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Can casino chips (checks) function as money?

Discussion in 'Business & Economics' started by Onion Eater, Jan 18, 2009.

  1. Onion Eater

    Onion Eater Member

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    In my book I use the term “commodity money,” not “gold.” I did not want to mention any empirical facts because my work is purely theoretical. I specifically did not want to mention gold because, while I am not an historian, I did grow up on a ranch and I was always uncomfortable with the image of cattlemen attaching so much value to jewelry that they would make the material it was made of into their medium of exchange. Too girlie! Cows are money and a calf from the next roundup is the obvious monetary unit. It continues to be so today: Modern ranchers make purchases on credit by pledging a calf to be delivered the following fall. We know that gold coins have value but, except for teenage girls and dentists, nobody sees use-value in the material the coins are made of.

    Let us consider the case of the dentist. If he pulls a rancher’s tooth and demands a calf in payment, what is he to do with it? Keeping a cow in town would ruin him with feed costs while any rancher can keep the animal in his herd at no cost. Thus, it makes sense for the rancher to pay the dentist with a claim on a cow from his herd, similar to the warehouse receipts that goldsmiths are known to have issued millennia later. The goldsmith’s receipts were made of paper but, since the origin of money predates Gutenberg’s invention, receipts for cows would have to be stamped into a coin. Gold is the best choice for technical reasons, though other metals were sometimes used.

    Small ranchers would have neither the means to mint coins nor the trust of the community to accept them, so they would have to sell some of their cattle to a large rancher in exchange for coins to be used in case of emergencies, like toothaches. Zarlenga asks (p. 1), “Does [money] obtain its value from the material from which it is made, or from its acceptability in exchanges due to the sponsorship or even legal requirements of the government?” He clearly intends to prove that gold coins were never issued by merchants but only by governments. I agree. Wealth is power and the largest rancher in the community is the government. Or the government is the largest rancher, whichever way you want to look at it. In our example, the dentist did not issue the coin, the local cattle baron did.

    The most difficult part of ranching is the cattle drive and one can only imagine what it was like before the invention of railroads. If the Mexicans of a hundred years ago had had to drive their cattle, not just to the railhead in Phoenix, but all the way to Chicago, Chicago would have been a much smaller city. The limiting factor on the size of cities was not how well organized the city government was, but how well organized the ranchers were. Besides picking up the trash, there is not much to running a city, but driving cattle hundreds of miles takes real organizational skills.

    Zarlenga writes (p. 4), “That such censorship [of the Greeks by the Romans] occurred in the monetary area appears likely. For example, in the Athenian Constitution coming down to us, we can find out how the garbage was collected, but we will search in vain to learn how Athens [sic] state coinage system was run.” Actually, I suspect that our copy of the Athenian Constitution is intact. The reason that we know so much about how they collected garbage is because that was the city government’s only real job. They did not mint coins. Historians have focused on these glorified ragpickers in the city while overlooking the more interesting economic activity of minting coins that was being conducted by cattlemen in the countryside.

    Corporations did not exist back then but, if all the ranchers in a community sell their cattle to one man in exchange for gold coins and agree to help him drive the herd to town, chasing strays regardless of their brand, and then settle with him after all loses have been accounted for, they have almost formed a corporation. After he trades the cattle for wheat and oil and other bulk items, he distributes it to his men by selling it to them for the coins he purchased their cattle with. But his men all have shopping lists of their own, so it is natural that the retailers in town would accept the coins of the cattle baron. They know that there will always be an inter-town demand for them because the cattlemen come to town every fall and any townsman who anticipates needing a cow to butcher before winter must, in the meantime, obtain one of the coins in trade.

    Casinos in Las Vegas will accept their competitor’s chips (actually called “checks,” but I will say “chips” to avoid confusing them with demand deposits at banks) even though they are under no obligation to do so, and it is technically illegal under Federal law. Similarly, the several cattle barons who drove their cattle to the same city would come to accept each other’s coins, provided that they were all the same weight, about 130 grains as recorded by Zarlenga. A cattleman would not want to lose a sale just because a customer had someone else’s coin. The cattleman could redeem it later through the clearing house at the local saloon where the cattlemen gathered. There it is easy to locate the issuer and trade coins straight across, with the balance to be delivered in cattle the next morning at the feedlot.

