Actually, value theory is much more closely affiliated with philosophy than economics in today’s institutions. Regarding what kinds of things are most valuable, the professor’s position sounds a lot like John Stuart Mill’s in Utilitarianism. But I’m not sure about the focus on things being valuable for longer. I agree that there is a difference between value which is consumed and value which is created and not consumed. For example, I might value buying more exotic food equally to charitably commissioning a project to research malaria, and the costs of these two alternatives could conceivably be the same. It seems like the professor is highlighting the idea that even if the cost to me is the same, and the value I get from each alternative is the same, the alternatives are not equal. It would be better for me to commission the research than to buy the food. I can definitely see where he’s coming from. But I’m not sure that we would be justified in coercing someone to choose to fund the project, even if we knew that the situation was as I described it (and of course, it might be impossible to ever know this in the first place).
Danny, I thought the professor was an economics professor. I’m merely surprised he would issue such a response on a matter regarding economics. It seems to me he’s trying to evade the debate on gold and shift the topic.
I think this is somewhat true. As mentioned, he wanted to focus on the true nature of wealth, which is not found in gold or central banking. How can my gifts and talents and your gifts and talents be used to further the society and encourage people to pursue interests will further advance the common good? Providing capital for a medical student who wants to practice medicine in a developing country is much more beneficial for society than providing capital for brothels and gambling casinos.
I then proceeded to ask him if human culture was seeking the good, then which kind of monetary policy, central banking or gold standard, would be be the natural outcome. He never really responded to it, or at least I don’t recall what he said. He was definitely opposed to wasteful spending of resources that don’t advance the good and intellectual growth, individually and culturally.
Hmm…if that’s what’s going on, then I’d definitely object. I imagine that there are problems with the adoption of a gold standard, given its reliance on a substance which currently isn’t valued for use as money, and which is desirable for other uses which would likely be priced out if gold were backing the entire US (or world) economy. Not to mention the fact that the flight from fiat currency to gold-backed currency would produce winners and losers for reasons which seem rather objectionable (losing half of the value of your life’s saving because you didn’t buy gold fast enough doesn’t seem fair).
But your professor’s objections don’t seem to be focused on the gold part of the gold standard, but rather the implications for monetary policy. That is, his problem seems to be that a fixed money supply would constrict the government’s ability to influence the economy, because it would need to pay for all of its expenditures with tax revenue, and would not simply be able to print money to finance its projects (that is, assuming that the gold was actually owned by the people, and the government didn’t store all of it centrally, which would create the possibility of the government making use of a fractional reserve policy). As far as I can tell, this boils down to the assertion that governments need to be able to influence the economy without citizens being fully aware of the costs of government programs. I don’t even know where to start objecting, because that position just seems like an objection to itself. Am I missing something?
Ethics assumes choice; choice assumes value; and value assumes the highest value, the good. In philosophy, the good is based on human nature, which is based on what ultimately exists, metaphysics. For example, in theism (Judaism, Christianity and Islam) humans are created in the image of God. Therefore, the value of human nature is grounded in the existence of God.
This is totally backwards of Mises, isn’t it? He says the only person who can actually know the true value of something is the person trading for it, at the time of the trade. Personal interest is the ONLY thing that generates value. Values vary from time to time, from person to person, from trade to trade. Gold itself doesn’t have anything to do with the intrinsic value, it has to do with what you expect to get with the gold. As the others have said, it is a medium of exchange, only.
As a cynic, whenever I see a statement like
I imagine that the next line is, SO I WILL TELL THEM WHAT IS OF VALUE. I can see Mao telling the Chinese what is of value as millions die of starvation. I can see Hitler telling the Germans what is of value while stealing their children and killing. I can see Stalin telling the Russians as millions die of starvation. I can see FDR telling the Americans as he first confiscated and then stole their gold.
I always get nervous when people will tell me what I value.
I don’t think that Mises believed that personal interest is the only thing that generates value, as far as you mean interest in the particular object in question. I’ve discussed this issue in this blog post. Hopefully that helps!
If you are able to do so without jeopardizing your grade, you should pin him down on this. As Inquisitor et al. have ably pointed out, it is only hard currency that can rein in speculative endeavours that aren’t backed by prior savings, i.e., the prior postponement of consumption. See how hard currency increases time preference? Under a gold standard, you are going to have a more future-oriented society, which means less brothels and casinos as those are consumptive, high time preference activities. IIRC, there have been articles on mises.org that referenced increased debauchery in the Weimar Republic as the currency inflated.
If he wants to talk about a cultural problem over in the humanities department that’s fine. But he’s wandered over to the business school and has asked about monetary reforms that would encourage his cultural preferences and the answer has been handed to him: a moral currency encourages a moral society. However, just as the gold standard restrains speculative ventures unsupported by prior savings (and hence more likely to be malinvestments like dot-coms and $700K 2BR/1BA homes in LA), it also restrains the government from its massive social engineering schemes via deficit spending. I think that’s his real objection.
Very insightful post, Byzantine. However, I believe he would say the inverse: that a moral society will encourage a moral currency. A demand by a society that finds its ultimate value in excessive consumption and needless debt will be supplied to it. A society that purchases what it needs instead of always what it wants would therefore establish a sound and moral currency policy. Correct me if I’m wrong, but I think what you’re saying is (and I agree with you): that a moral currency places checks on excessive abuses in the system.
Having said that, with a moral currency, human propensity to somehow abuse it is not quelled. History has shown that even under a gold standard and no central bank, fractional-reserve banking still took place because peopled abused it. Hence, if a society was honest and moral, the currency would necessarily become the same.
I just read through your blog entry which was great to read.
One remark though. I think, that the path goes into a wrong direction very early in the article, when you state, that a cake is valuable to people. Later on you say:
"Clearly the alcoholic values the drink, and the abused partner values his relationship, but there seems to be a sense in which we want to say that the alcoholic shouldn’t value the drink, and the abused partner should leave.
Here you try to raise value to a group thing. The fact is that the subjective value of the alcoholic does not change, only now there is a group called “we” that wants to tell what the value is. What we can say is, if the means a person uses to achieve an end is appropriate or not. We can make all kind of empiric statements like 99% of alcoholics as an outcome of their choices, we can’t deduct the goals of the individual though.
A way to help such people is not to tell them what they should do but rather to offer them options how they can act as well. It is not to coerce them in any way but to raise their amount of means to achieve their ends.
Let’s take the alcoholic. Let’s further say his end is to be in a more satisfying state than he is in this very moment. Let’s further say, that the only means he can employ -because that is what he thinks is the only option - is drinking alcohol. From his perspective he is totally right, because he has no other options available. He chooses the one that achieves the end.
It does not matter if anyone else knows more options to reach the end. Our alcoholic does not have access to them and therefor can not utilize them if he wishes. If we consider it bad - which is a moral statement - to use alcohol in such an exessive manner that it leads to death, than what we can do is to try to give the alcoholic more options to choose from and let him voluntary decide which path to follow. We might tell him that he can voluntarily accept a detox for example. At the end the single individual has to decide how to act, he must, there is no other entity that can make the decision for him.
“You can lead a horse to the water, but you can’t make it drink”
I think you should include your comments regarding you anticipating his response. It’s a slight “trick” but I find it helps make your point more concrete and/or palatable to the receiving end of the argument. I would’ve given an arm & a leg for knowing this forum back when I was trying to argue things in my papers and/or comments in class :).
Nhaag, wouldn’t the “should” there be the moral, as opposed to the prudential, should, as in which principles ought to guide one’s actions?
-Jon
And what makes spending wasteful is decided by those who are the experts? Like him for example?
I also wonder how it is more beneficial for the society to invest (who’s property) into a medical student who wants to practice medicine in a developing country than to providing capital for brothels and gambling casinos?
Societies can not provide, as a group is nothing but a mental concept of a bunch of individuals. LIke a forrest is nothing else as a catagory for a bunch of trees. If we say a forrest is emanating oxygen that is just another way of saying each tree belonging to that mental concept forrest emanates oxygen.
Now how can societies provide capital? Individuals can. So to provide capital you have to take it from the owners. If it is done by aggression it is called robbery, or taxation. It does not change anything if the robber can not tell anymore whom he had taken the money from. So if “society provides” capital to the good kid that wants to help the poor people in africa, this capital comes from a criminal act. Robin Hood is still alive and well.