*sigh*

From Principles of Economics, chapter one:

Economics relies on the scientific method. That procedure means:

Observing real-world behavior and outcomes.
Based on those observations, formulating a possible explanation of cause and effect.
Testing this explanation by comparing the outcomes of specific events to the outcome predicted by the hypothesis.
Accepting, rejecting, and modifying the hypothesis, based on those comparisons.
Continuing to test the hypothesis against the facts.

It goes on to state that international trade forces us to modify our models of economic reasoning a bit.

You are being fed real world data points, you must be willing to modify your model in accordance with that.

Wouldn't matter. Things cheaper here != dollar "worth" more. I didn't consider the dollar to be "worth less" when I moved from Wyoming to Colorado, where gas is more expensive. I considered gas taxes to be higher. (The dollar is worth less because of inflation, but that is a totally separate effect based on quantity and does not depend on location at all.)

You are being fed real world data points, you must be willing to modify your model in accordance with that.

I'm being fed non-scientific observations, which attempt to explain differences in prices across locations erroneously by the value of currency, and not the differing factors of cost at each location. This explicit point was addressed by the source material itself, not just me.

I'm about to just throw my hands up. I really recommend you take a more in-depth study of economics. I know the state of Missouri requires that every college student take an entire year of it (at least my adviser told me to when I declared), and I know that Arkansas, Oklahoma, and Kansas all strongly recommend it.

You are basing your model on incomplete understanding of commodity costs. A pound of beef here is not the same price as a pound of beef in, say, New York. And it certainly isn't the same price in London. Even accounting for taxation and transportation, the cost of goods is not the same everywhere.

collegestudent22 wrote:Things cheaper here != dollar "worth" more.

Don't be a jackass. If semantics is your only argument, then you're not in a good position.

I'm being fed non-scientific observations, which attempt to explain differences in prices across locations erroneously by the value of currency and not the differing factors of cost at each location.

You seriously believe the only factor in differing prices are things like local taxes and transportation costs? You believe unequal inflation and a rapid change in exchange rates are felt instantaneously, with no immediate or protracted lag in wage and price adjustment?

By the way, I'd love for you to explain how it can cost twice as much for a farmer 90 minutes from NYC to transport his crops or cattle to NYC than it does to transport cattle from Florida to Los Angeles. I'm guessing people inside the beltway at Washington DC must pay less than half what they pay for Florida oranges in Sacramento since they're so much closer.

collegestudent22 wrote:Things cheaper here != dollar "worth" more.

Yes, actually, it does. That's exactly what it means.

Dictionary.com wrote:having a value of, or equal in value to, as in money: This vase is worth 12 dollars.

A dollars "worth" is defined by what it can purchase. If I can purchase an ounce of gold in one location for the same cost as I can purchase a pound in another location, the dollar is worth MORE in the other location. This is especially true if that is true for ALL GOODS AND SERVICES in that other location. If the only price difference were for the gold, then I would say you may be correct. The difference of cost for gold in these two locations is in transport costs and taxation, etc. Your stance simply does not hold true when (as in traveling to a non first world country) a fixed number of dollars is able to purchase much higher quality or more goods and services across the board. You may choose to try to include the cost of my travel, but it's not relevant in a global economy. Say I decided to expatriate to Costa Rica, and live off my retirement. I can still pull all of my American dollars from local banks and purchase more with them "there", than I could "here". Over the course of my retirement, the cost of my one way transportation would be insignificant.

spikegirl7 wrote:A pound of beef here is not the same price as a pound of beef in, say, New York. And it certainly isn't the same price in London.

It isn't the same good - it goes from being "beef here" to "beef in New York" or "beef in London". I could ship it from one side of the street to the other - it will have a cost, and therefore the beef will suddenly be more expensive. Doesn't have anything to do with the dollar used to purchase it.

Even accounting for taxation and transportation, the cost of goods is not the same everywhere.

You accounted for all of that, and included other various costs of production, uniqueness, and supply and demand considerations that have nothing to do with the money in question? On your own? Please, show me your calculations.

There are two things that can change the price of something. Changes in supply, demand, and production cost on the commodity side or changes in the value of money. Inflation is a change in the value of money by increasing supply - and prices will rise (usually quickly) to reflect such a change, no matter what currency is converted into the inflated currency. But the effect of transportation or locality shifting has absolutely nothing to do with it. It is a separate, and commodity side issue.

If semantics is your only argument, then you're not in a good position.

It isn't mere semantics, but an important point to understand in order to truly understand the workings of monetary and credit in a modern economy. But whatever.

You believe unequal inflation and a rapid change in exchange rates are felt instantaneously, with no immediate or protracted lag in wage and price adjustment?

No, but this effect is a known monetary effect and has nothing to do with the piece of paper in one's hand, but the spreading of new money into an economy. Your assumption that travel would be increased is based on the idea that exchange rates would adjust before prices - and that is mere guesswork, as it could happen entirely the other way around.

I'd love for you to explain how it can cost twice as much for a farmer 90 minutes from NYC to transport

Taxation. More expensive transportation of capital goods raising the price of initial production. And so on. I never claimed it was only transport costs of the produced good - only that it had nothing to do with the character of the dollar bill. An instance of inflation upsets costs and prices in a nonuniform manner, yes, but this is mostly unpredictable, and would have "trickled through" the economy within mere months.

Yes, actually, it does. That's exactly what it means.

No, it doesn't. Assume for a moment that the money is gold or silver coin. Would you say the same thing about that? That gold magically changes in market value across arbitrary lines on a map? Or is it rather that relevant commodity side issues arise - changes in taxation, security costs, local production costs (although this is not arbitrary - no one "decides" where a desert is, for example), local level of supply and demand (for local services, etc.), local variety/uniqueness (a hotel in Costa Rica is not the same as one in Longmont, CO, or even Florida), etc.

