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Knowledge and Its Understanding of Value Requires Reasoned Thought

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Sean, the fact that your lengthy response (to my previous diary entry) appeared 65 minutes after mine, tells me that you spent very little time in reasoned thought regarding what I had written in reply to the earlier comments you made. I suspect that this was the case also with my diary entry itself. Please note also that you did not distinguish between what I myself authored and what I was quoting from someone else.



I don't understand any of gobbledygook that you mention.
Money is nothing more than a representation of the time spent laboring. I don't need to read anything else, I already know what money is.

True, money is a kind of representation - but more correctly it is the standard by which all values destined for exchange may be measured and compared with each other. However, what is more fundamental are the methods by which the value of a good or service is determined. For the owner/creator of the value, this is definitely related to the time spent on its creation/acquisition, but it will generally also be related to the intellectual capital (knowledge/skill) and any purchase/processing costs that were required to enable the good or service to be in its current state. For the purchaser/receiver of a good or service its value is simply the maximum amount of money (the standard of value) that s/he would be willing to give up in order to acquire it.

Therefore, in a truly free market (which does not exist in the US or anywhere in the current industrialized world), a given amount of money - the Creation Cost (CC) - measures the total value of the knowledge and/or skill, time and maybe materials as assessed by the owner, which is generally the minimum that the seller is willing take in exchange for the good or service s/he has produced. In turn, another amount of money, Purchase Value (PV), measures the valuation by another person - what s/he is willing to pay (trade hir accumulation of value) to obtain ownership (or other benefit, if a service). Only if PV is greater than CC will an exchange take place at some Selling Price (SP) between the two. As always, this is an exchange to mutual advantage since the seller gets more than what s/he values the good or service (hir profit is SP-CC) and the buyer gets the good or service for less than hir valuation of it (hir gain/profit is PV-SP).

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As an example, the money that one person pays for a pair of shoes that a shoemaker makes hirself represents the value that the buyer has accumulated (saved) from hir sources of income for the knowledge and skill the shoemaker has acquired along with the tools (both likely via someone else) in addition to the materials s/he has obtained (hirself directly or through another exchange) and the time it takes to physically put those items together to produce the desired pair of shoes. The buyer could be a teacher who has been paid by students (or their parents) to convey information and teach them skills that those students (or their parents) consider valuable to have; the teacher, of course obtained hir information via hir teachers and hir knowledge and skill through hir own effort and time. (In an industrialized society, there are more individuals and steps in the process of producing most shoes and usually obtaining an education, but the principle of value exchange is the same.) If the buyer did not sufficiently like the shoes available from this shoemaker or the shoemaker was not willing to produce them for what the buyer was willing to pay, there would be no transaction.

A similar example would be one of the maker of knives who has added value to iron ore s/he has purchased, from another who has discovered its location and done the digging, with the use of hir knowledge of smeltering (or purchased it in this purified form after such processing by still another) and then forging of the metal and final knife crafting. That ore in the ground remains as just so much subearth material (simply holding up the topsoil) until some human adds value to it through knowledge, effort, use of tools and time. This is the same with all raw materials, hence the word "raw" - without value added. Here too, if the buyer did not sufficiently like the knives available from this knife maker or the knife maker was not willing to produce one for what the buyer was willing to pay, there would be no transaction.

However, government interferes in many ways that distort the exchanges of such value - decreeing what types of exchanges are permitted to take place at all, to who can perform certain services, to taking a cut of the action, and many more.

The fact that you do not understand the explanation of what governments have done to interfere in the value of a medium of exchange (create "fiat money" - simply declared to have value under threat of force), shows that you really do need to step back and take some time to become knowledgeable about the history of money - how human beings came to exchange items of value to measure (more than just represent) the knowledge, skill, and time they have to trade with each other - which allowed for long distance trade and expansion of goods/services rather than simple face-to-face barter, the development of that medium of exchange into paper currency and the current government role.

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We don't have a free society. It's compulsory to work in this society. A true free society would be some sort of stateless, classless society, which neither of us will probably ever see in our lifetimes.

