A fascinating article from 1945: An economist who was a P.O.W. during WW2 describes the POW Camp economy which developed.
In this camp we did not visit other bungalows very much and prices varied from place to place; hence the germ of truth in the story of the itinerant priest. By the end of a month, when we reached our permanent camp, there was a lively trade in all commodities and their relative values were well known, and expressed not in terms of one another—one didn’t quote bully in terms of sugar—but in terms of cigarettes. The cigarette became the standard of value. In the permanent camp people started by wandering through the bungalows calling their offers—”cheese for seven” (cigarettes)—and the hours after parcel issue were Bedlam. The inconveniences of this system soon led to its replacement by an Exchange and Mart notice board in every bungalow, where under the headings “name”, “room number”, “wanted” and “offered” sales and wants were advertised. When a deal went through, it was crossed off the board. The public and semi-permanent records of transactions led to cigarette prices being well known and thus tending to equality throughout the camp, although there were always opportunities for an astute trader to make a profit from arbitrage. With this development everyone, including non-smokers, was willing to sell for cigarettes, using them to buy at another time and place. Cigarettes became the normal currency, though, of course, barter was never extinguished.
Via Crooked Timber (from whom I stole the post title)..
I’m doing a little prison support for the brunswick ten and investigating CCA, the county’s biggest private prison, so i’ve been learning how this works. cigarettes are contraband, so the unit of currency is ‘a soup’, a package of chile ramen noodles. 5 soups = 2 stamps. some inmates have commisary, and can buy soups once aweek, usually, while others, indigent, can get 3 stamps a month or soap and suchlike. to my informant, getting a pen was most important, so he could file grievances and preserve rights from the prison litigation reform act. he’d charge a soup for nosy questions or a chess lesson, and trade legal research for medicine or food. as a vegetarian, eating soups meant dipping into capital for pens and stamps, but was necessary.
he’d post a written shopping list; the other inmates used oral bartering. the christian circle practiced primitive communism, while the gangsters traded on reputation capital.
barter and sharing were officially against the rules, but tolerated. it was an interesting lesson in social ecology and micro-economics.
i’ll be trying to introduce a few structural changes into the dynamic; the prison should not be withholding pens stamps medicine from the newest prisoners, should allow vegetarians food they can eat, that sort of thing.
markets happen. when markets are suppressed, everybody loses. we tend to be a little too tolerant of using government money to denominate our transactions; we could find another standard like e-gold or soups.
Not an avid follower of the dismal science, so please forgive this naive question. How does it affect an economy if the unit of currency is a volatile item? Presumably the cigarettes got smoked?
Had a language class the other night where we had to discuss the pros and cons of the Euro. Mind is still spinning a bit from the realisation that our money (coins, notes, etc) is as cheap as it can be, consistent with anti-counterfeiting, and that most money is in fact just electrons in a computer (or ink in a ledger, in an earlier age); just a way of keeping score. So money that’s actually worth something real itself… I can’t quite get my head around it.
i remember when i was a kid my brother would go to the bank and get rolls of dimes and half-dollars, and sort though them for pre-1964 coins made from silver. the silver dimes had roosevelt on one side, the fasces on the other – a bundle of rods symbolizing roman law, ‘out of many one’.
but i didn’t make the connection and add this to my lbj file until a month ago. debasing the currency is an old trick of tyrants. later, a friend who worked in a movie theater would watch for the occasional $5 silver certificate. i think it was nixon in 72 who stopped backing the dollar with silver. fiat currency is backed only by the guns and credit rating of its issuer.i think it might have been reagan who replaced the copper penny with the zincie. i don’t know if a nickel still has nickel.
civilizations rise and fall based on their ability to back currency with something real.
assyria, greece, rome, spain, england, usa, japan, saudia arabia, rise and fall based on ability to back credit with metal/minerals. metal isn’t perfect, but it’s less perishable and more fungible than cigarettes or camels or cheese or wampum. once they start bringing back big hunks of metal from the asteriods, power will shift again. perhaps non smokers have an advantage in the prison economy – we could ask the econ bloggers if there’s literature on this.
I read that there’s more nickel in a cent than in a nickel, an odd twist of affairs.
As for a consumable currency, although many of the prisoners smoke the cigarettes and thus reduce the currency supply, the equivalent of the Federal Reserve (the commissary or prison store) “coins” or imports more currency, which it distributes in exchange for prisoner labor, so the currency supply doesn’t evaporate. And there’s an indirect equivalence between cigarettes and labor; Karl Marx would be proud.