Nothing about money or trading or buying or selling or competition or interest or inflation or taxes or … the list goes on and on. None of it makes any sense unless people own stuff. And people own stuff if and only if – in other words, what it is for someone to own something – is 1) for others to have agreed to be excluded from its use save by that someone’s leave, and 2) they can be reasonably counted on to abide by that agreement. Absent that understanding and assurance it’s not ownership, it’s just possession. But possession changes with the alacrity of the weather.

This institution – the institution of ownership – is hard-wrought, millennia in the making, and fragile. It’s fragile because it’s hard to want something and yet not just take it if one can. If this be doubted just watch toddlers in a sandbox. So subscription to the institution of ownership has to be motivated. What’s that motivation? It’s that unless there’s an overwhelming asymmetry of power between the parties, one can’t reap the benefits of looting without also incurring the risk of being looted. But – and this observation is attributable to the character Glaucon at 358e in Plato’s Republic – here’s the kicker. I tend to lose more by your looting what I’ve acquired by my labour than I gain by looting what you have by yours.

This isn’t always the case. And when it’s not the notions of “mine and thine distinct”, as Thomas Hobbes put it, fall away. But because it’s more often than not impossible to perform the requisite calculation, most of us have adopted a second-order disposition to honour the institution of property until the advantages of overriding it in some particular case – think of Pizarro and the Incas – are too compelling to ignore. That’s when we revert to what God designed us for in the first place – namely war. Hence, like so many largely laudable human contrivances – compassion, tolerance, democracy – respect for private property is notoriously fragile.

Of course the institution of property presupposes we’ve agreed on what’s “mine and thine distinct” in the first place. John Locke thought that this exclusion-conferring principle, if we’d but consult it, is embedded in all of us, perhaps by God, according to which what’s mine – and mutatis mutandis what’s yours – is whatever my labour has added value to, provided I leave as good and as much for others to do likewise. I suppose Locke thought that if this be disputed, which it certainly is, well then, “Deep in your heart you know I’m right!” Call this, if you will, the Barry Goldwater manoeuvre.

A more promising proposal, we might allow, is the notion, attributable to Adam Smith, of “To each what he’s most likely to increase.” Why? Because the more there is the more there is to redistribute. Well yes, except that if his increase is just going to be redistributed, one’s not likely to bother increasing it, now is he?

So a more promising proposal, attributable albeit at a stretch to John Rawls, is that we let him keep enough of his increase to motivate him to increase it, but give ourselves leave to redistribute what’s in excess of that. Which, come to think of it, is pretty much the way we do assign what belongs to whom.

Okay, so you grow apples and I build ladders. And so provided that neither am I starving nor have both of our kids fallen down separate wells, those apples are yours and this ladder is mine. Why? Because 1) you’re good at growing apples in much the way that I’m not, 2) I’m good at building ladders in much the way that you’re not, 3) you’ve left land enough on which for me to grow apples were I so inclined and 4) I’ve left lumber enough with which for you to build ladders were you so inclined, and 5) we’re both satisfied with the current distribution of things between us.

That said, it’s true that some people can’t grow apples, or build ladders. Or through either sloth or disability perhaps they can’t do anything. This seems not to have been of concern to either Locke or Smith. But it was of concern to Rawls. So he proposed that we’re all entitled to enough to survive, provided there is enough for us all to survive, and only then do we worry about how to distribute the surplus. Which, come to think of it, is pretty much what we think we’re all entitled to, at least here in the affluent West. So, so far so good.

Now then, I suppose I could have been raised by wolves like Romulus and Remus, and then, having been weaned, I struck out on my own to do as best I could in the wilderness. But let’s be honest; that never happened. Human beings are social animals, precisely because we can’t survive on our own. (Nor can we scratch our own backs. Hence the invention of the hug. But I digress.) More to the point, in living together we’re already trading. We’re trading labour. I’ll make you pancakes if you’ll wash the dishes afterwards. So it wasn’t much of a stretch to go from flapjacks and washing up to apples and ladders.

Throughout human history, including in the kitchen, very few trades are simultaneous. I made you pancakes and then you washed the dishes. But when the second performance is delayed – in exchange for the ladder I only want some of next year’s apples – “he that performs first has no assurance of he who is to perform second.” And so now, at long last, we have … Well, we have something, but what, exactly?