You are very correct in that no current human (what I assume you mean in using "we") society is a "free society" - in the sense of being without coercive rule by some one or group of others. A truly free society is one in which individuals
voluntarily trade to mutual benefit, each with the purpose of maximizing hir lifetime happiness, the goal of each person's life, whether or not s/he realizes it. In such a society no one could physically force another to perform work for hir, which means also that no one could demand that others support hir. The Self-Sovereign Individual Project has as its goal such a Stateless society based on the Theory of Social Meta-Needs implemented with the twin frameworks of the Natural Social Contract and Social Preferencing, both of which flow from that theoretical basis. As to whether I or you ever see such a society in our lifetimes is dependent on how many people become not just familiar with these principles of Social Meta-Needs, but come to understand and begin to practice them consistently.


I certainly don't see anyway 'this permits civilization to develop'. I'm in agreement with the famous Ghandi quote, anyway, "Western Civilization would be a good idea."


First, these were not my words, but one's I specifically quoted by Murray Rothbard in
the section on indirect exchange in the Chapter "Money in a Free Society" from his book What Has Government Done to Our Money?

To simplify the situation for you, consider how much you would be able to obtain for yourself if you could only trade with others directly for what they produce using what you produce. If you bake bread, you can only trade loaves of bread with the person who makes shoes or the one who builds houses or grows apples or raises chickens or heals illness/injuries or teaches a skill or conveys limited information or produces any number of other products or services. The fact that you are not limited to carrying around loaves of bread to various individuals nor limited in the distance and or time over which various trading transactions can take place is a result of using a medium of exchange - money. Instead, you produce your loaves of bread in your location and buy, for instance, a shirt that was produced by someone (or group by way of a cooperative or company) that is hundreds and maybe thousands of miles away and is sold by an enterprising person
(or group by way of a cooperative or company) who has earlier purchased that same shirt for sale to others.

What I have described in very simplified form, is the way that civilization (societies of greater overall total overall value and happiness than previously) developed form the times of the earliest traders who transported goods from one place to another, and also used various media of exchange as the commodities that were recognized as valuable by the different individuals involved.

The fact that you use some quote from Ghandi to support your current lack of understanding of how the development of civilized societies has really come about means little. There are aspects of what is described as "Western Civilization" that many people (myself included) consider wrong - a major one is the starting of wars by governments,
which is simply the initiation of force under the auspices of an individual or group that has declared itself the legal authority in an area. But all other aspects of governments, whether part of "Western" or other Civilization, are also only possible because of their monopoly on the legalized use of force, or threat of its use.

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I don't agree, I think developing money and valuing commodities at a certain price, is a major factor in the creation of an inegalitarian society. It seems to me, that to elminate[sic] a class society (haves and have nots) eliminating money would be a good way to get there.

Sean, you have mixed together a lot of words representing various ideas - some contradictory - in the attempt, I think, to explain how you think a better society than what exists would appear in structure.

First of all, value determination is an individually (subjectively) performed process. You are very unlikely to value any item available at the same level as anyone else. Simply because in the current society you may be willing to pay the same price for an article as someone else does not mean that you both value it the same. The price may represent (more accurately measure, as explained above) far more of your accumulated wealth (or willingness to go into debt) than someone else. You may also spend more time and/or money in caring for or providing maintenance for that original purchase than someone else, which again demonstrates perceived value for that item. People are individuals - a very basic concept that can not be forgotten without eventual dire circumstances, many of which are present in the lack of liberty (freedom from coercion) seen to varying degrees in the entire world.

The fact that everyone *is* an individual means that they are different from one another in their abilities and ideas. T
here will always be some people who have more knowledge, skill, strength, endurance, beauty, daring, wisdom, etc. than others
. However, human characteristics are so diverse that it is impossible that any one person will be better than all others in every aspect of being. Furthermore, since all valuation of such characteristics is individual to each valuing person (subjective), it is impossible that any one person is overall "better" than all others (or even any other) as valued by all others. This false concept of "better people" is what underlies a non-egalitarian or specifically defined class society - the last being very marked in certain parts of the world like India up until the last century though still visible in some ways.

