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Is currency inefficient?

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tbj2102@gmail.com
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So your position then is not that I need to use currency to be productive and create anything I want to create, but rather that it's required for any hypothetical profitable microwave manufacturer to use it?

Let's be more concrete then. How did you acquire your smartphone? After you answer that, how would the company/producer of that phone be able to judge to give you the phone or that you deserve the phone in some capacity if you will probably never meet the people you are trading with ever again? Even further, how would you propose that company deals with manufacturing the phone if they need to acquire materials from other companies? This is what is meant by large scale, and I'm curious about your answer to them. You need to consider and explain how a company could produce millions of a product and decide who to distribute to without the use of money if you want to say money is wholly inefficient. And even if the product is opensource, all the operations to create that product involve trade with thousands of people implicitly, some people that the developers might never meet in their life. It's perplexing how this is even possible without just pure egalitarianism - everyone by virtue of being human deserves just as much as everyone else in the world. Either that, or you limit yourself to a tiny little spaces, never expanding into industrial economies that provide your values of smartphone, wikipedia, and so on.

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Define a large scale operation for me and explain exactly when that will occur, why I should conduct it, and why it will require me to use currency. This thread has already had 705 views and 70 posts. That's a much larger scale than I operated on previously, and none of this productive discussion has required me to use currency.

It does require someone to use currency. How was this site paid for so that it exists for you to post and browse on it?

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Cars were a new change in ways to do something. You aren't proposing anything new, such things have been around forever and a day, you just are proposing giving up something else which is newer and has coexisted with it. I mentioned before that trading, especially in currency, is great for interactions between people when getting to know somebody well first is impractical or even impossible. Giving up anything involving situations where it would be impractical or impossible removes all kinds of complex and/or higher quality goods and services from our lives, like, say, cars.

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What you aredoing here is what you did before, you skipping all the principles that lead up to the concept of currency then just rewriting the result to suite your lifestyle as if the idea of production was a primary. If it works for you in some cases then fine but don’t act like it is a primary because it isn’t.

In this case, what you are describing is developing someone. That has its place if you are in a leadership role. As a manager, I develop people because it’s the best way to create value – By developing people to actually do this. In fact I spend a lot of time training managers on how to lead people this way (i.e. you manage assets, you lead people).

But that is not a lifestyle. You are still avoiding the basic principle of money and that it is a store of value for future consumption. Yes, you can train or develop someone to help you produce values but it will not allow you to save money to put your kid through school, unless you are working some bizarre karmic collectivist “I’ll train lots of people and hope they support my kid through school” scenario.

Money is the current most efficient store of value to save for the future. It is objective, in hand, and disposable by your choice. Some collectivist system of putting faith it all working out somehow in the long run should speak for itself.

The mind reals at the thought of a farmer just helping his farm hands and not saving seed stock for next year’s planting, or not having leftover income for equipment repairs next season and just blinding having faith in the universe, or God(s), in making sure he will not starve next year.

And for the other point from the top of the page, Rand did speak about the role of her characters and they were not putting others as their primary value. That is the opposite of egoism and is the exact opposite of the entire Objectivist philosophic system. It’s a little thing called altruism which has been accurately described as nothing less than the destroyer of morality.

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You have conflated currency with capital. This is a poor analogy. Seed stock demonstrates the concepts of capital and investment. Mutually productive trade equates to mutual investment, since it makes all parties better able to produce in the future.

Consider the benefits of putting others as your first value after your primary one.

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@bluecherry: You created a false dilemma. I am not proposing abandoning complex production chains, but rather integrating them further for increased trust and communication to eliminate logistical inefficiencies.

Currency cannot solve a problem. Substituting a full understanding of all individuals' behavior patterns and motivations in a supply chain for thought-numbing currency... well, you decide what to do. Again, if you study my quotations from Francisco's money speech you may begin to see the mind-substituting nature of currency use everywhere.

Edited by [email protected]
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@Tyco (#10): So let me get this straight: an Objectivist is telling me I am worse off focusing solely on building mutually beneficial relationships than if I sacrificed some of that relationship value in exchange for government issued currency sitting in an FDIC-insured bank account that is part of a fractional reserve banking system that receives all kinds of government subsidies?

Yes.

