Saturday, May 25, 2013

The limits of money

Money is a socially ambivalent institution.

I was reading an anthropological study of a rural Russian village, which made an interesting point not always appreciated in our market-mad society. Which is that the smaller the social unit, the less relevant is money in its economy, down to the family, where money is distinctly repulsive as a form of exchange. Within this village, people were always helping each other- planting potatoes, sharing preserves, visiting, gossipping, giving health care. But virtually no money changed hands.

The expression "your money is no good here" expresses this phenomenon neatly, implying that a relationship has passed from the level of anonymous money to the familiar one of in-kind exchange and social warmth. Which is not to say that accounts are not kept. In any relationship, there are quid pro quos- no love is unconditional. But the values exchanged are so personal, emotional, and idiosyncratic as to be impossible to quantitate or put in the common currency.

My father used to pay me for good grades. I don't think his heart was in it, but this was in the days of Milton Friedman and Young Americans for Freedom, so his ideology made it necessary to bring market forces to bear on my scholastic motivation. It is not a method with a good track record. The money had no role at all, other than as a token of his interest and support, which could be far more effectively communicated in other ways. Sometimes, we are tongue-tied.

It is well-recognized that people do not really work for money, either. One expects pay as a necessary part of a job, but being paid twice as much doesn't double one's output or really increase one's enjoyment. Motivation comes from the people we work with and the interest of the work. And even in terms of pay, its importance really boils down to its relative social value- are we getting more banannas than the guy in the next cubicle?

Likewise, money also makes a poor gift.  It can be sort of appropriate from higher to lower members of the social hierarchy, but definitely not the reverse. Grandmothers who have given up on the interests and pursuits of the young might resort to a money gift, but the reverse would be unthinkable.

Money is a powerful tool to enable exchange among anonymous people in vast societies, and the invention of minted/printed money with elastic supply has been two of the greatest advances of civilization, almost up there with writing and printing. But anonymity is dangerous; the accounts we keep as social beings are far more complex and significant than those kept in a ledger. A reputation is a holistic judgement that broadly informs what we can ask of others and what they deserve in return. It is a multidimensional measurement of human value, while money is resolutely one-dimensional.

Money exists in part to prevent cheating, since its value is evident on its face and agreed by convention. But under this guise, any amount of other cheating can still take place, since the other half of each transaction is necessarily non-monetary- the product bought, the service expected, etc. While money resolves some of the information asymmetry in a transaction, plenty remains, especially when amplified by anonymity, leading to vast amount of misvaluation, inefficiency, and fraud that continues on in our monetary systems.

One of those misvaluations is, obvously, of what people are "worth". Another is the quality of national life, as embodied in the hallowed GDP. Any exchange ripped from the social sphere, like child care, or elder care, becomes part of the GDP, not to mention horrifically damaging activities like fraudulent loans, environmental rape, and government lobbying / corruption.

All this is to say that money, like markets, are a tool which we need to continually desacralize and regulate so that we can employ it towards our true ends, which are, for instance, full employment and good employment. Throwing millions of workers on the scrapheap of unemployment so that the sacred dollar can be kept from the sin of inflation (putatively) is anti-human policy. Similarly, bailing out the biggest and most destructive financial institutions so that the sacred markets can keep producing profits for their pathological executives (even paying the most culpible mortgage financiers for another round of fraud in the form of foreclosure management and chimerical mortage adjustment schemes) is anti-human policy. Letting money leak into our political systems to control its own regulation in a vicious cycle of corruption is anti-social policy.

The answers to these issues of human value do not lie in more markets or technical tweeking of money supplies, but in our communal, i.e. political, decisions of human value, which have themselves been so corrupted by money and class in recent decades. One of my blog friends is an libertarian / anarchist of the right sort, whose ideal is a world with no government, where private enterprise runs everything, from police to roads. He looks forward to buying his police services from the lowest bidder (baddest bidder?). This is the Murray Rothbard / Ron Paul vision, and it is appalling in its celebration of monetized values for every particle of our existence, not to mention its quixotic impracticality.


  • More than a "liquidity trap", we are in a savings & inequality trap.
  • And our governing trajectory is into the third world. Is convergence with Mexico the right wing goal?
  • Should corporations pay taxes at all?
  • Not only do companies not pay taxes while running our lives and political system, but use the legal system to keep their wrongdoing secret.
  • And commit ecocide.
  • Yes, a zero-E building can be done and done well.
  • A short guide to tornadoes.
  • Blitz theology from CNN.
  • The Pope- flirting with atheism?
  • Word, from Kanye West.
  • Economic quotes of the week, from an academic blog commenter:
"Markets always operate within some framework of laws and enforcement, and the claim that greed is good implicitly assumes that the legal framework is essentially perfect. To the extent that laws are suboptimal and enforcement is imperfect, greed can easily enrich some market participants at the expense of total surplus. All of this seemed sufficiently obvious to me that at first I wondered if the paper was even worth writing, but the referees were surprisingly difficult to convince."
  • And Bob Cringely, on the bankruptcy of GM, and corporate looting in general:
"So while the function of the public corporation is supposed to be increasing shareholder value, there are evidently other underlying values that are even greater. In the case of General Motors circa 2009, that greater value lay in continuing to service the company’s debt while also rewarding GM management."
"The reality is that Argentina, in part, provides a model for all nations that have surrendered their currency sovereignty courtesy – either via a peg of some sort of outright use of foreign currencies (as in the Euro case). 
That is why the elites are working hard to disabuse us of the notion that Argentina is broadly applicable. They know that the nation effectively got away with a major default, enjoyed renewed FDI [foreign direct investment] and have been growing more or less continuously ever since. 
They don’t want anyone to get any ideas!"

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