16 May 2020

## Murphy Twin Spin

==> My latest chapter in Understanding Money Mechanics, this one on Austrian business cycle theory.

==> Ep. 79 of the Lara-Murphy Show, where Carlos and I discuss whether the Fed’s inflation threatens the validity of IBC (the Infinite Banking Concept).

#### 23 Responses to “Murphy Twin Spin”

1. guest says:

Regarding the Understanding Money Mechanics.

I’ll begin by saying that a search for the words “fiat money” in both “Human Action” and “The Theory of Money and Credit” convinces me that Mises held Rothbard’s position on whether a commodity money could continue to be used as money if it lost its use-value.

I nevertheless continue to believe that this view is inconsistent with his Regression Theorem. The reason is that to value a commodity money based on the exchange value it had the day before it lost its use-value is, in fact, to ascribe a made up value to it; And if a money can *maintain* its value as money after it loses its use-value and is now using a made up value, then it follows logically that anything can – in spite of Mises’ objection – *begin* to be used as money based on a made up value.

If you can maintain it with a made up value, you can start it with a made up value. And you don’t need a Regression Theorem to explain money prices. The values are made up – next question.

But the problem with that is that you now can no longer point to monetary inflation as the source of booms and busts, because inflating the supply of a money the value of which we make up does not prevent us from just choosing to make up another value.

Bob, quoting Mises:

“It can hardly be contested that fiat money in the strict sense of the word is theoretically conceivable. The theory of value proves the possibility of its existence. …”

It appears to me, based on some other passages I found in my word search, that what he meant by this is just that he believes it’s possible that people would still continue to use a money even after it has become completely fiat.

Consider this, from “Human Action”:

“As long as these claims had been daily maturing claims against a debtor of undisputed solvency and could be collected without notice and free of expense, their exchange value was equal to their face value; it was this perfect equivalence which assigned to them the character of money-substitutes. Now, as redemption was suspended, the maturity date postponed to an undetermined day, and consequently doubts about the solvency of the debtor or at least about his willingness to pay emerged, they lost a part of the value previously ascribed to them. They were now merely claims, which did not bear interest, against a questionable debtor and falling due on an undefined day. But as they were used as media of exchange, their exchange value did not drop to the level to which it would have dropped if they were merely claims.

“One can fairly assume that such credit money could remain in use as a medium of exchange even if it were to lose its character as a claim against a bank or a treasury, and thus would become fiat money. Fiat money is a money consisting of mere tokens which can neither be employed for any industrial purposes nor convey a claim against anybody.

“It is not a task of catallactics but of economic history to investigate whether there appeared in the past specimens of fiat money or whether all the sorts of money which were not commodity money were credit money. The only thing that catallactics has to establish is that the possibility of the existence of fiat money must be admitted.”

It seems that what he’s saying is that he notices that people choose to discount, rather than abandon, formerly money-certificates the redeemability of which has been temporarily suspended; And that because people do this, he thinks people could, in theory, choose to use a completely fiat money and there would be no boom-bust cycle.

But since the boom-bust cycle is the result of higher-order-goods sectors expanding in concert with one another, and out of sync with consumer preferences, and since a completely fiat money has no necessary link to consumer preferences (the values are made up), all fiat moneys are logically always out of sync with consumer preferences.

In the case of the Federal Reserve Note, the reserve currency of the world, notice that the Federal Reserve has always had to continually print money in order to keep the charade going. That’s not an example of a fiat money working, but of a fiat money continually destroying the wealth of those using fiat money for the benefit of, first, the Federal Reserve and the government, and second, the United States as a group (to the extent that other countries feel compelled to also use FRNs).

“Likewise, it would also be an example of commodity credit if someone lent \$100 in currency to a borrower who promised to pay back \$110 in a year. Because the lender would no longer physically possess the currency, this would be a genuine deprivation, a sacrifice of present goods for the hope of obtaining a greater number of future goods, and hence would be considered commodity credit. …”

“… For example, when a man deposits \$100 in his checking account, upon which he earns interest because the bank then lends out \$90 to a new borrower, even though this is a credit transaction, the original depositor still thinks that he has \$100 in the bank. This is what Mises has in mind when he says that there are credit transactions in which the renunciation of the lender “results for him in no reduction of satisfaction.”

I’ll address both of these segments using Mises’ book, The Theory of Money and Credit, but I strongly disagree that he would consider commodity credit to take the form of bank notes. I would also disagree that the “something for nothing” exchange in your example is what Mises meant by “no reduction of satisfaction”.