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You have conflated currency with capital. This is a poor analogy. Seed stock demonstrates the concepts of capital and investment. Mutually productive trade equates to mutual investment, since it makes all parties better able to produce in the future.

Consider the benefits of putting others as your first value after your primary one.

There is no confusion and it is a perfect analogy. You are ignoring the purpose of money and the practical reason it exists. Currency is a product of the need to save work for future use.

Once upon a time we did not have currency and we had to live hunter-gatherer/farmer style on a daily need. One day we started to save our work instead of living for the moment, thus being able to save the time we spend that day so we didn’t have to do it tomorrow. If we wanted to build a tool or learn something, we could work hard one day and save the food for tomorrow and not need to hunt/farm that day.

Eventually, society started to specialize – One would hunt, one would farm, another fish, someone would do husbandry, another would make tools, etc. If I was good at blacksmithing but terrible at farming, I didn’t have to do both. I could make tools and make lots of them so I could trade for the things I needed. People produced what they specialized in and made more than they needed for themselves, but it was OK since they could do extra and trade for other needs.

Now, if I made a bunch of tools for trade I had to carry around those tools much like the farmer had to take his bales of hay or bushels of apples around. Imagine the poor guy with a herd of cows. This was inefficient and worse, some items could spoil, making them short lived items that someone produced and saved but needed to trade soon or it would be wasted work. Plus, value was sometimes hard to determine between dozens of commodities. In order to make transport easier, the trade items more durable, and help make value uniform common items developed for trade that became universal values. Gold is one but various cultures developed others, like salt in Africa for example.

That is currency. It is an easy and durable value that represents saved work for future use.

Capital is the next evolution of money which can be accumulated much like the farmer does, and did, to invest in the future and when you get down to it is the same principle. But currency is the first step and serves the same purpose, to allow you to work and save what you don’t consume for tomorrow. Without currency you are the farmed trying to stock a barn full of apples to put his kid through school, a ludicrous thought indeed. It is also inefficient.

As for putting others first, as a manager and trainer I enjoy training and working with others. But it is not a primary. If I put others before myself I would starve to death, which does me no good (or the others you want me to put first).

You have to be your primary value since life requires self-sustaining action. If you do not do this basic fact of life you are dead. Once you do this you need to plan to live and that takes us back to work and planning/saving work for future consumption. Unless you plan on running range of the moment like a hunter-gatherer…

Sorry to tell you this, but you are your number one value or you will end up doing no one any good. You’ll be… Gone

Deceased

Ceased to be

Cashed it in

Taking a dirt nap

Kicked the bucket

Bought the farm

Gave up the ghost

Fragged

Got your toe tagged

Left the building

Gone west

Worm food

Pushing up daisies

Jim, he’s dead

Met Elvis

Assumed room temperature

Joined the choir invisible

Paid Charon’s fare

What? A little humor always helps. I know I’m forgetting a few too.

Edited by Spiral Architect
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Are you even awake, Spiral Architect? I don't know how I could make any clearer that I agree with you on all these points with one slight variation. You state that currency is a product of the need to save work for future use. I would add that nothing but unawareness of a better alternative makes it a necessary or even efficient step to fulfill this need.

I would even go so far as to poke at the idea of "saving for the future". If you are a manager you are well aware and likely employ the principle of "Just in Time" logistics.

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Ha! It was late when I had fun with that post but I was awake. I'm not going to ignore the basic principles of money because you do. No matter how you choose to dance around the subject, you cannot ignore the fact that if you want to buy a house, a car, save for a vacation or a kids school you need to use money. If not then you either show up and work for years and measure it somehow (since there is no determination of value) and hope in several years the person gives you that car or house (and if they don’t?). Or maybe you think people should give it to you up front then you work like a serf with land obligations X amount of hours a week until your obligation to the landlord is paid. You need to have a base line of value and you need to have it transferable.

You tell a bank that currency is inefficient and you’ll just spend time developing their staff as payment for your house instead.

JIT is a base of inventory control to minimize assets held unused for production; it increases cash flow and improves efficiency of through-put as well. You still need to BUY your inventory even if you are minimizing the time they are saved for future production. A manufacturer cannot send some managers over to the supplier and have him develop people, hoping for the best that it will be enough for all of his parts to arrive in time. In fact, without objective baselines of value, manufacturers would be forced to build inefficient stockpiles of supplies so they would not be a victim of waiting for people to decide whatever time was the right magical moment that investing in others was sufficient to ship parts. Again, you need an objective and disposable way to trade value – It’s in your best interest so you can plan.

