Maslow's hierarchy of money


A new study shows that the form of shadow "money" used in US prisons is changing. For many years it has been cigarettes (tobacco), and to a lesser extent stamps and envelopes. But now it seems the popularity of these in the prison black economy is declining - in favour of food. Specifically, Ramen noodles, a high-calorie, substantial foodstuff.

Without examining the reasons for this change, it would be easy to assume that this is a matter of relative scarcity. Perhaps Ramen noodles are cheaper and more widely available than cigarettes, so inmates are turning to them because they are easier to obtain. If so, then Gresham's Law tells us that Ramen noodles would eventually become the principal medium of exchange. Cigarettes would gradually disappear from circulation, becoming an increasingly expensive store of value.

Of course, rich prisoners might worry that lack of demand for cigarettes would reduce their value - after all, if you can't sell your ciggies, you might as well smoke them. So they might hoard Ramen noodles in order to restrict the amount in circulation, or they might try to force up the value of Ramen noodles by artificially pinning their price to cigarettes. We might end up with something akin to a bimetallic standard, with Ramen noodles being the "silver" used by the poor and cigarettes becoming rich prisoners' "gold".

This would create hardship for poorer prisoners, some of whom would be unable to obtain the noodles needed to buy other near-essential goods such as hygiene products. Perhaps there might be some enlightened prison officer who would deliver an inflammatory speech demanding the free circulation of Ramen noodles. "You shall not crucify prisoners on a cross of cigarettes"......

Alternatively, prisoners could be taking to Ramen noodles because they are all giving up smoking and want a new, healthier type of money. "Maybe Ramen noodles are the prison equivalent of Bitcoin", said one bright spark on Twitter.

Umm, no. The change is being driven by a fall in supply, not demand. And it is not the supply of cigarettes that is falling. According to Michael Gibson-Light, the author of the new study, the change is caused by deterioration in the supply of food:
"Prisoners are so unhappy with the quality and quantity of prison food that they receive that they have begun relying on ramen noodles -- a cheap, durable food product -- as a form of money in the underground economy," he said. "Because it is cheap, tasty, and rich in calories, ramen has become so valuable that it is used to exchange for other goods."
The US's prisons are overflowing with people, as politicians insist on more and longer prison sentences. But the funds to run the prisons are not keeping pace with the increase in inmates. Consequently, prisons are being forced to cut back on basic provisions, such as prisoners' food.

So the change in prisons' "shadow money" is being driven not by Gresham's Law, but by Maslow's hierarchy of needs. The lowest level on Maslow's hierarchy (see the image at the head of the post) is physiological needs - air, food, water, shelter, warmth, excretion.* Inadequate food within US prisons has financialised prisoners' physiological needs. It has turned food into money.

Tobacco addicts may claim that they have a physiological need for a smoke, but the widespread substitution of Ramen noodles for cigarettes suggests that for most prisoners, the need for tobacco is higher order. It is easy to see that stamps and envelopes belong in the "love and esteem" section, since they enable prisoners to communicate with family & friends. But where does tobacco fit in? Perhaps there is a hierarchy within a hierarchy, a relative ranking of physiological needs. Tobacco is only a driving physiological need until a greater need shows up.

There is of course a positive effect from this change. If cigarettes will no longer be so freely available, fewer prisoners will smoke them. But against that we must put the health effects of restricting food. What kind of society is it that will provide so little food to prisoners that a black market food supplement becomes money?

Food, of course, does not only feature at the physiological level. Few would argue that caviar and truffles are a physiological need: they belong in the "esteem" section, three levels higher. And in some forms of "self-actualisation", food intake can be severely restricted - ideological veganism, for example. Food features at every level of the hierarchy. And so does money, in one form or another. Money is the facilitator, the means by which people are able to meet their needs, including many of their higher-order needs: after all, self-actualisation is a bit irrelevant when you don't have food or shelter, and relationships can be broken beyond repair by failures at the physiological or safety level.

But Maslow's hierarchy applies to the individual, whereas what constitutes "money" is a collective decision. As Hyman Minsky said, anyone can create money, the problem is getting others to accept it. Money is a social construct. And yet - just as in Maslow's hierarchy, lower-order needs drive out higher-order ones, so when a whole community is distressed, lower forms of money drive out higher ones. Silver replaces gold, paper replaces silver....but when people are starving, gold, silver and paper become worthless, and food becomes money. We can, in a way, regard Gresham's Law as the social equivalent of Maslow's hierarchy.

