ECON 310 Lecture Notes - Lecture 3: Market Economy, Classical Economics, Barter
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Lecture 3: 01.11.17.
TOPIC 1: WHAT IS MONEY?
Readings:
- Chapter 3 of text
- 3 papers available on Canvas
- Radford, “The Economic Organization of POW Camps”
- Bryant, “Island Money”
- Sweeney & Sweeney, “Monetary Theory and the Great Capitol Hill Baby Sitting Co-op
Crisis”
THE CIGARETTE ECONOMY
Radford was someone who was a pilot in WWII
- Trade in goods from Red Cross care packages utilizes the cigarette as currency
Why are cigarettes a natural currency in the POW camp?
- A good unit of account
- Small
- Uniform quality - relatively durable
- The POW camps were barter systems through the care packages from the Red Cross
- Due to differences in tastes and preferences led to gains from trade
- A different way for us to gain money
- Co-op organizing committee vs. no authority or people imposing cigarettes as an
economy
- People who wanted to take advantage of this trade began to create this
economy
Issues:
- Variable supply - the supply was disrupted time to time because of the nation of war
- Extreme price variability
- The supply is very important to people who smoke and those smokers lower the
amount of currency in the economy
- Radford focuses on the price inflation/deflation due to the inconsistent supply
- Classical economists would support this prediction of price variability (starving money of
the economy will put it into recession)
- Influx of loose tobacco and hand-rolled cigarettes
- Collapse of the monetary economy - the soldiers must once again barter because the
currency is no longer a unit of account or consistent
- The Red Cross makes a seemingly inconsequential change in the care packages, where
they have loose tobacco and paper to roll them
- People chose to roll cigarettes with less tobacco (underweight cigarettes)
- People with pre-made cigarettes unrolled them and rolled them into a larger
amount of cigarettes
- The people would sell their food to the store, but they would receive less
- This experience is an example of many monetary economies
GRESHAM’S LAW
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ECON 310 Full Course Notes
Verified Note
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Document Summary
Radford, the economic organization of pow camps . Sweeney & sweeney, monetary theory and the great capitol hill baby sitting co-op. Radford was someone who was a pilot in wwii. Trade in goods from red cross care packages utilizes the cigarette as currency. The pow camps were barter systems through the care packages from the red cross. Due to differences in tastes and preferences led to gains from trade. A different way for us to gain money. Co-op organizing committee vs. no authority or people imposing cigarettes as an economy. People who wanted to take advantage of this trade began to create this. Variable supply - the supply was disrupted time to time because of the nation of war. The supply is very important to people who smoke and those smokers lower the amount of currency in the economy. Radford focuses on the price inflation/deflation due to the inconsistent supply.
