ANCAP (commodity Standard) - Details of ANCAP

Details of ANCAP

In 1982, the University of Chicago Press published Robert Hall's idea of ANCAP as an alternative to the gold standard. ANCAP is based on a weighted average of four commodities-- ammonium nitrate, copper, aluminum, and plywood (or, ANCAP, as an abbreviation).

Hall chose the four commodities (which he calls "resource units") from a list also containing wheat, sugar, heating oil, soybean oil, tin, zinc, nylon, cotton, latex, and mercury. One unit of ANCAP would consist of 33 cents worth of ammonium nitrate, 12 cents worth of copper, 36 cents worth of aluminum, and 19 cents worth of plywood (all prices are in 1967 values).

In his proposal, Hall states his position against the idea of a government holding reserves under any type of a commodity standard. He argues that by allowing the government to manipulate the market, the anti-inflationary purpose of the commodity standard would be invalidated. This statement by Hall allows for a wider variation in commodities to be used as the bundle. For example, if the government wanted to hold reserves of a certain commodity, it would certainly not choose plywood because of the size (compared to gold, which has relatively concentrated wealth) and potential deterioration.

Hall argues that any commodity can serve as the base as long as it is (1) sufficiently homogenous and (2) easily measured. However, he claimed that ANCAP was a particularly good choice because the index followed the Consumer Price Index very well from the postwar era up until the year he published the idea, 1982. Hall claims that one possible goal of a commodity standard is to stabilize the cost of living (trying to stabilize all prices is likely unrealistic). To do this, commodities whose value changes in accordance with changes in the cost of living should be chosen as the base.