despite the fact that personal possession of currency is not allowed by u.s. prisons, in reality, incarcerated people still exchange goods and services. until 2003, the year in which the u.s. government banned smoking in federal penitentiaries, cigarettes were the preferred medium of exchange among prisoners. a main difference between using cigarettes and using dollars as money is that have intrinsic value. cigarettes are an example of money.
LectureNotes said despite the fact that personal possession of currency is not allowed by U.S. prisons, in reality, incarcerated people still exchange goods and services. Until 2003, the year in which the U.S. government banned smoking in federal penitentiaries, cigarettes were the preferred medium of exchange among prisoners. A main difference between using cigarettes and using dollars as money is that they have intrinsic value. Cigarettes are an example of commodity money.
Answer:
In U.S. prisons, the possession of traditional currency is prohibited, yet prisoners still find ways to exchange goods and services. Before 2003, cigarettes were the primary medium of exchange within many correctional facilities. This was largely because cigarettes possessed intrinsic value, unlike fiat money (such as dollars), which has value primarily because a government maintains it. This specific attribute makes cigarettes an example of commodity money.
Intrinsic Value of Cigarettes:
- Intrinsic Value refers to the actual value of an item based on its tangible characteristics and utility. Cigarettes have intrinsic value because they can be consumed and used for smoking, giving them a utility outside of their role as a medium of exchange.
- Commodity Money is money whose value comes from a commodity out of which it is made. In this case, cigarettes were valued not only as a medium for trade but also as items for personal consumption.
Difference Between Commodity Money and Fiat Money:
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Commodity Money (Cigarettes)
- Tangible and Useable: Cigarettes can be directly used by inmates for smoking.
- Value Derived from Utilization: The value is derived from their desirability and utility, which remain even if not used as money.
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Fiat Money (Dollars)
- Government-sanctioned: Fiat money’s value is derived from government regulation or law.
- No Intrinsic Value: Dollars have no intrinsic value; their worth is based on trust and societal agreement that they can be exchanged for goods and services.
Summary:
Before the smoking ban in federal penitentiaries in 2003, cigarettes served as a form of commodity money with intrinsic value. This differs significantly from traditional currency (fiat money) used outside prisons, which lacks intrinsic value but functions as an accepted medium of exchange due to governmental backing and societal trust.