It’s true that Mises says, with regard to commodity credit:

“In the first kind of credit transaction, what is surrendered consists of money or goods, disposal over which is a source of satisfaction and renunciation of which a source of dissatisfaction.”

Which can seem to say that commodity credit can consist of currency transactions, but later in the same section he says:

“The peculiar attitude of individuals towards transactions involving circulation credit is explained by the circumstance that the claims in which it is expressed can be used in every connexion instead of money. He who requires money, in order to lend it, or to buy something, or to liquidate debts, or to pay taxes, is not first obliged to convert the claims to money (notes or bank balances) into money; he can also use the claims themselves directly as means of payment.”

Notice that he makes a distinction between bank notes and money – they are not the same to him.

So, when he says that commodity credit can consist of “money or goods”, it’s because he defines money as also a commodity. And that’s what makes it commodity credit.

I think the problem with thinking of commodity credit in a way that allows fiat money to be considered a commodity (because goods are typically given in exchange for them) is that fiat money’s value is made up, and you can’t *really* be said to have given up something of value when you can choose to value it however you want any time you want.

Side note: It appears that whenever Mises uses the term “money” without qualification, he is referring to a commodity money. That is *except* in the following case, from The Theory of Money and Credit:

“If the government practises restraint in the issuance of additional amounts of its credit or fiat money and if public opinion assumes that the inflationary policy will be stopped altogether in a not-too-distant future, an inflationary currency system can prevail for a series of years. The country experiences all the effects resulting from a currency the unit of which vacillates in exchange-value as against the international gold standard. With regard to these effects the freely-vacillating currency may be called a bad currency. But it can last and is not inevitably headed for a break-down.

The characteristic mark of this freely-vacillating currency is that the owner of any amount of it has no claim whatever against the treasury, a bank, or any other agency. There is no redemption either de jure or de facto. The pieces are not money substitutes but money proper in themselves.

Here, he seems to view anything that is voluntarily valued as money as money proper (which is why claims to gold were not money proper, even when they circulated as if they were money).

The problem with this view is that any supposed problems with inconvertability or inflation of the money supply ought to be thought of – if we’re being consistent – as entirely resolvable by simply voluntarily valuing the claims or fiat money in a way that makes you happy. Problem solved essentially by wishing it away.

But since all transactions are really exchanges of goods against goods, and since arbitrarily valued things are incapable of conveying the subjective values for the actual subjective ends you are trying to satisfy.

A piece of paper or a bitcoin cannot convey the relative values of sandwiches and race cars that any one person holds. But a piece of gold can because one person can compare his own desire for gold to his desire for sandwiches, and another person can compare his own desire for gold to his desire for a race car.

Mises also says, in The Theory of Money and Credit:

“Many of the most eminent economists have taken it for granted that the value of money and of the material of which it is made depends solely on its industrial employment and that the purchasing power of our present day metallic money, for instance, and consequently the possibility of its continued employment as money, would immediately disappear if the properties of the monetary material as a useful metal were done away with by some accident or other.2 Nowadays this opinion is no longer tenable, not merely because there is a whole series of phenomena which it leaves unaccounted for, but chiefly because it is in any case opposed to the fundamental laws of the theory of economic value. To assert that the value of money is based on the non-monetary employment of its material is to eliminate the real problem altogether.1 Not only have we to explain the possibility of fiat money, the material of which has a far lower value without the official stamp than with it; we must also answer the question, whether the possibility of a monetary employment of the commodity-money material affects its utility and consequently its value, and if so to what extent. The same problem arises in the case of credit money.”

As for the phenomena he would believe my view leaves unaccounted for, by which I think he would mean that people do voluntarily attempt to use unbacked tokens as money (such as the FRN or bitcoins), that’s easily addressed by referring to the very theory of economic value which he thinks opposes it.

A made up value is not an economic value – at least not in a meaningful sense. We could say that having been suckered into a Ponzi scheme is also an expression of economic value because the participants have voluntarily partaken in it.

That is certainly true, catallactically – even people’s mistaken choices have real economic consequences. But that’s not a helpful explanation of “money”, when the question is “where does the value of money come from”.

(By the way, that’s how to address Mises’ objection “What about people using fiat money”. It’s a Ponzi scheme, not money. Possibility explained.)

And no, it was never enough to say that the value of money comes from people’s desire to hold cash balances. Nobody asking that question way back in the day would have been satisfied with that answer because it misses the point. Where, ultimately, is it coming from; Why do people find it useful – *that’s* the point.

