Given the recent Super Bowl, I have a sports metaphor for you: Dagny and Rearden are like Olympic-grade field and track athletes who have stumbled onto a professional football field. They are extremely fast, they are extremely strong, they can get that ball from one end of the field to the other with no problem… and they have no clue why those referees keep on yelling at them, or why those other guys on the field are working together and even strategizing. There are two different competitions going on here, but Dagny and Rearden aren’t willing to learn the rules of football and the rest of the world isn’t willing to give up the game in order to celebrate pure individual strength.
In some ways, this book seems to foretell the shift our society went through in the way it treats information. We are so inundated with information, in today’s world, that someone’s attention is a valuable resource. Marketing firms make and spend fortunes focusing attention. Facebook is monetized based on the idea that people and corporations will pay money in order to get the attention of various demographics. Dagny and Rearden are the dinosaurs in this new economy. They are the takers rather than the makers when it comes to attention. They demand it of others, but they don’t give it to anyone else. That is why they are currently failing so hard. They ignore their “men in Washington” and their boards of directors just as they ignore the vast majority of people. Dagny even states that she doesn’t think her brother’s new wife is worth the attention it would require to form an opinion of. The economy based on a currency of time and attention is something that she and Reardon are completely unaware of. They wander through the marketplace, wondering why no one will barter with them, when they so obviously have nothing to give.
Anyway, a quick summary of events and then a discussion of money and logic and why Francisco is an idiot.
First, we are introduced to the fact that various great men are disappearing, apparently of their own free will, but under mysterious circumstances. There are a variety of highly successful businessmen who are wondering if they are going to be next.
Meanwhile, Dagny has hired Quentin Daniels to study and complete the super motor that she and Rearden discovered.
Lillian convinces Rearden to attend Jim Taggert’s wedding to the shop girl Cheryl. Jim has ulterior motives in marrying Cheryl. Cheryl thinks she’s living the dream despite knowing about Jim’s ulterior motives, and she may very well be right: this is the most realistic version of Cinderella I’ve run across. Meanwhile, Lillian has ulterior motives in manipulating Rearden into attending and Rearden thinks he’s doing his husbandly duty. So Rearden and Cheryl are hopelessly naïve; Jim and Lillian finally begin to show some basic agency which makes me like them better despite the malice in their motives.
Dagny wears the bracelet of Rearden metal and refuses to return it to Lillian.
Francisco attends the wedding, publicly thanks Jim for being so helpful to his business, goes on a screed about the godliness of money, and then creates a run on the stock market that reminded me of the bank scene in Mary Poppins, but with less singing and even more hypocrisy.
Now, a return to ranting:
The part that really annoyed me was Francisco’s screed about the importance, value, and virtue of money. It’s multiple pages about what a godly thing money is, a perfect tool for demonstrating and demanding virtue. It’s possibly that Balph’s previous philosophical rant at the last party was merely a demonstration that rants of this nature were acceptable party talk. These people need to introduce dancing to their parties, because the conversations are awful.
There’s a woman who disagrees with Francisco but relies on her inner feelings of truthiness rather than argue the point.
I, on the other hand, couldn’t make it through a single paragraph of this without wanting to point out specific fallacies. My disagreements ranged from specific details to the overarching argument. For just a few of them:
- Francisco says that money is but a promise that sits in for gold. But, I would point out, a mineral has to rely on the exact same promise as paper money does: that someone else will find it worth trading for. Gold just happens to be somewhat prettier than paper, but neither one is edible.
- He talks about how America is built on the toil of real producers and isn’t dependent upon the work of slaves. Apparently, Francisco (and probably Rand) skipped American history class: America was literally founded with slave labor.
- He contradicts himself repeatedly in the way he talks about money as both an implement to be used without intrinsic judgment and as a manifestation of judgment of virtues. He specifically states that “money is only a tool” and that “money will not permit a county to survive as half-property and, half-loot. … money is men’s protection and the base of a moral existence.”
- He talks about how money can never be used inappropriately, and yet the “men in Washington” are using money to bribe and manipulate, using money as a means of trading favors. So either he needs to acknowledge that favors are goods worthy of money or that money can be used inappropriately.
- He appears to want the free market to reign without any interference by the government or agreements between businessmen. There is a lot to be said for anarchy, in which individuals must provide for themselves and protect themselves. However, it is also the single least stable form of government, because people are social animals and tend to trade off favors and then codify those trades.
- He appears to think that people’s work and efforts can be perfectly demonstrated by the amount of money have accumulated. He has a weird set of circular arguments that blur the lines between what is and what should be. He describes what money is and how it works, clearly identifies the counter evidence, and then argues that this is a demonstration that the world is wrong rather than his philosophy. It makes me want to argue the scientific method with him. The fact that there are people with money who didn’t earn it, there are people who should probably get a chance to earn it who haven’t been allowed to, and there are people trading money for favors, is evidence that money is not the perfect tool and judge that he is arguing that it is. The world may be broken, but the fact that the world doesn’t follow his belief system is not proof of anything other than that his belief system is wrong.
