Opinion Forum

The Value of Money

November 20th, 2009

One of the stock complaints people make when they point out that there are individuals unable to pay the bills for the things they need, is that “a person’s value shouldn’t be judged by the amount of money they possess.”

Now on the surface, this sounds like a reasonable and compassionate statement, and not one that any decent human being could repudiate. Except, of course, that it isn’t and one can. But in order to understand why that is true, we must first understand what money is, why it was invented, and what it is designed to represent.

Money was invented to facilitate trade, to represent goods and services in the marketplace. Money was given to you in exchange for goods and services, to show that you had put something of value into the marketplace, and thus had the right to draw value back out again in exchange. The invention of money therefore greatly advanced both free trade and freedom. It meant that instead of having to worry whether your neighbor would accept your potatoes in exchange for his wheat, you could simply sell your potatoes to whoever wanted them and could pay for them, use the money to pay your neighbor for his wheat, and let him do whatever he wished with the resultant profit. This in turn allowed the specialization of labor and vast increases in production that eventually resulted in the spectacular society we live in today.

But did one receive money for just anything? Could one, say… receive money for a product that did not work? Or for labor that was so badly done that it needed to be done over the next day? Or for a product which, while fundamentally sound in and of itself, was something that nobody wanted enough to deplete their own store of value by purchasing? No. One could only receive money for some good or service that was of an actual benefit to the person who paid for it. If what you put into the marketplace was of no value to anyone else in it, then you were not entitled to receive money for it in return.

This means that when we judge people by their money, we are quite literally judging them by the amount of service they have rendered their fellow men, minus the amount of service they have asked from them in return. We are judging them by the net store of value they have put into the world, as measured by every single individual who decided to compensate them for it.

Does this system work perfectly? Of course not. There will always be people like rock stars, who get more money than most would say they deserve, and teachers, who get less. But so long as money is not obtained by force or fraud, so long as money is made by the voluntary exchange of value for value, the fact that you consider a particular transaction to be unfair does not give you a right to barge in on it and demand that it be regulated or stopped.

So let’s take this analysis and go back to the idea that people’s value shouldn’t be judged by their money. If judging people by their money is judging them by their productivity, then what does it mean when we attempt to judge them by a different standard, or to not judge them at all?

What it ultimately means is that, no matter how much mental twisting and turning you perform to hide the fact from yourself and justify your actions, you are allowing the people who are so judged to consume more than they have produced. And no appeal to emotion, no plea for pity or compassion, will ever have the power to change the fact that this sort of scenario cannot be sustained indefinitely, that the only way to do it is by suborning the resources of others, and that every attempt to consistently implement such a system nation-wide (Socialism and Communism as implemented by Hitler, Lenin, Mussolini, Stalin, Mao, Castro, Pol Pot, Kim Jong-Il) has inevitably resulted in mass graves. Not because Communism has just never been done right, but because death is the only and inevitable product of a system which is built on the principle that people can be judged by something other than money and that it is okay to consume more than you have produced.

We now live in a nation of debtors where the government is in debt by over 150% of our GDP, has unfunded liabilities going much higher, and where the Federal Reserve seems hell-bent on solving the problem via printing press. In essence, not only is our country failing to judge people by their money, it actually ceased doing that a long time ago. We have consumed more than we have produced, we have been doing it for a very long time, and the bill has finally come due.

The only question is: Will we admit that the jig is up, pay the dues for our folly, and go back to judging our fellow citizens and our nation by objective standards? Or will we allow our delusion that people should be judged by anything other than their ability to produce to lead us from what is currently a recession into what could ultimately be a disaster?

Articles written by Brianna Aubin
Tags: communism, economy, free market, money, productivity, socialism
Categories: Economics, Politics | Comments (15) | Home

15 Responses to “The Value of Money”

Brian | November 20th, 2009 at 4:01 am

Heartless. Cruel. ;^) She would be proud.

No, our leaders will not admit that the jig is up. They’ll blame everybody and everything but their own absurd moral code.

It only stands to reason that where there’s sacrifice, there’s someone collecting the sacrificial offerings. Where there’s service, there is someone being served. The man who speaks to you of sacrifice is speaking of slaves and masters, and intends to be the master. — Ayn Rand

Keep this in mind in the coming months as we are asked by our “leaders” to tighten our belts while inflation takes off and interest rates go out of sight.

Tom | November 20th, 2009 at 4:37 am

Outstanding essay, Brianna! Unfortunately, there’s no chance we’ll ever judge people solely on the basis of their objective accomplishments and their value to society. In fact, I’m not sure that’s ever been done, except perhaps in the most primitive of societies, where people were judged by their strength, cunning, and possessions (if not money, then horses or goats or whatever — even wives!).

And thinking further about it, I wonder what standard we would use to judge where we should be. Maybe the closest we’ve been in our short history to an economic state of nature was the days of the robber barons, when the strong and cunning few amassed great fortunes at the expense of the weaker and less cunning, who lived in misery.

