Money as a "Crusoe Concept"

[syrakusos]

Money as a Crusoe Concept

© Copyright 2005 by Michael E. Marotta

http://groups.yahoo.com/group/molinari-institute/message/202

(These comments came from a series of posts I made about money to www.solohq.com)

Objectivists recognize that alone on an island, Robinson Crusoe needs morality. Morality is not a social convention, but a condition required of any volitional being. Similarly, alone, on an island, Robinson Crusoe would need money. Money is (1) a store of value and (2) a unit of account as well as (3) a medium of exchange.

Money's first attribute is its being a store of value. That is what allows money to be a unit of account and a medium of exchange. On his island -- in the Defore story, actually -- Crusoe's primary money was food. If he could store food, his labor could be invested. When he discovered that he had accidentally sowed wheat which "took" he was overjoyed. (Historically, in fact, wheat (not gold or silver or even cows) was the first form of money.) In other times and places, stone arrowheads -- which require significant effort -- would be a form of "money" not for trade -- there is little evidence of that -- but as a store of labor for the individual who makes it.

It is also possible to "exchange" with yourself across time. You fish today and catch more than you need. Some you can dry. The chum you can bury to improve the soil into which you will plant your wheat later. Thus, in planning and carrying out plans, you effect economic trade with yourself across time.

Planting today means that you harvest tomorrow. Should you plant? Build a fire -- and tend it? Catch fish? Look for coconuts? What you do on an island is determined by how you value your time and the return on it. You need bookkeeping of some sort and that means that you must have a unit of account. You must have "money" if only as a conceptual construct: youi might not have "coins" but you need some way to count and account.

Even Ricardo's Law of Association applies because if you are going to undertake any complex task, then it is more efficient to break that down into repetitive actions, rather than carrying out the entire process in sequence. Sawing boards, drilling holes, braiding twine, etc., each should be done as a distinct task rather than sawing a board, drilling a hole, braiding a rope, and then drilling the next hole, and after four, going back and sawing the next board, and so on.

The laws of reality are not social conventions.

You pay for entertainment because it improves your self-experience. In suggesting ways to lose weight, Durk Pearson once said on the Merv Griffin show that a person could get rid of all the food in the house and buy a 50-lb bag of Purina Monkey Chow. It would be nutritious, but tasteless. That is sort of like the old joke where the doctor tells the patient to give up smoking, drinking, and sex. "Will I live longer?" the patient asks. "No," replies the doctor, "but it will seem longer." The point is that when Objectivists say that "life" is the "goal" of "living" it is unstated -- and unfortunately unexplored in great detail -- that by "life" they really mean "self-experience." In fact, the need (and it is a need) to avoid boredom is the limitation on Ricardo's Law of Association: given a choice, people will perform inefficient tasks rather than suffer boredom. That does not contradict anything in the nature of money but only helps to define the purpose of money.

1. Money is a tool for quantifying choices. Money is a tool for calculating morality. Alone on an island, you do not need to keep a stack of coins and a counting board (checker board), but you do need a "unit of account" and a bookkeeping system of some kind, however "intuitive" it might be. (The more focused and rational your accounting, the better for you.) There are many kinds of money and almost anything can be money. Robinson Crusoe might put most of his calculations in terms of wheat and still quantifiably value "progress toward the completion of a boat. " The common denominator might be hours, the one thing he has the most control over. Whatever conceptual tools Crusoe uses to quantify his choices, those tools are his moneys.
   
2. Money has social uses. So does language. We learn language socially, but the primary purpose of language is to think. Language is an individual skill. Alone on an island, Crusoe would need language. We learn to use money socially. Alone on an island, Robinson Crusoe would need money.
   
3. As a cognitive tool, money enabled a new kind of abstract thinking in ways not found in nature. The works of Denise Schmandt-Besserat on the origin of writing demonstrate that literacy and numeracy were invented together, with number driving the process. The earliest writings are inventories and promises to deliver goods. Like language, we learn numeracy in a social context, but like literacy, the primary purpose of numeracy is to empower individual thought.
   

