Alan Greenspan thinks food is a luxury for hungry people. He uses a common economic term incorrectly when explaining commodity based currencies. He displays insensitivity.
Greenspan describes money, “… Durable…In a primitive society of meager wealth, wheat might be sufficiently durable to serve as a medium…”i “More importantly, the commodity… must be a luxury… Wheat is a luxury in underfed civilizations… The term “luxury” implies scarcity and high unit value.”ii
In an underfed nation, desperately hungry people require food for nourishment. Because it is necessary, scarce food has high unit value; but that doesn’t make food a luxury. Greenspan is using an incorrect definition.
In the field of economics, “luxury” is a technical term which refers to goods which are not necessary. “Luxury” does not refer to food staples, such as wheat. In economics, food is a “necessity good”, not a luxury good. If money must be a luxury, food wouldn’t used as money, especially in an underfed nation.
In Greenspan’s example, the institution of a monetary system is a given. The goal is an efficient economic system. The material circumstances are irrelevant except for how they serve the requirements of the economy. Feeding hungry people is not a factor. If food has high unit value, Greenspan thinks hungry people should not eat the food, but use it as money. Greenspan is insensitive.
iPg 96 Gold and Economic Freedom by Alan Greenspan in Capitalism the Unknown Ideal Signet, New American Library
iiPg 97 Gold and Economic Freedom by Alan Greenspan in Capitalism the Unknown Ideal Signet, New American Library