WEBVTT NOTE 28. Halloween and Its Candy Economy 1 00:00:00.000 --> 00:00:04.740 Halloween and its Candy Economy 2 00:00:04.740 --> 00:00:11.040 Dale Steinrich once wrote that Halloween has a socialist tenor because menacing figures 3 00:00:11.040 --> 00:00:17.120 arrive at your door uninvited, demand your property and threaten to perform an unspecified 4 00:00:17.120 --> 00:00:18.120 trick. 5 00:00:18.120 --> 00:00:24.000 If you don't fork over, that's the way government works in a nutshell. 6 00:00:24.000 --> 00:00:28.360 And yet for overall kid excitement, Halloween seems to surpass Christmas, at least from 7 00:00:28.360 --> 00:00:30.560 and what I can observe. 8 00:00:30.560 --> 00:00:35.160 The kids spend months preparing their costumes and thrill to every detail of the ceremony 9 00:00:35.160 --> 00:00:41.740 – pumpkins, scary things, and, of course, candy. 10 00:00:41.740 --> 00:00:46.160 For the children too, there is the attractive fact that parents are not all that happy about 11 00:00:46.160 --> 00:00:51.900 Halloween with its goblins, gore and gluttony. 12 00:00:51.900 --> 00:00:56.160 But a deeper lesson to be drawn is that there is also an economic dimension to Halloween 13 00:00:56.160 --> 00:01:02.240 – something that goes far beyond simply demanding property with menaces, however light-hearted. 14 00:01:02.240 --> 00:01:06.940 Unlike at Christmas, where kids must only be good little citizens all year in order 15 00:01:06.940 --> 00:01:13.460 to be showered with gifts from their beneficent guardians, at Halloween, kids must actually 16 00:01:13.460 --> 00:01:17.500 work in real time for their candy. 17 00:01:17.500 --> 00:01:21.900 Because there is no taboo in place about trading once proceeds, the kids also have a chance 18 00:01:21.900 --> 00:01:27.580 to participate in genuine market experiences. 19 00:01:27.580 --> 00:01:32.340 For starters, they work hard on their costumes, under the very real expectations that those 20 00:01:32.340 --> 00:01:37.580 who hand out candy tend to be more generous to those with better costumes. 21 00:01:37.580 --> 00:01:42.160 Nor is the labour done there, for it clearly continues with the long walk around the neighbourhood 22 00:01:42.160 --> 00:01:46.820 with the prospect that each house visited will yield a gain of only one or two candies 23 00:01:46.820 --> 00:01:49.120 at most. 24 00:01:49.120 --> 00:01:53.120 This in itself forms an interesting feature of the ritual, since all of these same kids 25 00:01:53.120 --> 00:01:57.960 have lots of candy back at home that is being given out to other kids even as they tramp 26 00:01:57.960 --> 00:02:01.360 through the cold October evening. 27 00:02:01.360 --> 00:02:06.700 What could be the point of seeking out abroad what you already have at home? 28 00:02:06.700 --> 00:02:07.700 There are two reasons. 29 00:02:07.700 --> 00:02:12.360 First, though the kids may not consciously recognise it, they surely appreciate the candy 30 00:02:12.360 --> 00:02:17.680 more if it represents something they have to go seek out for themselves. 31 00:02:17.680 --> 00:02:22.120 And second, by mixing their labor with the process of candy acquisition, they have a 32 00:02:22.120 --> 00:02:29.240 greater sense that the candy partakes of qualities of duly earned private property. 33 00:02:29.240 --> 00:02:33.780 No child really believes that the bowls of candy at home really belong to him or her, 34 00:02:33.780 --> 00:02:38.240 but by contrast, the candy that the child collects from the neighborhood is said to 35 00:02:38.240 --> 00:02:44.560 be his or hers exclusively, even if mom or dad still oversees the overall patterns of 36 00:02:44.560 --> 00:02:46.800 distribution. 