    So it was that 130-grain gold coins gradually came to be thought of as money, regardless of whose mark was on them, and by people who had no immediate need for a cow. This result requires only that the clearing house functioned smoothly in the sense that anyone who did not have enough cattle to meet his obligations was no longer allowed to issue coins. And, not to put too fine a point on it, by “no longer allowed to issue coins,” I mean they were executed. Participation at the clearing house was not considered optional. Merchants did not have the capability or the authority to execute a cattle baron, but his peers did. They were competitors, after all, not friends. They all sold their cattle to the same townsfolk and, where their territories overlapped, their men were actively, if surreptitiously, engaged in rustling each other’s cattle.

    Thus, I will concede Zarlenga’s point that only governments and not merchants issued coins, but I would undercut his argument by observing that the cattlemen of antiquity did not divide their world into private-sector entities such as corporations and public-sector entities such as governments. Without firearms it would have taken, literally, an army to protect a cattle drive from thieves. Historians are unanimous in considering the presence of troops to be evidence of a government, so it is not surprising that Zarlenga claims that it was governments and not merchants who issued coins. But I would argue that what historians call a government was more like what we would call a corporation, but one with a military wing.

    Also contrary to Zarlenga’s thesis, that coinage requires the stamp of approval from a legitimate government, observe that the chips issued by Las Vegas casinos function as money, yet nobody mistakes a casino for a government. Casinos have no authority beyond their property line and the legitimate government, the Feds, strictly prohibit accepting casino chips in trade. Yet people do so all the time. When I worked in Las Vegas (not at a casino), I was sometimes paid in chips. Small businesses, but not the national chain stores, would accept chips for groceries and such. If it were not for the Federal law, it is easy to see how private coinage could come about.

    The government discourages people from accepting casino chips in trade by making it illegal but, simultaneously, they encourage such trade by insisting that gamblers must pay taxes on their winnings but cannot declare their loses as a business expense. Thus, when a gambler wins big, rather than be confronted with a W-2 form at the cashier’s cage, he simply walks the chips out the front door and then foists them on everybody to whom he owes money. People do not have to fill out W-2 forms if they redeem only small quantities of chips so, once his bucket of chips has filtered through the local economy, they will eventually all be trundled back to the cashier’s cage. How long they remain in circulation is anybody’s guess, but I doubt it is long enough to inspire a casino to keep less cash on hand than they have outstanding chips.

    Anarchists should not take this example to imply that a private entity such as a casino is more “sound” than the federal government. People look for an alternative to dollars because they fear the IRS, not because they distrust the Federal Reserve. Las Vegas locals have little in common with anarchists hunkered down in northern Idaho waiting for the dollar to collapse. Nevertheless, motivation aside, the fact that casino chips are readily accepted in Las Vegas belies Zarlenga’s contention (p. 13) of “an institutional origin of money rather than a market origin.”

    Zarlenga (p. 13) writes that “One of the main points... is that early gold coinage was designed to represent the ox/cow commodity money unit, already recognized in most advanced societies.” Apparently the government, in their wisdom, simply recognized that gold would work better than cows and decreed that, henceforth, 130 grains of gold would be the equal of one cow. Zarlenga concludes (p. 15), “This has deeply negative implications for the Austrian School, for the Libertarians, and for the free bankers, which they would be well advised to investigate now.” As a libertarian and a free-banking theorist who has just conceded most of the cow-certificate argument to Zarlenga, it would seem that I am in big trouble. But why? What do events that took place thousands of years ago have to do with anything today?

    The only really crucial point, both for Axiomatic and Austrian Economics, is... continue.
     
  2. Agnapostate

    Agnapostate New Member

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    Shouldn't you be busy writing your limericks?
     
  3. Onion Eater

    Onion Eater Member

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    Limericks are much too difficult a format for me! I'm sticking with the A-B-A format, thanks.

    Ski! Ski! Ski! Ski!
    “So you enjoy gracefully schussing down the hill?”
    A friend asked and I laughed, “Graceful? No. Not me!”

    “I seek giant moguls,” I tell the ski patrol, “Where’s the best snow?”
    “We’ll get a stretcher ready and prepare our splints for you.
    “The Wall is what you seek. That’s where all the crazy people go.”

