Fans of the “rockumentary” This is Spinal Tap will recall the scene where the band’s guitarist explains that his amplifiers are louder because their volume knobs “go to eleven.” When asked why this is different from having ten as the highest setting, he simply repeats “these go to eleven.”

Most of us have no trouble understanding that changing the units used to measure something does not change the character of the thing being measured. A day doesn’t get longer if you keep track of time in minutes instead of hours, four quarts isn’t more than one gallon, and paying for something in pennies instead of dollars doesn’t make it more expensive.

Yet somehow people continue to claim that a redenomination of the Iraqi currency will have important economic effects. (See this story.) Replacing all the dinars currently in circulation with new ones at a rate of 1,000 to one, thereby “knocking off three zeros,” is supposed to reduce the money supply, for example. Instead of the commercial banks holding 27 trillion dinars as central bank reserves, they will “only” have 27 billion. People won’t have to carry as much money once all the thousand dinar bills have been replaced by one dinar bills. And so on.

It would obviously be ridiculous to insist that an amp that “only” goes to ten would be softer than one that “goes to eleven.” Isn’t the claim that it matters how many zeros there are on a bank note an example of the same fallacy?



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