've been preparing to deal with it)

I can offer you this though... do not the contempt...

"What is needed for a sound expansion of production is additional capital goods, not money or fiduciary media. The credit boom is built on the sands of banknotes and deposits. It must collapse." - Mises Human Action page 559.

Blogger Nate March 01, 2013 8:31 PM  

note... do NOTE the contempt... dammit.

Anonymous Koanic March 01, 2013 8:51 PM  

I agree that judging is gay and cheapens the peanut gallery, which is unpardonable.

So now we know that Asher's IQ is approx 135, with some sort of down modifier for Asperger's or schizophrenia. A useless philosophy prof at some podunk college with massive unacknowledged social adjustment problems.

Nate's IQ is high, at least equal to Asher's. But Asher can't follow Nate's genetically different thought patterns. He can only appreciate the Aspie line drive, which is the opposite of Nate's style.

I know that I haven't put in enough effort to actually destroy Nate's position, and that he's intelligent. But I expect VD will do the job.

And I will continue to throw peanuts whenever I damn well please.

I don't have the precision socratic strategy of Vox; I tend to go for the evisceration with every swing. It's genetic disinterest in the man vs the argument. Should anyone wish to step into MY octagon, the proof of the supernatural (and destruction of materialism) is always waiting. I'll leave the Mises and whatnot to those who care enough.

Blogger Nate March 01, 2013 8:54 PM  

This comment has been removed by the author.

Blogger Nate March 01, 2013 8:56 PM  

Did I just say that out loud?

Never mind.

Look all I am saying is.. I think Vox is a smart guy that knows a lot about economics... and I am not debating him because I think I am smarter than him... or because I think I know more about econ than he does.

Blogger Nate March 01, 2013 9:07 PM  

"I know that I haven't put in enough effort to actually destroy Nate's position, and that he's intelligent. But I expect VD will do the job. "

See?

I have a lot more respect for this kind of thing. If you're prejudice... I'm fine with that. VD may very well do the job. And if he does... will we not all have benefited? No doubt I will have learned more than one or two lessons. And will we all no be entertained? Certainly we will.

I'm the underdog here right? Who can blame you for paying attention to Vox. The assumption clearly is Vox is the Big Dog who can end this fight whenever he wants with one swing. Right? I'm not the one that wrote a book on economics that just happens to be being used as a text book for college level econ.

I'm just the redneck from Alabama that writes about guns and bourbon.

Its like...

Kimbo Slice vs some gay dude...

Anonymous Raggededge March 01, 2013 9:12 PM  

I'm just the redneck from Alabama that writes about guns and bourbon.

Yeah, yeah, where is the ATF?

Blogger James Dixon March 01, 2013 9:13 PM  

> The assumption clearly is Vox is the Big Dog who can end this fight whenever he wants with one swing.

End it, yes. But not with one swing. In any case, we'll see.

Anonymous Koanic March 01, 2013 9:20 PM  

Oh come on, only morons were ever impressed with Kimbo Slice's MMA prospects

Blogger Nate March 01, 2013 9:22 PM  

Why Raggededge... have a little faith old man...

Blogger Nate March 01, 2013 9:22 PM  

"Oh come on, only morons were ever impressed with Kimbo Slice's MMA prospects"

Koanic... shhhh... some of the lesser informed may not actually get the joke.

Blogger Nate March 01, 2013 9:36 PM  

Oh dear.

It appears Asher has run out of things to say about himself.

Anonymous Koanic March 01, 2013 10:03 PM  

Heavens, that would be the second time I've shut Asher up. I must fast and pray for my ego.

Anonymous civilServant March 01, 2013 10:25 PM  

Money is an exchange medium that is used to complete a transaction.

If money is a medium then is not any exchange of goods for money incomplete until that money is exchanged for other goods? If so then it would seem that the difference between goods-money-goods and goods-check-money-goods is merely a difference between two steps and three.

As for Nate's example of a dollar store refusing to take a derivitive as money it must be pointed out that that same store would not take gold either. Is money that is not accepted still money?

Blogger Nate March 01, 2013 10:31 PM  

"As for Nate's example of a dollar store refusing to take a derivitive as money it must be pointed out that that same store would not take gold either. Is money that is not accepted still money?"

We have... roughly 5000 years of stores accepting gold as money. We will, in the interest of charity, forgive Gold, if some ignorant proprietors ignore it to their peril today.

Its that entirely unfair?

Blogger James Dixon March 01, 2013 10:32 PM  

> ,,, it must be pointed out that that same store would not take gold either.

And as I already pointed out, that's not quite true. You can use any gold American Eagle coin at any US store for its face value.

