Tag Archives: economics

Part I and II of this series on the American Dollar can be found here and here.

Simple Thoughts on Money
by Donald Hughes

Money is not the root of all evil, but it does come from a sort of failing. That failing is that we have, so far, found it impossible to limit our consumption to our needs while contributing what we can in the absence of an apparatus of coercion. Even stating the problem, however, gives a sign of how difficult that challenge would be to meet. Money is how we make certain promises to each other. If we recognize our need for a high level of coordination between people and property with a fairly strict degree of rationing, it makes sense to express that coordination in prices. Once you have a set of prices, certain imperatives require a related monetary policy and systems of coercion to enforce the price system. Nothing in this seems inherently objectionable if you can tolerate the “original sin” of the loss of achieving the communist ideal. Prices perform strong information functions, and if they reflect real social costs then they are a beautifully simple way of conveying an immense amount of wisdom about how a consumer might behave. For example, if I buy food that is more expensive, I know it took more scarce resources to consume it, encouraging me to go for more efficient options.

One problem with this simple model is that markets produce severe inequalities which exacerbate the basic failing at the heart of prices, and become a tool for freezing in yawning gaps in wealth and power. One argument is that if inequality derives from free choices then it should be tolerated. For example, as Robert Nozick suggests, imagine if a person is good at basketball. Now imagine if everyone in an equal community gave a little bit of their money to see them play basketball. The inequality resulting from this would be immense, but is it really the sort of thing the state should be trying to prevent? The argument made is that both sides are better off, at least in ideal conditions, so that there shouldn’t be an arbitrary intervention to prevent free choices that lead to unequal resource outcomes. While this may be sensible to some degree, a counterargument, made by G.A. Cohen, is that a person acting in step with justice and community would not demand extraordinary inequalities in order to deploy their talents. Indeed, if we go back to the communist ideal, shouldn’t a person simply perform their best at basketball because it will make people happy, rather than using it as a strategy to deny them their wealth? While this argument seems powerful to me, one can easily see the complexity of the issue – if you have prices at all, then you really are accepting the logic of prices, to some degree.

Returning to the idea of the principle of community, I agree with the idea that true market rivalry is not consistent with a strong sense of justice. This places me on the socialist side of things. However, there are other values at play. One recognition of this diversity of values is a reasonable pluralism. If we are still in the age of money, then it seems unlikely that a planning system that approaches the totality of society is compatible with a maximum degree of latitude for a wide range of opinions on how to organize ourselves. That is, socialism might require more of us than we are currently able to agree on. I believe that workers’ self-management is an important component of participatory democracy, but I see how not everyone agrees with that, and how markets can allow different people to pursue radically different models of organizing with relatively little conflict. If there is to be an overlapping consensus on a certain political conception of justice, then, perhaps it makes sense to focus on issues of inequality within market societies, and in ways of introducing participatory elements in the economy in a more measured way in response to the advance of a more comprehensive moral doctrine associated with socialism. In other words, there might be sustained moral change over time until socialism becomes part of the overlapping consensus, but we need to recognize that it is far from agreed upon in current debates.

Pluralism is not the same as defeatism, of course. I do believe that money is historically contingent and may well disappear over time. There are good reasons to shape markets and to insist on maximizing workers’ control, and the state will still loom large over the many choices of how to structure society while guaranteeing access to adequate incomes and wealth. Using prices and structured property rights to achieve shared aims seems like a second best in the absence of a more complete Utopia. Even the limited planning functions of a social-democratic state are useful foundations for future moves towards an advanced form of a just society. It will take radical moral change or stupendous economic progress to make money superfluous, and it will be an immense effort simply to reign markets towards more egalitarian outcomes. Fortunately, the quest to achieve justice seems limitlessly exciting.