Gold Standards Don't Work: Part II - Goldilocks Knows

This is a little follow up to that first post.

Here I want to talk about how cigarettes are used as currency in prisons, and why they make a good currency.

(Most of my knowledge about what happens in prisons comes from episodes of Porridge, so forgive me if this lacks realism. I'm more interested in the general principles though.)

Cigarettes make a good currency as they're something that everyone wants - a huge proportion of people smoke, so even if a particular individual doesn't smoke, he/she knows they can trade them with people that do.

And likewise, they make a good currency as they're not so important as to be precious. That is, though people want them, they don't want them badly enough that they're unwilling to trade them for other goods they want, say a magazine or a book.

They're also small, fungible and portable. So larger things can divide into them. A magazine might be worth two cigarettes, a book maybe three.

So, unlike gold, ironically, they fall into that goldilocks zone. Wanted enough to be valuable, but not so valuable that people are unwilling to let go of them for other things.

An Example

Say someone in prison has a framed photo of their family (something that has high personal value), or they have a gold watch or necklace (something that has high physical value), they're going to be highly unwilling to let these items go. They're too precious.

Plus, as they're so valuable they can only be traded for other very valuable things. You can't really trade a gold watch for a magazine. (Technically you could perhaps break a watch or necklace down into its component pieces; but it wouldn't be very practical, and by breaking it the whole would lose value.)

Conversely, if someone has ten cigarettes, it's quite different. Sure, they'd much rather smoke all ten. However, giving away two or three for some other item they desire isn't a huge personal sacrifice either. After all, they're just cigarettes.

Societal Prison

I think it's worth thinking about this. Not only as it gives a good example of what makes a good currency, but also because we could be heading into similar territory. As digitisation and state power grows we could find ourselves more like prisoners within it. I'm being a little melodramatic here, of course. Though saying that, I do feel increasingly like Norman Stanley Fletcher these days.

(If I'm not too lazy I'll be posting a follow up to this later, titled Anything Can Be Currency In A World Without Tax.)