Thursday, October 06, 2016

What Is The Root Of Money?

Margaret Thatcher said that the problem with socialism is that eventually you run out of other people's money.

She failed to ask the question that another great capitalist supporter Ayn Rand asked: What is the root of money?

Most of what business sells comes from science. Without science, capitalism would be nothing more than exchange of basic commodities at the level it was in Medieval Persia. What this means is that the money is owed in at least as great – if not greater – extent to science as it is owed to business.

It is also owed to teachers who educate both the businessman and the worker; the military and the police who protect national borders and enforce property rights; and of course the worker.

There were many places that had the market system. Most of them were poor. The reason that we are more prosperous than Medieval Persia or Tsarist Russia, which likewise had market system, is technology; and technology comes from science.

So when Margaret Thatcher talked about other people's money, she was confused as to what was the source of other people's money. Business had a role in it – a large role - but in no way did it begin to deserve full credit. Scientists, teachers and many others had a vast role in it as well. As of course did the workers, union or non union. As did the military, the police and any number of others. At that time, nobody knew how to deal with her arguments. I do.

This brings me to a related subject – that of responsibility. Just about everyone speaks in favor of responsibility; but they have different ideas as to what responsibility is. Some – such as many in business - think that responsibility is about being financially well off. Others – such as scientists, teachers, military and others – think that responsibility is about contributing to, or serving, the country or the civilization. I have of course heard it from all sides, including that of Ayn Rand.

When the only form of responsibility that is encouraged is what some call personal responsibility, or financial self-interest, we will see all sorts of negative effects. Everyone will want to become a yuppie; nobody will want to become teachers, scientists, police, military, or social workers. These professions do not make very much money, and if responsibility is defined solely as monetary self-interest then very few people will go into these professions. This will starve the country of a lot of what it needs. I've been a yuppie myself, and I did not find the other yuppies I knew to be more responsible than scientists or teachers I've known. They made more money; but the money that they made came from the work of scientists, and the reason that they could be yuppies was owed to their teachers and college professors. Likewise the fact that they could do business at all was also owed to the police that protected their property rights and the military that protected their country.

Now to someone who defines responsibility as monetary self-interest, teachers and scientists would be considered irresponsible. Many of them would be seen as losers. And yet these people's work is vastly important, even to business; and without them there would be no prosperity, even to the businessman himself.

In the people who equate responsibility with monetary self-interest, we see all sorts of other irresponsible behaviors. We see people poisoning the oceans and the air. We see people burning the rainforest and destroying great treasures that they cannot conceivably recreate. We see people forcing reliance on destructive technologies while standing in the way of progress toward better technologies. Some of them genuinely think that they are being responsible. They are not.

Who is more responsible: Yuppies or scientists? I've had extensive interactions with both. Both claimed to be practicing responsibility; but they had different ideas as to what responsibility meant. One saw responsibility as being well-off financially, and the other saw responsibility as contributing to the civilization. I see a room for both concepts of responsibility, as I do for both business and science. Yuppies need scientists, teachers, military, police and many others. Scientists need funding.

I am in no way against business. I am however against ignorance, and claiming business to be the sole root of prosperity is ignorance. Prosperity is owed to an equal – or greater – extent to science. It is also owed to teachers, military, police, workers, and many others. To claim that business is the only root of money is ignorance. And ignorance does not qualify as responsibility by any definition.

I, myself, am not ignorant of these issues at all. I have an economics degree from a conservative American university. I use concepts from classical economics for all sorts of things, including on issues on which nobody uses it, such as gender relations. I have found classical economics incomplete on three fronts. One, as I have been saying, prosperity is owed as much to science as it is owed to business. Secondly, most consumption decisions are not based on rational interest but on psychology. Finally, the market does not inevitably select for the best product, and there are many situations in which an inferior product rises to market dominance through a superior marketing or business strategy.

Do we throw out classical economics or militate against capitalism? Not by any means at all. We correct the errors in their claims. We also correct what is obviously an incomplete definition of what is responsibility. A good teacher or scientist is at least as responsible as any yuppie and most businessmen; and if the only idea of responsibility that is encouraged is “personal responsibility” then the country will be starved of such people, resulting in many negative effects to business itself.

A responsible person would not be poisoning the planet, nor would he be defunding the academia and gutting education. Unfortunately the Reagan conservatives have done all of the above. I do not meet them with Communism or socialism; I meet them with the logical implications of what they themselves claim to be their values. If you value responsibility, you would not be doing things that are irresponsible, such as poisoning the planet. If you have family values or Christian values, you would not be leaving behind for your children a worse world than you have found. And if you value honesty and integrity, you would not be telling people a pack of lies.

Now I've known any number of businessmen – liberal and conservative – and in many cases I liked what I saw. But I also liked what I saw in scientists and teachers and social workers, in any number of laborers, and even in some in the military and the police. I see neither one as being superior or inferior to the other, nor do I see either's definition of responsibility as totally wrong. I see a room for both definitions of responsibility. As much as I do for both business and science.

So that while it may very well be valid to stand in defense of capitalism, let's not forget who actually deserves credit for prosperity. Business has a role in it, but in no way is it the only role. Prosperity also owes greatly to science, as well as to any number of other pursuits. Equating responsibility proper with financial self-interest disincentivizes professions that do not make much money but are vastly important. And that hurts the country and business itself.


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