The use of the checker board and jeton accounting in the European middle ages had everything to do with money and little to do with trade. Bookkeeping --especially double entry bookkeeping -- is another example of a personal tool in support of cognition that later developed into socially powerful expressions that we call "money of account" (dollars, euros, etc.). The purpose of bookkeeping is not to enable taxation or to establish the evaluation of a company in a stock market. Similarly, the purpose of money is not to make it easier to Persons A, B, C, and D to make a round swap of apples for eggs for wool for fish, though money does have great utlitiy for that.

Money has to be storable over time. Iron has greater utility than gold, but it rusts away if you let it. Gold does not have that problem. In order to be traded, money must be durable to some degree. In other words, it must be a store of value.

In terms of Crusoe, money starts as a store of value. It also allows Crusoe to account. Money even lets him trade with himself.

The simple fact is that von Mises and Menger were wrong about the origins of money.

Ritual exchange is most likely the historic origin of money. Such ritual had nothing to do with division of labor.

The first division of labor societies of Mesopotamia were theocratic slavery societies in which some people performed no useful labor but were fed from the common store. That practice widened into customary promises made for the future. (Again, I recommend Denise Schmandt-Besserat's work the origin of writing.)

This division of labor exchange of durable money seems rapid to us. The span I am talking about is about 2000 years. That is not rapid. Therefore, when we talk about the historical origin of money, we are still far from the mark if we follow von Mises.

However, if we consider the "ontology of money" then consistent Austrianism demands that we accept money as a Crusoe concept, rather than as a social construct.

Edited January 10, 2008 by Michael E. Marotta

[tjohnson]

Interesting, bit I would say besides a store of value money represents TIME, in particular, time invested by you or others adding value of some sort. In other words, the expression 'time is money" should be reversed to "money is time". I first read about this view in Korzybski's work.

[BaalChatzaf]

Money as a Crusoe Concept

© Copyright 2005 by Michael E. Marotta

http://groups.yahoo.com/group/molinari-institute/message/202

(These comments came from a series of posts I made about money to www.solohq.com)

Objectivists recognize that alone on an island, Robinson Crusoe needs morality. Morality is not a social convention, but a condition required of any volitional being. Similarly, alone, on an island, Robinson Crusoe would need money. Money is (1) a store of value and (2) a unit of account as well as (3) a medium of exchange.

What R.C. needs is the determination to survive and the wits to pay attention to his surroundings so he can survive.

I do not see morality here. Choosing to survive or not choosing to survive is simply the choice between alternatives. Like choosing vanilla ice cream for desert or not. No second party can be wronged by the choice so it is not a moral or an ethical matter. Since we own ourselves (or at least we possess ourselves) and we are free to dispose of our time and energy as we see fit, we cannot wrong ourselves except by making mistakes. In which case it is no more a moral issue than getting an arithmetic sum wrong.

Identifying alternatives and choosing among them is not, per se, a moral or ethical matter, particularly in isolation.

Bob Kolker

Edited January 10, 2008 by BaalChatzaf

[Dragonfly]

What R.C. needs is the determination to survive and the wits to pay attention to his surroundings so he can survive.

I do not see morality here. Choosing to survive or not choosing to survive is simply the choice between alternatives. Like choosing vanilla ice cream for desert or not. No second party can be wronged by the choice so it is not a moral or an ethical matter. Since we own ourselves (or at least we possess ourselves) and we are free to dispose of our time and energy as we see fit, we cannot wrong ourselves except by making mistakes. In which case it is no more a moral issue than getting an arithmetic sum wrong.

Identifying alternatives and choosing among them is not, per se, a moral or ethical matter, particularly in isolation.

Bob Kolker

I completely agree with Bob. And a big font is no substitute for a good argument.

[syrakusos]

... money represents TIME... I first read about this view in Korzybski's work.

Thanks for the reminder. If Korzybski first announced this insight then we all owe him a large debt. It is an accepted article of fact that time is money. For some Objectivists, theft is analogous to attempted murder because it takes the time of your life to produce that which was stolen. This idea shows up often in Rand's works, so often, that I glossed over it and went with value. I wasn't thinking. "Value" is that which you wish to gain and/or keep, and it is also a tenet that values must be produced. As I formalize this paper, I will devote the required time to develop better that money is store of your time.

