Thursday, May 17, 2012

Rules of Trading in a POW Camp

By Tim Harford

Robert A. Radford had, in some ways, a perfectly conventional career as an economist. He studied the subject at Cambridge in the late 1930s, before war interrupted, and his civilian working life was spent at the International Monetary Fund. But he also spent half the war in a German prison camp, and on his release wrote an article in the LSE journal Economica.

The “Economic Organisation of a P.O.W. Camp” is a remarkable piece of writing, in which Radford analyses the economic institutions that arose in tough circumstances. Students should read it to learn about monetary economics, and their professors should read it to learn how to write. But Radford himself thought his experiences constituted more than a teachable moment: “the principal significance is sociological.”

First, a word about the basic economic building blocks. Prisoners received some rations from the Germans, but were mostly sustained by parcels of food and cigarettes from the Red Cross. The parcels were standardised – everyone got the same. Occasionally the Red Cross received bumper supplies, or ran short; in those instances everybody enjoyed a surplus or a shortage.

Radford’s first sociological observation was that there was no gift economy in the camp. Everybody started with the same, so what was the point? But trading quickly developed, because while prisoners had equal means they did not have identical preferences – the Sikhs sold their beef rations, the French were desperate for coffee. So middlemen who could speak Urdu or bribe a guard to let them visit the French quarters had the chance to make “small fortunes” in biscuits or cigarettes. In rare circumstances, the camp’s economy interacted with the outside world: coffee rations apparently went “over the wire” and traded at high prices in black market caf├ęs in Munich.

Read the rest here.

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