Tuesday, January 16, 2018

Economics: Wealth Without Money

Economics is also known as "the science of value". However, it fails miserably.

Before I explain that statement, I should let you know that my current project is taking the six Darwinian Dilemma posts (Street 01-06) and turning into the paper that I intend to post on the Documents page of the Desirism website.

While I did that, I wanted to step out of the realm of theory here for a moment, and into the realm of practice or practical application.

These ideas on wealth have been with me for quite some time, and I have simply decided to put them down.

Economists tell us that we need to determine a person's wealth by the total cash value of everything that he owns - its cash value being what other people are willing to pay for them. A person's income is the total amount of money he gets a year from all sources - gifts, wages, interest, realized capital gains (or losses).

Each week, I consume a huge quantity of goods for which I am not charged a cent, and I am only asked to pay what I wish. At the same time, I produce a number of goods for which I have obtained no money myself except from the sale of A Better Place back when I named the theory I defended here "desire utilitarianism".

An honorable mention for those who have provided me with valuable goods and services for the price of a donation:

Mike Duncan for his History of Rome and Revolutions podcasts.

Rick and Tracy, who provide the Civil War podcast.

Russ Roberts of Econ Talk

The London School of Economics for podcasting the school's Public Lectures and Events.

And, of course, there is Wikipedia and a huge amounts of information found on government web sites.

Because a huge amount of my week is spent on these activities in which I receive no pay and ask for nothing from others for what I produce, I am not a part of "the economy". This effort shows up in no government statistics on wealth or income.

And this is just an illustrative example.

Spend one day, going through your day, and consider the wealth you create for others, and the wealth provided to you by others, for which no money has changed hands.

This blogpost (I hope) is an example.

Indeed, this fact shows how to become wealthier without money. Acquire a desire for states of affairs that you can realize without spending money - which is pretty much what I have done. I can go for days without buying anything but the necessities . . . and, I would admit, a somewhat higher quality of those necessities - food, clothing, shelter (with heat), internet connection.

If the rest of your desires are those that require money, then you are going to be in for a bit of a struggle.

If, instead, they are desires for things that one can get without money, then one can be quite wealthy (in terms of having one's strongest desires fulfilled) without a great deal of cash.

The economists are going to tell you that you cannot be wealthy unless you have assets that can be converted into cash money. This is the only type of "wealth" that an economist can see. But you should not let this corrupt your thinking. If you read this and take from it the attitude that, "I am poor . . . I am not well off . . . my life has less value . . . because I have not accumulated that which can be turned into cash," you are doing yourself a disservice.

The economists are going to tell you that other people cannot be wealthy unless they have "stuff" - that which can be converted into cash. But that is not the actual measure of wealth - of value. Value is found in that which fulfills desires. Desires are malleable, and there are a great many desires out there that one can fulfill at very little expense.


Martin Freedman said...

It would be helpful if you could point out which economists make such an argument that you are criticising. You are talking in generalities but, at first glance, i cant think of any economists who make such an argument.

The mainstream - new consensus, new Keynesian - the recent mainstream neoclassical synthesis, neoKeynesions - all argue that money is a veil over the real exchange economy, that this is really a barter economy without money.

The Post-Keynesians all reject this and argue for a monetary production economy where money is no a veil but endogenous, we have both a monetary and real economy.

The latter still does not lead to your criticism but the former is dominant in most circles and is the most likely target for your criticisms, which make no sense.

So who specifically are you addressing?

Alonzo Fyfe said...

This is a sound criticism.

In fact, you can take the criticism further and report that I violated one of my own cardinal rules - the rule against using collective (tribal) terms in criticism. Your criticism reminds me of why such a rule is a good idea - and why it should not be broken.

The proper object of this criticism should have been stated as a public attitude - built into certain newscasts and public conversation, and in particular reports about the economy - that conveys the attitude that all wealth is to be measured in terms of "that which you have that you can turn into money."

When political activists write about "the top 1%" or complain about the "wealth inequality", these complaints are often presented in terms that understand "wealth" to be "that which can be converted into money."

When news casters give their reports on the economy, their reporting will quite often understand "wealth" to be "that which can be turned into money."

And my point is that this is a poor definition of wealth - and one is well advised not to internalize these claims. One should not fall into the trap of thinking that one person is better off than another - or, even, better than another - based on a measure of "that which can be turned into money."

And each of us could get by a little better in life if we focused less on "that which can be turned into money" - cultivating desires and interests that do not take money to fulfill.

Martin Freedman said...

"In fact, you can take the criticism further and report that I violated one of my own cardinal rules - the rule against using collective (tribal) terms in criticism. Your criticism reminds me of why such a rule is a good idea - and why it should not be broken."

That was my original thought!

However I thought it better to analyse the specific problem with your term "economists" rather than just state the general point.

The term I use is "MediaMacro", these are the people you are referring to in your comment - those many pundits, reporters and politicians etc. who have quite a distorted view which oversimplifies and misrepresents, in different ways, both mainstream and heterodox macroeconomics and economists.