You can’t answer that with reference to made up values. You *can* answer that with reference to subjective values, though, where subjective ends are the source of value for subjectively valued real, tangible things. Therefore only something that has an existing use-value can be money.

2. Harold says:

“But a piece of gold can because one person can compare his own desire for gold to his desire for sandwiches,”
If gold were not used as money, how much would anyone desire it? What would you do with it?

In our world, I suspect peoples’ desire for gold is because it is worth \$’s

• guest says:

Not only does it have ornamental value, but it has medicinal and technological uses.

Also, as I said before, silver has very strong antibacterial properties.

“In our world, I suspect peoples’ desire for gold is because it is worth \$’s”

What’s a dollar worth?

If you said “whatever people will pay for it”, that’s not an answer; And it’s not an answer for the same reason us Austrians can’t get away with saying “money has value because people want to hold cash balances”.

• Harold says:

You said that a person can compare his own desire for gold directly with that of a sandwich, which cannot happen with paper “money”. Yet what desire do you have for gold, beyond the fact that other people will exchange goods for it?

What would you use it for? Do you make medicinal materials requiring gold? Technological items? If not then you personally have no use for gold above ornamental value. Many other materials are just as pretty these days. If you sell gold jewelry to a gold buyer they usually give you the price of the gold melted down. A great many of these gold items have zero commercial ornamentation value.

Gold has almost no use value to you.

This is the value you would need to compare to the desire for a sandwich.

• guest says:

“Yet what desire do you have for gold, beyond the fact that other people will exchange goods for it?

“What would you use it for? Do you make medicinal materials requiring gold? Technological items? If not then you personally have no use for gold above ornamental value.”

I am sensing that you did not read my original response to this question.

I’ll repost it because it answers this very issue:

“”What is actually happening, here, is that most people do not actually value gold for its use-value. But *some people* in the economy do, and it’s through the arbitrage opportunities made available by those people’s valuations of gold that we get the money-value of gold.

“You say, “Why would someone want the use-value of gold, when someone else in the economy can get all this other stuff?” The reason is because different arbitrage opportunities are available to different people.

“Consider this story:

“Got an old cell phone? Trade it for a Porsche

““Steven Ortiz, a 17-year-old from California, has pulled off a minor miracle. He has, through a series of trades, exchanged an outdated cell phone for a 2000 Porsche Boxster. It took him two years and 14 trades, and in the end he actually traded down from a more valuable 1975 Ford Bronco.”

“Why would someone want an old cell phone when someone else in the economy can get a Porsche? Same thing.”

Find my original response to this question, here:

[www]https://consultingbyrpm.com/blog/2020/04/bitcoin-and-the-theory-of-money.html#comment-1978582

• Harold says:

I think I see what is happening. You said:

“then they more or less behaved as money.

But they were not money.”

We are using different definitions of money, so of course we will have differences. Your definition of money requires that it has a use value.

This is begging the question about whether what functions as money needs a use value.

You are pre-supposing that the arbitration opportunities require a use value, which was the original argument.

I argue that what functions as money is money. I also argue that anything that has the required properties of money would have been a commodity until recently. Therefore pointing out that things that have been used for money always had value does not answer the question.

I don’t understand your argument about the cell phone for a porsche

Actually, nobody swapped a cell phone for a porsche. There were a series of trades.
We all attach arbitrary values to everything. At each stage the person valued the thing obtained more than the thing lost, for whatever reason. The last swap for the Porsche was for a lower monetary value item, but Ortiz prefered the Porsche. He did not get it for free “he spent the better part of two years tied to his iPhone,”

Many people do effectively the same thing but they use money as an intermediary. They do not directly swap things for things, but they buy things and sell them for a bit more.

I do not see what this has got to do with use value – perhaps I am missing something.

“”“Again, if you’re arbitrarily attaching values to things, there is no supply, or lack thereof, that is preventing you from attaching any value you want to anything.” Of course. Someone may value a Porsche less than a cell phone and the swap could have been made in one step. At each step there needs to be a partner who wants to make the exchange. If I value small pebbles at the same value as a Porsche, then I am sure I will have many people offering pebbles for my Porsche, but none offering their Porsche for my pebble.

I could arbitrarily value \$5 bills higher than \$10 bills, and I could very easily exchange all my \$10 bills for \$5’s and consider myself richer. Yet nobody does this.

• guest says:

“If I value small pebbles at the same value as a Porsche, then I am sure I will have many people offering pebbles for my Porsche, but none offering their Porsche for my pebble.

