“The purchasing power of money is the same everywhere”

By Tyler Cowen

Didn’t Mises insist on that proposition in his Theory of Money and Credit?  The claim always bugged me, as it is true only tautologically.  Here is one counterexample:

In a remote area of Papua’s Pegunungan Bintang regency, purchasing staple commodities will put a far bigger dent in your wallet than in most other areas of Indonesia.

For a sack of rice, typically weighing 10 kilograms, people in the traditional gold mining area of Korowai have to spend at least Rp 2 million (US$138.5), similar to the cost of a low-end smartphone.

For comparison, in Jakarta, 1 kilogram of rice costs Rp 10,000 to Rp 11,000, meaning 10 kg of rice costs people in the capital around Rp 110,000.

The massive price discrepancies are not limited to rice. A box of instant noodles costs Rp 1 million in Korowai. Sometimes, people even pay with two grams of gold.

“A pack of instant noodles costs Rp 25,000,” said Hengki Yaluwo, an administrator of a cooperative in Korowai’s Mining Area 33 on Wednesday.

“Ten kilograms of rice costs four grams of gold. If you pay with cash, you need Rp 2 million,” he said.

One can of fish typically costs Rp 150,000, while a cell phone could cost 10 to 25 grams of gold, Hengki said.

As for arbitrage:

Reaching Korowai is difficult. People must take a helicopter from Bovel Digoel regency, and then continue by longboat, traveling along the Boven Digoel river for one day. After this, they must travel by foot for two days before finally arriving at the Korowai mining area.

Here is the full story, via Shaffin Shariff.  Here are photos of the Korowai people, ignore the text.  Here is a more sober and probably more accurate Wikipedia article.