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Money, Gold, and Aristotle

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ZSorenson

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I have previously asked: what is money? I tried to discuss the issue generally, but the question itself wasn't explicitly answered. I think that money itself is an example of a partial contradiction of Aristotle's philosophy. I also think the issue of the definition of money says a lot about what property is and is not.

First, I offer my best attempt at a definition of money. Literally: something tangible that is exchanged as a holder of value for other values. That applies to any form of money that has ever existed. The only time it doesn't apply is in situations where you trade nothing, or when you consume exactly everything that you have bartered for, and you have bartered only that which you have produced. I think there is a better definition of money, that is more relevant to the concept of wealth. Money is something tangible that is representative of other values.

Consider gold. Gold is not valuable other than as an aesthetic value. Yet, this, plus its scarcity, plus centuries of primitivism that have transformed into tradition, plus a few industrial uses today have made gold a holder of value. It represents other values. An ounce of gold buys food, labor, products, etc. This is only from trades, however. There is no intrinsic value to gold as gold.

Now consider a whaler, he makes a fortune with a fishing fleet that is well organized and produces much oil for lamps. He amasses this fortune in gold, then bequeaths it to his son, who is a terrible fisher, but spends the money judiciously, living his life as a religious preacher. His son receives the wealth in turn, and is also a preacher. Finally, his son receives the wealth, and decides to invest it. By now, whale oil is pretty worthless. Society has switched from kerosene, to gas, to electricity. Yet, this man has tremendous ability to invest and make economic decisions. In fact, the real producers, the entrepreneurs and the like, must be willing to let much or most of the profits they have earned go to the investor, despite doing all the entrepreneurial work themselves.

This is of course perfectly fair, the great-grandfather provided value to society, and with his earned wealth, he may again create more value. That wealth is what makes value creation possible. But there's a hitch. The value was provided to individuals long since dead, and the value itself is valueless in today's society. So in what sense ought the entrepreneur have to subordinate himself to someone who has wealth that is of no relevance to modern society's values.

Granted, this is hardly the situation even most of the time. The entrepreneur doesn't need to work in an unfair situation, he may refuse. Likewise, the whaler had every right to pass his wealth along.

My complaint is with the concept of enduring wealth. That is the justification for a gold standard, and I hope my example begins to show why there's a value disconnect involved. The problem is with the nature of money. You simply cannot 'fix' it objectively. A pound of gold is worth only what it is: how badly you want a shiny yellow thing relative to its scarcity to you. With money, A is not A. Well, it is if you're talking about nominal money. 5 1 dollar bills is 5 dollars. 3 ounces of gold is 3 ounces of gold. A is A. But 5 dollars is not a Big Mac, or an hour of labor. Yet, without acting as a holder of value, of being worth something for what it's relative worth is, money has no value. For money as something valuable, A is not A.

I said money contradicts Aristotle. Check your premises, right? If you try and see money as having 'fixed' value, or 'objective' value, if you try and claim that money possesses value, you are misapplying the law of identity. So, Aristotle remains correct, you are the mistaken one.

This is why earlier I spoke of a system of money that is a more technologically advanced form of barter. Value only exists in the goods and services that are presently usable. This means that wealth ought to consist of a portfolio of presently operating endeavors, not some eternal store of value. Let me put the whaler example in context now. The whaler's wealth should not have outlasted the value he produced. By his great-grandson's day, the value he had produced was of no value, but it was stored in gold. I think a rational society would therefore try to abandon gold as their standard, and accept my barter system.

Gold has been subject to scarcity crises which cause deflation and depression and unavailability of credit. It has also been subject to inflation in cases where much became suddenly available (there are asteroids out there, with lots of precious metals). It has also done little to prevent economic crises of other natures even before the invention of fiat currency. But worst of all, gold preserves wealth long past the initial creation of value. Those that possess wealth must keep it by continuing to produce value with it. I think it's fine if people use gold as a currency, but it should not be a government imposed standard, oh no! And I would encourage financial innovators to try and move away from gold, and see if they can't come up with a more efficient system.

Going back to Aristotle, I've had concerns with Objectivism - or rather, what Objectivists say - that I consider contradictory. Money was my main example here. But there are others. I think some Objectivists, in an effort to assign identity to everything, assign identity to things that aren't identities. This is sort of what I think is Plato's error. Money's value is purely abstract, it's relative, and dependent on market equilibrium. Yet, we have a concept of 'money' and an identity associated with that concept. Concepts are not identities just because they exist. My language would be that to call a concept an identity when it is not one, is to believe in Forms. Money's identity is its nominal identity - paper, gold, sea shells. The concept of 'a dollar' is not an identity. But it just so happens that you can exchange one piece of US dollar paper for a Double Cheeseburger at McDonald's.

Taking this way further, consider Godel's incompleteness theorem. Axiomatic mathematics depends on the concept of wholeness, or '1', in order to function. Where did '1' come from? It is a Form, not an Identity. So when Godel uses the concept of infinity to prove that math is inconsistent or incomplete, but not both consistent and complete, his discussion bares no relevance to reality. He says A is Form, Form contradicts, A is not A. No! A is A, only. A is not Form.

