Could we survive without Money?

In the future, please read the entire thread before you post on it. I covered that point eight years ago.

Our species is programmed to only care for and depend on members of our extended family (or "pack") whom we've known intimately since birth. We have no instinct to feel responsible for anyone outside that group, and in fact we have just the opposite instinct: to regard them as competitors for scarce resources and fight with them. We developed agriculture twelve thousand years ago so we now have a food surplus, but it's been a struggle to overcome our pack-social instinct. Twelve thousand years is not long enough for new instincts to evolve by random mutation and natural selection.

Today we can live in communities of ten or twenty thousand and feel kinship with them, but it's very difficult to "work for the common good" of people on the other side of the planet who are nothing more to us than abstractions.

This is why socialism works in countries like Bulgaria and Sweden, with a tiny homogeneous population who regard each other as brothers. And this is why it doesn't work in countries like the USA or the USSR, with a gigantic heterogeneous population who regard each other with suspicion and disdain.

I've responded to this hypothesis several times on this forum. The barter system worked in Stone Age villages. Everybody knew everybody and everybody was busy producing the necessities of life.

But as soon as our villages grew into cities and the Stone Age gave way to the Bronze Age, barter no longer worked. People had to trade with people they didn't know and couldn't trust. Even worse, because a Bronze Age economy produces many more types of goods and services, they weren't trading directly with each other and they weren't trading goods and services at the same time.

• I need a new wagon.
• The wainwright needs a new roof on his house, but not until winter.
• The roofer needs new boots for his whole family.
• The bootmaker needs a supply of hides, which won't be available until fall.
• The trapper would like a year's supply of wine for his mountain cabin, which can't be made until spring.
• The winemaker wants my band to play at his daughter's birthday party, which will be next summer.
• None of us know each other personally.

Multiply this by the number of wagons, roofs, boots, hides, casks of wine and birthday parties that the population of a city needs, and bear in mind that a city has dozens of wainwrights, roofers, bootmakers, trappers, winemakers and musicians. How can anybody, no matter how honest they try to be, be sure that all of these exchanges are done fairly?

Then remember that a prosperous economy requires the maintenance of an inventory. In reality the bootmaker isn't going to order the hides for those boots, he bought them last year and they're in his storeroom. The wainwright has a couple of brand new wagons sitting in his lot; all he has to do is paint them and choose the right kind of wheels for the customer's usage. Some of these products come from other cities, and they're currently in the back of a wagon being pulled by a mule, and it might take them a few weeks to arrive in our city. You have an inventory of goods in storage or transit, so when someone needs them they'll be available.

You end up having to keep very detailed records of all these transactions. Eventually somebody figures out that one particular kind of commodity, say a barrel of olive oil, makes a handy surrogate for the value of all goods and services. So I give the wainwright a few barrels of olive oil for the wagon, he hangs onto them and gives them to the roofer next winter, etc., etc. Eventually people get really tired of schlepping barrels, and besides they'd rather use that olive oil instead of leaving it in the barrels while goes rancid.

So the city fathers, who keep a huge barn full of olive oil, make little clay chips with pictures of barrels of olive oil on them. When you do a service for them they give you chips for the number of barrels your work was worth. You know they've got the oil and you can trade the chips for oil anytime you want, but it's easier to just carry the chips around. I give a couple to the wainwright, he gives some to the roofer, etc., and next summer the winemaker gives me some for playing at his party. They're probably not the same chips, but I can still go back to city hall and turn them in to collect my olive oil.

Soon we come up with shorthand ways of representing barrels of olive oil. In many cultures it was a hash mark system: 1111 equals four, and then you slash the whole batch to make five. Eventually they want to put more information on the chips so they come up with other symbols for oil, sheep, sheaves of wheat, etc. Those symbols become stylized pretty fast. You end up with little clay chips that are money.

Clay isn't very sturdy so they start making them out of metal. Eventually paper is invented and they just print them on paper. Somebody gets the bright idea that by expanding the set of symbols you can use them for recording more than business transactions. Maybe your laws or your religious texts. Even the news and birthday greetings. In fact, in most human societies, the writing system evolved from bookkeeping records!

So we come back to what I have said before: Money is nothing more or less than a record of surplus wealth or "capital." It represents a warehouse full of olive oil, or a lot full of wagons, or a shack full of hides, or a field of grapevines that will become wine in a few months, or a repertoire of songs and the talent to play them.

