Eric, Gates does not have $40 billion in money. (He could, but he doesn’t). The $40 billion is merely the estimate for the aggregate market value of his real wealth wich comprises of shares, real estate, property, art, investments, etc. Even you treat the two as completely indistinguishable.
Krugman and socialists are only “focused on money” because money, by definition, is the medium through which real wealth can be aggregated and measured. Socialists would be making the exact same agrument even if land acreage or sheep were used as common measures of wealth instead of money.
After talking a bit with a friend on this topic he suggested that the problem is that many people view things relatively, not absolutely. If you are to guage total quality of life on a scale of 1 to 10 many people will see the poor being at 3 and the rich being at 6 as preferrable to the poor being at 4 and the rich being at 9.
The problem is that it is far easier for someone to compare their situation with others around them than it is to compare their situation with history, or an abstract theory of what things would be like if the world were different. So instead of realizing that a quality of life score of 4 is better than a quality of life score of 3, they instead only see the difference between them and their peers (3 from the top in the first example, 5 from the top in the second example).
So while wealth is not a zero-sum game, that doesn’t matter to people on the left because all they can see is the difference between the rich and the poor, they can’t see any absolute sums at all.
Thanks for the clarification. You’re right that Bill Gates does not possess $40 billion in cash, and I didn’t mean to imply that he did. My point in bringing up the Bill Gates issue was to show that Krugman (a flag-bearing leftist) neglects the real goods and services that patrons of Microsoft got in exchange for the $40 billion they gave to Bill Gates, that he focuses on the monetary value.
Question: Do you see no difference between money and real wealth?
Thanks for your insight. You bring up an interesting point about relativity. Would you agree that the relative view of wealth that the Left seems to maintain is based in the fact that they see it as a zero-sum game? The wealth of others doesn’t matter at all unless it is a zero-sum game, where gains for one necessarily mean losses for others. But when wealth is thought to be zero-sum, then something that someone else has is automatically detrimental to what you have.
I think it’s a combination of the two that leads to the leftist view and that combination strengthens their resolve. If you try to argue that wealth is a non-zero sum game they will fall back on the relativistic view of wealth. If you try to argue about absolute wealth they will fall back on the zero-sum argument. Unfortunately, many people can only deal with one paradigm shift at once and if they feel another paradigm of theirs supports the one being argued they will fall back on it.
This means that in order to convince a leftist that their views are incorrect you need to convince them that both of these paradigms are wrong simultaneously which is no easy task.
Which was my point, too. The patrons could have paid Gates in sheep and bottles of whiskey, and still the socialist would have made his zero-sum-exploitation (and not a positive-sum-exchange) argument. For a socialist, a profit-generating exchange is exploitative regardless of whether the profit is measured in acres of land, sheep, bottles of whiskey, or money.
Assuming – for simplicity of argument – that we’re talking about free market money (and not fiat money as it is created out of thin air and manipulated by a central authority), then the only diference between money and any other property is the fact that, by definition, money is the asset (commodity, property) most commonly used in market exchanges. By its very definition, money is the asset which is most easily exchangeable with (thus transformable into) any other asset (or, as you say, real wealth).
Because of this, money is also the unit of measure and a vehicle through which real wealth can be aggregated/calculated. It is only for simplicity’s sake that the socialist talks about Gates’ $40 billion of wealth as it is too complicated for him to list all of Gates’ (non-cash) assets separately (1000 acres of land, 5 houses, 400 sheep, 200 bottles of single malt scotch, etc.).
I see your point now, thanks for reiterating. And, yes, to some extent leftists see all profit as exploitative, perhaps even in the instance of barter, though I could foresee some more reasonable leftists seeing how barter can be mutually beneficial.
I have to contest your take on money and real wealth. As I understand it, the two are almost completely different (and intentionally so). To begin, money is not useful in itself and therefore can only be useful given a complex network of persons and groups. Real wealth can be used right away. Also, money keeps its value with each use whereas real wealth deteriorates over time. As such, money can be stored and accumulated to a much greater degree than real wealth. And, most importantly, the supply of money is necessarily limited and controllable, whereas real wealth is practically unlimited and uncontrollable.
These distinctions are important because, as it should be clear, one who sees money as wealth is looking at a wildly abstracted world. Wouldn’t you agree that for these reasons money and real wealth are significantly different? Or would you say that these are unimportant factors?
Socialists see all profits as exploitative, regardless of the units by which they are measured. If I could corner a socialist into conceding that an exchange (e.g., as you say, barter) could be mutually beneficial (i.e. non-zero-sum) then I’m couple of short logical steps away from turning him into a capitalist. It’s absurd to claim that I exploit my worker by paying him wages in money, but that bartering his labor for a bottle of whiskey or milk is suddenly mutually beneficial.
