Improving Our Standard of Living (Wattpad Edition)

Chapter 2: Money, Wealth, and Value

Wealth is goods and services, as well as property such as land, stocks, bonds, buildings, etc. Wealth is our basic material needs and other assets. Wealth gives us opportunities not already provided by human rights.

Then what is money? When thinking about how to improve our quality of life, having more money is usually the first thing that comes to mind.

More importantly, why is money necessary? What would happen if it didn't exist? Or if we replaced it with some other method of allocating resources such as barter, rationing, or a reputation system? What would happen if society allowed people to consume whatever they want, as much as they want, and whenever they want—like a 24-hour free buffet?

This chapter explains what money is and why it's a useful economic tool.

I'm aware of two modern movements that are skeptical of the need for money. The Zeitgeist Movement, founded by Peter Joseph, and the Venus Project, founded by Jacque Fresco. I have studied both movements extensively. Though I disagree with some of their arguments, they nevertheless had an influence on me because of their singular focus on improving world living standards.

The thesis of both movements is that the abolition of money and the profit motive would end scarcity, environmental degradation, and inequality.

In this chapter, I explain why that's incorrect. Money is an accounting tool that makes the creation and allocation of wealth easier than it otherwise would be. There is no way to know that unless one understands what money is and what it does. Without such understanding, it's easy to believe that money is an illusion.

Here's an example of the money-is-an-illusion argument: If a handful of people trapped themselves on an island, the currency in their wallets would be useless. That must mean monetary systems are pointless.

This is an example of a specious argument. It seems obviously correct on the surface, but it's wrong upon further inspection.

There's a big difference between an island of a few people and a sophisticated civilization. Even so, small island-tribes throughout history did use currency—just not in the form we're used to today. Examples include shells, beads, jewels, arrowheads, pelts, rai stones, dolphin teeth, and more [1] [2]. Money has always existed.

People used barter of course, just as they do today. But it was never the primary means of exchanging goods and services in any sizable civilization.

That doesn't mean money, as we think of it today, will always be in use. In fact, it wouldn't surprise me if people a century from now pay little attention to money. In this sense, the movements opposed to money might have been correct in a manner of speaking.

But currency will always technically exist, even if we achieve true abundance and rarely check our bank accounts.

Money Is Proof of Work

Wealth is resources, products, services, and various forms of property such as land and business assets.

But money isn't wealth. It's permission to obtain it. It's an IOU redeemable for goods and services. Money is evidence that people provided labor and produced things. As long as it's in their possession, they haven't yet redeemed it for things they want.

What makes money convenient is that individuals can redeem it for any good or service.

By contrast, in a barter system, if a person wants a commodity, such as food from a farmer, he had better have something to trade that the farmer wants, or he will go hungry.

But in a monetary system, the farmer will always take currency because he knows he can use it to get goods and services that he wants.

Money is also small, easy to store, and won't spoil.