Economic Lessons of Moist von Lipwig

All right. This is mostly a review of Making Money (of which I told the whole world that I bought), which nonetheless contains economic nonsense, in a most Discworldian logic. Naturally, this contains some spoiler, so do proceed with caution.

The story starts with Adora Belle Dearheart sitting in the desert (smoking as usual), arguing with a lawyer (who seem to play roles to comic effect in this book – afterall, who could resist making lawyer jokes). That was three weeks ago.

Then of course, Moist von Lipwig was bored of his role as Postmaster General (bestowed to him by an ‘angel’ – Lord Vetinari, Ankh Morpork’s Patrician). And so he was given another job by Lord Vetinari, after an interview with the Chairman of the Ankh-Morpork Mint (Mrs. Topsy Lavish nee Turvy). A majority of the story is with Moist dealing with his inner self.

Then there are subplots regarding Mrs. Lavish’s step-son, Cosmo wanting to be the Patrician himself; and where Moist’s past plays catch-up with him; as well as subplots regarding Adora Belle Dearheart’s Golem Trust (trust me, them golems play a big part later on in the story, a most ingenious twist I didn’t see coming); a lecherous ex-professor (he’s dead) from the Department of Necromancy Post Mortem Communication of the Unseen University; and oh, Mrs. Lavish’s nephew too, who created the Gloop (something like Hex, but an economic computer)… And Mr. Bent, chief cashier at the bank, who is almost certainly a vampire (nice fun twist to this too, at the end)

Right, the story aside (which in itself is an awesome read, but with fewer footnotes this time), Terry does it again, this time with economics. He explores fiat money (which he did slightly in Going Postal with the stamps), as the main theme, and economic simulation (until Igor mde the Gloop too accurate).

Terry mentioned in the foreword that the hemline observation was imparted to him by Sir Basil Liddell Hart, but the actual hemline theory (that skirt hemlines are correlated with the economy) is by George Taylor. Though it must be noted that in the original Hemline Theory, the length of the skirts in fashion is proportional to the economy. As the economy got better, hemline of skirts got higher. This was described the other way round in Making Money (also known as the alternate hemline theory – more of a layman observation).

In the book, Moist is frustrated by the concept of money (it costs more than a penny to mill a penny), and Mr. Bent is bent on keeping the gold standard. In the meantime, Moist is setting about getting banknotes established, but at no avail. Strangely enough, in this world, money is equally hard to define. There is, definitely a cost to making money, and when it costs too much to make money (like recently in US, where it costs more than a penny to make a penny), it’s generally not good.

In terms of macroeconomics, it is easier to think of money like any other products and/or services. There is a cost involved in producing it. But since we usually attach monetary terms to cost, it would sound like to make cheese, you need cheese. Ah… but then to explain this, I’d go on to talk nonsense about the veil of money and stickiness, which will lead to talks of kinky demand curves (i.e demand curves with kinks)… ah… isn’t it wonderful that economics can be expressed as sexual euphemisms as well?

The people of Discworld believe in the value of gold. When Moist tried to introduce a du jere dollar note (idea courtesy of Cosmo Lavish), he wasn’t very successful in persuading the citizens of Ankh-Morpork that the gold isn’t important, and that the value of the money is anchored in the value of the city.

By the end of the book, it was revealed that there wasn’t any gold in the vaults to begin with (and of course, Moist was pinned as a thief, but he wasn’t, since it was the Lavish family who took the money long ago). That would mean the coinage used in Ankh-Morpok had all the while been fiat money. The Ankh-Morporkians used the money becaused the believe in it – aka the Tinkerbell Effect (of course, the Discworld Gods also are bound by the Tinkerbell Effect – Gods with few believers end up being Small Gods).

This, interestingly, do happen in real life. To this date, there are people who believe that the US Dollar is valued by gold (apparently kept in Fort Knox, from what one of my friend who believes so). But in fact, since the mid-70s, Nixon had the US Dollar off the gold standard, or any backings by specie (instead, it’s a free float market, which is why you get the ridiculously complex exchange rates). There isn’t any gold backing the dollar any more, but yet, people still use it, in belief of the government.

In a way, Terry described the whole situation (minus the Cosmo Lavish drama) quite similarly to the times during the World Wars. Governments needed money, and so they temporarily took their currencies off the Gold Standard to pay for their war crimes (yes, war is a bloody crime to me). Similarly, Lord Vetinari had an Undertaking (you know its importance when the word is capitalized), and needed finance. Though it was Moist, acting as the independent Federal Reserve, who took the AM$ off the Gold Standard (there wasn’t any gold to begin with).

Also, there was a kind of economic depression going along Ankh-Morpork. But whilst Cosmo predicted a bank run when people found out that there was no gold, people liked and trusted Moist, and instead of giving the bank a run, Harry King (he was mentioned in earlier books as the guy who did waste disposal in Discworld, a niche business) deposited even more money in it.

Moist also saw potential in lending markets, opening up the bank to everyone (including CMOT Dibbler, sausages inna bun anyone?), much to Mr. Bent’s disgust. I don’t remember much of my macroeconomics course now, but I believe the whole situation with lending markets and the whole money multiplier thing is based of floats of liabilities (what people save in banks are liabilities to the bank), and the amount allowed to be loaned.

Terry includes a lot of economic references, including the Luddite Movement (protests against the many golems working in the city for very low pay, hence shifting the supply curve in labor markets), outsourcing (coins were not milled in the mint, which was why it was expensive), economists and their love for writing academic papers (Hubert: “I shall write a paper on it!”; Moist: “Or you could write it on paper!”), franchising (Moist suggested franchising to Dibbler), par value vs real value (Moist sold his first edition $1 bill at $50), signalling (Moist: “nobody wants to bank in a shack”) and et cetera. Which is brilliant, but it felt to me that halfway through, he lost steam in writing on economic references, and moved on to political references instead. I mean, while that’s not bad, I’d have prefered more jokes about money creation.

There wasn’t much description of the aftermath of paper money (like the way he described stamps in Going Postal). In fact, towards the end of the book, the Ankh-Morporkian had a new backing for money, that guarded itself from being stolen.

Maybe Terry is insinuating that we should all go back to specie backing? I dunno. Ah, but this is echo-gnomics, reflected sound of underground spirits, as Twoflower would have put it

Speaking of banks and franchises.. I really really ought to get around doing my economics assignment instead of writing reviews of one of my favourite books (except the cover, which IMO is butt ugly. Should have bought the British version). Ja… cya!