[syrakusos]

... Like choosing vanilla ice cream for desert or not. ... Identifying alternatives and choosing among them is not, per se, a moral or ethical matter, particularly in isolation.

Well, you have said more than once that you are not an Objectivist, so I am not surpised that you do not see this. In several classes, when I said this, my classmates and professors disagreed, as you did. Being limited by their mystical ideas, altruistic ethics and collectivist politics, they have very weak senses of self. Constantly bombarded with the message that selfishness is bad, that reason is not enough, that the senses deceive us, that reality is a social construct, they cannot imagine that choice is the sine qua non of humanity, and that all choices are moral choices... except, as you (and Nathaniel Branden) note, the choice of vanilla for dessert. Though some choices are ethically inconsequential, the fact of choice is essential to morality.

I have been reading some philosophers on ethical egoism. They are flummoxed by the "problem" that someone who acts in their own self-interest may not be acting "morally." They assume altruism and try to reconcile egoism to it. They never get to the question that Ayn Rand asked explicity: what are values and why do you need them? "The purpose of morality to define man's proper values and interests." (VOS, Intro). If you have not read "The Objectivist Ethics" in The Virtue of Selfishness, then it will be hard for us to be on the same wavelength here. Rand's focus was explicitly on those proper values. As she pointed out that a robber acts in his "interest" is not what makes him immoral: it is what he makes his interest that defines him so -- and the answer is not that he "hurts other people" (though there is that), but that he cannot live without victims, he cannot live by his own effort, but must have others around him. Further, he engages them in violation of their choice -- assuming they prefer not to be robbed. That is the secondary evil, but it derives from the first.

You mentioned arithmetic. In one passage of Atlas Shrugged, Rand waxes poetic about the morality inherent in the geometrical patterns of steel mill structures, each one of which was placed in answer to a single question: "right or wrong?"

The purpose of morality is to enhance your life. Alone on an island, every choice you make is moral choice with life-and-death consequences. If you found that you could ferment fruits and get drunk and then did so even beyond some most minimal level, you would be committing suicide. Watch Zemeckis film Cast Away starring Tom Hanks. It rains every day and he is always thirsty ... until he solves the problem. Every action is the result of an answer to a single question: Right or wrong?

[BaalChatzaf]

The purpose of morality is to enhance your life. Alone on an island, every choice you make is moral choice with life-and-death consequences. If you found that you could ferment fruits and get drunk and then did so even beyond some most minimal level, you would be committing suicide. Watch Zemeckis film Cast Away starring Tom Hanks. It rains every day and he is always thirsty ... until he solves the problem. Every action is the result of an answer to a single question: Right or wrong?

Right or Wrong. That confuses moral correctness with arithmetical accuracy and I claim Right and Wrong have to be qualified here. Right or Wrong is what regard? If one makes a mistake, how is that a moral breach. That would imply we ought to be infallible which we not only are not, but furthermore, we can never be. Humans are error prone. Then there is the Wrong of denying another his rights or interfering with his property or threatening or taking his life. That is not the same kind of Wrong as making an arithmetic error. Arithmetic errors, once pointed out can be corrected. Furthermore if one is not acting in a fiduciary capacity, failure to maintain accuracy is not actionable. If you can't or won't do you own sums correctly, you will experience inconvenience or even death, as in incorrectly reckoning one's course while flying a plane. If you are sloppy while being someone's accountant you can be sued or de-certified. If you do bad arithmetic deliberately (this is fraud) on someone else's behalf you can suffer legal action including being sued, paying damages and even going to jail Right or Wrong? In what situation?

The principle you state is the Aristotelean approach to morality as set out in -Nichomachean Ethics-. The Ultimate Good is Eudaimonia (translated as Happiness or Fullfillment or Flourishing, the achievement of human completion). The ways to achieve the Ultimate Good are the Virtues (which ought to be translated as Excellences --- Gr. araite). In short, Aristotelean Ethics is -virtue based- from the git-go. One might think that is totally consistent with being a first class human on a desert island. Except for one thing: Aristotle tells us that the proper science leading to correct ethical behavior (now get this!) is Politics which is about as social as sciences get!. Aristotle is right to this extent; desert island existence is not only not NORMAL, it virtually never happens. It is largely a theoretical possibility.

I have pointed out that survival is not necessarily an ethical matter. Survival is more a matter of (1) determining to survive (this is an option, not a duty) and (2) seeking those means to promote the end of survival, which includes paying attention to ones situation, using reason, identifying things correctly, etc. etc.). Since living, surviving is NOT a duty, but a choice I fail to see how morality applies. It is purely optional behavior. To be or not to be, that is the question. It is a matter of choosing to be or not to be. I fail to see how this differs in kind from choosing a menu item, other than the fact that the choice is irreversible. If one chooses to die or chooses not to stay alive the consequences are quite final. Is it the finality of the choice that is supposed to make it a moral-type choice?

Bottom line: we have NO DUTY to flourish. We don't even have a DUTY to survive. We have options and choices, but no DUTIES in the matter. Are we FORBIDDEN to fail? No we are not. FORBIDDEN by who or what? Do we OWE ourselves a best effort to lives as human beings. We do NOT. Most of us desire to live as human beings (rational and reasonable) but that desire is an option and following through with it is a choice. In general there is no Commandment given by a God or Nature to flourish. Nature does not care if we live or die, flourish or not flourish. Only we personally care, or our friends or family or even our enemies. We live in a universe that is not against us, but indifferent to us. To be or not to be. Right or Wrong. That is our problem, not Nature's.

Here is a rock bottom fact: one cannot derive morality (either Aristotelean morality or socially defined morality) from physical laws. Aristotle sees virtue based morality (the kind that matches your overgeneralized Right or Wrong criterion) in political terms and if that ain't social I know not what social means. Yes we do have a choice to be or not to be, if being is physically possible, but we have no obligation to be even when being is possible. Morality cannot be derived from facts. The fact that if you jump off a high cliff or building without a parachute you will almost certainly die as a result is NOT a commandment not to jump. Death is a physical consequence of jumping. If one were to take you p.o.v. to its logical conclusion, then one would consider suicide Wrong. Suicide is neither Right nor Wrong. It is an option. It so happens most people would rather not exercise that option, but not all.

Nature provides us constraints and possibilities. We do the choosing. The only time choice equates to Right or Wrong is whether the means fit the ends. If the end is given then resorting to an action that will to produce the end is operationally incorrect. It is a counter-productive move. Is there any ultimate end that is Right. I don't see one. Do you? What is it? It can't be living, because staying alive (when life is physically possible) is pure option. If someone is careless with his life or throws it away the most you can say is - I wouldn't do that. In short, that is not a choice you would make.

Ba'al Chatzaf

[syrakusos]

Your confession of faith shows that you are deeply committed to your beliefs.

[Wolf DeVoon]

No second party can be wronged by the choice so it is not a moral or an ethical matter.

Well, now you've heard it from the collectivist-materialist horse's mouth, contradicting my position concisely and clearly. He says ethics ariise only in relation to others. I say ethics pertain exclusively to individuals, not to groups or our relations with others.

Robinson Crusoe needed values: reason, purpose, self-esteem; and plenty of virtues: integrity, rationality, honesty, productiveness, etc.

W.

[BaalChatzaf]

No second party can be wronged by the choice so it is not a moral or an ethical matter.

Well, now you've heard it from the collectivist-materialist horse's mouth, contradicting my position concisely and clearly. He says ethics ariise only in relation to others. I say ethics pertain exclusively to individuals, not to groups or our relations with others.

Robinson Crusoe needed values: reason, purpose, self-esteem; and plenty of virtues: integrity, rationality, honesty, productiveness, etc.

W.