A society that has eliminated the use of money by its members - done by force or through the voluntary agreement of its members - has reduced the ability of those individuals to trade among themselves and definitely with others outside their group. At this point, please refer back to my simplified situation of you as a baker of bread. Without money (no matter what form or name is used for the commodity used to represent the value it stands for), you would definitely be limited in how much and for what you could trade. Simply eliminating the commodity used for value exchange - money - does nothing towards increasing the ability and/or willingness of any individual towards producing more that is valued by others and therefore purchased
(paid for) by them.



I believe the nature of human beings changes based upon the surroundings, that people grow up in (the day to day experiences of individuals). For example, (what Darren and I were talking about) the Pilgrims and the Native Americans were raised with very different values. Did they have the same human nature? That's a tough question, but I don't think we can say for sure that they did.

The basic nature of humans as a species does not change, although the demonstrations of that nature by individuals most definitely can and does differ considerably over a range within any group (the degree of the range often dependent on the size of the group) and even more so between groups. As the studied review of history and science shows - and is described in the Theory of Social Meta-Needs - the goal each person's life is to maximize what I (and husband Paul Wakfer) refer to as hir lifetime "happiness", that which each individual seeks to obtain and maintain (values), and likewise avoidance of what s/he does not value. This is a basic essential part of the nature of each human - to obtain the greatest total happiness possible over hir
lifetime. All life-forms seek to maximize their "happiness" as I've defined (even though some have rather weird valuations of what is happiness), but only humans can use long-range wide viewed thinking to attempt to optimize this value accumulation over their lifetimes.

The fact that any group of individuals at any one point of time will contain individuals holding different value estimations of various objects and actions does not mean that this is a fixed situation. Exchange of information between the individuals can lead to changes in value estimations by any number of those individuals. The fact that representatives of a group - most often that determined by legalized use of force, a government - very often do not facilitate the increased understanding and transactions between individuals, is a commentary on that system of communication exchange.


I lost you here, I'm not sure what you mean.

If you take the time to actually read - not skim - what I wrote, and at the links I provided earlier and above, you would not be "lost". To repeat again, for others at least, what I wrote that you "lost":

The nature of human beings does not automatically lead to the conclusion that individuals must be ruled by others, as is done now virtually everywhere, in order that there be orderly interactions between them. Society, just like any other natural system can be naturally self-regulating by means of interactions between its members, if only humans seeks to discover and are allowed to implement the methods by which such self-regulation can be effective, rather than continuing to embrace social systems that need to be constantly held in an unnatural (and very unoptimal) state of balance by the operations of their rulers and other influencers. Individual self-order without rule by others is the social system whose members are humans, who have become fully adult. Just as people can become physical adults, so can they become social adults - if only they are allowed (and even required in the sense that they will not achieve their desires unless they do) to socially mature sufficiently.
Some of these concepts are strange to you - and likely contribute to you being "lost" - because they are not what is taught in government schools. It is not in the interest of those who want to rule others to have those others be thinkers in-depth. Simply following orders, decrees, dictates, edits, regulations, laws, etc. is what those who are part of government want from the citizenry, thereby assuring the continuation of the government's dominance in a society.

If there are specific points in the small quote of mine above here - or anywhere in the writings at the Self-Sovereign Individual Project with which you have a comment or question, feel free to bring them forward. Please use quotes when you do so and after you have read - not skimmed - the material and links referenced.


I see capitalism as an anti-human system (at least in its so-called free market form). It's all about the production of commodities to enrich the few (instead of the many). Many conceptualizations of socialism have imagined much better types of societies. I think the Scandanavian[sic] countries are some of the greatest countries in the world (do you consider them socialist?).

Sean, it is clear from the above that you do not understand what capitalism or even the free market really are, as compared to the economic system that currently, and
for its entire history has existed in the US. A free market can and has existed without the current organization style of industries - these were voluntary exchanges of goods and services without the interference of government. However, historically these existed only in the most rudimentary form - and still do to some degree in the "underground" or "black" market - since governments are notorious for always interfering once there is any realization that gain (of wealth or power) by those in government can be had by doing so. But keep in mind when you read the following, that the participants in these free markets owned their own goods and the tools that they used in creating them.