In truth, I think we should aspire to finding the “golden mean” between, say, Rand’s objectivist society and Marx’s pure communism. That means those who can achieve most and produce most should be honored and respected, not envied and reviled. That also means those least capable of achievement and production should be helped by the rest of society and, when necessary, protected. Let me know if someone figures out how to get there in a society of human beings.

I agree that we, along with most of the rest of Western civilization, have slid too far in one direction. I’d like to see the pendulum swing back a bit, but not to the era of robber barons (unless I’m one of them, of course).

Along these lines, I often find myself defending Bill Gates and his wealth. I think he’s contributed more to humanity in the past 100 years than anyone else, and I don’t mean his charity work. In the age of computers, he came closer to creating a universal language that anyone else ever will. I respect his achievements, measured by his wealth, much more than I do that of, let’s say, the Waltons, who inherited it from Ol’ Sam, or even the lovable teddy bear Warren Buffett, who got it my churning and manipulating other people’s wealth.

doris | November 20th, 2009 at 10:01 am

Warren, at least, gives away a million dollars a month to those in real need and not to charities, who pay huge salaries to executives. I wish Bill hadn’t invented so much, I think we’d all be better off without computers and all this great technology.

Brianna | November 20th, 2009 at 11:01 am

“Maybe the closest we’ve been in our short history to an economic state of nature was the days of the robber barons, when the strong and cunning few amassed great fortunes at the expense of the weaker and less cunning, who lived in misery. ”

Tom, do you even know who the “robber barons” were? What they did? What their crimes were (you have to get a little more specific than “they robbed the poor”)? Does anyone who throws around the term with such abandon these days? Or is it just a popular way to say, “those guys are rich, I’m not, and I don’t like it?”

“That also means those least capable of achievement and production should be helped by the rest of society and, when necessary, protected.”

I have no problem with charity. My problem is with government-provided charity. Your argument is like the argument of people who say that teachers shouldn’t grade kids according to tests and homework, because the kids who can’t do it will be left behind. Yeah, there will always be a few kids who can’t cut it, but it’s not that the teachers with high standards are leaving the slower kids behind; they’re always available to give extra help to the kids who need it (just as private charities will always be available). They just realize that if they lower the bar, they’re not serving anybody’s interests, smart or stupid, because the gifted kids will be allowed to slack off and take it easy and the stupid kids will be taught that they don’t have to work hard or learn and they can always count on the teachers to bail them out when their inadequacies start to show.

“Warren Buffett, who got it my churning and manipulating other people’s wealth.”

People like Warren Buffett actually serve a valid function in a modern economy, whether you realize it or not. Bankers, stockbrokers, asset traders… all of these things function in the same manner as blood transfusions performed by doctors, transferring money from those who have saved it to those who can use it to create more and managing the risk that accrues from such borrowing. The invention of Wall Street and the NYSE was just as important to the growth of our economy as the invention of the light bulb or the steam engine.

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“I think we’d all be better off without computers and all this great technology.”

During the Industrial Revolution, the life expectancy of children increased dramatically. The percentage of children born in London who died before the age of five decreased from 74.5% in 1730-1749 to 31.8% in 1810-1829. Clearly technology is a terrible thing. I hope for your sake you don’t have any medical problems Doris; I doubt anyone who does will be well-served by Obamacare or a financial collapse.

Tom | November 20th, 2009 at 2:25 pm

Ah, Brianna. Yes, I “even” know who they were, and I “even” know the particulars of the history of those times. I didn’t say they robbed people (although some did), and I didn’t say, imply, or hint at anything like “those guys are rich, I’m not, and I don’t like it.”

If it makes you feel better, here’s a list of some of the people usually referred to as “robber barons” (this particular list is at Wikipedia):

John Jacob Astor
Andrew Carnegie
Jay Cooke
Charles Crocker
Daniel Drew
James Buchanan Duke
Brian James Dwyer
James Fisk
Henry Flagler
Henry Clay Frick
John Warne Gates
Jay Gould
Edward Henry Harriman
Mark Hopkins
Collis P. Huntington
J. P. Morgan
John D. Rockefeller
John D. Spreckels
Leland Stanford
Cornelius Vanderbilt

They were pretty much free to do anything they wanted, to include forming monopolies, with few if any restrictions to protect consumers or to ensure that their operations were legal. Some of them also did beneficial charitable things, of course, and that was good. But if you really know the era, you know that there were few rights and protections for workers, to include terrible health and safety conditions, and poverty-level wages were the rule.

The “golden mean” I referred to would be an economic and political regime in which business was free to operate in the most productive ways, answerable to stockholders and not government, except for clear and reasonable regulations.

I’m mostly on your side of this issue, you know.

doris | November 21st, 2009 at 8:54 am

Brianna, you are so smart, yet so cynical. Sad to think your generation will be running the world soon. Government funded charity keeps a whole bunch of children alive, but we don’t care about them, just so all of the rich get to keep most of their money, it’s o.k. I hate high tech. I am extremely healthy, maybe if I forget how to take care of myself and get sick, I will appreciate it all. I firmly believe computers to be responsible for many social breakdowns and a lot of scams and extreme amounts of pornography, including massive amounts of child pornography, can’t convince me it’s great.