I resent that. I am NOT a collectivst. In fact I am an anti-collectivist. I am however a materialist and a physicalist down to the molecular level. I believe that everything that exists is physical.

Robinson C. needed his wits and a determination to use them in order to survive. What does this have to do with morality and righteous behavior? R.C. made a choice. He decided to survive. He could also have decided not to survive. Neither choice has any moral import since it involved only him. Purpose, self-esteem and any other virtue you care to name are alternatives and one can choose to exercise or pursue them or not. It is no different in kind than choosing what, if anything, to have for dinner. A choice is a choice.

By the way R.C. did not need self esteem to try to survive. He could have been scared shitless of dying. That is motivation enough.

If I understand your position, then to be logically consistent you must object to suicide on principle. Is that correct?

Individuals have choices. How they exercise them in company IS a moral question. Why? Because we have no right to damage others except as a matter of self defense. It is impossible to do evil to one's self. One can damage one's self. One can benefit one's self. In isolation, none of these choices have any moral import whatsoever. In company one's actions can wrongfully damage another. That is a moral issue.

I suppose you consider people who abide by the law and fear punishment as collectivists. Is that correct?

Ba'al Chatzaf

[BaalChatzaf]

Your confession of faith shows that you are deeply committed to your beliefs.

We are all committed to our beliefs. That is why our beliefs are partial guides to our actions.

To answer you previous post about Right or Wrong wherein you overgeneralize Right/Wrong as though it had only one meaning. Not so.

Right/Wrong can either equal Righteous/Wicked or it can equal Correct/Incorrect (as in doing an arithmetical sum). These are at least two distinct meanings of Right and Wrong. The first has to do with moral judgment. The second has to do with conformance to some kind of a rule, standard or fact. My arithmetic can be Correct or Incorrect. It cannot be Righteous or Wicked. When I do arithmetic I am functioning in a mechanical sort of way. There is not moral quality there at all.

I use the terms Right and Wrong in situations where I am matching up a means with an end. The question I ask is: will the means achieve the end. If yes, it is the Right Means, if no it is the Wrong Means. That conforms to the Correct/Incorrect interpretation of Right/Wrong.

At a formal dinner it is possible to use the "wrong" utensil to eat your food. This is not an ethical issue. It is issue of conformity to custom. Do you see a moral issue there? I sure do not.

Ba'al Chatzaf

Edited January 11, 2008 by BaalChatzaf

[Dragonfly]

Well said, Ba'al.

[Wolf DeVoon]

I resent that. I am NOT a collectivst.

Huh? What happened to mass murdering the Muslims and their innocent children?

[BaalChatzaf]

I resent that. I am NOT a collectivst.

Huh? What happened to mass murdering the Muslims and their innocent children?

Self defense. The children are collateral damage. C'est dommage. One of the infelicities of modern warfare.

I have three simple rules.

1. Kill your enemies and god damn the collateral damage in doing so.

2. Cherish your friends and protect them.

3. Be polite the neutrals if it is practical to be so.

That has everything to do with protecting MY Precious Body and the bodies of MY family. It does not get more selfish and individualistic than that.

A million allied lives were saved by killing hundreds of thousands of women and children in Hiroshima and Nagasaki. It that is what it takes to survive then so be it. A torch to the enemy and screw the side effects.

Ba'al Chatzaf

[Wolf DeVoon]

That has everything to do with protecting MY Precious Body and the bodies of MY family.

How big is that extended family of yours? You're going to kill a billion people to protect six or seven loved ones in Joisey?

BTW, an interesting article in Newsweek about fearmongering (courtesy Past Peak)

Edited January 12, 2008 by Wolf DeVoon

[syrakusos]

... all of which brings us back to a few points that Leonard Peikoff made about objectivism on the web...

This was a discussion about Money. Then, the topic was hijacked.

"Money as a Crusoe Concept" was

1. patently obvious

2. clearly beneath contempt

3. too difficult to understand

4. something else.

[BaalChatzaf]

... all of which brings us back to a few points that Leonard Peikoff made about objectivism on the web...

This was a discussion about Money. Then, the topic was hijacked.