Capitalism is merely:
"an economic system characterized by private or corporation ownership of capital goods, by investments that are determined by private decision rather than by state control, and by prices, production, and the distribution of goods that are determined mainly in a free market" ( "capitalism." Webster's Third New International Dictionary, Unabridged . Merriam-Webster, 2002. http://unabridged.merriam-webster.com (9 Oct. 2008).
And "capital" goods - "
accumulated goods devoted to the production of other goods : facilities or goods utilized as factors of production " (from "capital." Webster's Third New International Dictionary, Unabridged. Merriam-Webster, 2002. http://unabridged.merriam-webster.com ( 9 Oct. 2008).

Put the 2 together and capitalism is "an economic system characterized by private or corporation ownership of facilities or goods utilized as factors of production, by investments that are determined by private decision rather than by state control, and by prices, production, and the distribution of goods that are determined mainly in a free market". The current system in the US (and even less so anywhere else in the world) is not one where "prices, production, and the distribution of goods [and services] ... are determined mainly in a free market". The government is highly involved at every level in virtually every aspect of the economy in the US. I cannot think of any service or product openly offered in which the government does not intervene/interfere in the transactions of the parties who come together to produce and or procure/receive them. And the fact that some products and services exist only "underground" is evidence that the government's presence has brought about the "underground" as a replacement for what would be a part of a free market.

Socialism:
1 : any of various theories or social and political movements advocating or aiming at collective or governmental ownership and administration of the means of production and control of the distribution of goods: as a : FOURIERISM b : GUILD SOCIALISM c : MARXISM d : OWENISM
2 a : a system or condition of society or group living in which there is no private property socialism that marked the first phase of the Christian community -- W.E.H.Lecky> -- compare INDIVIDUALISM b : a system or condition of society in which the means of production are owned and controlled by the state -- compare CAPITALISM, LIBERALISM c : a stage of society that in Marxist theory is transitional between capitalism and communism and distinguished by unequal distribution of goods and payments to individuals according to their work

Citation for the above:

"socialism." Webster's Third New International Dictionary, Unabridged. Merriam-Webster, 2002. http://unabridged.merriam-webster.com ( 9 Oct. 2008).



Please make note, Sean, the main difference between the definitions of capitalism and socialism as given by Webster - individuals, singly or voluntarily in a group are the owners and controllers of the production of goods and services in capitalism whereas, the individual plays no role in ownership or control under socialism and the collective or state is everything. The fact that in a free market (laissez-faire capitalism; without government interference/regulation) individual human beings have ownership and control of their productive output makes such a system far more in tune with human nature (and its purpose to maximize lifetime happiness as each values it) than one in which government (headed by one or a group of individuals) dictate how all individuals will interact economically (how they will exchange values), rather than according to the voluntary desires of each.

As for your high evaluation of the societies in Scandinavian countries of today, it would behoove you to do much more investigation into what is missing (and present) under these highly paternalistic governments, which I do consider mostly socialistic. For an increased understanding of the economic liberty in Scandinavia I strongly suggest that you read "The Sweden Myth" by Swedish economist, Stefan Karlsson. Although it was written a little over 2 years ago, the information is just as pertinent in regards to the message about Sweden's economy as it was then. And Sweden's form of economy is not very much different from that of Denmark, Norway and Finland.

Until the second half of the 19th century, Sweden was fairly poor. But far-reaching free market reforms in the 1860s allowed Sweden to benefit from the spreading Industrial Revolution.

And so, during the late 19th and early 20th centuries, Sweden saw its economy rapidly industrializing, driven by the many Swedish inventors and entrepreneurs...

Another factor which continued Swedish prosperity was the fact that Sweden was able to stay out of both World Wars, and indeed all other wars as well. Sweden is in fact the country with the longest consecutive period of peace, having fought no war since 1809, when Sweden was invaded by Russia, losing Finland to the invader....

