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What is Money? Outing the L-Word Part 3

By Andrew S. Taylor  Posted by Jason Miller (about the submitter)     Permalink
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Thomas Paine's Corner 

“This planet has - or rather had - a problem, which was this: most of the people on it were unhappy for pretty much of the time. Many solutions were suggested for this problem, but most of these were largely concerned with the movements of small green pieces of paper, which is odd because on the whole it wasn’t the small green pieces of paper that were unhappy.”

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-Douglas Adams, The Hitchhiker’s Guide to the Galaxy.

We wish to live in a world where our wages have some objective meaning, and are not simply reflections of unthinking market relativism. But we live in an age of post-modern money, in which our currency - be it paper, plastic, or figures recorded in computer memory - serves as a re-writable “open text” for those to whom the world’s treasuries are entrusted. Its value can be altered by decree, trimmed and nudged with exacting precision in studied correlation to events throughout the world marketplace. As international banking is now completely reliant on electronic credit, we find that money is only sustained as a fact of reality by our own collective belief in it.

And yet, the bills and coins in our pockets feel so damn real. They work flawlessly for their intended purpose in our daily lives, and in these functions they are irreplaceable. Who has not at some point lost a $20 bill to a wayward breeze, and experienced that unique form of despair as it flutters away? In the backs of our minds, we know that the paper itself is worth next to nothing, but that what it represents is something intimately connected to our lives as individuals. It is for this reason that tax-time is such an emotionally difficult period for us - we feel (correctly) that something essential to our livelihoods is being forcibly extracted from us.

We console ourselves with the belief that the government needs to take “our” money to pay for the many social services that keep society going. But, how much must it take, and what stops it, in principle, from taking much more than it currently does? In these moments, we might be inclined to sympathize with the Libertarian position that, in essence, all taxation is theft, and that as long as we as a people submit to compulsory taxes, we have engaged in a Faustian deal whereby no moral imperative exists to prevent our total exploitation by the IRS - that only their scruples stand between us and forced poverty.

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The Libertarian argument with regards to taxation and money is attractive because, in its talk of gold-standards and de-regulation, it seeks in principle to restore objectivity - a very important word here - to the currency we use. Surely, they say, the dollar must reflect something beyond the mere whims and machinations of social engineering. It must measure some aspect of reality that exists outside of government designs. This would then provide an epistemological basis by which the concept of currency could be once again directly wedded to the notion of rights.

Let us examine the word “objectivity,” and then, in seeing how it applies to money, determine if the Libertarian arguments regarding currency (and our right to possess it in any amount, no matter how extremely huge) do in fact lead to greater objectivity. Specifically, is the money we earn a true and accurate measure of our rights to procure goods and services from society, in all cases? The crucial thing to keep in mind here is this: for the Libertarian argument to be epistemologically and ethically correct (ethically, because money is a direct expression of the fact that we participate in a social contract), the absolute value of a dollar at any moment would have to be more than an emergent fact of “the marketplace.” It would need to be an objectively accurate measure of the means by which the dollar was earned. If a dollar does not accurately represent, for any holder of that dollar, a reasonably precise measure of the work that went into procuring it, then the dollar is not an objective measurement, but rather a structurally mutable fiction that changes its meaning with every human palm it graces. This latter scenario might benefit certain individuals and harm others, but, most importantly, it robs money of any possible ethical meaning.

What would make currency a socially objective measurement of work? And what exactly do we mean by “objective”? When we say that something is “objectively” true - we do not necessarily mean “true” with a capital “T.” What the term literally means is this: that there exists an external referent, some standardized unit of measurement, by which the properties of different objects or situations can be compared to one another. “I am tall” is a subjective truth - it is true when I compare myself to other people, but not true when I compare myself to buildings. “I am taller than most children” is objectively true, because I can in principle use a ruler (external referent) to prove it. Likewise, “I am rich” is a subjective statement - it’s true if I compare myself to a citizen of Cambodia, and untrue if I compare myself to Bill Gates. It is objectively true that Bill Gates has more money than I do.


While it is objectively true relative to monetary currency, the standard of measurement, is it objectively true relative to what money measures, i.e., the extent of one’s social entitlements in exchange for the work one has performed? Specifically, do our differences in wealth accurately correlate, with unitary consistency, to what we actually deserve to procure from society with our wealth? This is what we need to remind the Libertarian: if it is not accurate relative to the x property that money measures, then the statement that “Bill Gates is richer than me” approaches tautology. (Imagine that I measured my height with a ruler whose inches changed length every day according to perturbations in the metric system overseas, and that someone who was only a head taller than me found that his “inches” were one-tenth as long as mine - meaning he is more than 10 times as tall!). Sure, he has more money, but does this money accurately represent his entitlements from society? Likewise, does poverty accurately reflect the social entitlements of the impoverished?

There is one other aspect of objectivity which is crucial, but which is often overlooked - the properties being measured and the external referent itself must exist within the same frame of reference. Let’s take brief diversion into physics to illustrate this point. In physics, we say that d=rt (distance equals rate times time). Most of us experience a world easily described by Newtonian mechanics because we co-exist in the same frame of reference. Moving at essentially the same rate relative to one another, standing as we do on the same earth, we avoid any of the “relativistic distortions” predicted by Einstein and can proceed through our entire lives without ever realizing or caring that Newtonian mechanics do not, in fact, describe the world as it is, but rather only as it seems to be within our own frame of reference. Does that mean that it is not objectively correct? No - not if we take “objective” to mean what it should mean; that there may be posited a standardized frame of reference by which differing individual traits may be measured. As long as the frame of reference remains consistent, then the standardized measurement will measure accurately.

Many physicists, however, have bemoaned that the Theory of Relativity is improperly named, because what it in fact reveals about the nature of the cosmos is that there are limits not predicted by Newton’s physics. Specifically, that the speed of light is the ultimate standard of measurement. It is not just a “speed limit” - it is the point at which matter and the energy used to move it reveal themselves as different aspects of the same property (which is why nothing other than light can move that fast). As we approach light speed, vast amounts of energy are required to produce exponentially smaller increments of increased velocity. Likewise, as objects become more massive and dense, they exert a greater gravitational pull, and the rulers with which we measure our ledgers bend along the contorted contours of space itself. At some point, Professor Hawking intones that we are “crushed to spaghetti.”

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We can, of course, pretend that Newton’s d=rt applies everywhere at all times, and that we can move many times faster than light-speed if only we apply enough force to our chosen vehicle. We can decide to be ignorant, and calculate how much energy is required to reach Sirius B (8.6 light years away) in just under an hour. We could run the numbers - the math works just fine! And we could even chose to believe it. But it would be wrong. The math may work, but the numbers do not describe reality, because the extremes of speed and energy have changed the frame of reference, rendering the traditional means of measurement objectively useless.

How is this dealt with? The only way that it can be - “relativistic” equations are integrated into the Newtonian calculations, to accurately compare one frame of reference to another. Hence, we can calculate that greater and greater expenditures of energy are needed to produce ever smaller increases in speed, and no amount of energy will push a physical object up to the speed of light. These distortions are exponential in nature - the faster you go, the more the traditional measures of time and distance lose accuracy.

Might not something similar apply to monetary currency as an ethically viable measure of social entitlement? While the mathematical possibilities provided by capitalism, and its ability to produce exponentially greater gains upon larger amounts of wealth - to literally use money to buy more money - are technically limitless, does this mean that they are ethically limitless? If money, an immediate expression of our participation in a social contract, is premised on a limited frame of reference, might there not be, in principle, an objective limit to how much money one can ethically retain? Say, even, a maximum wage?

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