There are some idiots – they even teach in Economics Departments – who think I’ll take an IOU, symbolised by a shell or a round piece of metal or rectangular piece of paper, which I’ll miraculously take to be more reliable than just your word. This is nonsense. If you’re not going to make good on your word, why would you make good on that otherwise-worthless shell or piece of metal or paper?

So what’s needed, if we’re to make sense of the notion of debt, a.k.a. delayed gratification, is something that can approach a guarantee of repayment. I say approach a guarantee because if we’re struck by a planet-killing asteroid, or maybe it’s just an invasion from Mars, I’m probably not going to get my apples. So what do you suppose is going to provide me the level of assurance I’d need to be willing to forfeit that ladder for some future consideration?

There are other idiots – they too teach in Econ Departments – who think it didn’t start off as an otherwise-worthless piece of metal or paper. It started off as a sack of salt, or a piece of metal that was useful for, say, making jewellery, or perhaps for filling a cavity. I took the salt or silver or gold because, even though I personally have no use for these things, I hoped there’d be enough people who do that I could trade the salt or silver or gold you’d given me for something I do have a use for, including, for that matter, some of next year’s apples.

This makes perfect sense, except we’d need to know how the apple grower came into possession of the salt or silver or gold in the first place. Well, you might say, the same way I did. Only instead of ladders it was apples. But this just begs the question. Whoever bought your apples with the salt or silver or gold you’re now giving me, how did he get the salt or silver or gold he gave you? Push the question as far back as you like, the question remains.

To which the answer might be that someone mined the salt or silver or gold the same way you grew your apples, namely by the sweat of his brow. Well, not quite, says the Econ prof. What probably happened is that someone – call him the emperor – traded the miner’s life for the sweat of his brow. A fair trade? Certainly if he values his life, which slaves seem to do, since otherwise there wouldn’t be any slaves. So, one might then ask, since the emperor had the means to offer the slave his life for his labour, why not just do likewise for your apples?

And therein lies the Econ profs’ first mistake. He thinks his discipline takes off only after the threat of violence has miraculously been removed. But it can’t be removed. Human beings are animals. Animals compete for resources. Which, in the case of emperors, translates to territory. Thus “when two men [sic] desire the same thing which nonetheless they cannot both enjoy, they become enemies. And to this end, which is principally their conservation, but sometimes their delectation only, they endeavour to destroy or subdue one another.”

The economics of destruction is the bailiwick of military science. And no, a military campaign is not a zero-sum game. Killing consumes resources that could be assigned to more productive ends. Think of the manpower the Nazis squandered on exterminating the Jews, manpower that could have been reassigned to the Russian front. Plus more often than not – though not in the case just noted – attempting to kill others places oneself in danger of being killed. Think of how the Rwandan genocide backfired on the Hutu. So though the no-holds-barrred extermination of the enemy is sometimes the most reasonable strategy, more often than not the better option is to subdue him.

The economics of ‘subduction’, in turn, is called slavery. Or, under what Karl Marx calls capitalism, wage slavery. Are the two, slavery and wages, rendered distinct by the removal of the threat of violence? Not if, as just argued, that threat can never be removed. Not if we only allow that threat – and we allow this only at our peril – to disappear. And on this point, no, I do not digress. An interrogator can swear he’d never use violence to elicit a confession, but if he has you in his power that threat remains on the table.

So what determines one’s wages – including whether one will settle, as does the slave, for nothing more than food and shelter – is not just the availability of labour and labour’s alternative sources of sustenance and delectation, the so-called law of supply and demand. It’s also whether one could lose access to alternative sources of sustenance and delectation. For example, if Canada outprices the oil it sends south, the 49th Parallel won’t stop a less-than-diplomatic ‘correction’ to that price. So it’s that the 49th Parallel won’t stop such a correction which keeps the price of that oil to what the Americans are happy to pay. So though in cosmology it’s turtles all the way down, in economics the bottom turtle is a tank. (Even now in my dotage, every once in a while a sentence spills out of my fingers that lets me know I still have it. I think that was one of these.)