Look, as someone who does training, staff or manager, I get the idea of developing people. It is actually a very powerful tool and a good leadership skill. I train managers to do this as well (manage assets, lead people). But it is not a primary – You have to be the primary first to insure survival and if you want to live beyond the rang of the moment then it involves planning your life and you need the most efficient tools to do so. Telling a used car salesman that currency is inefficient and you’ll just dedicate extra time every week over and above you other work obligations to get the title to that car is not the way to do that. In fact it is so inefficient, the idea of working hands so you spend time each week in little part time jobs with the car salesmen, the bank, the grocer or farmer, the utility company, cable company, school, and on and on it makes this whole discussion moot. Surely you can see that specialization in a skill and trading a standard of value for those things is easier for you then all of that.

Edited by Spiral Architect
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"@bluecherry: You created a false dilemma. I am not proposing abandoning complex production chains, but rather integrating them further for increased trust and communication to eliminate logistical inefficiencies."

How? This says nothing of how any complex product would actually be made with so many people involved. How do you propose quickly and efficiently dealing with strangers for brief interactions or how do you propose creating these complex products at least equally well without involving lots of people and having short interactions when you can't wait around to get something?

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@Spiral Architect: You do need currency to buy something by definition. You're not stating anything interesting there. I know that. You are also continuing to argue with positions I have explicitly stated I am not advocating (such as putting something above myself as a primary value). Currency is not required for housing, cars, etc. The consent of productive people is. There is nothing inherently parasitic about not using currency. As long as your focus remains on production of real value for yourself through producing value for others, currency is simply unnecessary.

@bluecherry: You seem to believe that complex products can't be produced in any more efficient way without employing currency. Identifying inefficiencies in a production process (idle capacity, bottlenecks, etc.) and correcting them has nothing to do with currency. We have been inserting an extra, unnecessary step.

Let me state the principle clearly: The value that others produce for me is always directly proportional to my production of value for others. I only have to focus on value production for others as a secondary value to get anything I desire for my primary value. If you demonstrate to others that helping them is a high priority, this creates a self-interested motivation in others to invest in you in any way possible. This is not some vague spiritual notion of karma, but based in evidence, experience, and rationality. Why wouldn't someone want to invest in another person with an appropriate psychoepistemology? Galt demonstrated to Rearden that we have every reason to promote the success of others even if these others end up outcompeting us.

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Parasitic? I never said anything about a parasite. I do think you are talking about honest and open trade, only a different way of doing it. The core issue is the practical efficiency of it – It’s your whole thesis here. The secondary issue is egoism versus altruism which I’ll just ditch for a moment so as to not muddle the two issues together.

Currency serves a purpose and it is the most efficient way to execute that purpose. You claim it is inefficient and I'm explaining to you why it is the exact opposite. The consent of people does come first but then there needs to be a measure of trade to know how to trade values from each other. You have to know what you are consenting first. How does one week of farming equal one week of computer programming equal 10 pounds of beef versus 5 gallons of gas versus the cost of a car? The moment you create a way to measure it you have created a standard of measurement and the basics of currency. You make it a durable good that is portable you have created money.

I don’t think that saving a barn full of apples is the best way to purchase a house. I’m fairly confident the mortgage company will agree with me.

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And while I’m thinking about it, we are also forgetting a critical and unspoken fact of free trade that currency provides, and that is information.

Price tells you important information about something. You do not need to be a global weatherman, an expert on agriculture, spend time each day reviewing international news and shipment reports, or understand the supply chain of coffee to know that an increase price is likely about supply and demand issues in everything involved with coffee. You don’t need to be an expert: The price goes up and you know that you need to act accordingly, including learning why if you need to stock up or buy something else because there are factors affecting the value of coffee.

Currency allows for market factors to convey information through pricing which is the backbone of decision making in a free economy.

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"You seem to believe that complex products can't be produced in any more efficient way without employing currency. "

Those kinds of efficiency increasing efforts are not directly tied to currency, but they can coexist with currency and currency provides efficiency benefits I haven't heard another way to get. So, there is more efficiency potential in a system with currency than one without it from the looks of things.

