9: The Problem of Local Differences
To clarify, the comparison of locations that follows is based on the notion of two separate markets that use the same money, and as such excludes notions of exchange rate among different currencies or legal differences.
In general, the valuation of goods is considered within a single market, as there are marked differences in the production costs of goods in different locations (or the transportation costs to bring goods to two different exchanges) that are particular to a given location.
Also, the effect of distance eliminates the use-value of a good: coffee in Brazil does not have use-benefit to a person in Europe - before it becomes a good, it must be transported, hence "coffee in Brazil" is essentially a different good than "coffee in Europe" from the perspective of the buyer, whoc values it accordingly.
In terms of money, geographical distance no longer has any bearing: a note backed by gold that is stored in a bank in England is honored at face value in continental Europe, by virtue of commercial exchanges and clearinghouses that eliminate the necessity to travel to redeem it. That is to say that "money in England" is not substantially different from "money in Paris" because the money can be redeemed or exchanged locally.
As such, money cannot e equated to consumer goods in terms of its value based on locality.
Differences in Purchasing Power
There is a common perception among individuals that travel that money has a different value in different locations, but this is largely based on the exchange value among currencies.
There is also the matter of the cost of goods more proximate to their point of origin. In effect, coffee in Brazil is cheaper than coffee in Europe because it is produced locally, hence the seller's cost of providing coffee to the Brazilian market need not compensate for the transportation costs, as the good has not been transported. Were the European traveler to price a good in the Brazilian market that was manufactured in Europe and transported to Brazil, he would likely find the "local" price to be more expensive (in effect, the same price in Europe, plus transportation cost).
It is also noted that the differences in costs among markets also depends on the demand for goods in each of the separate markets - and it is the value of goods, rather than the value of money, that determines prices in a given market.
Further, the chief factor of production in every market is labor: the cost of producing a good is dependent upon the cost of the labor to produce it. Even where a good is manufactured from other goods, the cost of the component goods is primarily based on the labor to produce them, and the populace of an area may have an impact on the value of labor, hence the value of goods.
(EN: I'm not sure I follow Von Mises here - he seems to be discussing matters ancillary to the topic rather than directly addressing it, nor do I find his arguments compelling. My sense is that he enumerates the reasons that prices of goods in one market may be lower than prices of goods in another, but that in terms of local exchange of domestic goods, the ratio of exchange is similar - but there still remains the fact that money commands a greater quantity of goods in exchange in some locations than it does in others.)
Differences in the Cost of Living
There is also the notion that it is possible "to live" more cheaply in some locations than in others - in effect, to obtain the goods and services necessary to the satisfaction of all our needs in one location, at a lesser cost than it is possible to purchase them in another.
However, "living" in one location is often not the equivalent of living in another, largely due to the differences in needs based on locations. One example is an Englishman living abroad who perceives that he is able to live more cheaply, but merely because he is released of the obligations of the social duties he performs at home. Another example is that the urban individual, upon moving to the countryside, has a sense it is cheaper to live, but this is because he no longer utilizes the same volume of services he does when living in the city.
There are also factions that differentiate the quality of goods in one location from the quality of goods in another - hence the person may enjoy the same goods, at a lower cost, due to their quality - as well as the differences in price due to location-convenience - the cost of goods being lower in a location proximate to their manufacture.
It is likewise the case that the difference in the value of labor makes the cost of living seem cheaper in some locations than others. A person who lives in one location does not necessarily need to give more or less in terms of labor to earn a wage necessary to obtain for himself the same bundle of goods in one place or another.
(EN: Again, I'm not sure I'm quite following - or if I am, that I entirely agree with the point. It's certainly true that workers in different locations receive different wages, and that in a markets where a laborer earns more money, he pays a higher price for the goods - in effect, when both prices and wages are considered, the difference in exchange value between two locations may be less dramatic. But there are still marked differences among locations such that it may require significantly less labor to obtain the same amount of goods. But this is more an effect of the value of labor than the purchasing power of money. The more I consider it, it may not be possible to divorce the two to isolate the value of money alone, without reference to its exchange value for other goods.)