“I could arbitrarily value \$5 bills higher than \$10 bills, and I could very easily exchange all my \$10 bills for \$5’s and consider myself richer. Yet nobody does this.”

The reason this is so is because there is a real – albeit subjective – constraint that bears on any monetary transaction, and that is the actual goals of people that require real, tangible things in order for those subjectively valued goals to be met.

People instincively understand that the use-value of pebbles would rank far lower on people’s value scales than that of all the goods one could trade in exchange for a porsche.

What I’m arguing is that the use-value of paper notes and of bitcoins is even lower than that of pebbles, and their failure to treat them like an offer to pay in pebbles reveals a disconnect.

All voluntary transactions reveal *something* about a consumer’s belief about his own subjective ends (which is where we get the price system from).

So, assuming we have what we call “sound” money, those money prices will naturally have a coordinating effect on the distribution of goods that efficiently allocates them to their most desired ends.

It’s important to keep in mind, though, that what sound money *cannot* do (at least not right away) is reveal the mistakes in consumer spending that result from misinformation.

(Mistaken purchases do bear on future consumer spending and saving, so sound money will eventually reflect the corrections people make.)

But if a currency has no necessary connection to *someone’s* subjective ends, then it cannot convey the information that results in an efficient allocation of resources (in the sense that the extent of each individual’s gain is naturally restrained by all other individual’s rights to property – at least to the extent that all the transactions involved are voluntary).

So, in short, prices are information about subjective ends. And if the value for a currency is made up, then it logically cannot convey helpful information.

• Harold says:

Hi Guest, taking this down below as it is getting rather narrow.

• skylien says:

Do you own Gold or Silver?

3. skylien says:

Hey Bob,

What do you think is the reason that insurance companies do not promote this model themselves. Too complicated? Or are they earning more with other policies with less cash value?

4. Harold says:

“But if a currency has no necessary connection to *someone’s* subjective ends, then it cannot convey the information that results in an efficient allocation of resources.”

Imagine a group of 10 people, maybe on a spaceship. Their basic needs are met by the ship, but each has skills that produce things the others desire to some extent.

They have a fixed amount of a certain size of nut that do not fit anything – they are useless. They were about to eject them into space as useless weight.

However, they decide to use the nuts as a medium of exchange. They hand out the nuts equally, then allow free exchange of the nuts for each other’s services and goods.

The nuts can serve in this fashion because they are durable, limited, uniform etc.

Soon a value is built up for the nuts. Person A can pay person B 10 nuts to take his turn at the washing up, knowing that this will cost about the same as a bar of chocolate person C makes. In that moment, he prefers to avoid washing up to having a bar of chocolate. Person B does not like chocolate, but prefers to wash up and use the nuts for a slice of cake made by person D. Thus information about subjective ends is conveyed by their actions, although the nuts have no use value.

Can you explain why this could not happen?

• guest says:

“Can you explain why this could not happen?”

Yes. What you’re describing is a static economy, where preferences do not change, and it fails for the same reason that Socialists would fail at trying to impose and maintain the exact prices that were in place on the last day of free markets before they took over.

The nuts in your example aren’t money, but IOUs for specific goods; They only seem to behave like money because each good has a known barter relationship with all of the other goods.

And because of the inescapable reality of something called Marginal Utility (the more of a good that each individual has, each aditional unit of that good will be used to satisfy increasinly less urgent desires), the barter relationships between the goods will necessarily change.

So that when the guy who wants chocolate has had enough, the price of chocolate in terms of nuts no longer represents economic reality.

You say, “But we can just have the price of chocolate go up in terms of nuts.” But that assumes that there is a static relationship between chocolate and not having to wash up; which there isn’t because both of those things are subjectively valued.

So, your system only seems to work if the ratios of demand for each good remains the same – but that’s now how human beings desire things and economize resources to achieve their goals. And even under such a logically impossible static economy, the nuts system only “works” because it is representing the then-current demand rations (which always change in real life).

• Harold says:

Ok, I think I am getting where you are coming from, but I am not sure it makes your case. This stuff is complicated.

The point I was trying to demonstrate was that this need not be true.: “But if a currency has no necessary connection to *someone’s* subjective ends, then it cannot convey the information that results in an efficient allocation of resources.”

This ties into “your system only seems to work if the ratios of demand for each good remains the same”

I don’t see why the latter statement is necessarily true.

