Damn it to Hades, I forgot to log into Firefox before posting. . . .
I'm in the process of reading (rather listening to) Frederic Bastiat's What is Money?, and in a few ways I can see how Rothbard's approach to economics is really an addition to Bastiat's. One thing confuses me though: whether Rothbard disagrees with Bastiat regarding money as wealth.
In What Has the Government Done to Our Money?, Rothbard says that money is a commodity; that when we make a transaction with money, both people are selling: one sells a service, the other sells his money. Thus money qualifies as a commodity. Even though it is mere currency, it has a fractional potential and is naturally selected to act as an exchange medium between willing, voluntary parties. As far as I can tell, Rothbard does believe that money is wealth in that it is a commodity: a value that can be bought with a service.
Bastiat, on the other hand, has this to say about an inquiry his character receives regarding why more money does not equal more wealth: that money is merely the sign and measure of things to be exchanged. He goes on to say that, "A gold eagle is no more the sign of a barrel of flour than a barrel of flour is the sign of a gold eagle." Then he goes on to say that the trouble with looking at money as wealth is that we only need to "increase the sign in order to increase the things signified."
So is money wealth, or merely a symbol of wealth?
triknighted:Damn it to Hades, I forgot to log into Firefox before posting. . . .
How about you just use it normally and leave Intercrap Explorer (and 1999) altogether?
Obviously it depends on your definition of the word.
See here. (And the links in the links section.)
Bastiat seems like he was referring to government-created currency, not money. Currency is not money, because money (a medium of exchange) is created by the market.
Of course Bastiat is right, and Rothbard doesn't disagree with the point he is making.
Money has two components that give it value. It has what we may call intrinsic value, meaning what a person could do with it if nobody was willing to trade it for anything. Thus, if we are talking about gold, it has value as jewelry, as a component of electronic devices, things like that. Of course, fiat money does not have this component, being all but useless intrinsically. That is exactly why it is called fiat money.
Of course what Rothbard writes makes a lot of sense when discussing this aspect of money. It's component of intrinsic value certainly is a commodity like any other.
And if money does have some intrinsic value, then Bastiat would concede that this intrinsic value component is wealth [=something worth having in and of itself]. Bastiat was talking about the second component that gives money value, which we are going to talk about right now:
Once something is a medium of exchange, meaning you can easily trade it with anyone for anything they are willing to sell, then it's value goes up, because it is more useful to people and thus there is more demand for it. An ounce of gold might fetch, say $5 an ounce as jewelry. Once it becomes cash and legal tender, it will be worth much more per ounce.
About this second aspect Bastiat was emphasizing that you can't really eat it or drink it [and we aren't talking about its use as jewelry etc]. So that it isn't real wealth.
However, one could consider even this aspect of it a commodity, if not true ultimate wealth, because it is useful to people.
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It's easy to refute an argument if you first misrepresent it. William Keizer
Mon. 12/05/28 22:56 EDT .post #158
Smiling Dave:Money has two components that give it value. It has what we may call intrinsic value, meaning what a person could do with it if nobody was willing to trade it for anything.
Mark,
You're right, didn't phrase it well.
Here's Mises' way of putting it, describing the two kinds of value inherent in money:
As soon as an economic good is demanded not only by those who want to use it for consumption or production, but also by people who want to keep it as a medium of exchange and to give it away at need in a later act of exchange, the demand for it increases. A new employment for this good has emerged and creates an additional demand for it. As with every other economic good, such an additional demand brings about a rise in its value in exchange, i.e., in the quantity of other goods which are offered for its acquisition. The amount of other goods which can be obtained in giving away a medium of exchange, its "price" as expressed in terms of various goods and services, is in part determined by the demand of those who want to acquire it as a medium of exchange. If people stop using the good in question as a medium of exchange, this additional specific demand disappears and the "price" drops concomitantly.
Thus the demand for a medium of exchange is the composite of two partial demands: the demand displayed by the intention to use it in consumption and production and that displayed by the intention to use it as a medium of exchange.[7] With regard to modern metallic money one speaks of the industrial demand and of the monetary demand. The value in exchange (purchasing power) of a medium of exchange is the resultant of the cumulative effect of both partial demands.
I explained what he means in simple language right here:
http://smilingdavesblog.blogspot.com/2011/06/bitcoin-takes-beating.html