Barnacles

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Barnacles
are hard-shell-encased creatures often found on the sides of ships.
They are of concern to people mostly because of the drag they increase,
causing shipping companies increased cost; one
estimate
led to the calculation that over 41 million barrels
of oil are wasted due to them, costing over $2 billion with oil
at $50 per barrel. Of course, the sides of ships are not their usual
place of residence, which is typically near the shore and in the
inter-tidal zone.

The seacoast
is a harsh but productive environment for life; waves constantly
pound upon rock, to say nothing of the effects of storms. In this
situation, one would expect that the inter-tidal barnacles, taking
the constant assault of water and wind, would have sturdier shells
than ones of the same species living on the calmer nearby ocean
bottoms. In fact, the exact opposite effect obtains: barnacles in
gentler waters have stronger shells. The reason is evolutionarily
simple: barnacles exposed by the tides and battered by the waves
are more subject to predation and early death, and so more of their
life energy goes toward reproduction rather than building a tougher
shell before death takes them; a barnacle near the shore that built
a sturdier shell would get out-bred by faster-reproducing ones,
and so become extinct.

One attraction
of Austrian economics reflects its grounding in the long tradition
of natural law; economic laws are not made, but discovered, and
they are in force whether one recognizes or chooses to acknowledge
them. The same economizing that the barnacles must undertake in
the face of strife should likewise apply with other living creatures,
including man. In the area of constructing living quarters, one
can see some of the same effects encapsulated in the expression
"they do not build them like they used to."

Two
houses
, each alike in dignity, show the effects of battering
of stormy seas on economic life. One has recently undergone renovation,
melding older and newer construction, and the other is largely unchanged
from its original format; the renovated house is older.

It is interesting
to observe the construction problems of the older house: its dimensional
lumber
is oversized for modern usage, with 2×4 studs actually
measuring two inches by four inches. All other lumber likewise measures
out to exact inch measurements. Thus when adding new
studs
to an older wall, it is necessary to take a current "2×6"
and rip it down to a stud that measures exactly 4 inches deep, increasing
material and labor costs. The older studs' wood is denser, having
come from old-growth trees; it resists and holds nails much better
than its shrunken modern counterpart. The older house's neighbor
has studs that are about 1.75×3.75 inches; modern 2x4s are 1.5×3.5
inches.

What could
cause this degradation in language, and inflation in the amount
of claimed wood offered for a fixed measurement? The older house
was built in 1910, its neighbor in the 1920s; the renovation is
a 21st-century affair. The older house was thus built
at the end of what Murray Rothbard called "the
golden age
," a time of more honest money, with a century
from 1815 to 1914 of human productivity gradually
deflating prices by about 2% annually
when compared to gold;
$20.67 was required to buy an ounce of gold when the house was built,
a price that had been so fixed for over a century.

In 1913, the
Federal Reserve act went into effect, centralizing control over
money and interest rates. Of course, gold coin would remain legal
currency at $20.67 an ounce until 1933,
when an enabling act, grown out of World War I, was used by Franklin
Delano Roosevelt to forbid the private ownership of more than five
gold coins per citizen; following this
act in 1934
, the dollar price of gold was changed to $35 per
ounce. This nominal price, unavailable to citizens, was maintained
until 1972. Thanks to the Gold
Bullion Coin Act of 1985
, it is set today at $50 per ounce.

The dollar,
then, which was once a relatively fixed measure like a pound or
a foot, has changed its size with respect to gold, and realistically
it is worth 1/40th of the amount it brought when the
older and newer houses were built; the effects of currency debasement
can already be seen in the decline in the standard of the 2×4. The
effects on home construction appear elsewhere, as more costly materials
and methods, which would last longer, are replaced with cheaper
materials and methods.

The craftsmanship
required to nail (By hand! With no nail guns!) lathing to studs,
and then apply three coats of plaster was made too expensive by
the uncertainty that a floating dollar and World
War Two manpower shortage
introduced, and it was replaced by
the now-ubiquitous wallboard, made of gypsum. Walls were now less
prone to cracking, but less solid and soundproof, and more easily
dented. Plywood gradually replaced sawn boards (to great detriment,
as the
glue wears out in 40 years
, causing houses to literally come
apart at the seams), and was replaced in turn by oriented strand
board, each substituting cheaper lumber for more expensive. At the
same time, artificially low interest rates caused labor in home
construction to be replaced by capital (something that should cause
labor unions to support honest money, but doesn't). The 1970s saw
the nadir of construction, with aluminum wiring replacing the copper
in many newly-constructed houses; not coincidentally, that era was
a time of massive commodity inflation and shortages driven by the
1971
suspension of the gold window
by Richard Nixon.

More recent
times have seen even greater price instability. After the
relative calm of the Clinton years
, gold prices started to gyrate
wildly in the 21st century, hitting a new nominal high
over $1000 an ounce. This instability was driven by Federal Reserve
interest rates of 1%, which set off a housing construction boom.
Because of the shifting standard in money, earning a return meant
exposing oneself to a minimum of time before selling a newly-constructed
house. As Christopher
Leinberger notes
, the "future is not likely to wear well
on suburban housing. Many of the inner-city neighborhoods that began
their decline in the 1960s consisted of sturdily built, turn-of-the-century
row houses, tough enough to withstand being broken up into apartments,
and requiring relatively little upkeep. By comparison, modern suburban
houses, even high-end McMansions, are cheaply built. Hollow doors
and wallboard are less durable than solid-oak doors and lath-and-plaster
walls." He predicts that the exurban fringe will become the
"next slum."

One can thus
see the effects of shifting tides of currency values, abetted by
the battering of war. It has driven the construction of American
living quarters to a lower standard than that obtained in time of
peace. (Environmentalists
will hopefully note
that those old-growth forests are gone,
a victim of both the tragedy
of the commons
seen when private ownership is lacking and the
hypertrophic economic growth caused by fiat currency, reflecting
the same public choice effect that causes democracy
to be less stable, economically, than monarchy
.) Fiat money
and war cause a drag on the economy; allowed to build, like barnacles
on the hull of the ship, they slow and eventually stop economic
progress. If the encrustation goes far enough, their weight will
eventually sink the economic ship.

December
3, 2008

Thomas M.
Schmidt [send him mail],
a native of Brooklyn, notes that the liberty-head dime he found
in his attic from 1910 buys about the same amount that it did back
then.

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