Money and Ayn Rand

     Ayn Rand and her followers worship money. But on money, her notions are such a muddled mix of insight and delusion that it's hard to know where to begin a rational critique. From the Ayn Rand lexicon 
     Money is the tool of men who have reached a high level of productivity and a long-range control over their lives. Money is not merely a tool of exchange: much more importantly, it is a tool of saving, which permits delayed consumption and buys time for future production. To fulfill this requirement, money has to be some material commodity which is imperishable, rare, homogeneous, easily stored, not subject to wide fluctuations of value, and always in demand among those you trade with. This leads you to the decision to use gold as money. Gold money is a tangible value in itself and a token of wealth actually produced. When you accept a gold coin in payment for your goods, you actually deliver the goods to the buyer; the transaction is as safe as simple barter. When you store your savings in the form of gold coins, they represent the goods which you have actually produced and which have gone to buy time for other producers, who will keep the productive process going, so that you’ll be able to trade your coins for goods any time you wish.
    Her key points are nonsense. Gold has no more intrinsic value than any other currency; its value as money is only and exactly what people believe it is. Rand falls into the almost universal delusion that money some kind of stuff. She does this despite the fact that she says money should be "not subject to wide fluctuations of value, and always in demand". IOW, that the value of gold depends on people's beliefs about it.
     The notion that money somehow buys time for future production misses the point. "Delayed consumption" is possible only when there is a surplus of goods or productive capacity. Money cannot create a surplus, nor is it needed to ensure that any surplus will be used. Humans have invented many ways of saving surpluses without money. What you need is a technology that multiplies the effect of human work, and a system of customs that will ensure the surplus will be stored and traded. Fact is, even today much trade is done without money. The basic rule of all trade is "mutual obligation".
     And like practically everybody, Rand misquotes St. Paul’s comment on money:
So you think that money is the root of all evil? . . . Have you ever asked what is the root of money?
     St. Paul actually wrote, The love of money is the root of all evil. Look it up!
     Money is a way of making trade with strangers possible, and thereby mutually dependent. A very useful invention, IOW. For example, just try to calculate how many people have been involved in producing a ball point pen and making it available to you. A stranger is someone to whom you owe nothing, and vice versa. This makes interaction between strangers dangerous. Hence, all societies have had to invent ways of making at least temporary mutual obligation possible. Think of "guest right", for example. Puzzle: Why do all those strangers work to produce and deliver a cheap pen to you? Because money makes it not only possible to trade with people you will never see, it makes it easy to do so.
     Nowadays, money trades are used to measure economic activity, which produces such incomplete, gappy data that it causes pernicious delusions. Even in our highly monetised economy, about 1/3rd of economic activity does not involve money. In pre-money times, that was 100%.
     Basic rule about money: Money and wealth flow in opposite directions.
     I think everybody needs a good introductory survey course in anthropology, to learn about all the ways humans have organised the production and distribution of goods and services. It might cure one of the notion that our current economic arrangements are somehow natural (or, gaak!, god-given.) For over 95% of our existence as a culture-creating species, we humans have had no money. Yet humans managed to produce the goods and provide the services they needed. It’s true that money, because it accelerated trade, and more importantly enabled trade with strangers, accelerated the creation of wealth. But trade, and its beneficial effects on wealth creation and cultural exchange, existed long before money. It is Rand's blindness to this fact that leads her astray.

     2013-03-11; 2014-05-23; 2015-11-07; 2016-05-12