I am inclined to doubt the stories told by my predecessors, of two Americans being shut up in a room together, and emerging twenty-four hours after, each with a large fortune made by swapping jack-knives. This, I am quite sure, is a mere traveller's story, little worthy of credence. It probably is founded on the fact, that the bowie-knife, being the only article in the country of fixed value, is made the basis of all important financial operations. Thus an American offers to swap or dicker (an American never says sell or trade) his bowie-knife with a consignment of cotton, or a number of shares of bank-stock, to boot for his correspondent's or business friend's knife, and certain money, or so much real estate to boot. The stock or the real estate might fluctuate in value, pending the bargain, as, indeed, I have discovered to my cost, in case of my own stock; but the bowie-knife, being in universal and constant demand, has an absolute, permanent value; and it must be admitted, that it lends American trade a certain kind of respectability, by giving it some sort of metallic basis to rest upon.
Monday, January 23, 2012
Amusing Story About Trade
One of the great flaws in the zero sum model of economics is that it fails to recognize that it is possible to increase the total wealth of a society by trade and improved efficiency of production. Of course, you can go too far the other way, also, as with this amusing story from Richard Grant White, The Adventures of Sir Lyon Bouse, Bart: in America during the Civil War (New York: American News Company, 1867), 62-63: