Money

Philosophy Forums Society, Government, and Economics
1

Hi,

I have a logical problem regarding money. I don’t understand much in economy so this may be a simple question.

Lets say person B heirs person A to cut his grass in return for a cretin amount of money.
This person (A) goes to a different person C, a farmer, and pays him this money in regard for some fruit.

Person A transfered “Actual” value to person B (the grass cutting). Person C transfered “Actual” value to person A.

Assuming person B and C never have direct or indirect exchange in their natural life,
How do we promise that person A’s “Actual” value reaches person C?

2

So you’re trying to gauge fruit producing against grass cutting?

Measures of value in one way are as unlimited as your imagination, nevermind when gauged relative to another way.

You can standardise an ‘exchange value’ according to zillions of factors. Supply and demand is just one. Labour hours is another. How many beads of sweat you produce, lol, or even equating 1 cut grass to one grown fruit could be a couple of less likely ones.

There’s ‘use value’ too: how useful the cut grass is to person B or anyone effected by his cut grass, or how useful fruit is to person A or anyone effected by his fruit purchasing. Use being highly subjective.

The more the accepted form of standardised ‘value’ measurement has been agreed upon, the more you can ‘promise’ fair value exchange in as much as it’s accepted to be ‘equal enough’. B and C would all have to be exposed to the same regulating body or agreement if they’d never crossed paths in any way, which A would have to have been exposed to too. This ‘equal enough’-ness could be quantified by money: essentially a ‘promisary note’, as is probably written on any monetary note you might have. But again, how much this money equates to “Actual” value is purely subjective.

Your question is more about the subjectivity of value. The answer would be nothing more than ‘value is entirely subjective and realistically entirely non-communicable’. Attempts to communicate it have been entirely artificial and based on loose emergent generalities - exactly the same as all epistemological problems.

3

I want to make sure I am understanding this.

Person B wants grass cut-hires person A

Person A wants fruit-cuts grass for Person B, buys fruit from C

Person C-Now has money

So, person B hires A to do something that is an intangible, to the extent that he is getting a service (as opposed to product) and he pays person A for that service.

Person A goes to person C and buys a product from person C.

Now, you want to assume that Persons B and C never have a direct or indirect exchange in their lives’, but the problem here is that they already have had an indirect exchange through person A.

In fact, it is only because of the existence of money that this exchange could have taken place the way that it did. Assuming that person A used all of their earnings from the grass cutting for fruit (essentially meaning they cut grass in exchange for fruit), then without money the barter system would work such that person B would have to take some sort of tangible good (or intangible service) and barter it will person C in exchange for fruit to then use to compensate person A for the grass-cutting job.

Either that, or B would have had to compensate A with some other good that C would accept in exchange for some fruit.

Money sort of balances things out as well, particularly in the individual and private market because people know what they can do with their money other than pay whatever someone else is willing to take for some good. In other words, let’s say that person A is completely without food, in the barter system, people could theoretically collude against person A and make person A perform ridiculously long duties in order to just get enough food to eat. They could do this because they know that person A is completely without food, and thus, food holds more value to A than any amount of labor.

With a currency-based system, though, starving or not, Person A has a little more control because he can demand a certain amount of compensation for his labor. Of course, he will not always get it if other people are asking less or do a better job than he does, but he can at least demand it.

Or, maybe I’m not getting your question…

4

The problem is less the gauging or subjectiveness of money (or value).

Assuming their is such a thing as “Actual” value, which can be defined as things that are useful to other people (goods and services), subjectivly or not, and that money only represents these things and quantifies them (The paper in itself is not worth much).

In this case money would flow from B to A to C. And Actual goods would flow from C to A to B (fruit to A and grass cutting to B).

Now if we cant promise that A or B ever have something to offer C (In a world where only they exist) in regard for the money he has then that money would be useless to C (causing him to work for nothing).

So maybe to refine the question. How can we promise that money is valuable to everyone in a certain domain?

5

The short answer is that it is not. A nearly self-sustaining farmer might not value money nearly as much as a city office worker. But probably more to your point, in a scenario of hyperinflation, money may become of so little value that people go back to bartering.