Now then, over time, or so the theory goes, a pound of sterling, which weighs, well, a pound, was replaced with a piece of paper, weighing hardly anything at all, announcing itself as a pound sterling, redeemable, on the authority of the king, for … For a pound of sterling? Certainly not. For what must have been at one time a pound of sterling? Probably not. In fact a pound sterling stands in no relation at all to a pound of sterling. So in relation to what does it stand? In relation to how many apples one can be reasonably confident it could be exchanged for. Or how many one could be reasonably confident would be needed to be exchanged for a ladder.

A horse is not a symbol of a horse. A horse just is a horse. A symbol has to symbolise something that it’s not. But a pound sterling just is a pound sterling, in just the way a horse just is a horse. What makes a pound sterling a pound sterling is precisely mutatis mutandis what makes a horse a horse. Each does what it does. A horse can carry a rider. A pound sterling can be exchanged for apples. Or a number of them for a ladder.

Is a pound sterling, as some Econ profs insist, a medium of exchange? A medium mediates. In what sense – between what two things – does a pound sterling mediate that a horse does not? In no sense. Between no two things. This is what comes of thinking that if you don’t understand something it must be terribly profound. But I digress.

That a pound sterling is what it does, and that it does what it does quite independently of anyone authorising it to do what it does, is all one needs to know about a pound sterling, because it’s all there is to know about a pound sterling. The value of a pound sterling, if any, is the value to the holder of it of what he can reasonably hope to exchange it for. If there’s nothing of value to him he can reasonably hope to exchange it for, then it has no value to him. Hence the expression that money can’t buy you love. Likewise since he that wants for nothing wants nothing, for him a pound sterling truly is a worthless piece of paper. And likewise is it worthless if, like Mr. Howell on Gilligan’s Island, there’s nothing he might want that he can exchange it for, because there’s nothing on the island to be had.

In fact unlike a pound sterling, Gilligan’s Island is a symbol. It’s a symbol of how we’ve taken assets as a metonym for wealth. Wealth, as the word suggests, is a measure of wellbeing. But an asset contributes nothing to one’s wellbeing until it’s exchanged for some object of consumption, and at that consumption that contributes to his wellbeing. An nth house that’s never lived in, an nth car that’s never driven, an nth TV that’s never watched … these make a billionaire no wealthier than a pauper. What they do do, however, is render n-1 houses, n-1 cars, and n-1 TVs inaccessible to people for whom these things would contribute to their wellbeing. And that, it seems to me, is a legitimate complaint against this kind of appetitiveness.

What’s not a legitimate complaint is the appetitive accumulation of assets. Why? Because these assets are not sitting empty on a tropical promontory, or idle in a garage. They’re out in the world, covering your mortgage. The idea that Scrooge McDuck keeps his billions in a secret silo somewhere is to armchair economics what kindergarten Christianity is to Christianity. If this be doubted, imagine that he does keep his billions in a secret silo somewhere, he’s kept it there for half a century, and has no intention of ever letting a single pound sterling of those billions out of that silo. How would we know that all these pounds sterling were sitting idle in that silo? And what would be the effect on the economy if we did? And if we did, would we even think of them as pounds sterling? We would not. And we’d be right. Because a horse that doesn’t do what a horse does is not a horse.

So money is not a promissory note because a promise requires there be someone under an obligation to fulfil it. But there isn’t. What there is, and all there is, is the hope that someone will exchange my piece of paper for something I want that is not just another piece of paper. But that hope, in turn, rests on his hope that someone else will hope that someone else will hope … and so on. But all of this can unravel. It can unravel if, like on Gilligan’s Island, there’s nothing to be had. Or there’s very little to be had. Or there’s too many people wanting what little there is to be had. Or …

There! Eleven minutes, as promised. Tomorrow, if I’m up to it, I’ll be offering my seventeen minute course in Advanced Economics. So as they say, watch this space!

Categories: Everything You Wanted to Know About What's Going On in the World But Were Afraid to Ask, Social and Political Philosophy, Why My Colleagues Are Idiots

Tags: Adam Smith, economics, Gilligan's Island, john locke, John Rawls, Karl Marx, military science, philosophy, Plato's Republic, Thomas Hobbes