Money Mischief_ Episodes in Monetary History - Milton Friedman [2]
I have benefited greatly from the knowledge and advice of many friends. Their contributions to particular chapters are acknowledged in the notes to those chapters. I owe a more general acknowledgment to Anna Jacobson Schwartz, my longtime collaborator on monetary studies, who has as always been there when I needed some help. Also, to my longtime secretary and assistant, Gloria Valentine, who did invaluable background research in basic sources, patiently typed, retyped, and revised version after version of the text, made sure that all references were accurate, and was available when I needed her in and out of office hours.
William Jovanovich, who contributed so much to two previous books by my wife and myself, Free to Choose and The Tyranny of the Status Quo, has made an important contribution to this one as well. And the readers and I owe a debt to Marianna Lee, who served as executive editor of this book, and to the skilled copy editor who corrected many an infelicity in the original text.
The Hoover Institution, under two successive directors, W. Glenn Campbell and John Raisian, provided ideal working arrangements, giving me maximum freedom to pursue my interests and providing nearly ideal resources for doing so.
I have left the best to last. I have been fortunate beyond my dreams in my mate, Rose Director Friedman, who has enriched my life since we first met fifty-nine years ago. I cannot count the many ways she has contributed to this book, as she has to all of my other personal and intellectual activities.
Milton Friedman
Stanford, California
July 5, 1991
CHAPTER 1
The Island of Stone Money
From 1899 to 1919 the Caroline Islands, in Micronesia, were a German colony. The most westerly of the group is the island of Uap, or Yap, which at the time had a population of between five thousand and six thousand.
In 1903 an American anthropologist named William Henry Furness III spent several months on the island and wrote a fascinating book about the habits and customs of its inhabitants. He was particularly impressed by the islanders' monetary system, and accordingly he gave his book the title I have given this chapter: The Island of Stone Money (1910).
[A]s their island yields no metal, they have had recourse to stone; stone, on which labour in fetching and fashioning has been expended, is as truly a representation of labour as the mined and minted coins of civilisation.
Their medium of exchange they call fei, and it consists of large, solid, thick, stone wheels, ranging in diameter from a foot to twelve feet, having in the centre a hole varying in size with the diameter of the stone, wherein a pole may be inserted sufficiently large and strong to bear the weight and facilitate transportation. These stone "coins" [were made from limestone found on an island some four hundred miles distant. They] were originally quarried and shaped [on that island and the product] brought to Uap by some venturesome native navigators, in canoes and on rafts....
[A] noteworthy feature of this stone currency ... is that it is not necessary for its owner to reduce it to possession. After concluding a bargain which involves the price of a fei too large to be conveniently moved, its new owner is quite content to accept the bare acknowledgment of ownership and without so much as a mark to indicate the exchange, the coin remains undisturbed on the former owner's premises.
My faithful old friend, Fatumak, assured me that there was in the village near-by a family whose wealth was unquestioned—acknowledged by every one—and yet no one, not even the family itself, had ever laid eye or hand on this wealth; it consisted of an enormous fei, whereof the size is known only by tradition; for the past two or three generations it had been, and at that very time it was lying at the bottom of the sea! Many