3' - Island of Stone Money

Milton Friedman’s 1991 article "Island of Stone Money" compares the Yapese monetary system to the gold standard used by the U.S. in the 1930s. The Yapese people used large, heavy stones as currency, and while the stones were difficult to transport, their value remained even if lost or underwater. Friedman argues that the Yapese belief system mirrored the U.S. gold standard, where the physical possession of gold, even when buried in vaults, served as a symbolic representation of wealth. He emphasizes the role of belief and shared understanding in determining the value of money, challenging the notion that the U.S. financial system was inherently more rational or logical than the Yapese system.