how well do pouches of mackerel satisfy the six properties of ideal money?

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kipling2448 | (Level 3) Educator Emeritus

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The “six properties of ideal money” generally refers to a currency’s portability, divisibility, durability, uniformity of quality, ease of production, and acceptability.  The precise terminology employed in discussions of the ideal characteristics of money vary, but the concepts are largely constant.  What follows is the application of these six properties to “pouches of mackerel”:

Portability: Six pouches of mackerel, even without knowing the size and weight of each pouch, would probably not be regarded as particularly portable.  Transporting sacks of presumably raw fish would be cumbersome and, consequently, not qualify as an ideal system for transferring value.  When discussing the portability of a currency, the operating assumption is that an individual human being is transporting the items in question.  Since this assumes that a truck is not being used, but rather a pedestrian, then the six pouches of fish are not portable.

Divisible: Six pouches of mackerel are certainly divisible.  They can be divided up an infinite number of ways.  They can be divided up into six separate units, and the contents of each pouch can be subdivided.  In short, the sacks of fish are highly divisible.

Durability: Six pouches of raw fish are definitely not durable.  On the contrary, raw fish is notoriously perishable.  Obviously, if the fish are smoked or dried, then their durability increases considerably, but the operating assumption, again, is that these are pouches of raw fish, which fail the durability test.

Uniformity of quality: Presumably, qualitative distinctions between individual fish or pouches of fish are minimal or nonexistent.  As such, the six pouches of mackerel pass the uniformity test.  However, if some of the fish are in markedly better condition than others, those higher quality fish will be in higher demand, eventually leaving only the lower quality fish.  Conversely, the owner of the six pouches could plan on keeping the better quality fish for himself, bartering or selling the lower quality mackerel to willing buyers.  The effect of this strategy would be to place the bad currency into circulation while hoarding the good currency -- the problem of Gresham’s Law. [See on this point William McEachern, Economics: A Contemporary Introduction, “Properties of the Ideal Money.”]   If all of the fish, or each of the pouches, are of uniform quality, they will all hold the same value.  Assuming that all of the fish are of equal quality, then they pass they uniformity test.

Ease of Production:  Fish, of course, are caught (this, naturally, assumes they were not purchased, stolen or bartered for from a fish farm).  One of the properties of ideal money is the ease by which it is physically produced.  The more difficult the minting or manufacturing process, or the more expensive the process by which it is attained, the less ideal.  Commercial fishermen would not consider the capture of six pouches-worth of mackerel to be difficult.  As such, the six pouches would pass the “ease of production” test.  An individual, poor fisherman who must catch his fish with a line or a small net, however, may find the production of this value difficult.  To remain consistent, this exercise will assume the latter situation: the lone, economically destitute or slightly prosperous fisherman who goes out alone in his small boat to catch fish.  As such, the six pouches of mackerel may represent an entire day’s or multiple days’ worth of labor.  If that’s the case, then the “ease of production” test is a failure.

Stability: How well the commodity or currency holds its value is one of the properties of ideal money.  Whether six pouches of mackerel is worth the same next week as it is this week is a product of the amount of mackerel available.  If the individual with the six pouches represents the sole source of mackerel, and if demand for that mackerel remains stable, then the value of the commodity is stable.  If another fisherman comes along with six pouches of his own that he is looking to sell, then the value of all the mackerel declines.  Similarly, if the public decides it no longer likes mackerel, then the value of the six pouches declines, as the market for the goods has diminished.  If the fisherman is the only source of mackerel, and demand for that particular fish remains high, then the value increases.  It is all dependent upon variables that may be difficult or impossible to predict.  As a general rule, however, the six pouches of fish could be considered to represent a stable medium of exchange. 

An additional property that is used interchangeably in discussions of ideal money could be acceptability.  Closely related to “stability,” “acceptability” refers to the expanse of the community that accepts a particular item as representing value.  The scenario assumes that mackerel is an accepted form of currency.

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