This touches on fundamental questions about the nature of money. Food-as-money works for those who need food: inflation is benign, since it ensures that all those who want food can have it. Grain standard currencies are very good for agricultural communities, since they ensure that the price of food naturally adjusts to production and wide fluctuations in food prices are avoided. But for those who want to save for the future, food-as-money has serious downsides, including the fact that it can be eaten. When times are hard, the temptation to eat the money and leave nothing for the future can be very high. You can't eat metal or paper.

There is a vast ideological gulf between those who regard money as primarily a store of value, and wish to fix its supply to prevent the value falling, and those who regard money as primarily a medium of exchange, and wish its supply to respond flexibly to demand. In choosing Ramen noodles over cigarettes, it seems that prisoners prefer to regard shadow "money" as a medium of exchange.

But it is early days yet. There may still be a backlash from those rich in cigarettes. And you never know, they might even start using Bitcoin.

Related reading:

The nature of money
The golden calf
Ultra-liquidity - Pieria


Image from Wikipedia.

* The image at the head of the post shows sex as a physiological need, but this is disputed.

Comments

  1. This topic hasn't half made the rounds yet none have mentioned the obvious likely cause of the switch and drop in value of cigarettes as a medium of exchange: smoking is banned in US prisons "except as part of authorized religious activity".. https://www.themarshallproject.org/2015/07/01/the-case-for-smoking-in-prison#.sI2njyldh

    As for the quality of prison food.. it's always been shit and if it wasn't the daily mail would soon have a campaign to make sure it was..

    Using long discredited concept such as Maslow's HoN to support your arguments ??? .. a theory which now only has application in management meetings organized by David Brent...

    I thought you were a better journalist than that.

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    1. Please read the author's press release, which is linked at the top of the post. The author dismissed the idea that the change in "currency" was due to tobacco restrictions. He was very clear that it was due to the decline in the quality of prison food.

      Maslow's hierarchy is not '"discredited": the main problem is that it is too simple a model - indeed I discussed one of its oversimplifications in the post. I could have talked about "hygiene factors" instead. It would make no difference to my argument.

      I am not a journalist. I have pointed this out MANY times.

      Please refrain from personal attacks in your comments here.

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    2. Maslow's HoN has long been well discredited.. ( http://www.bbc.co.uk/news/magazine-23902918) and replaced by Alderfer's RPG models.. like I say only David Brents hangs on to it.. as for the guardian and the bbc (who uses a stock picture of a restaurant mung bean dish when the article is about 25c super/maggie noodles).. a bit of laterally thinking tells you that there are not many products that can be used for currency. Before prisoners were given kettles (a nec appliance for ramen noodles) biscuits were the currency..

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    3. Similarly just because the author in the original article chooses to dismiss the most obvious cause of the rise of noodles as currency because it doesn't support his argument that prison food has deteriorated, doesn't mean that the smoking ban isn't the cause.. but then it doesn't mean either that prison food hasn't deteriorated.. it just means a lot of bad journalism.. apologies for calling you a journalist, I wouldn't like the label either.

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    4. one more.. (sorry should have put it all in one post) if you want to put ramen noodles into Maslow then it's up there with 'esteem' not down there with needs.. like the reebok trainers and the adidas tops (so in demand in UK prisons) it's not need it's status

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    6. No, Maslow's hierarchy has not been "discredited and replaced" with a model you like better. It is still widely used. But even if it had been, it does not matter. The post is about money, not needs - hence the title.

      This post is not about what goes on in US prisons. I used the report as a metaphor for the attitude of distressed populations towards money. I have no idea whether the report's findings are accurate or reasonable, and frankly I don't care. They are not the point of my piece.
      You seem to have wanted me to write a different post.

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    7. It's not my model Frances just as Maslow's is not your model.. It's the model of the American Psychologist Clayton Alderfer a model psychology regards as more relevant. The mainstream (if there be such a thing in psychology) would aver a I do; that you cannot squash the human condition into a triangle, particularly one that omits the most important Human requirement of all: Freedom from fear, something one is not in a prison.

      The guardian doesn't put a link to the study but it does mention that it was conducted in one prison with 60 prisoners...what the World's largest prison population at his disposal??.... I call that lazy at best.. certainly not reliable

      As for the metaphor ...the noodles are not sustency but luxury, they are your caviar and truffles, just as the cigarettes were before.. for it to work both the prison story and Maslows HoN need to be correct, as does your interpretation of what Ramen noodles actually represent in the prison system.. that's why your metaphor doesn't work..

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    8. I really don't care what American psychology regards as more relevant. I'm not doing psychology. I'm happy with Maslow, for my purposes. As I said, this post is about money.

      The link is not to the Guardian.