But the foundation for future trouble had already been created. In 1932, the Social Democrats rose to power in the face of the Great Depression. And like FDR in America and Adolf Hitler in Germany, they started to expand government power over the economy. Until 1932, government spending had been kept below 10% of GDP in Sweden, but the Social Democrats, under their leader Per Albin Hansson, wanted to change this and remake Sweden into a "folkhem" ("people's home"), a term Swedish Social Democrats adopted from the Fascists in Italy.

Even in the early 1950s, Sweden was still one of the freest economies in the world, and government spending relative to GDP was in fact below the American level.

But between 1950 and 1976, Sweden experienced an expansion in government spending unprecedented during a period of peace, with government spending to GDP rising from about 20% in 1950 to more than 50% in 1975. Virtually every year, taxes were increased while the welfare state expanded relentlessly, both in the form of a sharp increase in the number of government employees and ever more transfer payment benefits....

After this deep downturn [late 1980s-mid1990s], Sweden has performed much better for a number of reasons. The 20% decline in the value of the krona in late 1992 gave a strong boost to exports and together with the dramatic lowering of interest rates, this helped kick-start a cyclical recovery in late 1993. Moreover, a number of free market reforms implemented during Ingvar Carlsson and conservative Carl Bildt (who was Prime Minister between 1991 and 1994) had helped raise the structural growth potential of the Swedish economy.

Apart from the already mentioned reforms of reduced marginal tax rates and abolished currency controls, deregulated bank lending and significantly lower inflation, this included privatizations of several state-owned companies and deregulation of several key sectors, including the retail sector, the telecommunications sector and the airline industry. Also, when the massive budget deficit was eliminated, even the Social Democrats realized the need for deep spending cuts, which together with the typical cyclical decline in the burden of spending during booms helped reduce the extremely bloated burden of government spending somewhat....

Yet as should be clear, the relative improvement of performance is due not to high taxes (lower now than previously), but to free-market reforms.

And even with these reforms, Sweden has not, in fact, performed better than the rest of Europe. While headline GDP growth has been slightly higher, this advantage disappears when taking into account that Sweden's terms of trade have deteriorated significantly....

The headline unemployment rate in Sweden is only 5–5.5%, but this number is extremely misleading as it only includes a small number of the people who the government pays not to work. Many unemployed are sent to so-called "labor market political activities" — activities whose only purpose is to reduce the official unemployment rate.

And Karlsson's concluding paragraphs - written in August 2006, still at the height of the recently burst economic bubble that had been created by the pump priming actions of central banks of all major industrial countries:

Money supply rose 11.5% in Sweden in the year to May [2006], even higher than the 8.9% seen in the Euro-zone. It is the dramatic acceleration of monetary inflation in 2005 which has temporarily boosted Swedish growth. The timing of this boom is, it should be noted, very convenient for the ruling Social Democrats and their parliamentary allies, the Green Party and the communist Left Party, given the fact that they face an election this year in September.

Ultimately, this artificial boom will have to come to an end, and although the ensuing crisis will likely not be as deep as in the early 1990s, the seemingly impressive Swedish boom will certainly be revealed as a fraud — just as the whole story of the success of the Swedish economic model is a fraud.

Perhaps it would help your review of why you think "the Scandanavian [sic] countries are some of the greatest countries in the world" if you listed for yourself specifically what it is about them that you think is so great. Then ask yourself in the case of products or services (and not simply the scenery)- Who is producing these items? How are the producers being paid for this production? What about the people who do not want or use these products or services? What is the level of liberty to opt-out of the payment via taxes and other government fees for the payment of services/products a citizen does not use or even want?

Sean, from what I've read in your comments,
I think you truly do want a better society. However, your apparent fascination with socialism is without complete understanding of it, and none of praxeology (the theory of human action - of which Mises "Human Action" and a more complete basis for all optimal human action is described by the Theory of Social Meta-Needs). Unfortunately, neither of these are yet taught at the majority of US educational institutions, but rather the various faulty philosophic and economic theories which dominate government actions.

 

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I am a professional life-extensionist and liberty promoter who practices what I and husband, Paul Wakfer, encourage. More detail about both of us - philosophically and physically - at http://morelife.org/personal/ When the comment time period has closed at OpEdNews.com, readers are welcome (more...)
 
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