New ideas for money since 1827

May 22, 2018 (Windy Hill Beach, South Carolina) — A column by Nobel Prize-winning economist Robert J. Shiller includes an interesting discussion of some of the new ideas for money that preceded cryptocurrency:

… In 1827, Josiah Warner opened the “Cincinnati Time Store” that sold merchandise in units of hours of work, relying on “labour notes,” which resembled paper money. The new money was seen as a testament to the importance of working people, until he closed the store in 1830.

Two years later, Robert Owen, sometimes described as the father of socialism, attempted to establish in London the National Equitable Labour Exchange, relying on labour notes, or “time money,” as currency. Here, too, using time instead of gold or silver as a standard of value enforced the notion of the primacy of labour. But, like Warner’s time store, Owen’s experiment failed.

Likewise, Karl Marx and Friedrich Engels proposed that the central Communist premise — “Abolition of private property” — would be accompanied by a “Communistic abolition of buying and selling.” Eliminating money, however, was impossible to do, and no Communist state ever did so. Instead, as the British Museum’s recent exhibit, “The Currency of Communism,” showed, they issued paper money with vivid symbols of the working class on it. They had to do something different with money.

During the Great Depression of the 1930s, a radical movement, called Technocracy, associated with Columbia University, proposed to replace the goldbacked dollar with a measure of energy, the erg. In their book, The A B C of Technocracy, published under the pseudonym Frank Arkright, they advanced the idea that putting the economy “on an energy basis” would overcome the unemployment problem. The Technocracy fad proved to be short-lived, though, after top scientists debunked the idea’s technical pretensions.

But the effort to dress up a half-baked idea in advanced science didn’t stop there. Parallel with Technocracy, in 1932 the economist John Pease Norton, addressing the Econometric Society, proposed a dollar backed not by gold but by electricity. But while Norton’s electric dollar received substantial attention, he had no good reason for choosing electricity over other commodities to back the dollar. At a time when most households in advanced countries had only recently been electrified, and electric devices from radios to refrigerators had entered homes, electricity evoked images of the most glamorous high science. But, like Technocracy, the attempt to co-opt science backfired.

… as in the past, the public’s fascination with cryptocurrencies is tied to a sort of mystery, like the mystery of the value of money itself, consisting in the new money’s connection to advanced science. Practically no one, outside of computer science departments, can explain how cryptocurrencies work. That mystery creates an aura of exclusivity, gives the new money glamour, and fills devotees with revolutionary zeal. None of this is new, and, as with past monetary innovations, a compelling story may not be enough.

Source: Robert J Shiller (a 2013 Nobel laureate in economics, currently Professor of Economics at Yale University), “Why it’s difficult to crack cryptocurrency mysteries“, Khaleej Times (UAE), May 23, 2018, p. 15

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