The trading impulse and the Money Power

In attempting to understand The Money Power (TMP), which has dominated humanity for some 4000 years, engendering violence and corruption regardless of what the reigning ideology is (feudalism, capitalism or socialism), I’ve come to the conclusion that it did not arise by itself but rather out of what I call the Trading Impulse (TI), which caused bartering to be superseded in obedience to the conceit of ‘coming out ahead’ in any transaction. This implies that cheating is the basis of trade, the exchange of commodities to exploit differences in market value, as opposed to use value, which is the basis of barter. By ‘buying cheap and selling dear’ one hopes to find a greater fool who will pay more for a good than you did. And what better means to measure this outcome than with money?

The invention of money first provided a medium of exchange between counterparties operating in good faith in a barter system. Money was also a means of storing a good’s use value, which also can fluctuate, but within tighter bounds than market value. But rather quickly, I imagine, it became a commodity in itself, with all the nasty consequences we’ve been seeing.

:smack:This is already getting to be too long-winded for a first posting. But let me state my bottom line: how can we learn to say ‘no’ to TMP?

Good question.

:goes off to achieve enlightenment:

What do you think money IS? What made those shiny lumps of metal stamped with pictures of kings and emperors money?

I agree that many people around the world and throughout history are convinced that if someone makes a profit through trade they can only do so by cheating their customers–if Alex buys a goat from Bob for 3 lumps of metal, and sells it to Charlie for 5 lumps of metal, then he’s either cheated Bob by paying him too little, or cheated Charlie by charing him too much, or both. However, this widespread belief is false.

How do you propose we transfer goods and services to each other?

You’ve made the fundamental mistake of assuming that trade is a zero-sum game, and therefore for one person to get ahead, the other must be exploited.

This is simply not true. Trade generally adds value to both parties, due to the efficiencies of specialization, comparative advantage, and differences in how we value things.

For example, you have two bicycles, and I have two hammers. You can only ride one bicycle, so the other is useless to you. I can only swing one hammer, so the other is useless to me. If we trade a bicycle for a hammer, then we each have a bicycle and a hammer, and we both benefit.

Or let’s say I’m really good at building tables. I can build ten tables a month. But I suck at building chairs, and can only build four a month. You, on the other hand, are a master of chair building, and can build forty a month, but you can only build two tables a month. If I agree to trade two of my tables for ten of your chairs, what happens?

Without trade, after two months I make ten tables and four chairs. You make 40 chairs, and two tables. Aggregate wealth: 12 tables and 44 chairs.

But now I focus on building tables only, and you focus on building chairs only. After two months, we have 20 tables and 80 chairs. I give you 2 tables, and you give me 10 chairs. Now I have 18 tables and 10 chairs, and I’m wealthier by 8 tables and 6 chairs. Was it at your expense? Are you poorer for trading with me? Nope. You’ve now got 2 tables and 70 chairs, and are 30 chairs better off for having traded with me. We both got wealthier.

Why do we have money? Because maybe I don’t need chairs. I need hammers. But the guy who makes hammers doesn’t want a table. So trade doesn’t take place between us, leaving us poorer. Instead, we have to bring intermediaries into the mix. In a barter society, this rapidly becomes unwieldy and inefficient. So we introduce money so that we can abstract the process of trade away from the physical goods. Money allows us to trade more efficiently and it acts as a filter that transmits essential information (price, representing relative supply and demand) while leaving out all the unnecessary details.

Cheating has nothing to do with it. We trade because it is in our interest to do so, and money facilitates trade. That’s all there is to it.

At risk of sounding “snarky”, I get very frustrated in a lot of these sort of discussions. Any topic on the SDMB revolving around business or economics seems to be based on the presumtion that the entire business community is run by corrupt idiots and exists for no other purpose than to rob and loot from the masses.

**In attempting to understand The Money Power (TMP), which has dominated humanity for some 4000 years, **

Al you need to understand about money is that it is simply a means to communicate relative value. It has no inherent value in and of itself, other than it is not easily replicated outside of the Mint or the Bureau of Engraving and Printing.

engendering violence and corruption regardless of what the reigning ideology is (feudalism, capitalism or socialism),

Money does not “engender violence”. Greed, jealousy, resentment, a sense of entitlement, and disparity of wealth engenders violence. Mankind has attempted to resolve these issues in many by creating different types of economic and government systems in order to try to maximimize wealth and production while equitably distributing resources in a fair way. The problem is that people have different access to resources and different skills and abilities. How do you distribute the fruits of their labor without creating disincentives or income disparity?

Feudalism - Tends to benefit a small number of landowners at the expense of a peasent class who are dependent on working the land for their livelihood

Capitalism - Provides more private ownership and allows people to pursue their wants and needs to the best of their ability, but does not ensure that all needs are met. And for some, can become almost feudalistic as people are forced to find a corporation to be their lord and master.

Socialism - Ideally provides equally for all, but creates disincentives to do more than the bare minimum as exceptional performance isn’t rewarded.
** I’ve come to the conclusion that it did not arise by itself but rather out of what I call the Trading Impulse (TI), which caused bartering to be superseded in obedience to the conceit of ‘coming out ahead’ in any transaction.**

I don’t understand what you mean here. Bartering is not substantially different from using currency, other than cash and credit cards are easier to carry than pigs, chickens and beads.
This implies that cheating is the basis of trade, the exchange of commodities to exploit differences in market value, as opposed to use value, which is the basis of barter. By ‘buying cheap and selling dear’ one hopes to find a greater fool who will pay more for a good than you did. And what better means to measure this outcome than with money?

The basis of trade is that each individual has access to different resources, skills and abilities and values them differently. If I raise chickens for a living, they are not as valuable to me, other than in the sense that I can trade my unused chickens for other goods and services (or money). Sure corruption and fraud exist, but much greater information exists which allows people to be more sophisticated when negotiating prices.

The invention of money first provided a medium of exchange between counterparties operating in good faith in a barter system. Money was also a means of storing a good’s use value, which also can fluctuate, but within tighter bounds than market value. But rather quickly, I imagine, it became a commodity in itself, with all the nasty consequences we’ve been seeing.

By “consequences”, I presume you are talking about the current financial crisis. The problem IMHO isn’t that money became a comodity, but that debt became a commodity. There is a school of thought that all money is derived from debt. In a certain sense it is. It is an agreement to provide value. A dollar bill is not fundamentally different from an equivalent gold coin or an entry in your bank account. They just have different amounts of risk associated with them. Where we got into trouble was in creating complex instruments for trading in debt without adequately assessing the risk (defined as the actual likelihood of getting paid back).

**This is already getting to be too long-winded for a first posting. But let me state my bottom line: how can we learn to say ‘no’ to TMP? **

Unless you could somehow live in a completely self-contained manner, you can’t. Another alternative is to work to make markets more efficient so that it becomes much harder to cheat. Of course business constantly look for ways to avoid their products from becoming comodities through specialization.