Reason for a New Age

Posts Tagged ‘trade’

Money and Philosophy

Posted by publius2point0 on 2010/01/06


A point that needs to be made early in this blog is that the basis for Economics lies in the realm of philosophy. In fact, many of the various areas of science currently studied have their roots in this rather nebulous and largely unscientific realm. Sociology and Psychology, for instance, are both descendants and both overlap with one another and with Economics as well.

I bring this point up because it is rather unfortunate that most people are unaware of this truth. You will hear plenty of people talk about money as an evil, heartless thing that was created by the greedy and serves no purpose but to be able to lord it over others. And they will say that people should be giving. That a good person doesn’t care about money, just about being able to serve and aid others. As you will see, holding this sort of outlook is ludicrous if you understand what money actually represents.

Simply put, money is a measure of how much you have given to society. Yes, the paths can by labyrinthine by which a person adds his output to the sum total of human output, but the truth remains that money is always an exact measurement of how much the rest of society views you as having added to the collective.

Let’s take an example. Say that we have Adam, Bob, and Charlotte. Adam repairs household machinery and electronics like dishwashers and TV sets. Bob repairs furniture, rooves, plumbing, and other such things. Charlotte is a mechanic, working on cars, lawn mowers, etc. Between these three people, any sort of general home repair can be done. If something breaks, they have only to walk across the street and knock on the other’s door to get it repaired.

So now let’s say that Adam’s car breaks down. He goes over and asks Charlotte to fix it. She does so, and at the end Adam tells her to feel free to ask him to fix any home electronics she has.

Adam has just given her 1 Repair Point. It might not be a physical token that she can cash in, but certainly she has earned some good will with him up to that point. If she comes over to him and demands that he fix all of her appliances, plus vacuum her floors, plus drive her to the store, etc. then that’s not an equal trade. She has earned some good will, but only to an equal extent as she has displayed herself.

But so let’s say that Charlotte doesn’t cash in her chit at all. Rather than her laundering machine breaking, it’s her sewage system that gets all messed up. She has to ask Bob for help. When Bob repairs her plumbing, Charlotte could offer t0 fix something for him, but similarly to how she’s holding a chit for Adam without being able to use it, there’s not much purpose in offering Bob a mechanical repair if he can’t be certain when he’ll need it. What she does is tell him that he can either come to her if he needs something mechanical, or Adam owes her a favor if he needs any household appliances fixed.

For Bob, this is the ideal. He’s no longer holding a very specific token. He’s holding something that can be turned in for many possible services. And this is the first truly great thing about money. It allows you to translate your labor into other people’s labor. You don’t have to trade like for like. If I want to build a whole house from scratch, I don’t have to serve as a personal slave to my architect and all of his men for one year, to earn enough favor from him. I can work at whatever occupation interests me and, via money, translate that labor into my gratitude for the labor of my construction team. They can then take that money and use it for whatever services they need.

But so you might be thinking that I haven’t really proven that this is equivalent to the great, anti-greed, kindly, and giving morality that I said it would. You ask, why should Adam, Bob, and Charlotte trade at all? A good person will simply do a favor without asking anything in return, and of course receive everything he needs from others without having to expect some blackening debt to them.

The problem is that people aren’t good. Confucius, Jesus, The Great Spirit, Plato, etc. all of these philosophers/religions advised living a good and giving life like this. They had thousands of years to attempt to make this work. Yet, you’ll find that life, personal freedom, equality, etc. were no better in regions where these ideas flourished than in places where they didn’t. Karl Marx advocated using force to make it happen. This ended up even worse.

This isn’t to say that people are evil, just that we’re people. We have our limitations and personal quirks as a species. Any underlying philosophy which advocates living up to some sort of superhuman credo is, frankly, stupid. If there was ever an evidence that all of the divine laws that have been handed down to us over the millennia are bunk, this is it, I am sorry to say. Interestingly, it proves Ayn Rand and Objectivism to be wrong as well.