Any commodity (including money) has a market value based on supply and demand - it does not become "worth more" on a market without modification of supply and demand. And that only occurs with the commodity being traded for the money - not the money here.

Your stance simply does not hold true when (as in traveling to a non first world country) a fixed number of dollars is able to purchase much higher quality or more goods and services across the board.

You cannot get such higher quality "across the board" in such a poor country. In fact, you suffer from much lower quality in nearly everything, with only a few exceptions based primarily on a low demand from locals and generally in the service industry (cheaper labor as there is a lower demand for it due to lack of capital).

collegestudent22 wrote:Assume for a moment that the money is gold or silver coin. Would you say the same thing about that? That gold magically changes in market value across arbitrary lines on a map?

Of course it does. Where have you been taking classes that they teach you otherwise? You think maybe the beads exchanged for Manhattan were of differing values?

Deacon wrote:

collegestudent22 wrote:Assume for a moment that the money is gold or silver coin. Would you say the same thing about that? That gold magically changes in market value across arbitrary lines on a map?

Of course it does.

No, it does not. A British pound in the colonies was a British pound in England. Same money. The money did not change at all. The market value did not change at all - the only thing changing is the market value of what is exchanged for it.

You think maybe the beads exchanged for Manhattan were of differing values?

What are you even on about? I'm referring to one thing, and you bring up this?

Let's say the money was taken out of the equation. Say you are trading wheat for a chair. And you go to an area where there are lots of chairs, but the same amount of wheat. You will find that you can trade less wheat for that chair. But it has nothing to do with the wheat. Just as this change you are seeing has nothing to do with the money. You are associating an effect with the wrong cause.

Actually, it does. If everyone in Place B doesn't give a shit about gold because rubies are the big thing then the LOCAL market value of your gold changed when you left Place A where gold is all the rage. Money is really no different. If you go to a place where people don't make as much money, everything is cheaper, therefore your money is worth more. In reality the number on the currency exchange board has very little to do with the actual value of a currency. The value of a currency lies in the value of the good/service for which you're trading.

If you retire in poverty in Manhattan with $500k and I retire in Costa Rica in luxury with $500k you just keep telling yourself your money is worth the same as my money.

No, there are transportation costs for that apartment you bought.

raptor9k wrote:If you go to a place where people don't make as much money, everything is cheaper

No, everything is less available. Poor countries are not utopias where everything is cheap because there is not much money. And in today's economy, there is no "local" value of currency - or anything, for that matter - except in the poorest of locations, where people are literally dying of starvation in droves.

And, in your example, I would be able to trade my gold close to par with rubies as people would need the gold to pay to ship things in or should they travel to where I came from, etc. During transition periods - i.e. while inflation of the money supply is occurring - adjustment is imperfect and only tends towards equilibrium. Value shifts here, and it is possible that exports from and travel to a country would become comparatively cheaper. But that is temporary, and imposed by government action, not the market.

The value of a currency lies in the value of the good/service for which you're trading.

The value of a currency lies in all the goods you (or anyone else) could possibly purchase at that time (and are willing to) and the supply of currency to purchase those goods with. The market price of a specific good in relation to other goods depends on the particular supply and demand for a good.

If you retire in poverty in Manhattan with $500k and I retire in Costa Rica in luxury with $500k you just keep telling yourself your money is worth the same as my money.

Price is affected in Manhattan by government controls. Limits on building height, zoning, etc. all factor in. High taxes, etc. affect incomes. The comparison is not the same. But you will not be able to get an "apartment with a view of the Brooklyn Bridge" anywhere else - and that makes it a fundamentally different good than "apartment on a Costa Rican beach".

The difference is that if you just say "money is worth more in Costa Rica", you ignore the causal action for the price differences. Any analysis of economic factors, including the selling of government land, then operates on a different area.

Just to look at exports and travel costs, we could - if we don't stop at "money is worth more" - see that there is a better way to make this sector of the economy stronger, without the inflation that devalues savings, hurts imports, and causes the business cycle. We could reduce export controls, various taxation, and remove restrictions on using land (like the stupidity that is "open space" laws) that drives up prices by artificially limiting demand.

No, everything is less available. Poor countries are not utopias where everything is cheap because there is not much money. And in today's economy, there is no "local" value of currency - or anything, for that matter - except in the poorest of locations, where people are literally dying of starvation in droves.

Everything IS cheaper because there IS less money. Demographic distribution has a good deal to do with price points. And when we're talking about developing nations where things are relatively cheap it IS because there is less money. This is due to many things: late arrival of modern economic growth, political instability, etc.

spikegirl7 wrote:Everything IS cheaper because there IS less money.

Right.... good luck buying your super cheap food in Uganda or wherever. I'm sure that it will be great. I just hope you don't starve to death before finding any.

And when we're talking about developing nations where things are relatively cheap it IS because there is less money.

No, it is because of a lack of competitive demand for supply. Starvation conditions preclude any kind of real market economy. "Things" aren't cheap in developing nations - services are, such as the earlier mentioned chef-cooked meal, because laborers are just looking for enough to survive (or maybe slightly more in "somewhat developed" countries like Costa Rica). They aren't concerned with the latest computer tech or big screen TV or video games or refrigerators....

Only you, CS22, could take a simple question about whether countries would resort to selling their own sovereign lands and turn it into a pissing match over fundamental economic issues over currency. Can we take this to another thread or just stop, please?

Alright. I'm done. Now I'll rant about how government's claim to own land is total bollocks. Or just make the statement. I'm tired, alright? Just.... tired.