Blogger Nate March 01, 2013 10:35 PM  

James Dixon... fair warning. I cannot decide who's side you are on in this debate... and you remain in peril of being declared impartial.

May God have mercy on your soul.

Blogger Nate March 01, 2013 10:41 PM  

"Should anyone wish to step into MY octagon, the proof of the supernatural (and destruction of materialism) is always waiting. I'll leave the Mises and whatnot to those who care enough."

Koanic... this is by no means a challenge... but wear can I read your thoughts on the supernatural?

Blogger Nate March 01, 2013 10:42 PM  

Holy shit... bourbon has a terrible effect on my grammar.

WHERE...

WHERE may I read your thoughts on the supernatural?

Anonymous civilServant March 01, 2013 10:45 PM  

As for Nate's example of a dollar store refusing to take a derivitive as money it must be pointed out that that same store would not take gold either. Is money that is not accepted still money?

We have... roughly 5000 years of stores accepting gold as money. We will, in the interest of charity, forgive Gold, if some ignorant proprietors ignore it to their peril today.


Your point is clear but seems inactionable. An accusation of ignorance will not buy a carrot.

And I must point out that "we" have only our own personal lifetimes and not 5000 years. If one subscribes to the notion of "Most People" then the utility of gold as money is limited.

Anonymous civilServant March 01, 2013 10:46 PM  

You can use any gold American Eagle coin at any US store for its face value.

It must be pointed out that it is the number on the coin that is being accepted and not the coin itself or its composition.

Anonymous Raggededge March 01, 2013 10:49 PM  

Nate: Holy shit... bourbon has a terrible effect on my grammar.

Yeah, bourbon, that must be it...

Blogger stareatgoatsies March 01, 2013 10:49 PM  

there is no extant theory of economics that takes serious exception to Milton Friedman's statement...

What about the post-keynesian economists like Steve Keen, whom you hold in high regard?

This is an earlier post-keynsian, Augusto Graziani's, definition of money FWIW:

“Therefore for a system of credit money to work, three conditions had to be fulfilled:
In order for money to exist, three basic conditions must be met:
a) money has to be a token currency (otherwise it would give rise to barter and not to monetary exchanges);
b) money has to be accepted as a means of final settlement of the transaction (otherwise it would be credit and not money);
c) money must not grant privileges of seignorage to any agent making a payment.” [11]
In Graziani’s words, “The only way to satisfy those three conditions is …:
“to have payments made by means of promises of a third agent, the typical third agent being nowadays a bank.


everyone understands the definition of plastic without delving into the nature of man.

Does the nature of plastic change when man's opinion of it changes? Clearly not, but when people lose faith in a currency it's nature as guarantor of value or status as an accepted means of final settlement certainly changes.


Economists can play at modeling all the N-body economic problems they want. That will never work, in part due to the problem posed by the fact of subjective value.

Check out Keen's new kickstarter project if you haven't already. I'd be playing around with it if I could get Windows booting again. This kind of approach, in my opinion, has a better chance of predictive and explanatory success than defining ambiguous terms in terms of other ambiguous terms and half a book later Mises is still trying to define money, though the debate I'm sure will be interesting nonetheless.

Anonymous civilServant March 01, 2013 11:10 PM  

It's all right there in front of you, but again, you demonstrate that you can't put the pieces together. Which is one of the reasons I ignore your challenges. Because they simply aren't a challenge for me and they won't illuminate things for anyone else.

I for one would appreciate seeing your views spelled out in detail even many times.

Anonymous Noah B. March 01, 2013 11:12 PM  

"It must be pointed out that it is the number on the coin that is being accepted and not the coin itself or its composition."

Why, did you find the term "face value" ambiguous somehow?

Blogger foxmarks March 01, 2013 11:17 PM  

is not any exchange of goods for money incomplete until that money is exchanged for other goods

After comments made at Nate’s joint, I think I have come to understand his view that money is the only thing that can make an exchange complete. If all parties are satisfied and nobody is obligated to perform in the future, money was involved in the trade. The form of the money is not particularly important.

Whoever introduced the term “asset” earlier I think was onto something. When a gold nugget or picture of a dead president is your pocket, it is an asset. It isn’t money until it is used to obtain some other asset.

The traditional “store of value” aspect of money is not an essential aspect of money. Value is stored in assets. Value is exchanged via money.

Anonymous Noah B. March 01, 2013 11:23 PM  

Nate, can you clarify your definition of what makes a transaction complete? Are you referring to the legality of the transaction's completeness, or the practical aspect of one or more parties having to take an action that converts money into the most desired form?

