This paper focuses on the analysis of the Prisoners-of-War Camp (POW Camp from now on) as depicted by R.A. Radford regarding various economical matters and behavioural aspects of its inhabitants. First of all the organisation of the POW Camp itself will be explained with a secondary focus on the extent, to which organisational structures foster a functioning market. Afterwards the emergence of cigarettes as a currency in the market of the POW camp will be examined with a detailed focus on a comparison between the properties of an ideal currency and properties of cigarettes as a currency. This examination will be followed by research on the validity of Gresham´s Law in the POW Camp´s market. Finally this paper will analyse the reaction on market shocks by the market of the POW Camp in comparison to the Asset Pricing Market. This topic is of economical significance, because the POW Camp resembles a good example of a Robinson Crusoe economy that once was to be found in reality. Therefore basic market mechanisms and certain economic matters such as trade and market shocks can be examined in detail without distractions from the core focus on the issue.
2) Organisation of a Prisoners-of-War Camp
In this section a rough overview of the organisation of the POW Camp will be given. It will also be determined which features of the organisation of the POW Camp support the functioning of the market in the POW Camp. The author spends his war captivity after his caption during World War 2 in three different POW Camps. After two short stays in transit camps in Italy and Germany the author reaches his permanent camp in Germany after one month. This camp is a so-called Oflag. Oflag means “Offizierslager” in German and means officer camp. Officer camps are constituted by 1,200-2,500 prisoners living in houses, that have a capacity of about 200 people. The author stays in this camp from the end of 1943 until April 1945. Compared to Stalags, Oflags are considerably smaller (Radford, 1945). The relatively small size of the author´s POW Camp allows information to be passed on, whereas this is not possible in Stalags because of their size. The ability to pass information is supported by the fact that in an Oflag the prisoners are allowed to move freely within the camp. The level of commercial organization is the highest in the permanent camp he stays in in comparison to the other camps. With regards to Radford (Radford, 1945), the size and the slender organisation of the Stalags provoke the formation of numerous smaller markets instead of one central market. A sufficient level of organisation is a determining factor for markets and their efficiency. This is why the ability to pass information is important for the emergence of a market. As Radford puts it “the unity of the market and the prevalence of a single price varied directly with the general level of organisation and comfort in the camp” (Radford, 1945, p.191). Without the small size of the POW Camp and the possibility to pass on information it would not be possible to establish a common market for all of the prisoners of the POW Camp and make it work efficiently.
3) Cigarettes as an alternative currency
3.1) The emergence of cigarettes as an currency
After the assumptions for an emergence of a market in general have been clarified, this section will elaborate on the historical commencement of the market in general. Then it goes into further detail about the developments of the market and how cigarettes became a currency, having a closer look on what characteristics coin money in general and what is needed in order to consider something as a currency. First of all, the fundamental reason for the development of the market in the POW Camp is self-interest. As Adam Smith states “It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their...