      My metaphor still works if noodles are luxury goods. Indeed that is why I mentioned caviar and truffles.

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    9. well at least I suppose you are being true to economics in ignoring the social context.But as long as you do you will never grasp that it is not about money in prisons..it's about power.. so your metaphor doesn't work. but going round in circles here..

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    10. "particularly one that omits the most important Human requirement of all: Freedom from fear"

      This is not in "safety"?

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    11. Unbelievable crap from one of your readers. Maslow has been updated, but hardly contradicted, by Doyal & Gough (1991): A Theory of Human Need, for which I prepared the statistical data as part of the evidence base. Here is a recent review of an old and relatively neglected masterpiece: http://www.tandfonline.com/doi/abs/10.2747/0272-3638.15.3.297

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    12. No Miguel, Safety and 'Freedom from Fear' are not the same thing. Freedom from Fear is a fundamental requirement and one that includes irrational fears (i.e phobias).. it comes before food or shelter, then safety.. (A person who avers otherwise has never been so afraid they can't move let alone eat..and thus is oblivious to the existence of that requirement..In the same way Marie Antoinette seemed oblivious to hunger when she said "let them eat cake" so you are oblivious to fear.

      and Guest perhaps you could supply a copy of your paper that isn't £83.00? .. you can mail it to me, I will read it.

      As I understand Maslow “set out to research and understand people who were abnormally normal, i.e. super healthy in a psychological sense..." (Payne 2000) not withstanding I have no idea what that actually means it hasn't stop Maslow being used to explain the entire spectrum of human behaviour .. regardless of the degree of normality...a criteria inmates of a prison might struggle to meet.

      But that's not my only complaint nor that of countless others including Clayton Alderfer who evolved the concept by changing it from a ridged hierarchical structure to one based on balance. Alderfer realized that all areas need to be satisfied to some extent not each in turn. Thus his ERG model isn't an evolution but a completely different and more representative model of the requirements for growth.

      I (and many others) don't accept that you can encapsulate what motivates the most complex creation in the known universe into a five tiered triangle.

      Payne, R. L. (2000). Eupsychian management and the millennium. Journal of Managerial Psychology, 15(3), 219-226.

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  2. Oh, my Gosh. I think I may have totally missed the subtlety of this post.

    I contacted a friend who teaches economics at a Texas university (part of the A&M system), and asked him to read it and help me understand it. After a while he said that the prison inmates were a metaphor for the American people. He said that no real, practicing, self-respecting economist would ever begin to draw conclusions about the entire population from a relatively small prison population—unless, he added, the author of the report intended to say that the American people have no better economic choices or opportunities than prisoners, and therefore are prisoners themselves.

    I then contacted a friend who teaches English language and English literature at a large, private, religious university, to ask her about the use of metaphor. She is a whiz, metaphorically speaking. She called back in a little while and said that it was a proper use of metaphor to discuss the prison population as a proxy for the entire population. She referred me to the New Testament saying that Jesus used lots of parables which are in the same general category as metaphors. But, I am not sure about that, I think I detected suppressed giggling in her voice.

    I then called my niece who is a graduate Civil Engineer and who owns her own company, and asked her about the math involved in extrapolating from the prison population to the entire national population. She listened politely, as she always does, and then she said, “Uncle Hestal, I have a lot of work to do today, so I can’t help you. But I will see you on Labor Day and we can talk about it then.” So she went back to her bridge-building.

    I then checked the InterTubes to see what others were saying, and most of them seemed to miss the use of metaphor in the report. So, which is it? Is the prison population a proper metaphor for the entire population and therefore the “noodles-as-money” discussion has meaning for us all? If so, then what is that meaning? I am going to the grocery store this afternoon, should I buy more noodles than I usually do? I want to help the economy if I can. Should I hoard noodles? There are lots of vacant buildings on my hometown square. Should I open a noodle bank? Or perhaps a noodlery? Help me. What is real, what is illusion, what is false, in the field of economics?

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    1. You have completely missed the point. I suggest you read the links under "related reading". Then you might get it.

      I did not say that this post was about the American people. I discussed "distressed populations". They could be anywhere. Right now, they might be in Greece, or Syria, or Yemen. Your economics lecturer friend is shockingly parochial. But then he doesn't exist, does he?

      Metaphor is a legitimate tool in economics, as in other disciplines. Your English teacher friend should know this. But again, she is shockingly parochial. And she also doesn't exist, does she?

      Your civil engineering niece should know that toy models can be useful to help explain real world behaviour. This is a toy model. It is not attempting to model the general population: it is specifically about how distressed populations view money. But she doesn't exist either, does she?