For instance, let's say I buy a Nightforce scope with a half ounce eagle. We agree that it's a deal, shake hands, and I walk away with my scope. The seller accepted the half eagle, making the transaction legally fulfilled, but he needs a money order to pay his rent. He has to sell the half eagle to get cash, then take the cash and buy a money order. So was the half eagle money in this transaction, or was this simply a barter?

Anonymous Koanic March 01, 2013 11:26 PM  

Nate, it's at http://www.koanicsoul.com/blog/mathematical-proof-that-the-supernatural-exists/

Anonymous Asher March 01, 2013 11:37 PM  

I just noticed something odd. Only three posts at VP have mentioned Hayek in the past year while Mises is mention in twenty. Having spent several years devouring libertarian writing I can say this is in marked contrast to the larger community that call themselves libertarians. Why?

Dont't get me wrong, I have lots of respect for Mises, especially his contribution to the socialist calculation debate. Still, I remember a libertarian-leanng philosopher who spent a lot of time reading Mises and pointed out how his writing was riddled with unwarranted andunargued for a priori assumptions.

Anonymous Jack Amok March 01, 2013 11:43 PM  

So, are you guys going to gabble about the theoretical definition of money all week, or are you going to get around to the practical definition of it as pertains to inflation? 'Cause, Vox has a post up over on AlphaGame that points out in theory Lena Durham is more beautiful than Scarlett Johansson, so maybe you should dispense with the theory and get onto the whole inflation/deflation bit.

Anonymous Anonymous March 01, 2013 11:43 PM  

Wello done!

Blogger Nate March 02, 2013 12:45 AM  

"So, are you guys going to gabble about the theoretical definition of money all week, or are you going to get around to the practical definition of it as pertains to inflation?"

Look mate when this whole thing started I was the one that pointed out that we probably wouldn't get past the definition of money. Don't blame me.

Anonymous Josh March 02, 2013 1:23 AM  

Having spent several years devouring libertarian writing I can say this is in marked contrast to the larger community that call themselves libertarians. Why?

Hayek is much more accessible than Mises. Also, Hayek is less radical.

Anonymous Asher March 02, 2013 2:06 AM  

@ Josh

I subscribed to Criticqal Review for several years which is a libertarian journal published for academic audience and discussed philosophers like Hume, Kant and Nietzsxhe as well as libertarians like Mises and Hayek so I doubt accessibility was the issue. My estimation is that th positive references to Hayek vastly overwhelmed those to Mises. Also, many references to Mises were more negative in quality and quantity than those to Hayek.
50 ywars ago I would think Rothbard could be l

Anonymous asher March 02, 2013 2:13 AM  

Ugh. Damn droid. Anyways my general impression was that Mises and Rothbard were considered interesting and valuable for their day but antiquated now and it was pretty consistent.

One thing I've heard is the objection that Hayek was not a real libertarian and that true libertarianism is limited to followers of Mises and Rothbard. Well, by that sta@dard thereare probably only several thousands of libertarians.

At that level of relvance libertarianism is not so muvh a political philosophy as a cult.

Anonymous Agent Mongoloid March 02, 2013 3:27 AM  

Monies shupply, credit, ish all the shame ting. Niezzzzhhsshe shaid shometing about... or wash it Mishesh, about, no bordersh and all trades, makesh Jack a dull shomething.... or anuthr... uh, Rectum... hell, i nrly killd em. NONE OF YOUS ISH A' SHMART ASH'eR ME!!!1!! Wha... hell, Ah cans typ'ng.

Blogger James Dixon March 02, 2013 8:09 AM  

> I cannot decide who's side you are on in this debate.

I don't know which of is right, Nate. I lean slightly more to your side of the argument than Vox's, simply because what I see in the marketplace is inflation, not deflation. But I'm waiting to be convinced one way or the other.

> ...and you remain in peril of being declared impartial.

Not quite impartial, but pretty much.

> May God have mercy on your soul.

He's said he would. I have no reason to doubt him. :)

> It must be pointed out that it is the number on the coin that is being accepted and not the coin itself or its composition.

In which case it must be pointed out that I didn't say it was, as Noah B. was discerning enough to notice.

Anonymous civilServant March 04, 2013 6:37 PM  

It must be pointed out that it is the number on the coin that is being accepted and not the coin itself or its composition.

Why, did you find the term "face value" ambiguous somehow?


No. But I believe you are confused or are attempting to confuse. I spoke of spending gold itself as such. You then spoke spending the value stamped on the coin as if they were the same thing. They are not. One may as well speak of spending aluminum or copper/zinc.

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