Money is often labeled as the root of all evil as a consequence we are often encouraged to think of ways to avoid money. That has always seemed like an oversimplification to me and when I dug a bit I discovered that instead of money many people have labeled greed as the root of the root evil. However, Dante only holds greed and other attachment sins as levels 2 through 4 in hell. After further inspection I am even forced to acknowledge that greedy self interest has powered some significant economic advances in our world. In fact many of the risks that people take and many of the second and third efforts that people make in contribution to our society are driven by self interest. I'm even reminded that many of the broken economies we see in this world today were formed as experiments with the best intentions of elevating human endeavor to an altruistic plane. I think there is a place in my heart that wishes there was an altruism based economy that was beating the pants off of capitalism but I'm not aware of any. Even economies with some level of central planning must operate in a capitalist world and are to some extent enabled by the self interest external and internal to them. As a consequence I have done some thinking on the role that money plays in our society.
My thought process began with a mental exploration of the ways we might live without money. The measure I used for a successful non monetary economy was a theoretical attempt to build a cell phone from scratch. I intentionally picked a highly complex technical task since I wanted to set the current measure of success within our capitalist society as a baseline required achievement level. In the details of this measure I included that the phone would need to go from raw materials to working product using manufacturing facilities and design work all implemented with no monetary exchange. As I went down each of the possibilities to accomplish this I kept running into a barrier that I call the 'familiarity singularity'. This singularity appears to exist at the point in any non-monetary based economy where participants are no longer able to know and respect all the other members of the economic group. Anecdotal evidence appears to put this number roughly between 100 and 1000 people. Past that point the necessary management of cooperation appears to always require a monetary system of some kind. In fact in today's society where monetary drivers manage most of our daily activities it is rare to see groups of more that 5 people cooperating in a non monetary fashion for economic self support. (Family structures) This may be a measure of social breakdown but I'm not so sure. The alternative hypothesis is that monetary based economies are more productive and people are drawn to success. In the end the massive amounts of disposable income generated by a benign capitalist system is often invested as socialization and non economic cooperation. If this didn't happen we would be living in a terribly lonely and competitive world.
You might ask why we should feel the need to be so productive and efficient? It may be that you feel this is the root of evil, this constant search for efficiency. In point of fact this efficiency has been a saving grace for the world. I believe the biggest risk of a technology rollback is a Malthusian Catastrophe resulting from a reduction of productivity. We should not forget the lessons of the american dust-bowl resulting from single family semi-autonomous economies. I believe that any substantial rollback in technology and therefore productivity and resource efficiencies from today's levels would result in a large scale human die-off event. I actually think that I might have the skills to survive something like that but morally I am unwilling to advocate a path where large portions of humanity are required to die in order for the rest to live better.
So if money is the enabler of great things and capitalistic use of money helps avoid the (zombie?) apocalypse what exactly does it do? I believe money enables 5 things that would not be possible otherwise. Specifically, these are five things that seem to need to be enabled together. Supply and demand, futures, risk, taxation, and brokerage. When I reviewed how self interest plays into those categories I discovered (known by others, new to me) something very interesting. Using supply and demand as an example you can see that if the supplier is not attempting to get the very highest price for their wares or if the buyer were not trying to pay the very lowest price for said wares then there would be no mechanism to adjust the price without some outside control. Obviously some of this fluctuation is also enabled by competition and innovation. The price is additionally stablized when both the buyer and the seller have choice through brokerage and competition. Brokerage, risk, and investing in the future all require rewards to give incentive for people to engage.
If we were to manage these elements by controlling the amount of reward for each of these roles through some central planning body in order to remove the contribution of greedy self interest we find quickly that enforcement is required. Wherever there is enforcement of price controls corruption and black markets can also be found. Externally motivated innovation also requires investment up front rather than on the back end. This includes money paid for blind alleys not always rewarded in a capitalist scenario. (risk is more efficient in capitalizim) In my opinion the burden to society of enforcement, illegal activity, and poorly managed innovation quickly outweighs the short term benefit to the buyer of fixed pricing and the seller of fixed demand.
I acknowledge that self interest in supply and demand can go horribly wrong as demonstrated by Martin Shkreli and does seem to beg for some intervention. Although, part of Martin's ability to behave so reprehensibly was enabled by a lack of competition in a very narrow market. Unsupervised brokerage also has significant risk of damaging the economy as demonstrated by the mortgage crisis of 2008. The other areas of monetary action are equally at risk of destructive action that is more damaging than helpful. I do have some ideas about when, how and why intervention is appropriate but I haven't ironed them out completely. The question of pure self interest appears to be stuck between the proverbial hell outlined by Dante and the hard place of an under-performing economy. I suspect that there is another blog post or two there. In the end there is, and I believe there will remain, a solid argument for the role of governments in a market economy and therefore taxation to support them.
So if there is no meritocracy or ideocracy that can replace greedy self interest as a mechanism to drive our economy forward what is a right thinking person to do? Should we all just bite claw and scratch our way to the top of a large pile of money? (And by the way the meta question is how can I tell if I'm a right thinking person?) I would argue that passively we can ask yourself if the monetary transactions we engage in are respectful of the other party as a minimum. Just doing that allows us to inject some level of moral action in a world designed to only reward self interest. Additionally, I believe that I have uncovered one additional measure that can be used to manage our perspective on money. If we view monetary systems as the best mechanism to enable society then I would propose that each of the sub elements should also be judged on that merit as well. The goal being to optimize society. Using brokerage as an example we find that where there is a lack of brokers, transactions fail to occur at their maximum volume. However in today's market place we have established a norm where brokers are rewarded as a percentage of the total transaction value that they enable. In point of fact the specific contribution of brokers to society is bringing buyers and sellers together where that would not occur on its own. If this action enables one or a million transactions it makes little difference in the work required by the broker. In a strange twist of fate I think there is a self interested opportunity to offer brokerage as a service priced action rather than a percentage priced action which would leverage better return to society. (Advertisement as a moral good!)
As I think about the 'good for society' measure I find myself amazed that the market has not self corrected this for brokers. It is true that some brokerage actions apply to such small transaction volumes and transaction content that it doesn't make sense to broker them. OK, but at the high end of brokerage transactions it is very hard to ignore that some people are being paid hundreds of thousands of dollars for a few days work. The only way this would be possible is if other people decided to not offer the same service for less money. The self interested market has failed in this case. It has failed by the measure of providing value to the individual without returning equivalent value to the economy. What is the right way to correct this? As a vendor be the person that offers value for compensation rather than value for a percentage of the transaction. I think that the market will reward people who take these actions since there is so much self interest on the consumer side. On the consumer side your burden is to purchase actions or products not leverage or perceived value. Guerrilla capitalists arise!
You might say to me isn't a percentage based pay scale just enabling a person to ask the highest price for services? At a macro scale this is true but I think that by sub-optimizing for self interest alone we actually leave market opportunities on the table unrealized. Additionally when sub-optimizing for self interest we also damage our society. In fact I think that by this measure we find the true root of evil. Only through seeking benefit to both yourself and society can we truly maximize the growth potential of the monetary system. Is there some governmental role needed to enable or reinforce this focus? Probably, but we do not need to wait for governments to act since the market itself should be reward individual action.