37 00:02:46.800 --> 00:02:52.360 The candy you collect is yours, a product of your own efforts, and nothing can quite 38 00:02:52.360 --> 00:02:56.440 replace that feeling of merited ownership. 39 00:02:56.440 --> 00:03:00.280 And yet the real thrill is far from over. 40 00:03:00.280 --> 00:03:06.040 What children truly adore about Halloween is what takes place after the candy has been 41 00:03:06.040 --> 00:03:10.480 brought back to home base, the trading. 42 00:03:10.480 --> 00:03:14.480 Here is where the excitement begins. 43 00:03:14.480 --> 00:03:19.740 No child can fully control what he or she is given, so it is up to that child to make exchanges 44 00:03:19.740 --> 00:03:24.820 with others in order to obtain what he or she really wants and to do so in a strategic 45 00:03:24.820 --> 00:03:29.980 manner so that overall wealth is enhanced. 46 00:03:29.980 --> 00:03:36.320 This process of trading began at our house at 8pm and lasted for about 30 minutes, at 47 00:03:36.320 --> 00:03:40.000 which point the children concluded that they had come as close as was possible to what 48 00:03:40.000 --> 00:03:45.080 what they wanted most, and so there was no more trading left to do. 49 00:03:45.080 --> 00:03:48.920 During the 30 minutes of active haggling, nine kids sat around the dining room table 50 00:03:48.920 --> 00:03:55.140 and participated in a hectic, yet orderly, if complex, interchange, bearing a good deal 51 00:03:55.140 --> 00:03:59.280 of resemblance to a Wall Street trading floor. 52 00:03:59.280 --> 00:04:04.140 Some traders shot up and shouted prices, deals, proposals, results, changes in preferences, 53 00:04:04.140 --> 00:04:06.860 new resource discoveries. 54 00:04:06.860 --> 00:04:12.620 The traders remained quiet and moved with great subtlety and surprise. 55 00:04:12.620 --> 00:04:18.260 The more strategic the plan, the more impressed the other kids were by it. 56 00:04:18.260 --> 00:04:23.260 It was fascinating to watch as the trading began slowly and as the first barter relationships 57 00:04:23.260 --> 00:04:25.780 began to form. 58 00:04:25.780 --> 00:04:31.980 One for one, two for one, three packages of nerds for one popcorn ball, two snickers for 59 00:04:31.980 --> 00:04:37.560 for One Candy Necklace, a Blow Pop for Two Pieces of Caramel, and so on. 60 00:04:37.560 --> 00:04:42.320 All children brought to the table their own subjective sense of what was valuable, a sense 61 00:04:42.320 --> 00:04:47.740 which was strongly influenced by the corresponding opinions of the other players, but one which 62 00:04:47.740 --> 00:04:52.880 also added to it a degree of prediction concerning just how the subjective values of others would 63 00:04:52.880 --> 00:04:55.020 stack up. 64 00:04:55.020 --> 00:04:58.920 It wasn't long before barter relationships, even those involving three or four simultaneous 65 00:04:58.920 --> 00:05:02.800 Transactions did not suffice. 66 00:05:02.800 --> 00:05:08.400 What those around the table needed were some means to achieve indirect exchange. 67 00:05:08.400 --> 00:05:12.680 They needed to hit upon a good which everyone would desire to possess because of its more 68 00:05:12.680 --> 00:05:17.820 certain onward marketability among all the other kids. 69 00:05:17.820 --> 00:05:22.160 This entity did not need to be highly valued from the outset by everyone present. 70 00:05:22.160 --> 00:05:26.560 What the kids only needed to notice was that there was something which a sufficient number 71 00:05:26.560 --> 00:05:32.560 The number of their group tended to want more than any other competing candy on offer. 72 00:05:32.560 --> 00:05:37.320 It was a short step from there, said the dawning of a realization that would occur to one or 73 00:05:37.320 --> 00:05:39.800 two kids. 74 00:05:39.800 --> 00:05:45.240 These would then try to acquire that particular candy, not to consume it themselves, but to 75 00:05:45.240 --> 00:05:51.200 use it, to trade it for whatever other candy they really wanted to enjoy. 