      The report is the report. I used it a a metaphor and an (imprecise) model of the behaviour of distressed populations.

      All your sarcasm shows is that 1) you are shockingly parochial 2) you do not understand the use of metaphor 3) you do not appreciate the usefulness of limited imprecise models.

      If you have constructive comments to make, by all means make them. Further sarcastic commentary like this will be deleted.

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    2. Yes, all of those people do exist, and I did talk to them.

      Yes, you did not say that the prison population was in America, but you did name the author of the report and he said that it was in America.

      My niece does know her profession and if toy models are required or appropriate then I am sure she will use them. You will notice that she did not have the time to comment on my question, so she did not venture an opinion on modeling one way or the other.

      I do not understand your use of "parochial," and you should notice that my English teacher friend did say that you were using a metaphor. So, because I have confidence in her I was aware that you were using metaphor. Just in case that you overlooked what she told me here it is again: "She called back in a little while and said that it was a proper use of metaphor to discuss the prison population as a proxy for the entire population."

      But you, as an expert economist, now tell me that your use of metaphor was limited only to "distressed populations." I think it is forgivable for me to include the population of the United States in that category. Distress is very high here, and among developed nations we are the outlier in terms of economic inequality. Strong evidence of this can be found everywhere and a book published a few years ago called, "The Spirit Level," did an excellent of documenting the problem. I recommend that you read it.

      I do appreciate the use of imprecise models, I used them for thirty years in my profession as a designer of large scale hardware and software systems for large enterprises. Building warehouses, or predicting sales are things I had to do all the time and models were of great value.

      So, since you did not intend to include the idea that the prison population could serve as a model for the American population then I must take credit for it, whatever the consequences may be. So, I thank you very much for the inspiration of that, now my, idea.

      I am sorry that my attempts at humor came across as sarcasm, but I did not intend to be sarcastic. I did talk to my friends, they have been helping me on a long-term project about American government and the American economy. I was excited by the idea of the prison model as a tool to use in describing the limitations of our current economic system. In my conversation with the economics professor he took the idea several steps forward, and I will probably use his suggestions.

      So, I have upset you, and for that I apologize. And I will also thank you because I can put the idea, which you disclaim, to good use.

      BTW, I have a technical question. When I post a comment here, it is duplicated, not initially, but when I come back at some later time a second comment appears. I just delete it. It doesn't happen every time, but it happens most times. How can I prevent this?

      I have heard you, and I will genuinely, not sarcastically, obey.



      Delete
    3. Yes, all of those people do exist, and I did talk to them.

      Yes, you did not say that the prison population was in America, but you did name the author of the report and he said that it was in America.

      My niece does know her profession and if toy models are required or appropriate then I am sure she will use them. You will notice that she did not have the time to comment on my question, so she did not venture an opinion on modeling one way or the other.

      I do not understand your use of "parochial," and you should notice that my English teacher friend did say that you were using a metaphor. So, because I have confidence in her I was aware that you were using metaphor. Just in case that you overlooked what she told me here it is again: "She called back in a little while and said that it was a proper use of metaphor to discuss the prison population as a proxy for the entire population."

      But you, as an expert economist, now tell me that your use of metaphor was limited only to "distressed populations." I think it is forgivable for me to include the population of the United States in that category. Distress is very high here, and among developed nations we are the outlier in terms of economic inequality. Strong evidence of this can be found everywhere and a book published a few years ago called, "The Spirit Level," did an excellent of documenting the problem. I recommend that you read it.

      I do appreciate the use of imprecise models, I used them for thirty years in my profession as a designer of large scale hardware and software systems for large enterprises. Building warehouses, or predicting sales are things I had to do all the time and models were of great value.

      So, since you did not intend to include the idea that the prison population could serve as a model for the American population then I must take credit for it, whatever the consequences may be. So, I thank you very much for the inspiration of that, now my, idea.

      I am sorry that my attempts at humor came across as sarcasm, but I did not intend to be sarcastic. I did talk to my friends, they have been helping me on a long-term project about American government and the American economy. I was excited by the idea of the prison model as a tool to use in describing the limitations of our current economic system. In my conversation with the economics professor he took the idea several steps forward, and I will probably use his suggestions.

      So, I have upset you, and for that I apologize. And I will also thank you because I can put the idea, which you disclaim, to good use.

      BTW, I have a technical question. When I post a comment here, it is duplicated, not initially, but when I come back at some later time a second comment appears. I just delete it. It doesn't happen every time, but it happens most times. How can I prevent this?

      I have heard you, and I will genuinely, not sarcastically, obey.