But if A never has anything to offer, no one will give him money to begin with, and he won’t participate in the money economy. Money doesn’t have a fixed value, and there are times and places where it has had virtually no value at all.

I think we are in one of those times - I’ll PM you my address so you can mail me all your worthless money.

Just part of the service here at ILP.

6

That’s great!

Another thing you have to think of is a sort of Armageddon-scenario. Money becomes useless, and there is a premium on weapons, ammunition, bottled water and canned or dried foods…probably in that order.

Either way, were the shit ever to really hit the fan, I wouldn’t sell you a bottle of Dasani for $1,000.00.

7

Yeah - you see, what will happen in that case is that ammo will be money - probably .22 and 9mm in this country, because it comes in small and countable units and because many people will want it. I think ammo would take precedence over weapons, because it can store value and because it’s a consumable - like grain. That it is consumable will keep demand up and that it’s easily transportable and durable will satisfy the “store of value” requirement. People who do not have guns will still want it, the way prisoners or soldiers who don’t smoke will still want cigarettes - they can in turn trade it for something they do want. Or at least that used to be the case when people still smoked.

You might sell that water for ammo, Pav. Water can be found out in the woods. Ammo’s a little harder to come by.

Other stuff would probably become money, too. I think we can all imagine scenarios where teas bags, candy, liquor and personal hygiene items like toilet paper could become currency. The value is set by a market. I am sure Wiki has a decent article on markets, Coby.

8

That’s an excellent point, Faust, and I agree wholeheartedly.

In fact, I think that all of the latter items mentioned will become money, and ammo will become gold.

I probably would be willing to negotiate a water/ammo trade, by the way, but money sure as Hell would stay uninvolved. If I were the one with the ammo, I might give someone one extra bullet for a huge stack of money, good kindling.

9

Sorry for my ignorance. (Told you this might be a simple question)

What i find hard to grasp is how things work in the macro level.

I can understand that every single person gets a certain input in regard for his output. Meaning i work and i can get food in exchange.

What i don’t completely understand is why my output can be given to some person (or body) and my input received from some totally random person. Not having the slightest connection to the person receiving my output.

Does this mean that in a working economy my output is always transfered threw a random amount of people (and converted into different goods) until it reaches eventually the person whom i get my input from?

And if so why does this work most of the time (What makes it possible), taking inflation aside…

10

Well, I think you are just not seeing the connections. Those connections can be seen in the market - a market is where transactions come together. Now, in a large and complex economy, it is often too complex a series of transactions to trace every one in detail. And market models will usually assume a degree of rationality that does not exist in real life. I think A-Rod is overpayed, but the Yankees did win, after all.

Also, while models are necessarily an oversimplification, there is no one person at the other end of the transaction, usually. If you grow grain for market, chances are that your grain will be distributed to many people, both as grain and as value-added products. Neither is there only one person from whom you get your “input”. When you buy a loaf of bread, you are paying for labor, transportation, traders (middlemen), perhaps advertising, and several other “ingredients” of the transaction - in other words, that transaction is really many transactions.

I really think you have to read up on markets.

Let’s take that loaf of bread, though. The farmer knows his costs - labor, land, equipment, and so forth. So he knows what a loaf’s worth of grain costs him, and he knows his profit. The commodities broker knows the same - and the bakery and the store. The cost of that loaf of bread can be determined at every level. And value (cost, for our present purposes) is also added at every stage. And those costs can be broken down by labor, overhead, etc. So we can theoretically find out how much of the purchase price of a loaf of bread went to the janitor at the trucking company’s garage.

But do we really want to?

The reason it works requires a rather longwinded exposition. The short version is that markets are exactly those abstract entities that bring these transactions together. A market is exactly and only the sum of those transactions.

11

Coby - if you took money out of the equation entirely, and first imagined a society that operated purely on a “barter” system - it might help you understand how values can be connected indirectly.

Try restating your earlier examples in terms of bartering - imagine money (not coin, nor paper) was ever conceived.