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This thread is not about currency.

The OP is going Galt, he thinks, by avoiding monetary transactions and even barter transactions in order to avoid paying taxes. In this way he avoids the 'sanction of the victim' dilemma. All this bullshit about currency is ad hoc rationalization for the prior conclusion he has already reached about what he should be doing to be moral.

This thread can only be worthwhile by discussing the underlying issue, the validity and morality of 'going Galt'.

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  • 4 weeks later...

I don't think this thread is really about going galt. The OP said,

  1. "Human competency and motivation are the safest stores of value"
  2. "I can get money from a business transaction that leaves my counterparty hating me and gives me a bad reputation in the community"
  3. "This has all led me to the conclusion that the most efficient form of profit is obtaining the intangible goodwill of others."

Aren't these points the embodiment of Marxism? "Marx envisions a world where men are able to eat, drink, dance, love, go to the theater, etc.. free of charge! and without actually having to earn a living by working and saving." Take point 2. In a nutshell, it says, "money replaces true virtue, authenticity, and genuine human relationships with avarice." And point 3 says, "The very idea of having (of acquiring and accumulating material goods beyond a certain level) is anathema to man's true being. It enslaves man to things. A fully human life is not concerned with acquisition and accumulation, which have the ultimate effect of shriveling man's soul."

All three points ignore the facts that, "one must work and save in order to live a materially and spiritually satisfying life" and that "money is the physical embodiment of self-interest." (Quotes taken from Thompson's lecture.)

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@[email protected]

What you have done in your reasoning, is not just abandon the idea of currency. You abandon all objective reason with regard to the value of your work.

First of all how did you become a lawyer, you or your family perhaps with government's assistance. At that point no one raised the question why you should pay a lot of money to become a lawyer. If all peolpe in the world lived like you, unless you come from a very well off background, there is no way you would have got education. So you take something that took effort to produce and reduce its value to nothing by not agreeing to fair trade before providing your service. You talk about capital, but what capital do you have. Can you quantify that 'goodwill' can you ensure that when you're cold and hungry that one of those people who owe you 'goodwill' will repay the favour? You have no place to live an nothing to purchase even the most basic sustanance. What's your capital? If your car, that you used to procure food for you (by driving your friend), who will pay for its prepairs. What if the mechanic does not want your 'goodwill'?

Let's say I am a doctor, I invest half my life into finding a cure for lung cancer. And then I find it. A simple pill that kills all lung cancer cells. What would you do with this. In a free market economy this person would become immensly wealthy enjoying the benefits of his hard work. But I am not even sure what a doctor would do in your world. Would he just publish the formula online for all? And have nothing for himself. In such a situation why would ANYONE devote half their life to something that they get nothing in return for it? Wouldn't it be easier to do menial work that does not require your mind? Or would a doctor driven by your philosophy simply treat those he/she wants to? Surely that one doctor cannot treat all patients that would need it. Then how does one objectively choose who to provide care to?

What you're proposing is not 'going-Galt.' Galt valued his labour and in the Gulch nothing was for free. Even if one were to offer his services for no cost, no other resident of the Gulch would morally accept such an agreement. Rearden and Dagny were moral in every way. James and Lilian were the antagonists since the very beginning. If you want to claim that fiat currency and taxation are the tools of the looters and live 'off the grid' that would be different. Galt wanted people like Dagny and Rearden out of the system, because they supported it. They were more dangerous because they could produce thereby the worked against Galt's ideas. As such taking them out of the world was a purely selfsihly motivated goal for Galt. He wanted to stop the engine of the world regardless fo who suffered along the way (justified as it was a virtuous cause).Dagny and Rearden though would not cross over until it was in their interests. Galt could not persuade them, and morally could not coerce them (as they were moral themselves). But at every step it was a trade of equal value between both parties. If you provided your services for equal value trade without the use of currency, then you would be closer to what Galt did. However as mentioned before barter system is incredibly inefficient.

So to summarize your method of conducting cashless 'business' amount to nothing but pure altruism. Your 'goodwill' is worthless because it cannot be objectively quantified (not money but value). So one day you will either coerce someone to pay back that 'goodwill' or you will encounter a situation of life and death where no one is willing to pay back your 'goodwill'. In the first case you are the immoral in every sense of the word. In the second case you will either be dead or your quality of life will be reduced to nothing. Either case you have given up your will to live the moment you abandned objective value of your product. Read 'We the Living' to see how your altruism turns out on a big scale (hint: it always starts with vouluntary altruism).

