This past week Matthew Yglesias wrote two pieces for Slate that underestimate the value of money in our society. His first piece was about eliminating paper money, where he argued that we could end recessions by eliminating paper currency. In a blog post this Friday, he argued about the “Irrelevance of Money.” None of Yglesias’ comments are directly untrue; in fact, the first paints a clear picture of how the cash we hold and the interest rate we receive drive spending decisions. Yglesias does however, hide the other two main sources of value of money.
The origins of money are as a trading tool. A currency, whether gold, silver, or printed paper, facilitated and continues to facilitate trade. My cart full of corn for your week’s labor is a difficult trade if there is no means of payment beyond barter. This is the most obvious use and value of money.
But money as a storage of value over time is money’s main source of value, and opposite to Yglesias’ claims, its obvious relevance. Economists model the value of money using a model called “Overlapping Generations,” first formulated by Irving Fisher, then expanded upon by Paul Samuelson and Peter Diamond.
The non-mathematical description of the model and subsequent formula for the value of money goes like this: When we are in our working age (the first generation), we generate income but in our later years we do not generate income. Subsequently, we need to store our income from our younger years to our older year. The way we do that is money. Food rots and houses deteriorate, when we are not generating an income, we need to be able to provide by delaying consumption from our early to latter years. In the model, the young “sell” services and goods to the old for “money,” and when the young turn old, they buy services from the new young generation, and so on. In the “Overlapping Generations Model,” money increases utility and that increase has subsequent value.
Yes, money is the cause of many evils in the world, but money is not the sole cause of recessions as Yglesias claims. Besides the everyday ease money creates in facilitating transactions, money is a necessity as a means of transferring wealth over time.
One week ago, the cornerback position was a major weakness for the Philadelphia Eagles. Now, it is a major strength and many fans and pundits are waiting for the Eagles to deplete their depth by trading Asante Samuel. Unless they receive a significant return on Samuel, I think the Eagles should stand pat with three shut down corners; here’s two reasons why:
First, security against an injury. Defensive players are consistently missing games and plays due to minor injuries, tweaks, etc. How many times do you see a deep ball to the opponents top receiver and wonder why the third string corner is covering him? Other teams see the substitutions and attack the weakness. With three top corners, the Eagles will not have this issue.
Second, the NFL is a pass first league, period. Look at the projected top teams in the NFL: Green Bay, Atlanta, and New England. Each of these teams feature predominately receiver heavy sets and in the playoffs, the Eagles will consistently need their three corners in the same defensive set. Pundits are saying that the Eagles should use more nickel packages because of their glut of talent at corner. While their conclusion is right, their reasoning is wrong. The Eagles will be forced to use more nickel packages by their opponents, especially in the playoffs.
With the MLB trade deadline approaching and the NFL off-season condensed into one week, there are some interesting trade rumors flying around in Philly.
For the Eagles, Dominique Rodgers-Cromartie (DRC) would turn a weakness into a strength for sure and he would help the Eagles win now. The Eagles need to think about winning this year, because Mike Vick will not be the same next year or the year after. Full NFL seasons are going to start to take a toll on Vick and the Eagles will soon be on the look-out for a new QB. There’s no doubt in my mind that the Eagles backup will start at least 3 games this year. I’d like to see the Eagles trade Kolb for DRC, but also go after a guy like Brian Hoyer the #2 for the Patriots. With their pickup of Ryan Mallet, they have a solid backup for the future, so Hoyer, a good backup himself would be expendable. In any case, the Eagles need to have a backup plan at QB once Kolb is out of the picture.
Over at CItizens Bank Park, the Phillies rumors surround a bat. Renting Carlos Beltran has a nice ring to it, but I don’t think he is the answer. On the other hand, Hunter Pence would fill the gaping offensive hole left by Jayson Werth’s departure. Pence is in the last year of his contract, but if the Phillies were confident that they could re-sign him (they have Ibanez, Lidge and Oswalt’s contracts coming off the books… 33 million), so they can afford an expensive addition. Plus with Pence signed, the Phillies would have more leverage in negotiations with Jimmy Rollins this winter; his offense could be considered expendable.
The debate about acquiring Pence surrounds trading Dominic Brown. Over the past few years, prospects have become extremely over valued. I heard Brown compared to Darryl Strawberry recently. I think a better peak projection would be exactly what Hunter Pence is right now: .300 average, 25 home runs, and 15-20 stolen bases. Pence has a proven track record of success, while Brown only has question marks. Some trades work well for both teams (see Red Sox/Marlins deal featuring Josh Beckett, Hanley Ramirez, et al.). I think a deal of Pence for Brown gives both teams what the desperately need, as long as Pence is not a 3 month player (yes, I am counting October…).