      Delete
    4. Unfortunately, you did come across as sarcastic - at least to me, though others may disagree. That's the problem with posting online comments when you don't know the person concerned. They are easily misunderstood. Suggesting that the Endlish teacher was laughing about the metaphor didn't help.

      I did in fact say in the post that the prison population was in America. But I was not using the American prison population as a metaphor for the American population in general. I'm not American, and I don't live in America. I don't think I know enough about the American population to apply this or any other limited model to it: that would be for someone who has studied the Amercian population to do, if it is helpful. I deliberately didn't specify a country. I was using it as a metaphor for distressed populations anywhere.

      I often find that Americans are parochial about their own economy. They assume that what applies locally also applies globally, or - as in your case - that something intended as a general explanation is specifically about America. I have read numerous papers and books about "the financial system" which describe how the American system works, including 10% reserve requirements, originate-to-distribute lending and securitisation. No other country in the world has a financial system that relies so much on these. But the papers I read never even mention that the financial system they describe is American. That's what I mean by parochial.

      Seriously, if you think what I have described in this post is a helpful metaphor for the American population and useful for your own work, by all means develop it further.

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    5. The reference to the giggling English teacher should not have been made. The possible giggle was due to her talking about Jesus and his parables. I am not very religious and she is. She was laughing, if she was, because she had needled me a little about religion. I should not have included that.

      I was very interested to learn that our two economic systems are so different. I understand that there are differences at the transaction level, but they should follow the same laws of economics, right?

      I see now that you did intend "parochial" to be an insult. My understanding is that economic inequality here and where you are are essentially the same. The people who are on the short end of the economic scale suffer the same whether they are here or there, right?

      I don't expect you to remember this, but I once commented that I had followed many blogs looking for helpful information about economics and how it works. I complimented you at that time, and I have followed your blog ever since. I do read everything I see posted here, so you don't need to tell me to do it. And even though I find what you write to be instructive I do not always agree with most of it. My lot in life is to look at systems, including systems of economics, to see if they can be improved. By "improved" I mean improved for ordinary people. I have the impression that you are not pleased with the economic system where you are, but I know you will correct me if I am wrong. I am certainly not in the business of defending bad systems or bad professions, and I think I have made myself clear that the profession of economics does more harm than good and is still doing harm. It is a deep sinkhole on the road to prosperity for ordinary people. I am trying to find a way to change that. I don't think I have any special ability or knowledge to really accomplish anything but I am working very hard, every day, to get something solid done. I have nothing else to do.

      I suppose that I am entirely wrong, because economic blogs all over have angrily refused to engage with me and my questions about economics. As an old system designer I have seen that "hunker-down" mentality many times. When they get angry and/or defensive I know I am on the right track.

      For example, when I say that any sovereign nation has an unlimited supply of money and the job of economics should be to devise ways to use that money wisely and for the benefit of all citizens of the nation, the fur begins to fly. But when things calm down and I ask for them to explain why our supply of money is not infinite, they explode. I am not kidding. This reaction is clearly an admission that they have no answer.

      So, I have designed a system of economics in which a nation apply its unlimited supply of money for the good of all. The ancient Athenians had the system, they just did not have unlimited supply of money because they believed that money had to be hard. But we know better, right. We in America went off the gold standard for all practical purposes in 1933. At that time our supply of money increased in size until we have more dollars than there are subatomic particles in the universe.

      In such a world economic inequality virtually disappears.

      One final question. In your post were you being serious or sarcastic when you said, "The image at the head of the post shows sex as a physiological need, but this is disputed."

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  4. things do seem to make sense when you learn [ from comments section ] that prisoners are now entitled to kettles . smoking is illegal , so supply erratic . some smoke , a larger population may like to eat noodles . assuming hoarding noodles is legal , and supply limited , then a change is logical .

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    1. That is what I said in the second paragraph.

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  5. It's pretty hard to come up with a barter substitute for the dollar.

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  6. Hi,

    Very interesting. Apparently, I've read this piece completely different from any of the other commentators: I read it as explanation of the last but first paragraph: depending on whether you regard money as store of value or as a medium of exchange, you'd argue for raising or maintaining current interest rates...

    Regards,



    Johan

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  7. Sex is in the middle. When staving, sexual and reproductive functions shut down. Many monks who "conquers earthly desires " do so because their strict regimen is starving them.

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  8. Avoided reading. Seemed as dark or darker than as some of Varoufakis' dark stuff.

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  9. I think Gresham' Law is completely discarded because it refers to moneys with fixed exchange rate. So, Maslow's HON, could be very arguable.

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