So that's my argument, that it seems like Objectivists sometimes say A is Form, because they want to assign identity to everything. There's a deeper argument here about how existence exists, and how consciousness works, what an identity is metaphysically - I've tried to have these discussions before, but was never satisfied. Well, here's my example: money. It has an identity, but we also use it as a concept which has no identity. What is that concept then, if not an identity?

Plus, I'm making the same economic argument as well: no gold, just goods/services/contractual obligations/properties etc. as a basis for exchange (you can create bills to represent goods to make the exchange more efficient, and have aggregate currencies, I've explained it elsewhere).

If you want to reply, I'm looking specifically to hear about gold in particular and possibly a rebuttal of my argument on it. I also would like to hear about this idea of concepts that aren't identities that people mistake for identities - whether I'm speaking validly [edit: I've realized that this is actually just improperly assigning identity, but I still want to know how you would classify these concepts that are mistakenly associated with the wrong identities, like, what is math? what is price? as a conceptual framework]. But you may write whatever you want.

Edited by ZSorenson
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I hate to be the first to quote Ayn Rand on money, but what the hell here it goes:

Money rests on the axiom that every man is the owner of his mind and his effort. Money allows no power to prescribe the value of your effort except the voluntary choice of the man who is willing to trade you his effort in return. Money permits you to obtain for your goods and your labor that which they are worth to the men who buy them, but no more. Money permits no deals except those to mutual benefit by the unforced judgment of the traders.

Money is unconsumed wealth. The whaler you mention accumulated a store of unconsumed wealth from his toil on the high seas. Gold does have intrinsic worth. Have you ever noticed that the most common elements are simply just the most commonly fused elements in a star's fusion? Gold is rare, as are other elements beyond Iron, because they are a net energy losing fusion. When a star runs out of stuff lighter than iron to fuse, it dies in one way or another. But some fusing of heavier elements does occur. Gold should be a fairly rare element indeed compared to other elements like just simple hydrogen and helium.

One more thing: money's value is abstract when it is fiat currency. When you use something with actual value like gold, with its nontarnishable, shiny, and extremely malleable exterior, its not abstract value, its a barter. It would be like trading a horse for a gun or something like that.

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ZS, Change does not imply a lack of identity. Money has identity regardless of the fact that its value changes. Fiat currency has identity, as does gold. At its most basic, money is term we use for something that people use as a medium of exchange. Some people use shells as money, others use gold, still others fiat currency. Nevertheless, money has identity. Also, this variation does not make "money" a floating abstraction. (Someone else recently described it as such on a different thread, and your post seems to hint that you might think something similar.) By that reckoning, a term like "vehicle" would be a floating abstraction without identity. So would a term like "value", which is so broad that it can include millions of options.

As for gold, as I posted to your other money thread: Objectivism -- qua philosophy -- does not really support gold, but freedom and objective value.

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ZS, Change does not imply a lack of identity. Money has identity regardless of the fact that its value changes. Fiat currency has identity, as does gold. At its most basic, money is term we use for something that people use as a medium of exchange. Some people use shells as money, others use gold, still others fiat currency. Nevertheless, money has identity. Also, this variation does not make "money" a floating abstraction. (Someone else recently described it as such on a different thread, and your post seems to hint that you might think something similar.) By that reckoning, a term like "vehicle" would be a floating abstraction without identity. So would a term like "value", which is so broad that it can include millions of options.

As for gold, as I posted to your other money thread: Objectivism -- qua philosophy -- does not really support gold, but freedom and objective value.

Thanks, this is what I wanted to discuss. What would be good examples of floating abstractions? I'm trying to figure out why people have a tendency to accept mysticism. My thoughts were that some things - perhaps floating abstractions - were mistaken for identities. For example - feeling happy as what existence is.

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A floating abstraction is used when someone uses an abstract concept without understanding the more concrete concepts that comprise it. Example, those that use the term "democracy" to describe our constitutional republic; assuming of course that they are not purposely trying to obliterate the objective definitions of both. A strong assumption in many cases.

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What would be good examples of floating abstractions?
A floating abstraction is more about the way one holds an abstraction in mind, rather than being about the abstraction itself. One could argue that certain abstractions cannot properly be tied back to reality, and are necessarily floating, but one can also hold a valid concept in one's mind in a floating manner. Floating refers to holding an abstraction without a good grasp of the concretes that underlie it. Someone could learn some law of Physics, for instance, in a rather rote way, without really "getting" the concretes that it subsumes.

Rand gives some examples of floating abstractions: "society as a whole" (ARL, "A Nation's Unity"), "common conscience of a community" (ARL, "Thought control")

However, she also points out that valid concepts can be held in a vague way, untied to reality. In ARL, "The Principals..." she says: '"Government," to most people, is a big, vague, floating abstraction;...'

She also cautions Objectivists against holding legitimate principles in the form of floating abstractions:

I will list these essentials for your future reference. But do not attempt the shortcut of accepting them on faith (or as semi-grasped approximations and floating abstractions). That would be a fundamental contradiction and it would not work.

The essentials are: in metaphysics, the Law of Identity—in epistemology, the supremacy of reason—in ethics, rational egoism—in politics, individual rights (i.e., capitalism)—in esthetics, metaphysical values.

Edited by softwareNerd
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  • 4 years later...

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