Case Study 14.1: Mackerel Economics in Federal Prisons The economist R.A Radford

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Case Study 14.1: Mackerel Economics in Federal Prisons The economist R.A Radford spent several years in prisoner-of-war camps in Italy and Germany during World War II, and he wrote about his experience. Although economic activity was sharply limited, many features of a normal economy were found in the prison life he observed. For example, in the absence of any offi cial currency behind bars, cigarettes came to serve all three roles of money: medium of exchange, unit of account, and store of value. Cigarettes were of uniform quality, of limited supply (they came in rations from the International Red Cross), reasonably durable, and individually could support small transactions or, in packs, larger ones. Prices measured in cigarettes became fairly uniform and well known throughout a camp of up to 50,000 prisoners of many nationalities. Now fast-forward half a century to the U.S. federal prison system. Prisoners are not allowed to hold cash. Whatever money sent by relatives or earned from prison jobs (at 40 cents an hour) goes into commissary accounts that allow inmates to buy items such as snacks and toiletries. In the absence of cash, to trade among themselves federal prisoners also came to settle on cigarettes as their commodity money (despite offi - cial prohibitions against trade of any kind among inmates). Cigarettes served as the informal money until 2004, when smoking was banned in all federal prisons. Once the ban took effect, the urge to trade created incentives to come up with some other commodity money. Prisoners tried other items sold at the commissary including postage stamps, cans of tuna, and Power Bars, but none of that seemed to catch on. Eventually prisoners settled on cans of mackerel, a bony, oily fi sh. So inmates informally use “macks”—as the commodity money came to be called—to settle gambling debts, to buy services from other inmates (such as ironing, shoe shining, and cell cleaning), and to buy goods from other inmates (including special foods prepared with items from the commissary and illicit items such as home-brewed “prison hooch”). At those federal prisons where the commissary opens only one day a week, some prisoners fi ll the void by running mini-commissaries out of their lockers. After wardens banned cans (because they could be refashioned into makeshift knives), the commodity money quickly shifted from cans of mackerel to plastic-and-foil pouches of mackerel. The mack is considered a good stand-in for the dollar because each pouch costs about $1 at the commissary, yet most prisoners, aside from weight-lifters seeking extra protein, would rather trade macks than eat them. Wardens try to discourage the mackerel economy by limiting the amount of food prisoners can stockpile. Those caught using macks as money can lose commissary privileges, can be reassigned to a less desirable cell, or can even spend time in the “hole.” Still, market forces are so strong that the mackerel economy survives in many federal prisons. SOURCES: R. A. Radford, “The Economic Organization of a P.O.W. Camp,” Economica, 12 (November 1945): 189–201: and Justin Scheck, “Mackerel Economics in Prisons Leads to Appreciation of the Oily Fillets,” Wall Street Journal, 2 October 2008. QUESTION 1. How well do pouches of mackerel satisfy the six properties of ideal money (durable, portable, divisible, uniform quality, low opportunity cost, stable value)?

Explanation / Answer

Cash and the monetary framework: Mackerel Economics in Federal Prisons.

Pockets of mackerel don't fulfill the six properties of perfect cash. Initially, they are not sturdy. The pockets have an expiry date after which they will end up noticeably unfit for human utilization. Second, the pockets are not completely convenient. They can be moved around in the jail however their weight will increment with bigger sums. Ten dollars will mean ten pockets of mackerel and a hundred dollars implies a hundred pockets of mackerel. This will make the 'cash' overwhelming. Third, the pockets of mackerel are not distinct. On the off chance that one needs fifty pennies; the pockets of mackerel can't be separated. Fourth, the property of uniform quality isn't fulfilled by pockets of mackerel (Ahamed Kameel, Mydin Meera, Moussa Larbani, 2006). The quality shifts as per the expiry date on the pocket. Diverse wellsprings of the pocket can likewise mean contrasts in quality. Fifth, low open door cost isn't fulfilled by pockets of mackerel. The substance of the pockets can be eaten if a detainee needs more protein he may eat the mackerel. 6th, the last quality is that of stable esteem. In the short run this quality is fulfilled by pockets of mackerel. For a week or till expiry date the pockets have stable esteem however over the long haul pockets of mackerel don't have stable esteem. The esteem break down with time or harm to the pockets.

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