Demonetize it!

Money, incentives and optimization of resources: Questions asked and answered.

A gentleman on Facebook who uses the title King of Paupers as part of his username, recently posed some questions to me about the abolition of money in a comment he made to a post about the documentary “Ethos”. Here are his questions and my answers. I did not address his mathematical formula because I did not understand it.

John KingofthePaupers Turmel How are you going to optimize use of resources if you don’t have a medium of exchange? How are you going to maximize incentive without chips to score the game? Don’t throw out the accounting used in the unfair game so you don’t use accounting in the fair game. Focus on the problem (1/(s-i)) and it’s only getting rid of the "i", not the 1/s that does the fair job.

John,

Thank you for your questions.  They raise the issues that need to be addressed.  But in turn, I need to ask you some questions.  You call yourself the King of Paupers; why then do you advance arguments in favor of money? What do you mean by "optimize use of resources"? Money can certainly ration resources, but that rationing is not necessarily optimal.  Let me cite some examples.  British Petroleum probably thought that it was optimizing resources in the form of saving time and money by not installing certain safety devices and not carrying out certain safety tests on the Deepwater Horizon rig in the Gulf of Mexico.  Yet their desire to save that time and money led to the deaths of 11 men, the ruination of thousands of people’s livelihoods, and still untold devastation to the ecology of the Gulf.  I love baseball, but I fail to see an optimal use of resources in Alex Rodriguez having a 10-year $275 million contract, or Albert Pujols purportedly wanting a 10-year $300 million contract while the people who pick our fruits and vegetables live lives of abject poverty and near slavery.  Which function is more useful to the society, hitting a baseball or supplying that society with food? While we’re on the subject of food, I shop at a nearby Whole Foods Market.  A lot of people call that market "Whole Paycheck".  I wonder how much of its produce and meat are thrown away because people could not afford to buy it.  Both the United States and the United Kingdom, just to use two examples, throw away many tons of food each year.  Meanwhile, people in both nations go hungry because they did not have the money required to buy the food.  There are some people, and I’m one of them, who believe that food is a human right.  But it is an official position of the United States that there is no human right to food, only an opportunity to buy food.  I don’t consider this system by which food is either rationed by money or discarded while people go hungry as an optimal or moral use of resources.

Secondly, as to the matter of medium of exchange: first of all, it isn’t always necessary.  Consider your own circle of family and friends.  You often give and take from each other without a medium of exchange, and even without an expectation of immediate or even eventual reciprocation.  This is called gift-giving.  We need to do more of it, with a broader group of people than just our immediate circle of family and friends, and we need to recognize how much of it we currently do.  People can elect to trade goods and services.  They can also borrow goods.  The direct borrowing of goods, unlike the borrowing of money, is without interest.  You borrow a car; you give it back.  To make the lender whole, you fill up the gas tank before you return the car.  But when you return the car, you do not also have to give the lender a motorcycle. 

If you are interested in accounting for transactions, so that you can measure the flow of goods and services and know how much is needed of what sort of things, you can use mediums of exchange that do not have the intrinsic value that money has.  For example, you can use coupons, as we use supermarket or newspaper coupons today.  If you look on the back or on the bottom of such coupons, you will note that they say that they have no cash value or they are worth 1/20 of a cent, yet they still facilitate the exchange of goods and services. In the computer age, some kind of electronic entry can be the tally marker for accounting purposes.  So the abolition of money does not necessarily mean the abolition of the concept of mediums of exchange.

But unlike the other mediums of exchange, such as the store coupons, money has its own value, and this is a major problem. As David Korten recently wrote, "Money is a system of power. The more our lives depend on money, the greater our subservience to those who control the creation and allocation of money."  This subservience makes a mockery of the fundamental equality of all people.  We are all born naked and helpless, we put on our pants one leg at a time, and rich or poor, we all die.  So no one has a greater right to be on this planet than you or I.  To really optimize the use of resources is to make sure everyone has enough to survive as a biological being (food, clothing, shelter, and healthcare), and to thrive as an engaged member of their society (education, communication, transportation, and the tools of their chosen trade or profession).  Today, most people work as employees for money; some people start businesses to make money.  (I am sure you have often heard the phrase, "They are in business to make money.") Thus, everything in the economy comes down to what it takes to make money, not what it takes to make a particular good or service in and of itself.  And that’s why you get disasters, such as BP in the Gulf of Mexico.  That is also why you get war, because arms merchants and mercenary corporations such as Halliburton, can make a fortune and because land and resources can be seized by the victor and monetized. That is also why you get a waste of resources in trade. Did you know that countries trade identical goods to each other, e.g. the United States and Australia trade wheat? It’s done because there is money to be made from such transactions, even though they waste energy and each country ends up with food that is not as fresh as it would be if it were grown for domestic use.  Again, that is not an optimal use of resources.  As far as I know, nobody works for store coupons or other units of account the way they work for money.

As for maximizing incentive, money is certainly AN incentive for some people, but it is not the only incentive or even the best.  The strongest incentives anybody has for doing anything are desire or necessity.  The two archetypes for these incentives are artists and inventors, but you will find that these incentives motivate people in all fields.  I am sure you have heard that the artist creates because he or she just has to; the book, sculpture, painting, musical composition etc. is inside the artist and has to come out.  Unfortunately, the money-based world exploits this intense desire, often paying little for the work, because of the assumption that it would have been done anyway.  This is unfair to the artist who has bills to pay like everyone else, and perhaps more bills, in the form of material costs, than the average member of the public.  But it is a wrong assumption in another way: the lack of money may prevent the creation of the work, or decrease the overall productivity of the artist, because he or she cannot pay the material costs or take the time to do the work because of the need to work for survival. I have been in that situation as a writer and know other artists with similar difficulties.

Necessity is the mother of invention and curiosity its father. If there were never inventions created except in return for money, we would still be living in caves.  And even cave people were artists, as we know by the various cave paintings of many ancient civilizations.  Human beings work and create because it is part of their nature.  That has been forgotten throughout history and even up to the current day by people who believe that most others are inferior, lazy and bad, and will work only because they have to i.e. because they need the money.  Of course, that idea goes hand in hand with the idea that work is a punishment for sin.  If work is, in fact, part of our nature as human beings, and if we are working according to our personal dictates, i.e. our interests and aptitudes, work is a gift to ourselves and our community, never a punishment.  I think the notion of money as incentivizing work is based on the notion that we must have an incentive outside of ourselves in order to do work.  But money perverts the incentive to work, making us work to fulfill the desires of an impersonal market rather than to fulfill ourselves.  By fulfilling ourselves, I am not suggesting that we would never do things for other people unless we were incentivized by money to do so.  Doing things for others fulfills the altruistic side of our natures. Rather, I suggest that the incentive of money turns our attention to doing anything to get that incentive. Money, whether we need it or just desire it, can incentivize us to do work that is not only a waste of resources, but morally wrong.  For example, today’s designers of sophisticated weapons of war are very well incentivized monetarily, as are the manufacturers and importers of heroin and crystal meth. 

The human race must return to internally-based incentives.  Honoring the diversity of human beings will assure that each society has a good mix of products and services that suit their both their individual and societal needs and desires.  What we have now with money, and especially with globalization, is a greater and greater monoculture that does not need everyone’s product, yet still demands that everyone be a producer (or be the family member of a producer) in order to acquire resources.  Those who are unwanted by the marketplace and unrelated to a producer get little or nothing.  Throwing people away is hardly an optimal use of resources.