Money to burn?
I recently left Czechia, and I’ll probably never return to that country. (Not because it’s not worth revisiting, but I have many other places that I’d like to visit and limited time to do so.)
Perhaps you’ve had the same experience. You are at the train station or airport with a bit of local cash that will be useless at your next stop. Too little to exchange. What should you do with it?
I’ve seen airports with a bin where extra cash can be deposited. They say it will go to charity. Alternatively, you could burn the currency note. What should a utilitarian do? Here’s how I think about the issue:
1. Assume that it costs 5 cents to manufacture one dollar’s worth of Czech currency. Then burning currency notes is like donating 95 cents on the dollar to the Czech government. It provides them with “seignorage”.
2. If I believe that donating 95 cents to the Czech government will have more positive effects than donating $1 to a charity I know nothing about, then I should burn the currency, and vice versa.
If this result seems odd, it’s because we are used to thinking about currency as net wealth. Burning money seems grotesquely wasteful. The currency stock as a whole is net wealth, as it provides useful transactions services to society. But burning one currency unit doesn’t significantly reduce that value of the total currency stock, as it would be almost costlessly replaced by the Czech government. The only waste involved is the cost of printing a unit of new currency.
If you suspect that the quantity theory of money is lurking somewhere in the background, you are correct. But only in a ceteris paribus sense. In the long run, boosting the money supply by X% will reduce the purchasing power of each unit of money by the same proportion, other things equal.
PS. I can’t get used to all of these name changes. First Bohemia, then Czechoslovakia, then Czech Republic, and now Czechia. When will they settle on a name? (Yes, I know–they don’t all cover exactly the same region.)
PPS. Because we also spent two weeks in Austria, I have a few thoughts on why Vienna has once again topped the rankings of the most livable cities in the world.
I suspect that the break-up of the Austro-Hungarian Empire in 1918 indirectly caused Vienna to become a very nice city today. By the early 20th century, Vienna had rapidly expanded into a city of roughly 2 million, presiding over a large empire. Buildings constructed during the decades leading up to WWI had a lot of character—Vienna has “good bones”.
If the empire had survived, Vienna would have expanded greatly during the 20th century, adding lots of ugly utilitarian architecture, such a public housing projects. But for a small country such as Austria, a capital city with 2 million people is plenty large, and hence Vienna has roughly the same population as it had 100 years ago. As Austria has become richer after WWII, the city expanded to fill out the older city, much like a boy grows into his older brother’s clothing. It didn’t have to add as many ugly buildings as Paris and London, and also avoided some of their congestion.
Modern Vienna is thus preserved in amber to a greater extent than most other European capitals. In most cases, being stagnant is a sign of poverty. But Austria is a relatively rich country, without its capital city being very dynamic. Perhaps it is that combination that explains Vienna’s high ranking.
PPPS. I took this picture in Amsterdam: