I was miserable at college level economics. It was difficult for me to stay awake, let alone master the material. I ultimately dropped the course.
One of the few things I retained from it is an academic explanation of what money’s worth. My professor said, “A buck is a buck. It will never change. It will always buy a buck’s worth of something.” His point, of course is that while any currency may not have actual value, it will always buy the amount its users decide it’s worth, hence, comments like “the US dollar is down against the Yen”make sense and have consequences.
When I was a kid, a nickel got me a full-sized “Milky Way”. Spend a nickel on “penny candy,” and you got a fist full. Comic books were a dime. A quarter got a kid into a movie (at a matinee). My parents talked about what they paid for some of these when they were kids and their stories made me long for those earlier times.
These memories return as I read this essay by Mike Schaefer, “What is Money.”
One day, many years ago, I was looking at a dollar bill I was holding. I was aware of the thoughts and feelings this particular material thing evoked. This piece of paper/cloth and ink had a definite value. It was worth something.
I looked at a napkin sitting on the table and wondered why this piece of paper in my hand had more value than that one on the table. I went through all of the ideas about how this piece of paper was made in a special place and has special designs on it, and how it was sanctioned by the government and all that. But right here, right now, when I go up to pay the bill for the food I just ate, what gives this piece its power, its value?
There is only one thing, and I was shocked when I realized it…it had nothing to do with the government or the mint or gold reserves, or anything like that. The only reason this piece of paper has value is because we believe it does. We collectively imbue this paper with value as a kind of tangible abstraction representing something of true value, like goods or labor. It simplifies exchange and standardizes value. But money in and of itself has no value. It only represents value.
Doesn’t all value boil down to goods and labor as the only things of true value? Money is an abstraction, (kind of like the buckets in the reservoir story). But many of the goods and labor are given a certain value based upon what we believe their worth to be. It is dangerous, however, to assign value arbitrarily to labor. The labor of a doctor is considered more valuable per hour than the labor of a cashier, and we set up our system to reflect this belief. But we need to be careful lest we come to the perception that the value of an individual is equal to the value of their labor. A just economic system will acknowledge that certain labors are more highly valued than others, but will also acknowledge the value of all persons as equal.
We have all been hoodwinked through the recent decades into believing that money is what is valuable, and that goods and labor are expendable chaff that can be gotten anywhere. But in reality the goods and labor are all there are, aren’t they? We have much more power as laborers than all of the money stored in all of the banks of the world. The problem is we don’t believe it.