Brianna | November 21st, 2009 at 11:56 am

Tom – fair enough, and I know you’re mostly on my side. But even you have to admit that the fact that you know who they are and what they did puts you far above the norm. Most people just throw the term around with only the barest idea of what they’re talking about. Heck, even I don’t know that much about it. On the other hand, I don’t throw the term around, either.

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“Brianna, you are so smart, yet so cynical. Sad to think your generation will be running the world soon.”

Doris, that’s so sweet. I’m afraid for the day when my generation will be running the world too, but it has a lot more to do with the fact that they grew up on a combination of crappy public schools, crappy TV programs, and parents who thought the appropriate parenting strategy was wrapping their children in bubble wrap than any deliberate viciousness or cynicism on their part.

“Government funded charity keeps a whole bunch of children alive, but we don’t care about them, just so all of the rich get to keep most of their money, it’s o.k.”

Appeal to emotion; false argument. Anyway, it’s not that I don’t care. It’s that two wrongs don’t make a right. I have no problem with charity; my issue is with forced redistribution of income. Your misfortune per se does not entitle you to my fortune, for the simple reason that if we consistently put that ideal into practice, then humanity would not be able to survive. And honestly Doris, do you really have so little faith in the ability of private individuals to gauge what they have and what they can spare? I’m not rich and I don’t hand out money to bums on street corners, but I have been known to give help (financial and otherwise) to people who needed it and could use it, provided I could spare it. The same is true of others with more resources than I. On the other hand, when I’m dealing with someone who thinks they have a right to my help, simply because I have more than he does, I quickly become a lot less generous. Because I’m a cynical witch? Or because I don’t think that’s the way people should behave in a free society? You decide.

“I hate high tech. I am extremely healthy, maybe if I forget how to take care of myself and get sick, I will appreciate it all. I firmly believe computers to be responsible for many social breakdowns and a lot of scams and extreme amounts of pornography, including massive amounts of child pornography, can’t convince me it’s great.”

This is not an attempt to kick you off of anything, but if you really think computers are so horrible then why are you on the internet? Could it be simply because you are a hypocrite? Or do you realize that pornography accessibility aside, the benefits of having a world of information available for free at your fingertips outweigh the costs of the occasional piece of spam?

doris | November 21st, 2009 at 5:28 pm

I really do not enjoy any of this except arguing with smart, amazing women [and a few men] like you. I know people will not take care of the less fortunate, they are hungry as we speak, the children do not have a choice if their parents are losers and druggies or are really unable to work. I just don’t think there are enough of the generous to go around; seriously, you do? Maybe I am the cynical one, I have lived a lot longer than you and seen more cruelty. I pray the Government can and will care for the unfortunate and the out of work masses, if not no one will.

Brianna | November 21st, 2009 at 10:59 pm

You are of course free to pray for whatever you wish. I simply pray the world will not strangle me for the crime of not being needy enough.

Brian Bagent | November 22nd, 2009 at 11:04 am

Doris, if you have the ability and desire to help the less fortunate, why do you assume that so few others do? I’ve seen far worse in people than you ever will, and even I do not view the world so dimly.

What you are saying regarding an uncaring world is what psychologists call “projection.” It doesn’t flatter you.

doris | November 22nd, 2009 at 1:21 pm

Just what makes you think I want to be seen in a flattering light? You really assume a lot about me, Brian, knowing nothing of my life and what I have seen. I have most assuredly seen there are still lots of starving people, we aren’t taking care of them at present. People who can afford to adopt and help seem to be helping those in other countries and not our needy. The rich celebrities adopt and fund orphans in Africa and such places. There are plenty of homeless and orphans right here in Houston, does not seem to be working, us taking care of our own poor, yet. I am not projecting, just noticing and I know what psychologists say, I do care, unlike those in the generation coming into adulthood, at least those I am hearing.

I think the world will never strangle you, Brianna, you will thrive and survive, probably with all the money you ever make, at least that which the Government does not take from you.

I prefer to use my charity money for children and animals, both of which are entirely innocent.

Brianna | November 22nd, 2009 at 7:05 pm

More insults and appeals to emotion. Thanks Doris.

Brian | November 23rd, 2009 at 12:53 am

Well, I know I was a cop in Houston and worked some of the worst neighborhoods in the entire country. I know depravity and indecency well, and what you describe isn’t it.

Riddle me this: what percentage of Americans lived below the poverty line prior to the advent of government “charity,” and what percentage of them live below the poverty line now?

Brianna | November 23rd, 2009 at 2:54 pm

“It is noteworthy that the heyday of laissez-faire, the middle and late nineteenth century in Britain and the United States, saw an extraordinary proliferation of private eleemosynary organizations and institutions. One of the major costs of the extension of governmental welfare activities has been the corresponding decline in private charitable activities.” – Milton Friedman, Capitalism and Freedom