76 00:05:51.200 --> 00:05:55.360 As more and more of the participants copied them, this one candy would come to play a 77 00:05:55.360 --> 00:06:01.280 a role in more and more indirect exchanges. Child A would accept it from Child B for 78 00:06:01.280 --> 00:06:05.860 a less desired kind of candy and would instantly swap it again with Child C, who happened to 79 00:06:05.860 --> 00:06:10.240 have the goodie he or she really preferred, but who wouldn't have wanted any of A's 80 00:06:10.240 --> 00:06:17.760 originally proffered treats. In this way, this one candy would come to possess a quality 81 00:06:17.760 --> 00:06:30.200 In general, money, whatever specific form it takes, tends to have a high value per unit 82 00:06:30.200 --> 00:06:34.840 of weight, and yet it should be split into units small enough to cope with any scale 83 00:06:34.840 --> 00:06:36.880 of exchange. 84 00:06:36.880 --> 00:06:39.880 It should ideally have a fixed supply. 85 00:06:39.880 --> 00:06:45.280 Above all, it must be the one thing most readily accepted in settlement of a trade, because 86 00:06:45.280 --> 00:06:49.560 As the acceptor knows, it is something which can – with the highest available degree 87 00:06:49.560 --> 00:06:55.280 of certainty – be used to facilitate additional future trades. 88 00:06:55.280 --> 00:06:58.980 There is no way to know ahead of time what will fulfil this role, only the market process 89 00:06:58.980 --> 00:07:03.040 itself will reveal this choice. 90 00:07:03.040 --> 00:07:08.080 In our house, the popcorn ball would not work, since there were only four of them, and these 91 00:07:08.080 --> 00:07:11.480 were not divisible into smaller units. 92 00:07:11.480 --> 00:07:16.000 The Twizzlers did not pass the test, because only one child had any knowledge of what they 93 00:07:16.000 --> 00:07:21.320 tasted like, and hence no one else had any concept of their value. 94 00:07:21.320 --> 00:07:26.320 Though this problem might seem an intractable one, as it happened, it only took a few minutes 95 00:07:26.320 --> 00:07:33.160 for everyone to discover what would become money for the evening – a micro-size three-musketeers 96 00:07:33.160 --> 00:07:35.900 bar. 97 00:07:35.900 --> 00:07:40.800 Before people realized the true measure of its usefulness, a three-musketeer bar would 98 00:07:40.800 --> 00:07:46.800 trade for as little as a smarty package, but then it began to rise in value, selling for 99 00:07:46.800 --> 00:07:50.800 the smarty and a tootsie roll. 100 00:07:50.800 --> 00:07:55.880 Once it became clear that the three-musketeer was the commodity of the most use in exchange, 101 00:07:55.880 --> 00:07:59.080 it didn't matter whether you actually liked it or not. 102 00:07:59.080 --> 00:08:05.000 You were happy to trade the candies you didn't much care for in order to obtain a three-musketeer, 103 00:08:05.000 --> 00:08:09.360 simply because this could then be traded again for something which really did make your mouth 104 00:08:09.360 --> 00:08:17.360 Once the Three Musketeer became money, its own value was seen to rise as a consequence. 105 00:08:17.360 --> 00:08:22.840 What was occurring was that this extra property of tradeability was being added to the underlying 106 00:08:22.840 --> 00:08:26.200 demand for it as a consumption item. 107 00:08:26.200 --> 00:08:33.080 Indeed, by the end of the session, this value reached such a height that it became an instant 108 00:08:33.080 --> 00:08:42.080 legend as, at its peak, one solitary three-musketeer changed hands for no less than three tootsie rolls and a tootsie pop. 109 00:08:43.080 --> 00:08:54.080 Once this money was settled upon, it became much easier to price such candies as Reese's and Kit Kat's, which had previously had an illiquid and uncertain market. 