"Money as a Crusoe Concept" was

1. patently obvious

2. clearly beneath contempt

3. too difficult to understand

4. something else.

I think Rand said as much about Money as need be said. I cannot find a flaw in her peroration on Money.

Given that humans have specialized labor and traded since God invented dirt, it was inevitable that a nearly universal trade good would be found to mitigate the combinatorics of bartering. Without money a society would have several dozen goods and services up for trade. With money we have several dozen thousand goods and services up for trade.

Let's hear it for gold or some operational equivalent.

Ba'al Chatzaf

[Wolf DeVoon]

This was a discussion about Money. Then, the topic was hijacked.

Not to quibble, but you raised the subject of morality, right?

Objectivists recognize that alone on an island, Robinson Crusoe needs morality. Morality is not a social convention...

About the meaning of money, I think we should discard store of value. Francisco had the right idea when he spoke about expectations, trusting that other men will continue to produce and accept 'money tokens' in trade for their ingenuity, labor, and surplus output. But the world has evolved considerably (one could say fantastically or bizarrely) since 1957. Most money today is bank credit and leveraged 'investment' paper. I'm not talking about Federal Reserve notes or gold. I mean privately-issued paper that only remotely refers to real goods or real unencumbered capital assets.

W.

[syrakusos]

I think we should discard store of value. ... Most money today is bank credit and leveraged 'investment' paper. ...

I agree that there are many kinds of money. In my essay "What is the Root of Money" for the MSNS MichMatist, appearing here in the "50th Anniversary Essay" topic under Objectivism/Objectivism, I point out that a Visa Card is a better way to spend money. Elsewhere I point to "degree cooling days" a new derivative that is money, one of about a dozen or more that the Federal Reserve has identified but has no models for. Almost ten years ago, in a Loompanics essay that was chosen by the State of Kansas for its high school literacy test, I acknowledged the superiority of electronic transfers ("The Future of Money"). In an economics class last year, I presented a term paper on why M-zero (coins and banknotes) is no longer a useful measure. The Fed itself dropped M3 entirely and has questioned M2. Yet, of course, credit cards are not "money" even though you can monetize the debt many ways, among them to buy a cash gift card with your credit card: the person who gets it gets a form of money, effectively. My first publications in numismatics (1992) were specifically about tokens, "good fors" that monetize beer. As a numismatist and an Objectivist, I have been on this problem for about 15 years. So, I am aware of all that and more.

That said, my investigation into Crusoe's problems are a search to derive "money" from individual human action. As long as money is a social convention, then those who control society might as well control money on the same theory that they control the speed limits and the drinking age. If you, as an isolated individual need money on the same basis that you need morality, to assure your own life, then money begins with you. Given that, if two such individuals meet, and wish to trade, they must establish some agreement between them, even as they have the right to their own personal choices.

Acknowledging the wider consideration, nominal Austrians cite the classic three uses of money: medium of exchange, store of value, unit of account. However, as I said elsewhere, those three have been decoupled. Here and now in our world, we spend FRNs, save a wide range (gold, etc.), trade a wider range (the derivatives you and I like), and yet, you can keep your books in some third medium. I know of multinationals (ABB for sure, if I am not wrong, but others, too) that keep their books in dollars, even though they are not "American" companies. I worked for Securitas, which keeps its books in Swedish Kroner (anachronistically enough) even though (perhaps because) it has businesses in 30 nations, and even though American markets eclipse all the others. So, your unit of account does not need to be your store of value or medium of exchange.

Again, by analogy, what is the origin of language? Your mother taught you language even before you were born. You grew up with it in a social context. Alone on an island, would Robinson Crusoe need language? For the epistemological individualist, the primary purpose of language is to think. Secondarily, we use language to communicate. Language needs an individualist foundation, lest we be controlled by the socialists who say that words have no meaning or any meaning... or any meaning they give them...

How do you prove the Pythagorean Theorem? You do not measure a million triangles -- even though that is how it started -- you reason from first principles. So, too, with money as a Crusoe Concept.

Edited January 13, 2008 by Michael E. Marotta