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Sunday, November 01, 2009

Homo Economicus

In a Mises.org article a kids' Halloween candy trade drifts from a barter economy to a monetary economy while heading toward its ultimate goal, a Pareto-efficient equilibrium. The article also reminds us of the potential dangers of a government fiat currency monopoly.

Some picks:

Though this problem might seem an intractable one, as it happened, it only took a few minutes for everyone to discover what would become money for the evening: a micro-size Three Musketeers bar.

Once it became clear that 3M was the commodity of the most use in exchange, it didn't matter whether you actually liked it or not. You were happy to trade the candies you didn't much care for in order to obtain a 3M simply because this could then be traded again for something which really did make your mouth water.

Outside observers of a Misesian bent imagined the following: let's say someone arrived at the scene and threw down 100 3Ms on the table. All kids know precisely what would happen. The price of 3Ms would tumble. Each one would purchase far less than it had before.

But, fortunately, no Halloween bogeyman from the Federal Reserve Candy Factory came to ruin their game. So the kids could remain free to trust in the soundness of their candy unit.

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