The chocolate producer will produce the amount of chocolate that maximises his satisfaction. If the rest really desire it, they will pay more and he will make more. If they go off chocolate, he will make less and spend time doing something else. There is no need for it to be static. The person who offered to pay smeone else to wash up may feel differently tomorrow. The ratio of washing up to anything else does not remain static. It is just that everyone has a model of what each nut will buy him and can adapt what he pays to his desires at that moment. If chocolate becomes less popular and the chocolate maker cannot make anything else, he can offer to wash up for everyone. The supply of “washer-uppers” will have increased, so the price will drop.

• guest says:

“The chocolate producer will produce the amount of chocolate that maximises his satisfaction.”

But what maximizes his satisfaction are the goods and services in the economy, not the nuts. And now, because of changing preferences, it can no longer be said, as per your original scenario, that not having to do work is worth trading for a chocolate bar.

So now prices in terms of nuts no longer mean what everyone originally agreed to – which means that no one would be rational in expecting the nuts to maintain their purchasing power. Why use nuts when the demand ratios between different goods can vary wildly, thus resulting in any manufactured stability in nut-prices to logically fail to represent such wild variations?

You say, “Wouldn’t gold have that same problem, since the demand ratio of goods vary wildly, no matter what?

The reason this wouldn’t be the case is because gold would have its own varying use-values in relation to other goods, so ultimately all other goods would be priced in terms of someone else’s use-values.

You say, “Well, if they’re all varying, then why would gold solve any pricing problems that result from variations in the demand for its use-value.”

The reason is that gold was not chosen as money because people were looking for something scarce, etc. Scarcity was always baked in to its use-value because it’s use-values made it highly demanded in relation to its supply.

Nobody needed to look for something scarce to use as money, they just needed to have long term goals that – without even intending to – created arbitrage opportunities that made it more profitable to hold gold in anticipation of trading it to the gold-consumer. And then *those* arbitrage opportunities create other opportunities for people to hold gold in order to give it to the first guy that held gold for the purpose of indirect exchange. And so on, and that’s how gold became money.

So while gold would also vary in value as a commodity against other goods, gold has historically been so incredibly useful as a good that many arbitrage opportunities can be made available in satisfying the demands for its use-value.

• Harold says:

“But what maximizes his satisfaction are the goods and services in the economy, not the nuts. ”
Yes, of course. The nuts were never worth anything. They never were anything that would result in satisfaction. What a nut now means is what you can buy with it.

” it can no longer be said, as per your original scenario, that not having to do work is worth trading for a chocolate bar”
That was only ever the momentary value of the nut to that individual. Nothing permanent about it. As preferences change, the number of nuts required to obtain something changes also. The 10 nuts was a stand in for a chocolate bar for that individual at that moment. He was calculating.

Let us consider a counterfactual, which would be more akin to your model. I don’t know where this will go, so I am exploring here.

Instead of nuts, there is a limited supply of something that has a use value, but a very low use value. To keepit simple, lets say they are the same nuts, but they do fit some bolts, but there is a massive over-supply of this sort of nut. The nuts are useful to the engineer, but there are far more than he would ever use. The crew decide to use these nuts as a medium of exchange and divide them equally among the crew to use. They give the engineer a few extra because he can use some of them to attach to bolts, but nearly all of them are surplus to requirements.

Has anything really changed? Does this minimal use value alter how the nuts are traded? The engineer possibly only ever wants 6 nuts, but there are maybe thousands.

as I understand your argument (which may be wrong) it seems to be that because the nuts now have a use value, everyone will be better able to value their nuts. I don’t see it.

• guest says:

“What a nut now means is what you can buy with it.”

But now we’re back at square one.

“That was only ever the momentary value of the nut to that individual. Nothing permanent about it. As preferences change, the number of nuts required to obtain something changes also.”

We say that money cannot be a measurement of value because there are no such things as “units of satisfaction”; We don’t value something “twice as much” as something else, rather we rank our values for things on an implicit scale (in order of first place, second place, etc.) So there’s no way to know how much to raise or lower the price in terms of nuts off of its initial value as an IOU for specific goods.

We can’t say that the reason the price goes up 30% is because we value something “30% more than” something else – that’s not how values work.

So, money, not being capable of assigning a measurement to value, would not work in the way you imagine the nuts system to work.

“The engineer possibly only ever wants 6 nuts, but there are maybe thousands. ”

In this case, the nuts could theoretically serve as money until the engineer had all he needed; And since everyone else had all the rest of the nuts, everyone would be outbidding the others to try and trade with the engineer – if he needed the nuts bad enough that he was willing to pay a high price in terms of other goods – that we could reasonably assume that he’d acquire all he needed in the first transaction.

