Dimensions of Value: Money Under the Microscope

One basic claim of "Dimensions of Value" is that money is a poor yardstick for measuring value. Unfortunately is the language we use to speak about value. Even so, money itself is not as "real" as it seems, even when we look at it all on its own. How is it that we, as individuals, see money to have value?

Money appears to be simple. It obeys the rules of arithmetic. You can add or subtract money to money, divide or multiply money by a number, multiply. This tends to give money an extra aura of "reality", hiding what it stands for, namely debt.

With its mask off, money can be obtained by accumulating debt. Money can be used to pay a debt. Money can be used to pay or collect "interest" on a loan. Money is a way to create, buy, sell and ultimately eliminate debt. According to capitalist economics, every single thing is "worth" the amount of debt the buyer is willing to incur to "own" it. This may seem to be a crazy way of putting it, but it is increasingly exactly how ownership is acquired by individuals and the nation-state. But most of us don't think of it that way. In this post, we will treat money as "worth" something in itself. Why is that?

Of course, the main thing about money is that we value it and use it a lot to buy things we value. The more money we have - the more money "floating around in the economy" - the better things are. Right? Well no ...

ANOTHER LOOK AT MASLOW

If we bring Mr. Maslow back we can see how money relates to our basic needs.

PHYSIOLOGICAL

We are in deep trouble if we can't "afford" to meet our "physiological needs". We need to buy food and shelter. Even water is not free in most of the world these days. We need a certain "subsistence" income to stay alive. Capitalist economies tend to drive worker's salaries down to this level or below since these economies value only the work the person can put in. If the person has no "job", persistence income is somebody else's problem. To the individual, obtaining this level of income is literally a matter of life and death.

Subsistence income may come from subsistence property, such as a little plot of land that is farmed to produce the essentials. Capitalist economies put a market value on the land itself. Land may be used to secure a loan. If the land doesn't produce enough income to service the loan, the land (and the income it produces) is lost. This is the dynamic underlying thousands of suicides by farmers in India.

SAFETY

Once subsistence income is obtained, safety becomes important. If you are close to subsistence income, safety is a luxury. If you have more than enough, you can live between walls and pay staff to preserve your safety.

LOVE / BELONGING

Income plays a large role in the selection of partners. People select mates from the "class" created by relative income. Establishing a family requires income beyond "subsistence".

ESTEEM

At some level of income, money is available for visible signs of social class to signal membership in that class and "keep up with the Joneses". This operates in society with surprisingly low income. For some, ownership of knives and plates is a status symbol.

SELF ACTUALIZATION

Many people decide early on what kind of income would be "appropriate". I remember feeling a bit cheated as I struggled to obtain an income. It bothered me that many people in my same field made more than this - sometimes astonishingly more (Bill Gates and Steve Jobs were in my field). It wasn't just the money - it was connected to my own feeling of self-worth.

MARGINAL VALUE OF MONEY

This brings us to consider an aspect of money that is not reflected in its numerical nature. For the mathematician, what we are talking about is a derivative of money - either by time (which is income) or income by wealth - the amount of income as compared to the wealth one already has.

For some, an income of $1,000 per year is the difference between a miserable life and starving to death. For most "middle class" people in the West, it's a rounding error. $1,000 is not likely to make any difference in meeting our needs anywhere in Maslow's pyramid.

This holds true as income levels rise. To the very rich, $1 million is a rounding error. We tend to think of money as a percentage of either income or wealth. We laugh at the old lady who has a $2 million estate and comparison-shops for the cheapest light bulbs.

We conclude that the value of money varies greatly between individuals - a fact that is ignored in GDP figures. "Growth" of GDP (a central goal of political policy) means different things to different people and can actually mean the reverse of what it seems to show. If "growth" adds a few percentage points to the income of the very rich but pushes the general population "down the pyramid", "general happiness" is reduced by growing GDP. In fact, the capitalist economic system is engineered to do exactly that since capitalism drives labor costs to subsistence level or entirely out of the picture. 

People don't just look at their income and their cash-equivalent assets. They compare these to what they had a year ago and what their neighbors have. They are unhappy if their incomes remain stagnant and their assets are more and more pledged to the bank. A great number of people in Western Economies have a negative net worth - and it gets worse for them. This is a problem for them even if their standard of living is beyond the imagination of most people on the planet. We can see this as a problem of "Esteem" in Maslow's hierarchy, but it may even be a matter of safety and physiological needs as the household teeter on the edge of bankruptcy and/or a job is lost. Many people in the over-50 demographic are crushed to see their career hopes dashed. Their plans of "self-actualization" were psychologically tied to their jobs.

$1 million per year income can be seen as a problem if your next door neighbor makes $2 million.

Again we see the subjective value of money is not measured by the amount in question. That would not be a big problem except that, beyond subsistence, the value of money is only subjective.

This simple observation puts a lie to fundamental assumptions of traditional economics. A dollar is not the same to all consumers, employees, investors or any of the other supposedly interchangeable cogs of a market economy. Add to this the relentless efforts of producers to suck as much money out of consumers, which is another way of saying that the consumer is motivated to pile on as much debt as the system can bear. Advertisers play with Maslow's pyramid, convincing consumers (for example) that their old car harms their status - a new one is "needed". Or even that the world "owes" you a Lamborgini. Show the world that you have "made it".

What need is met by this $488,888 car?

While we are at it, we should mention the 680 billion dollars spent every year to make Americans feel "safe". 680 billion is not 328 million Americans spending $2,000 each to feel "safe". Nor is it $5,350 each to make 127 million households feel safe. Is it really true that America spends 2/3 of its GDP per capita to feel safe? The math doesn't seem to provide much insight. Somewhere along the line, we have lost sight of what $1 billion means. Perhaps we need to ask who or what is actually being protected and at whose cost.