Edited by Nith
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  • 1 month later...

I arrived late to this dance but thought I'd respond to these points anyway...

The OP said,"Human competency and motivation are the safest stores of value"

I actually agree with this, for no one can steal your acquired skills or your productive actions. Goodwill is also a safe store of value for no one can ever steal your good name and reputation from you.

I can get money from a business transaction that leaves my counterparty hating me and gives me a bad reputation in the community

In a sense, my work could be regarded as doing favors for others, and I don't get money from them, they willingly give it to me. Same goodwill, it just includes money. I heard a great line on the radio today that, if spliced in, applies here.

Blaming currency for avarice is like blaming spoons for obesity.

This has all led me to the conclusion that the most efficient form of profit is obtaining the intangible goodwill of others.

I agree... except currency is a tangible expression of intangible goodwill when you are of genuinely useful service to others. So all of the beneficial results you mentioned without the use of money are even more feasible with money.

Edited by moralist
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  • 2 months later...

I wanted to cap off this discussion and summarize my position as it has developed. If Intel engineers an advanced new microchip but chooses not sell the patent or even necessarily license it, then this is not something Objectivists would tend to criticize on philosophical grounds. If Pepsi distributes a new product to people outside a baseball stadium for free as part of their marketing, again I don't see any Objectivists tending to criticize this on philosophical grounds. If Starbucks invests in developing its employees' management skills and promotes internally, engendering loyalty in its employees, this is normal and not criticized on philosophical grounds.

Patents, brands, and employee loyalty are all components of "goodwill," which is an intangible asset that is generally recognized on the books of companies when they are sold. It is derivative -- like discovering planets through analyzing slight wobbles in stars rather than direct visual observation -- and a whole valuation industry exists to measure things like this. No one would object philosophically to productive activity which is not subjected to external accounting valuation until a later date.

Yet suddenly, when I propose that this accounting model applies equally well to individuals as it does to businesses, it seems like all hell breaks loose. Companies like I mentioned above all have complex, sophisticated, and fascinating accounting and financial systems that people spend years studying. This sort of thing was one of my core areas of focus in undergrad and law school. To suggest that these types of financial and accounting models are probably more appropriate to intelligent, educated, and competent individuals than current financial models does not seem to be a stretch to me. Companies like Pave and Upstart are beginning to build the framework for what I believe is a 21st-century model of personal finance. If you've read the Unincorporated Man novels, I am somewhat of a Mosh in my belief system on personal incorporation.

How does this square, you might ask, with my argument that the concept of currency, itself, is becoming obsolete? Perhaps I should moderate what I said previously. I am not sure so much sure that currency, itself, is completely obsolete as I am that many uses of government-issued currency are going to be supplanted by more complex financial products. For example, the computer science and engineering field has advanced to the point that I could easily see seamless transactions not based on "credit." Perhaps in 5-10 years people will be paying for dinner with shares of American Express transferred to the restaurant through a card or thumbprint rather than paying for dinner out with credit issued by American Express. Most educated, financially savvy people under 25 have no more of a relationship with currency (physical dollar bills) than they do with physical stock share certificates. At the point where you can sell shares of AMEX on a low-volume peer-to-peer automated after-hours stock exchange and use the proceeds to pay for dinner with a snap of the finger, more complex financial assets (stocks, derivatives, etc.) would become psychologically fungible for most everyday uses.

I believe moralist has it right when he says:

In a sense, my work could be regarded as doing favors for others, and I don't get money from them, they willingly give it to me.

I think of this as the gratitude, self-respect, and investment model of currency. We give currency to others as a recognition of our appreciation for what they do and gratitude for the fact that they have chosen to do it. We also give currency to correct a psychological power imbalance by clearing a debt (however temporary) when someone does something useful for us. Finally, we give currency to create and reinforce social relationships based on trust and mutual productivity because greater trust leads to greater opportunity for business relationships. In other words, currency exchange and production of goodwill are not mutually exclusive.

However, I stand by my thesis that investment of production in goodwill as a personal capital asset is often much more productive than investment in more easily accountable tangible capital assets.

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