After which point we’d be back to square one, again.

• Grane Peer says:

Why would someone with the authority to disburse the nuts do so? Your example makes no sense. Imagine you printed off a roll of Harold notes and gave them to friends, at what point do you accept them for goods or services of yours?

• Harold says:

Grane, they do it because they recognize that a medium of exchange is a valuable thing to have, as it makes trade much easier. The nuts are worthless unless they are used in this way. They do it because they want more chocolate, and this way they get more chocolate.

Guest, the value of the nuts is not agreed on for each item. Perhaps they started with a direct barter system. This would give them some idea of how they valued things relatively, but is imprecise. As such it cannot maximise resources.

Then someone discovers the nut hoard and realises that they could use them to get a more precise estimate of their relative values.

If person B improves his chocolate recipe, (perhaps buy adding nuts). Maybe person D will offer 11 nuts. Person A then has to decide if it is worth 11 nuts to him, and he can take it or leave it. This is based on a calculation he makes of what other things he could get with the nuts.

I am in danger of stretching the analogy and simply making it less clear rather than clarifying anything.

I do not see why a value could not become attached to the nuts based on the individual preferences of the crew. The value of each item in terms of nuts varies as the preferences change.

• guest says:

“Perhaps they started with a direct barter system. This would give them some idea of how they valued things relatively, but is imprecise. As such it cannot maximise resources.”

Barter isn’t imprecise, it’s just inefficient when there are arbitrage opportunities that exist which enable people to pay less in terms of opportunities foregone.

In fact, it’s the most precise because the desired goods for both parties are completely known. I can see right away whether or not I got a good deal in terms of what I gave up.

With money there’s a time horizon and uncertainty

I may not be able to find someone with the good I’m willing to barter for, but I know with exact precision what I’ve got with barter.

Also, it’s important to understand that the “maximization” of resources is a subjective thing.

For example, I could completely fill up my property with water containers so as to maximize the amount of water I have, but because of Marginal Utility, that is not a beneficial goal for most people.

What this means is that in cases when there are no known arbitrage opportunities that would make indirect exchanges less costly than barter, then barter does in fact maximize resources – you will have the maximum that you are to have in exchange for what you’re willing to give up.

“Then someone discovers the nut hoard and realises that they could use them to get a more precise estimate of their relative values.”

This assumes that our valuations of goods have precise numbers associated with them, which they don’t.

We rank our preferences, and the numbers associated with the goods we acquire, relative to other goods, are not set in stone, but instead reveal what we are willing to give up for a particular goal at a particular time.

So, sticking something quantifiable in between transactions for barter goods doesn’t, itself, increase precision.

The reason gold (or some other commodity) could increase precision is because any price of gold bears on the supply of a good (supply in the hands of particular people) that is subjectively valued by someone for its use-value.

The nuts system is contrived – nothing prevents you from choosing any value you want (and saying “whether another person accepts it or not is what prevents such a thing” is just pushing the problem back – *they* could choose just as easily to agree with your offer as not, since the numbers of nuts don’t convey subjective values other than speculation).

• Harold says:

Yes, I agree precise is the wrong word.

By maximisation I mean economic efficiency. Individual satisfactions or utilities are maximised.

“nothing prevents you from choosing any value you want (and saying “whether another person accepts it or not is what prevents such a thing” is just pushing the problem back – ”

That is what prevents such a thing. I don’t see a problem with that. the value of the nuts IS what they are traded for.

“*they* could choose just as easily to agree with your offer as not, since the numbers of nuts don’t convey subjective values other than speculation).”

Lets look from another perspective. Correct me if I have got this wrong. The regression theory says that today’s value is based on yesterday’s value. There is no direct connection to the use value. Trade occurs separated from the use value. People exchange goods for money units because of their expected value tomorrow.

But what is yesterday’s value based on? Eventually we have an infinite regression. There must have been a starting point. It is only this starting point that is the problem, not the fact that money units are traded for things.

Mises says this must be use value. Use value does indeed give *an* explanation.

However, I do not see any logical reason why the starting point could not be arbitrary, based simply on agreement. All you need is to get the thing started. Then we have a memory of yesterday’s value and away we go.

• Harold says:

This has nothing to do with how much I value my own nuts.

• guest says:

+1

I was trying so hard not to go there.

But now that you have, I feel like I’m a bad person for missing a chance to stand in solidarity with oppressed and deplatformed comedians.

• Harold says:

Yeah, maybe I should have used a different low value item, tennis balls perhaps.