    “Very well,” I go over The Wall with a silent prayer and a yell.
    Video cameras whir. Warren Miller will buy their tapes if I prevail,
    America’s Funniest Home Videos has bought the ones where I fell.

    At the top of each bump stands a mogul troll.
    Invisible creatures that will trip me up as I pass,
    But not if I reach forward and stab them with my ski pole!

    Leaning forward I impale the creature’s hairy foot,
    Then turn around him with my weight on my downhill ski.
    But if I miss my strike, then my mogul run is kaput.

    Some people telemark and some race the Super G,
    But sticking mogul trolls is what I do best.
    Gracefully schussing? These words are foreign to me.

    The sun has set, the day is done; I have not yet met my doom.
    I eat a thick steak and a carrot cake and retire to my hotel.
    What’s this? My God! A mogul troll, waiting in my room!

    Click here for my complete collection of poetry.
     
  4. Agnapostate

    Agnapostate New Member

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    Never replied to Reiver, did you?
     
  5. Onion Eater

    Onion Eater Member

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    Replied to him regarding what? I didn't even know he was at House of Politics. I found him at Political Forum and posted this thread:

    Reiver! Reply!

    I know that you are Scucca and I suspect that you are Steve Reglar. You have quoted Reglar and Yunker repeatedly at this and other forums, including Debate Politics. I asked you there to reconcile these two men's positions and you disappeared.

    Perhaps you would be so kind as to reply here?

    Or do you prefer to criticize my references, as is your custom when you are unable to refute someone?

    Cutting the Gordian Knot of GE Theory

    Steve Reglar (2005) writes:

    "As a tool of capitalist hegemony the doctrine of general equilibrium is very useful. It assumes that the normal condition of society is for the state to play as little a role in economic life as possible, because the market is part of human nature and the most efficient form of economic organization. The theory, therefore, has a role in legitimizing capitalist hegemony."

    A tool of capitalist hegemony? My, what harsh language! One can almost visualize GE theorists visiting smoke-filled rooms to accept bribes from their cigar-puffing benefactors. Indeed, Post-Autistic economists, after observing the word “axiomatic” in the title of my book (Aguilar, 1999), dismissed it out-of-hand, denouncing me as a bought-and-paid-for stooge of Big Business. Apparently, just that one word was enough to convince them of this about me.

    But before we dismiss this talk of an epistemological approach being a “tool” of Big Business to “legitimize” their obviously anti-social behavior, let us at least see if the socialists are consistent. James Yunker (2007) writes:

    "This article evaluates the performance of contemporary capitalism relative to that of a hypothetical alternative designated 'profit-oriented market socialism.' In most respects, profit-oriented market socialism would closely mimic contemporary market capitalism. The major difference would be that most profits and interest generated by the operations of publicly-owned business enterprises would be distributed to the general public as a social dividend proportional to household wage and salary income rather than in proportion to household financial assets. The basis of the comparison is a small-scale but comprehensive computable general equilibrium model."

    Here we read that GE Theory is not a tool of capitalist hegemony, but a tool of profit-oriented market socialism, that is, publicly-owned business enterprises (e.g. Fannie, Freddie, AIG, etc.) that mimic contemporary market capitalism. And it is not a “tool” in the sense of legitimizing the socialists (presumably, their legitimacy is derived from emotional appeals of the “Gosh, there sure are a lot of poor people – darn capitalists!” variety), but a tool in the literal sense of defining a software model.

    Well, which is it? Reglar thinks that GE Theory "assumes that the normal condition of society is for the state to play as little a role in economic life as possible." Yunker sees GE Theory as the basis for a central planner to "mimic contemporary market capitalism" while retaining for himself the authority to distribute the social dividend – hardly a "little role in economic life."

    Read the rest of the paper at Cutting the Gordian Knot of GE Theory.
     
  6. Agnapostate

    Agnapostate New Member

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    Of course; that's what I was referring to. The majority of your posts appear to be a crude advertising campaign for your "axiomatic theories."

    EDIT: You never replied to my citation of Gould's affirmation of Kropotkin either, though in retrospect, it was admittedly off-topic.
     
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