Part 1: Is the love of money, the root of all good?

Posted by Arkady K. On 11/03/2011

You are probably familiar with the famous line from the First Epistle to Timothy in the New Testament:
"The love of money is a root of all kinds of evil", or the more commonly abbreviated albeit somewhat incorrect "Money is the root of all evil".  We have been conditioned to believe that a love of money is something unhealthy and possibly abnormal, but allow me to simplify this further and show you that indeed the love of money is not only good and normal, but one of the pillars of America and the foundations of mankind.

First, what is money?  More appropriately, what is money supposed to be in the most fundamental sense?   At first blush, money is used to "buy" things, but what is the action of buying?  Buying is the same as trading, except that you trade money for goods and services, selling is trading goods and services for money.  Money has no other purpose, it functions as the primary tool for trade.  That begs the question, why are we trading?

Presumably there are several important items that humans need in order to live and even more items in order to not just live, but enjoy life.  Some of the most obvious items include food, water and probably shelter.  In more adverse climates some kind of clothing.  In order to acquire food and water and so efficiently the human requires tools.  We can extrapolate forever, but lets stop right here.  

Meet ZugZug!

ZugZug is a young, capable and clever cave dweller in the year 10,000 BC.   Winter is quickly approaching and although ZugZug is a skilled forager, it takes him almost the entire day to harvest enough berries/mushrooms/plants to keep himself full in these chilly days.  ZugZug comes across another sensible caveman, by the name of BugBug who happens to be a skilled trapper.  Problem is, eating squirrels all day long is boring and BugBug developed a hankering for something new and exciting.  So Zugs decides to trade, now both Zugs and Bugs have applied their skills and created a far richer diet - through trade.   Of course Zugs is still naked, which is fine, but BugBug has gotten fat off the squirrels and needs to be clothed, if only for Zug's sake.  Thankfully Zugs is acquainted with the perpetually hungry MagMag who is really good at crafting warm coverings for the naughty parts from the fur scraps left over by BugBug.  All three  decide to trade their goods and are now suddenly all fed and clothed to boot!   I can probably keep going until I run out of idiotic caveman names, but I think you get the idea.

Trade is essential, it keeps society functioning and makes life better!  However you can also clearly picture a scenario where trade becomes quite complicated as it always assumes that whatever you want to trade for is desired by whatever you are willing to trade away.  Maybe, just maybe once Zugs acquired enough of MagMag's shoddy squirrel undergarments he no longer needs any additional pieces of clothing.  But what if he decides to keep on trading and accumulating clothing.  He can then stockpile enough of these garments and may even consider traveling to the village up north where the diet is more interesting and the clothing can fetch him  something other than berries and squirrels!   What has ZugZug actually acquired?  Private property.

In fact, if he were so keen as to dig a hole in that cave of his where it is nice and cool then he could even keep some of the leftover grub, thus yielding you not only furs, but berries and meats.  Piles of private property.  Imagine also that ZugZug was able to trade for a spear, two knives and this large round thing with a hole that he is not quite sure what to do with, but apparently is all the rage.  Either way, he has more and more private property, property that makes life easier!  In fact with the private property Zugs can now hunt for squirrels with the spear, skin the animals with the knives and for a lack of a better idea plant a nice flower in the big round thing!

How do we call this accumulation of private property?   We can call it wealth.

ZugZug is wealthy, for in that particular society he has everything in order to be well fed, rested and happy.  Life is good.  Now imagine that BugBug and MagMag were also able to acquire the same items, then everyone is wealthy, life is great!

Where does money come into the picture?  It comes in quite naturally when the number of items that one exchanges is so great that trading becomes too difficult.  After all, the last thing Zugs wants to do is run around like a chicken with his head cut off trying to find someone who needs the latest squirrel sock, because he happen to fancy the new spear (made with extra thick twine), but the spear owner is looking for two of those round things with holes in it for some inexplicable reason.  Just becomes too damn confusing.

Now imagine we just got the past the whole "stone age" thing and tools are now made out of iron.  In fact almost everything is made out of iron.  Tools, shelter items, weapons and even belts!  Everyone needs iron, everyone.  Since everyone needs it, iron can now be used as the universal medium of exchange.  Gone are the days where ZugZug needed to swap with BugBug and his entire extended family.  As long as one had chunks of iron, the one could acquire *anything*.  In fact at this point, storing berries and excess tools and weapons just for trading is no longer necessary.  Not only do berries go bad, but hauling all that private property everywhere is cumbersome and hardly practical.  Not to mention paying that idiot Bubba with endless supplies of different foods just to make sure that nobody steals ZugZgu's furs.

So what do we have?

We have iron, that allows for trade.  Trade allows for everyone to get and exchange items they require which eventually leads to more and more people accumulating private property.  This leads to a wonderful and fulfilling life.  In this case iron is money.  Money is therefore essential in making people happy, quickly and efficiently.  All that is good was acquired by money.

Money is the root of all good.

Now pretend that everyone is happy with trading iron for goods.  Yet somehow, with no real explanation every village becomes overrun with endless supply of iron from a mysterious source.  At first, everyone is absolutely delighted for all the potential private property they can acquire.   Until of course they learn that more and more iron is required to trade for the same berries, furs, meats and tools.  

That my friends, is called inflation and will be explored in the next installment of ZugZug and friends.

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"It is no crime to be ignorant of economics, which is, after all, a specialized discipline and one that most people consider to be a ‘dismal science.’ But it is totally irresponsible to have a loud and vociferous opinion on economic subjects while remaining in this state of ignorance.” - M. Rothbard