PostHeaderIcon Capitalism Basics

A mental midget blathered the following inanity at the end of our Ayn Rand discussion today:

There are two massive problems with Ayn Rand. First, her philosophy is ludicrous. She claims to believe only in what can be rationally observed and proven; yet she herself willingly consents to completely irrational ideas while refusing to admit as much. For instance, money is a fundamentally irrational phenomenon. Money has no intrinsic value, nor any objective existence; its a consensual illusion for the sake of an ordered society. In other words, its a leap of faith. This doesn’t even occur to Rand. Nothing is more ludicrous, for instance, than the fetishization of gold in Atlas Shrugged. Gold is a completely useless substance in and of itself, its only value is what is given to it by humans – on no rational basis at all – and then consented to by others. On this level, capitalism for Rand is clearly a religion: a delusion accepted for practical purposes, i.e. a noble lie.

Then he went on to discuss her literary failings. I couldn’t resist the following reply:

What twaddle. “Irrational” is not a synonym for “abstract.” “Money” is simply the abstract term we use for a useful medium of exchange among traders and temporary storage of disposable wealth. If I trade one of my excess perishable oranges to a neighbor for 20 steel nails, because I know another neighbor will gladly trade me one of his excess apples for fifteen nails next fall, the nails serve as “money” for all three of us.

There is nothing irrational about us agreeing to this arrangement, and there is nothing phenomenal about the nails to a rational man who owns a hammer. They have intrinsic value as a building supply, even though we also choose to use them for money. The apple grower has the choice to use them as nails to hang up his winter shutters, or save them as money he can trade for something else he will need in the spring; an option he would not have had with rotting apples.

Now, absent meddlesome neighbors trying to interfere in our mutually beneficial and unregulated commerce, there is nothing prohibiting me from agreeing to wait for payment from the first neighbor, if he agrees to pay me an extra nail or two in “interest” for the time he retains my “capital.” Conversely, I could offer to advance my “capital” to the apple grower, at a nail or two less than his asking price, for the promise of an apple when his crop comes in; a deal that he might jump at if he has an immediate need and is short of capital.

Thus capitalism is born, is entirely rational, and all participants eagerly enter into the exchanges and contracts with open eyes. Nobody is harmed or cheated, because we each trade something we value less, for something we value more. I, as the much maligned “capitalist,” am the only one who takes risks (that I will get paid eventually for my “loans”); but I am paid for taking them. If the other neighbors keep their “hands off” and continue not to meddle in our private affairs, we can call it laissez faire capitalism.

All manner of durable commodities have been used as money in human history, but silver and gold have been the favorites; because of their scarcity, and thus their high value for small, easily transportable, quantities. Contrary to your assertion, gold has intrinsic value, exists objectively, and is not illusory. I’ll not deny that some may have a fetish for gold; but that only enhances its intrinsic value, and insures that it will always be easy to trade a quantity of it for something one values more. This makes it an ideal commodity to use for money.

Objectively, nothing has “value” other than that assigned to it by a human mind, whether rationally or not. To the trader, it matters not how a seller determined his asking price. The buyer only has to decide if he personally values the offering more than what he must give up in trade for it. If he does, both win in the deal; if not, no deal is made. Thus, there are no losers in pure free trade. The only way to lose in capitalism is to invest capital at risk, and no one is required to do so.

There are rewards for risking capital; but rational actors choose for themselves whether the rewards outweigh the risks. There is simply nothing metaphysical or delusional about money or capitalism. It is pretty simple and really only common sense among producers and traders. It is an elegant system for reasonable men engaged in commerce. Those who oppose it are immediately suspect; for chances are that they wish to attain unearned produce, by enslaving the producers, one way or another, to provide them. â—„Daveâ–º

2 Responses to “Capitalism Basics”

  • At the same time it is important that we keep separate in our minds the the concept of value and the concept of currency. We wouldn’t really have to do this with a fungible commodity, but in a fiat currency, we have to remember that the government is quite capable of remotely reducing the value of the currency we hold at any time. Nails, apples, and gold all vary in price with demand, but have intrinsic value not found in the paper notes. Fiat currency was obviously invented by the tax man, to prevent exactly the kind of trades you mentioned.

    The comment in question reminds me of people who think that if God doesn’t exist then there is no meaning to life. I wish these people would stop wasting perfectly good air.

    Gold is useful stuff. It is a great conductor, doesn’t corrode, is easily worked and cast. I’d love it if the stuff were much more common. I work in a corrosive environment and need small things to weight down my work. Some gold bars would be perfect.

  • Agreed. There wasn’t any point in confusing him with the distinction at that point. I doubt that he has a clue that green IOU’s are not money, but are instruments of debt. I am sure he calls them “dollars,” without the slightest notion that “dollar” is a unit of measurement, not an “objective” material object. I presume you saw his response. If he is half as obtuse as he appears, the professors who crippled him ought to be horsewhipped.

    I also concur about the utility of gold, which has great value for plating connector contacts in the electronic industry, for precisely that reason. It is quite useful for making members of the opposite sex either attractive (expensive jewelry) or unattractive (wedding bands). Yes, it would make superb paperweights, and if that plentiful, we could plate all our tools with it to preclude rust – or even nails. 🙂 â—„Daveâ–º

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