I don’t understant the point you’re trying to make. If I exchange a bottle of milk for a bottle of scotch, why does it matter whether I then proceed to use the scotch for drinking or for exchanging it for something else (i.e. use it as “money”)? Or assume a less puritan world in which I am running a respectable whorehouse (Z House) that is frequented by most business owners in my town. I go to the baker and I offer him a coupon for 30mins at my establishment (a ZH coupon) in exchange for 5 loafs of bread. The baker doesn’t even have to particularly enjoy visiting ZH (He’s gay) in order to find such exchange advantageous. He could easily exchange the ZH coupon (ZHC) for dozen candles from the candlestick-maker or for many other products from other businesses. The baker could accumulate a profit of 300 ZHC per year without ever thinking of stepping foot into my Z House. Pretty soon, the whole town is exchanging ZHCs for all sorts of things, making ZHC a de facto currency (money).
Finally, even if money was different from “real wealth”, how is this relevent considering that the former, by definition, can always (and easily) be exchanged for (i.e. transformed into) the latter?
Z.
I’m still not sure that I quite understand the point you’re trying to make.
Socialists see all profits as exploitative, regardless of the units by which they are measured. If I corner a socialist
into conceding that an exchange (e.g., as you say, barter) could be mutually beneficial (i.e. non-zero-sum) then
I’m couple of short logical steps away from turning him into a capitalist. It’s absurd to claim that I exploit my
worker by paying him wages in money, but that bartering his labor for a bottle of whiskey or milk is suddenly
mutually beneficial.
I’m still not sure that I quite understand the point you’re trying to make.
Z: Your example isn’t zero-sum because you keep printing money. If you did a one-time printing of ZHC, distributed them, and never printed again then it would be a zero-sum system. In the real world money isn’t zero-sum, but it is finite and (at least used to be) limited. Wealth on the other hand continues to grow over time, no one can stop the printing of wealth so to speak.
Excellent synopsis. I would add that money is only worth anything if it is fairly limited in its growth potential. Ideally, it is constrained wholly. Otherwise, you have hyperinflation and a currency that is unusable.
So what? Land is finite, too. One’s time on this planet is finite, as well (for now). No one can “print” land either. No can “print” more gold or oil than it can be extracted from the ground. No one can “print” more labor than is available through birth/death rates. No one can “print” more time than the time each of us has before we die. I can’t “print” more ZHC than the 30min time-slots I have available in my scheduler.
The amount of oil could grow faster than the amount of gold. The amount of time we have (lifespan) could grow faster than the amount of oil and scotch. The amount of bread could grow faster than the amount of ZHC. So what? Of course, gold is different from scotch and they are both different from ZHC but as long as they all can be voluntarily exchanged in a free market how are their differences at all relevant to the capitalist/socialist (positive-sum/zero-sum) paradigm being discussed?
The capitalist/socialist paradigm refers to whether voluntary exhanges as acts are positive-sum (mutual benefit) or zero-sum (exploitative). It doesn’t refer to whether the amount of total real wealth (gold, oil, scotch, ZHC, time, labor, etc.) on this planet is fixed or growing.
“Fairly limited”, “constrained” by whom? The free market choses the assets most amenable to being used as money. If tomorrow modern alchemists discovered an easy way to turn any matter into gold, then obviously gold would stop being used as money, but that’s not going to come by decree. The free market would simply adjust by devaluing gold relative to (say) ZHC. Similarly, if a competitor whorehouse (Y House) opened up in town and his owner started issuing his 30min YHC currency, the free market would adjust by devaluing the ZHC currency relative to gold. If a religious puritan wave took over the town, the value of both ZHC and YHC would go down relative to gold.
The only thing that matters is that markets are free and exchanges are voluntary. These are the only necessary things for the magic of positive-sum wealth creation to begin.
You say “If tomorrow modern alchemists discovered an easy way to turn any matter into gold, then obviously gold would stop being used as money”. Why is this so? And is it not to some degree due to the fact that money must be limited and controllable in order for it to be useful as money?
Eric, I ask you again “limited and controllable” by whom? To answer your question, yes, an asset is more likely to be useful as money if market participants have higher certainty (lower uncertainty) about its aggregate quantity going forward. This, however, does not necessitate someone manipulating such uncertainty (quantity) by decree. This is why I repeat that there’s no need to decree a single asset as money, nor to decree that whatever is money today must remain money forever. As with everything else, its best to leave the market to make those decisions instead.
Btw, we veered away from the capitalist/socialist (positive-sum/zero-sum, mutually-beneficial/exploitative) paradigm and I have yet to see how the above discussion about money has anything to do with it.
Limited and controllable by anything or anyone–the main point is that, as you put it, the participants have a high certainty that its aggregate quantity is somehow fixed and controllable. You bring up the notion of decree and the idea that the market should make the decisions of what is to be used for money, and I agree with you on that. But those issues are another topic altogether. I was interested in whether you agreed that as a starting point the quantity of money should be limited.
The reason this is relevant is that the pursuit of any limited and controllable entity (like money) is by nature a zero-sum game. Gain for one is loss for another. When anyone views wealth as money, then they will view the pursuit of wealth as a zero-sum game. It is my argument that the Left tend to view wealth as money, and this is the reason they view the pursuit of wealth as a zero-sum game.
So if I own 2 milliion acres, 500 tons of gold, 54 houses, and 10% share in every business in the planet, BUT have no money in my bank account, the socialist would leave me alone?