110 00:08:54.080 --> 00:09:00.800 Now, they began to sell for one-half and one-quarter of a three-musketeer, despite the fact that 111 00:09:00.800 --> 00:09:07.080 they had started out with much of the same intrinsic value as a snack item. 112 00:09:07.080 --> 00:09:11.320 From there on, their prices hovered within a narrow trading range roughly comparable 113 00:09:11.320 --> 00:09:18.360 to that of a small tootsie roll, while Snickers did slightly better than all of them. 114 00:09:18.360 --> 00:09:23.120 Extreme scarcity led to very high prices, anything up to four three-musketeers in the 115 00:09:23.120 --> 00:09:28.560 In the case of Jolly Rancher Hard Candy, Skittles, too, were highly prized and sold for as many 116 00:09:28.560 --> 00:09:31.480 as five Three Musketeers. 117 00:09:31.480 --> 00:09:36.640 Reese's Inside Out sold at a premium over the plain variety. 118 00:09:36.640 --> 00:09:42.220 However, showing that scarcity is not just a numerical concept, the parents of all these 119 00:09:42.220 --> 00:09:47.300 kids had long discouraged gum chewing, so despite the gum's similar rarity, no one 120 00:09:47.300 --> 00:09:49.420 wanted it. 121 00:09:49.420 --> 00:09:53.800 In fact, the price quickly fell to zero, where it was eventually given away free to the one 122 00:09:53.800 --> 00:09:56.600 child who was permitted to chew it. 123 00:09:56.600 --> 00:10:02.880 Thankfully, for the future of civilization, even that child soon lost interest in it. 124 00:10:02.880 --> 00:10:08.280 Interestingly, the advent of money also encouraged the kids to think beyond the immediate trading 125 00:10:08.280 --> 00:10:09.280 round. 126 00:10:09.280 --> 00:10:13.900 Instead, they began to acquire a surplus to be saved for successive rounds, where it was 127 00:10:13.900 --> 00:10:17.800 hoped better terms might be on offer. 128 00:10:17.800 --> 00:10:21.300 The kids soon adopted different strategies. 129 00:10:21.300 --> 00:10:26.000 Some started saving – hoarding – three musketeers to trade them in at the end of 130 00:10:26.000 --> 00:10:30.480 the trading session, speculating that the goods' price of three musketeers would continually 131 00:10:30.480 --> 00:10:32.760 rise. 132 00:10:32.760 --> 00:10:36.480 Others would acquire this valuable thing solely in order to consume it. 133 00:10:36.480 --> 00:10:42.000 This money, after all, originated as a consumable good, and so it remained. 134 00:10:42.000 --> 00:10:47.640 But mostly, this was the satisfying part for those anxious to observe the entrepreneurial 135 00:10:47.640 --> 00:10:49.920 discovery of money. 136 00:10:49.920 --> 00:10:56.320 Kids would acquire three musketeers solely to facilitate other exchanges. 137 00:10:56.320 --> 00:11:01.160 Outside observers of a Misesian bent imagined the following. 138 00:11:01.160 --> 00:11:06.240 Let's say someone arrived at the scene and threw down 100 three musketeers on the table. 139 00:11:06.240 --> 00:11:08.080 All kids know precisely what would happen. 140 00:11:08.080 --> 00:11:10.480 The price of three musketeers would tumble. 141 00:11:10.480 --> 00:11:14.180 Each one would purchase far less than it had before. 142 00:11:14.180 --> 00:11:19.680 This inflation might be so extreme that three musketeers might even cease to be money. 143 00:11:19.680 --> 00:11:24.520 The good everyone wants to acquire in order to acquire other goods and some other candy 144 00:11:24.520 --> 00:11:27.640 might take its place instead. 145 00:11:27.640 --> 00:11:32.800 Imagine the chaos that would ensue as the kids came loudly to bewail their recent exchanges 146 00:11:32.800 --> 00:11:37.200 of worthwhile candy for this now devalued commodity. 