To show what I mean, let’s return to our example. We return everything to its initial state. We have our three fixers, and none of them has done anything for the other yet.

Adam goes to Charlotte, asking her to fix his car. She does so, earning an appliance repair job from Adam. A month later, her laundering machine breaks. Going over and knocking on his door, Adam agrees to do the job. Charlotte goes back home and waits for him, but he never appears.

The next day, Charlotte goes over to his house and asks him what happened. Adam says that he had forgotten his tools at work, but would have them and be over to fix her laundering machine that night. Again, Adam never appears.

This repeats several times, until Charlotte gives up.

I’m sure all of you have encountered situations like this. While it’s only a percentage of people who are useless, they certainly do exist. In oldentimes, this aspect of humanity wasn’t really an issue because not working equated to death. If you had a child who refused to work on the farm or who would make excuses and not show up for work, he would be caned and forced to work. If that child got married and had his own farm, he would have to farm, or he and his family would starve. A person’s reliance on others was minimal. If you earned ill will from your neighbors, you could still live on without their aid. Of course, they might also shame you out of the town.

These days, it is nigh impossible for a person to be self-sufficient. It is however, entirely possible to get away without working at all, and still survive. This ability is, in fact, thanks to money though I won’t discuss the reason for it in this posting. Either way, I think you will note that money as an incentive is much kinder than canings and starvation. In the former Soviet Union, these were the only choices as well (substituting beatings, prison, and intimidation for caning).

But besides laziness, there is another issue with humanity that is solved by money. For this we need a new cast of characters.

We have Daisy, Ed, and Francis. Daisy and Francis are long-time friends. Neither of them much likes Ed. All of them are, however, specialists in widget making. They decide that they will team up and start a widget manufacturing business.

Any business requires someone to lead it. Sometimes someone has to get greasy and sweaty and work a sucky job. Sometimes someone has to spend long hours looking over numbers. Sometimes someone has to go driving all around the country looking for clients. A widget company which has the person best at manual labor doing the manual labor, the person best at accounting doing the accounting, and the person best at selling to clients doing that, will succeed where the company that has the wrong people in the wrong jobs will fail. You need a leader to tell people what they have to do to make the job work, and to figure out which person is best for what work. And in return, the workers have to listen and do as told. If the guy stuck doing manual labor wants to be the sales rep, but isn’t any good at that job, he still has to stay doing manual labor. This may be sad, but it is reality. And more importantly, it gets the very best widgets to the customers in the best manner, and even so everyone who was interested in widget making got to work in the industry (or at least, had a chance to enter the industry). You cannot say that for a world without money–where subsistence farming is basically your only choice.

Like I said though, how are you achieve this sort of status from our three workers? Daisy can’t boss Francis, nor vice versa, since they are friends. And neither of them even really wants to work with Ed. If Ed were to yell at Daisy, she would simply leave.

Money forces us to bind together and form hierarchical arrangements. Thanks to the ability to translate any sort of labor for any other sort of equal labor, everyone can use money. Everyone wants money. If person A has some and person B does not, B has little choice but to do as A asks. And since A becomes reliant on B for the continued production of products, he cannot fire B regardless of whether they hate each other, so long as they are still making money.

Again, this is all much better than caning and debtors prison, which are the former alternatives.

Hierarchies, also known as businesses, are also terribly wonderful. When I pay my gas bill, I do not have to go and do 1 second’s worth of service for the man who dug the oil well. I do not have to do 1 second’s worth of service for the man who refined the oil. I do not have to do 1 second’s worth of service for the man who laid out the pipe. The existence of money enables me to not only hand over the products of my labor to someone who has done a favor for me, but to give it to an entire group of people.

In summary, money is nothing more than a physical representation of the labor you have done for others’ sake. There is nothing evil about it. If there is an evil, it is in not earning any, for this shows that you have done nothing for others.

Advertisements

Posted in Theory | Tagged: , , , | 2 Comments »