What is money? Money is a symbol (printed paper, minted coins, a number on a bank's ledger) that represents an ability to obtain goods or services. It has this power because a government says it does. As long as people believe in that government, money distributed by it retains its value. Being rich is the state of having much more money (or access to money) than is necessary for survival. Why does being rich make some happy, and not others? Because money gives people a sense of security. Money represents, in an abstract sense, a freedom from the fear of not having what you need or want. When a person only needs or wants food, shelter, entertainment, and other material things, being rich makes them happy. When their lives are missing the things that money can't buy, like self-respect, friendship, love, and other non-material things, being rich does not make them happy. Their money does not release them from the fear of being alone, or of disliking who they are, or of being unloved.
Here's another thought on the nature of money: Start with the idea that money represents an ability to obtain goods and services. It is distributed by a government, to government employees and through central banks. The banks redistribute the money through other banks, eventually to companies and citizens in the form of loans. Money therefore becomes not only a symbol of the power to obtain services and material goods, but also a symbol of a responsibility to provide goods and services. When this power and responsibility are balanced, one is neither rich nor poor. If power is greater than responsibility, one is rich. And if one has more responsibility than power, they are poor. The simplest example of this is a bank account. If you have some savings, say three months worth, and no loans, then you are free to decide what to do with your time and energy for the next three months. If on the other hand you have no savings, and a mortgage on your home, then you have a responsibility to work until the loan is paid off.
Can money represent something more concrete than power and responsibility? I believe that it can. Borrowing some concepts from Thermodynamics, money represents mass and energy. Mass is the physical material that the goods are made of (usually a small portion of their monetary value), and energy is the amount of human labor required to produce the goods, or the amount of labor required in service. If a product is machine-made, then the energy required to build and run the machine is counted. This view of economics is very similar to ideas put forth by both Adam Smith in "Wealth of Nations" and Karl Marx in "Das Kapital." What is missing, however, is the acknowledgment of the Thermodynamic Law which states that mass and energy cannot be created or destroyed. What this means is that money, besides representing the ability to obtain goods and services for the person who holds it, also represents a lack of the same ability for everyone else in the world. When money is concentrated in one part of the world, the lack of that money is felt throughout the rest of the world.
Of course one can argue that since money is nothing but a symbol, and a government can simply produce more whenever it is necessary, the conservation law should not apply. But because people must believe that their money has real value and represents mass and energy (although they probably wouldn't state it that way) in order for it to have any meaning, the conservation law is enforced. When more money is produced, instead of mass and energy being created, what we see is inflation, or devaluation of the money. The same amount of wealth is still present, there are just more pieces with less value per piece. Of course, Earth is not a closed system. We are bombarded by solar energy, and a small amount of matter and energy reach us from elsewhere in the galaxy. We also radiate and reflect heat, thereby returning some to the rest of the universe. But accumulation due to this transfer is small, and production of money outpaces it.
So if accumulation of wealth indirectly deprives others of it, in some cases to the point of extreme poverty, is there a more fair way to distribute it? I'm glad you asked! You can send it to me. Just kidding. Socialism tried to tackle this problem, but it is not any more fair and in practice does not really work. Capitalism hopes to let things balance naturally, but interference from government and greed among some people can tilt the balance so far that it can be impossible to return it. So what choice do we have? Given the long history of well-meaning government being unable to fairly manage an economy, I believe that the best solution is to simply ask people with more than enough wealth to voluntarily give some back. I don't mean giving up everything but the bare necessities. I just mean that a person with several multi-million dollar houses should seriously consider whether they should keep all of them, knowing that each one represents a drain on the world's economy. Or maybe the owner of a large company could pay his employees a little better than what he thinks they deserve, because all of his profit represents energy spent by a worker somewhere that wasn't fairly compensated. Maybe if everyone thought about it that way, there wouldn't be any happy rich people.
If you liked this essay and think it makes sense, send it to a rich person you know (or don't know).
-- James T, July 20, 2004
-- James T, July 20, 2004