147 00:11:37.200 --> 00:11:40.920 Imagine the loss of innocents as they saw honest bargains frustrated and vowed to be 148 00:11:40.920 --> 00:11:44.880 more cautious of extending their trust upon the market. 149 00:11:44.880 --> 00:11:50.000 Imagine the general loss as trading once more became scattered and choices were again restricted 150 00:11:50.000 --> 00:11:54.840 as the idea of money fell into disrepute. 151 00:11:54.840 --> 00:12:00.180 But fortunately, no Halloween bogeyman from the Federal Reserve candy factory came to 152 00:12:00.180 --> 00:12:06.480 ruin their game, so the kids could remain free to trust in the soundness of their candy 153 00:12:06.480 --> 00:12:07.480 The Unit 154 00:12:07.480 --> 00:12:15.720 At last, the kids became exhausted by this frenzy, and the market closed. 155 00:12:15.720 --> 00:12:20.520 Not because someone sounded a bell, but simply because, in general, everyone came to see 156 00:12:20.520 --> 00:12:26.220 that each was as satisfied as they were likely to be with what they had. 157 00:12:26.220 --> 00:12:31.940 This was the Misesian plain state of rest. 158 00:12:31.940 --> 00:12:33.500 In Mises's words, 159 00:12:33.500 --> 00:12:38.380 "...people keep on exchanging on the market until no further exchange is possible, because 160 00:12:38.380 --> 00:12:44.880 no party expects any further improvement of its own conditions from a new act of exchange. 161 00:12:44.880 --> 00:12:50.340 The potential buyers consider the prices asked by the potential sellers unsatisfactory and 162 00:12:50.340 --> 00:12:52.020 vice versa. 163 00:12:52.020 --> 00:12:56.540 No more transactions take place." 164 00:12:56.540 --> 00:13:01.020 Once the trading had ended, the status of the three musketeers promptly reverted to 165 00:13:01.020 --> 00:13:06.020 to that of a purely consumable item, since the end of the trading game signalled the 166 00:13:06.020 --> 00:13:12.300 loss of their monetary properties, leaving them just a plain candy, much like any other. 167 00:13:12.300 --> 00:13:16.740 Some kids left with a far lesser quantity of candy than when they first arrived, but 168 00:13:16.740 --> 00:13:21.800 that did not prevent them feeling far wealthier, because now what they owned was a much closer 169 00:13:21.800 --> 00:13:25.840 approximation to their ideal mix. 170 00:13:25.840 --> 00:13:31.440 As for the other kids, well, they were astounded to discover that their own bags were far heavier 171 00:13:31.440 --> 00:13:36.680 than before, that they too felt wealthier, and that nobody was complaining to mom about 172 00:13:36.680 --> 00:13:38.800 that fact. 173 00:13:38.800 --> 00:13:44.160 Indeed all children left the table with smiles and happiness, each feeling as if he or she 174 00:13:44.160 --> 00:13:47.400 had gotten a great deal. 175 00:13:47.400 --> 00:13:50.680 What a stunning achievement! 176 00:13:50.680 --> 00:13:55.440 After all, the available physical resources were unchanged, nor had anyone planned or 177 00:13:55.440 --> 00:13:57.120 policed the trading. 178 00:13:57.120 --> 00:14:01.040 It had all happened spontaneously. 179 00:14:01.040 --> 00:14:06.380 One was left wondering at the true magic of that Halloween, namely at the transforming 180 00:14:06.380 --> 00:14:13.640 effect of something as simple as the opportunity for free exchange, for the chance to derive 181 00:14:13.640 --> 00:14:19.640 mutual benefit from the difference in tastes between individuals. 182 00:14:19.640 --> 00:14:24.680 And this, at least, Halloween, was all about treats. 183 00:14:24.680 --> 00:14:29.120 And despite what the opponents of the exchange economy will tell you, there was no trick 184 00:14:29.120 --> 00:14:31.640 about it anywhere you looked.