Note: This is part 2 in the series. Please read Part 1 to fully understand the concepts and theories behind my post. Everything I write is for educational purposes only.
In the last post we discussed the 2 different types of markets in prison. The "Administration Run Market" (ARM) and the "Inmate Run Market" (IRM).
In the ARM once a week you can shop in the commissary with a $360 a month spending limit.
Looking at the list below, you see prices and a number in () which designates the total quantity you can buy in 1 day. For Mackerel the number is 14, so we can more accurately than dollars, predict the new currency inflow into the market.
This is the ARM commissary list:
Alternatively, the IRM is where you can buy sandwiches, wraps, pizzas, Italian ices, hire a personal trainer, get a haircut, pay someone to clean your cube, repair a watch, even inmate run caterers for your birthday or going home party. Additionally there were inmate run 'stores' which sold commissary items at a markup since you could only commissary shop once a week.
These stores sold different things. There was "Papp Georgios" who made the best microwave pizza for 6 MAKS, Enrique the best barber for 2 MAKS, and Jim who would sew a scarf or hat for 5 MAK.
Over the period of my stay I observed some interesting market effects of various competing currencies. When I had first arrived I noticed that Mackerel packs were the most widely used currency because they had utility (being edible), good transactional currency, a good store of value and because of wide acceptance of these facts. Because many people believed Macks to have value, they did. Its as simple as that.
Over time, something else happened that I still could not figure out (If you have any ideas, please let me know!). I was speaking to someone who sells cold soda and when he told me his prices he said "1 Mack or 2 Money Maks". First thing I said was, "What is a Money Mak?"
He explained to me that Money Maks were just expired Mackerel, they had no real utility anymore and you could not eat them! So why did they have value? The answer is because the compound says they do. In fact, Money Maks were more widely used than Eating Maks were.
Im every Unit there existed currency exchangers. These guys essentially exchanged EMAKS (Edible Maks) for MMAKS (Money Maks).
I observed the following rates: 1 EMAK = 2 MMAKS 1.5 MMAK = 1 EMAK (You would have to trade 2 EMAK's to get this rate)
Coming from a background in economics, this was eye opening for me. I studied these economic theories but in a closed market you rarely get the chance to see its effects.
So what happened? How did MMAK lose all of its value in 1 day?
I was in the library one day and I saw dozens of people walking with MMAKS in their hand. This was odd seeing people openly carry Mackerel around unless they were eating it. So I took a walk over to the cafeteria and found a huge laundry bin filled to the brim of MMAKS. Inmates were taking arms loads and walking away. The administration essentially flooded the market with hundreds of MMAKS and gave them away for free. Within hours all the stores that accepted MMAKS stopped accepting them, currency exchangers as well. If you could not exchange them or use them, people lost confidence in its ability as a store of value.
Overnight Money Maks were gone.
In the next post I will discuss how Gresham's law played a big role in the IRM, where "bad money drives out good"
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