In a city, much less an entire interconnected planet, business is much too complicated to transact by barter. You need to keep records, and we call those records money.

 

Currency, specifically, may not be necessary, but something is necessary to allow us to maintain records of complicated transactions. As I pointed out earlier, barter is simply not feasible in a post-industrial economy run by billions of people who never meet each other, producing goods and services that may not be needed for six months or longer. Recordkeeping is imperative, to ensure that we don't produce so much wine that it turns to vinegar before anyone drinks it, but so few boots that our children get frostbite in the winter. Money is that record, and has been since the Bronze Age made life too complicated to be managed by a barter system. It doesn't matter if the money is a warehouse full of some extremely durable commodity, metal coins, gold bricks, a pile of diamonds, paper rectangles, or bits and bytes in a computer. A post-Bronze Age economy absolutely must have money of some sort or it simply cannot function well enough to sustain itself.

The problem is that for thousands of years gold was money. It was rare enough to prevent counterfeiting, plentiful enough to distribute as necessary, and it already had a cachet of intrinsic value because of its use as jewelry.

That's not unreasonable. Whatever a society uses for money has to be regarded as money by everyone. Everyone regards gold as money. No one regards diamonds as money.

People who don't understand this need to go review their university class notes on the relationship between economics and psychology. If they didn't take that class and don't have those notes, this discussion probably won't make much sense and it will be difficult for them to contribute to it.

Why should we expect the poor to be any brighter than the fortunate? One of the primary reasons poor people are poor, in a country like the USA, is that they didn't take school seriously and didn't learn anything.

 

You younger people may live to see the day when you can actually do that with food. Production systems that are almost completely automated, producing more than enough to feed everybody. Distribution systems that are programmed but not completely automated because transportation is a little too complicated for the foreseeable level of transportation technology to handle safely--too much stuff, including people, in the way, to let machines drive around by themselves. We'd probably need a dedicated network of delivery tubes, and that's a whole new physical infrastructure that will need to be built the old-fashioned way, with explosives and poured concrete and humongous wheeled and tracked machines driven by strong people with hard hats.

And I suppose minimally functional clothing could eventually be created and delivered the same way.

But who in this brave new world is going to want to subsist on C-rations and dress in school uniforms? People want variety, they don't all want the same thing, and they really really really don't want to all look alike. Someone has to take their orders for food and fashionable clothing, and someone has to program the automated machinery to produce that stuff. This requires planning the crops you cultivate so that the right ingredients are available in the right amount at the right time, and mining the right minerals.

But once we get off of the Third Step in Maslowe's Hierarchy, which most of us in the western world stepped up from a long time ago, how do you plan to produce and distribute the rest of the goods and services that comprise a modern economy? How do I get my bass guitar so my band can perform? How does a bar get built so we have a place to play? Who makes the beer and how do bottles of it get into the hands of the people who came to hear us?

The end result of the industrial revolution was that the world's economy tipped over from scarcity-driven to surplus-driven. In the USA that happened around 1895. Human and animal labor could just about produce enough food and other products for survival and security. But augmented by industrial technology we now also produce entertainment, leisure and luxury.

And now, augmented by electronic technology we're finally coming closer to spreading the necessities and luxuries a little more equitably among the world's population so there aren't some countries where everybody has air conditioning and others where most people don't have clean water. And of course those inequities are not all the fault of imprecise economics, some people ended up with despotic leaders who simply don't want them to have nice things or even necessary things. Electronic technology allows them to become better informed and organized and they're starting to overthrow the despots. Sometimes they just get a new despot and they have to repeat the process until they get it right, but hey progress is never easy.

In fact if you look more carefully at the poor countries you may very well discover that their poverty is not due to the failure of the traditional economic system. It's due to lack of education and communication, resulting in people having power without the consent of those they govern.

There's no technological or economic reason why the people in Latin America, Africa or southeast Asia could not, right now, have a standard of living considerably higher than what we call the "poverty level" in the USA, $22K per year for a family of four. The resources are already in existence, we could build that kind of system for them in three or four years. It would not require throwing out capitalism and all of its flaws.

What it requires is getting internet service into every home so these people can organize and act in concert. Fortunately, that's starting to happen.