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Economist Art Carden wrote a brilliant Halloween-themed essay for the American Institute for Economic Research. In Carden’s essay How Kids Create Wealth By Trading Halloween Candy; he details how voluntary trade makes all participants better off than they previously were. However, Carden uses an unorthodox example to demonstrate this point, children trading Halloween candy. As mundane as this simple example may seem, it serves as a powerful analogy defending unfettered trade. When we opt to exchange one commodity (most commonly money) for another product/service, we tend to value the commodity we are giving up less than the good we seek to obtain. This maxim implicitly validates the Subjective Theory of value, first formulated during the Marginal Revolution in the 1870s. Children trading candy with their friends demonstrates far more than the subjective nature of value. It also indirectly dispels the flawed arguments of protections, bringing the old king’s gold fallacy to its knees in capitulation. The medium of exchange may intrinsically hold value, but this value rests in the goods and services that we can buy with it. A bar of gold may be valuable to us, however to man isolated on an island in a Robinson Crusoe-style model of autistic exchange (p.84) the gold bar is of little value. A man deserted on an isolated island has nothing to gain in trading the gold bar (no trading partners). Clearly illustrates the fact that subjective worth of money exists in its utility for economic exchange. For a trick-or-treater who dislikes Twix candy bars, this variety of candy has no value as they would be more satisfied with Reese’s Peanut Butter Cups. However, their friend who has the opposite candy preferences between the two types of chocolate candy would want a Twix over Reese’s cups. What both trick-or-treaters can do is trade their stock of Reese’s for Twix bars and vice versa. Similar to how we exchange with friendly nations that have a comparative advantage for goods that we desire. But stubbornly holding on to the candy that the trick-or-treats do not prefer is not doing them any favors. Much how forcing domestic production of goods the U.S. does not produce efficiently is economically inefficient and a waste of resources.
If trade isn’t an option, she’s simply stuck with a lot of candy she doesn’t want to eat. With access to a market consisting in this case of her brothers and friends, she can swap the caramel-containing candies she doesn’t want for non-caramel-containing candies she does. She is better off. Her trading partners are better off. There’s an important lesson here: by getting candy into the hands of those who value it most highly, the kids are creating wealth.
It’s a mistake to think that wealth consists of stuff. Wealth, rather, is whatever people value. For someone who likes Snickers bars, Snickers bars are wealth. For someone who doesn’t like Snickers bars, they aren’t wealth–unless they can be traded. If they can, the excess Snickers bars become wealth because they can then be swapped for something better.https://www.aier.org/article/how-kids-create-wealth-by-trading-halloween-candy/
Following Dr. Block’s supposition that a person can commodify themselves and effectively sell or alienate themselves (p.6), we must address the issue of capital destruction. The economic costs go beyond losses in productivity but also have more subtle ramifications throughout the economy. The act of suicide destroys a person’s body; however, the intangible assets lost are arguably the most detrimental. Most notably, in the form of squandered human capital and social capital. While these forms of social capital are refutably mere constructs, they still seem to possess a priceless qualitative value. In the absence of the knowledge, credentials, and necessary social networks financial success is not possible.
Commodifying these abstract concepts applies them to John Locke’s postulations regarding wasting resources (p.12). But if the value of commodities is subjective, we have to evaluate Locke’s assumptions regarding frivolous resource consumption. Furthermore, if we accept this notion of wasteful consumption, we must apply it to other areas of resource allocation. For example, investing too in production can be considered a wasteful form of resource allocation. Under Locke’s theory, if extrapolated, we should bar entrepreneurs from making overinvestments in their firms. Not only would such a law be unenforceable, but it also suffers from the Hayekian Pretense of Knowledge. Neither the businessman nor the lawmaker has access to perfect information. How would the lawmaker even know if a business owner engaged in malinvestment until the downstream effects have come to full fruition, paralleling the flaws of proactive legal sanctions? Entrepreneurial decision-making is enveloped in uncertainty. To quote the great Frank H.Knight:
It will appear that a measurable uncertainty, or “risk” proper, as we shall use the term, is so far different from an unmeasurable one that it is not in effect an uncertainty at all. We shall accordingly restrict the term “uncertainty” to cases of the non-quantitative type. It is this “true” uncertainty, and not risk, as has been argued, which forms the basis of a valid theory of profit and accounts for the divergence between actual and theoretical competition. (p.84)
To preemptively declare a form of capital use or manipulation as “…wasteful..” is fallacious. At best, we can attempt to use market signals as a guide for appropriately deploying capital. Whether an investment was prudent or foolish will only be known once the downstream consequences are evident. In this respect suicide is just a form of managing the “… social..” capital structure through the informal destruction (p.21) of such social assets. Allowing people to dispose of capital at their own free will allows for the unfettered restructuring  of productive activities utilizing human and social capital. Allowing the substitution or destruction of “..social..” inputs.
- A reference to the Austrian Theory of Capital
The current price of 1 ounce of pure silver is approximately $15.21 USD . The average going rate for 2020 Silver Eagle drifts between $20.00- $25.00 . This is not accounting for any variance for any limited edition collector’s coins that command a higher price tag. We are looking at nearly $10.00 premium over an ounce of pure silver. The coins themselves aren’t 100 percent pure silver. They are typically 99.9 % pure. Due to the bonding agents uses to make it a usable coin. Why the premium over pure silver?
We could accept the Cost-of-production theory of value. It was favored by the Classical economists. Who doesn’t love reading a little bit of Adam Smith, David Richardo, or John Stuart Mill? The classical interpretation of value was insufficient for solving the Diamond-Water Paradox. Unfortunately, did not provide us with the precepts to invalidate the Labor Theory of Value. Some people view both theories of value interchangeably, I disagree with such wording. Labor theory in my perception focuses mainly on labor. Generally for the purposes of sowing anti-market bias.
Thankfully the fathers of the Marginal Revolution (Menger, Jevons, and Walras) provide us with a novel approach to determining prices and value. That is through the Subjective Theory of Value. Meaning that the value of goods is determined by the subjective evaluations of the consumer. If you think about as much the costs of production may influence profits, if the price is too high in the opinion of consumers the product will not sell. I can spend $20.00 making handmade coffee cups with a 10 percent mark-up. Odds are no one will buy them because they will see the price as being too high. Ultimately, I would need to find a new supplier for higher-order goods or more efficient production methods. As the producer, I am at the mercy of the consumer. If I do not meet consumer expectations (in terms of pricing or quality) I will not be in business for long.
What does this have to with the U.S. Silver Dollar? We could say that the premium of a U.S. Silver Dollar over 1 ounce of pure silver is due to the costs involved in the mint processing it into a coin. However, if the general public is unwilling to pay the $10.00 premium the coin will not sell. What the consumer is really paying for is the convenience of silver processed into a coin. Portability is a characteristic of all forms of money. What you sacrifice in purity is made up for in portability. Transporting raw silver is kind of cumbersome. The consumer is also paying for the officiality of the coin. It has the government seal of approval. Versus the seal of some hair-brained, tinfoil hat-wearing conspiracy theorist. Its having status under legal tender laws instills some sense of trust in its value. Depending on your political beliefs of course. Most folks still find the U.S. mint to be a reliable source.