- The main problem with his belief system, though, is iterations. A scenario that works for one iteration does not necessarily work for ten or twenty or infinite iterations. (The classic example of this is the Prisoners’ Dilemma.*) If everyone in the world starts from scratch and builds up their fortunes based on their hard work, then to a certain extent money can be a reasonable measure of productivity. But by the second generation, there will be inheritance and individuals judged by the work of others.
The real problem here is that there was enough truth in Francisco’s screed that it feels like an insult that he’s so very wrong. It’s two sides of an argument and both sides are using illogical, irrational lies. The truth is that money is an extremely useful tool and it should be respected as such. Money is not an intrinsic evil, like the various strawman-liberals here argue, but neither is it a pure good as Francisco argues. It is simply a tool. It’s an extremely useful tool, but like any other, it needs to be wielded correctly and there are important things that it cannot buy and cannot measure, and require other tools to deal with.
The whole thing reminds me of Dr. Stadler and Dr. Ferris’ conversation about the public. Apparently the public is too stupid to understand truth and logic, so neither truth nor logic should ever be presented to them, and then you can sneer in safety at the ludicrous things they believe because they know nothing of truth or logic. Francisco is doing the same thing and it’s particularly annoying that I can’t tell if his illogic is intentional or if he really believes what he is saying. He’s an idiot either way, but it’s different types of idiocy.
* The Prisoner’s Dilemma is a basic bit of game theory. There are two prisoners who have each been sentenced to one year in prison. The police offer them a deal: if one of them testified against the other, the one who testified will be let go while the other will serve three years in prison. But, if they both testify against each other, then they will both serve two years in prison.
When faced with this situation, as described, a prisoner’s best option is to testify. If the other one doesn’t, then the first one goes free; if the other one does, then the first one gets two years instead of three. What’s the dilemma?
The dilemma comes in when you play multiple iterations. If you play multiple times in a row, then past decisions can effect current and future decisions. Take a twenty-game iteration: If you testify the first time and go free because the other prisoner did not testify, then the other prisoner will have learned that you can’t be trusted. Thus, for the next nineteen plays, he’ll testify. Thus, if you both testify for those nineteen plays, you get sentenced to 38 years in jail, and the other prisoner to 41. But, if you both refuse to testify, then both get sentenced to only 20 years.
There are more complicated versions of this scenario with more players and more iterations, and different analyses. But one of the abiding results is that strategies change depending on the number of iterations: the fewer iterations, the more ruthless a player can be; the more iterations, the more the players benefit by working together.
I’m not entirely sure if Rand would have known about this bit of game theory. The Prisoners’ Dilemma was originally framed in 1950, only seven years before Atlas Shrugged was published, by Merrill Flood and Melvin Dresher at the RAND Corporation (no connection to Ayn Rand).
This is perhaps a bit of ‘truthiness’ but I had a pretty pivotal awakening about money in the workplace when I was working in college: I was a server in the school cafeteria, and it was hours of standing in front of steam tables, serving food to a seemingly nonstop flow of impatient students. It was hot, exhausting, and stressful, and paid minimum wage.
Every month or so, a catering job would come up, and it was a really plum position that we all scrambled for. For a couple of hours I could just deliver pre-served plates of food and pour water for double the wages. It really brought home to me that wages really almost solely depend on the outer veneer of the work, not the difficulty of the work at all.
Yeah, better pay almost always comes with better conditions and more respect, too. Wages may be dependent upon the outer veneer of the work, but I think the outer veneer is also dependent upon the wages, in a rather circular way: the more you pay your people, the more important they must be; the more important they are, the more they should be paid. And, in the other direction, the less, the less. If you can get away with paying them very little, then they probably aren’t worthy much.
Point for point on your 7 points:
1. Gold is mostly a luxury good, and certainly won’t substitute for food. But unlike fiat currency, it does have real value; it can be made into jewelry and used in products. In a free market, if someone doesn’t want to take payment in gold, he doesn’t have to. He can take payment in whatever he wants. But if you look at your paper money, you’ll find it called “legal tender.” What this ultimately means is that you are forced by the government to take it as payment if someone wants to pay you in it, even though it has no real value. The US government can manipulate the “value” of dollars by creating or destroying them. Gold can’t just be created from nothing; significant energy has to actually be expended to produce more of it. That people are willing to do this for gold shows that people really do value it.
2. And when slavery was abolished, did the US collapse? No, it got richer. The highly productive North didn’t depend on slavery. All told, slaves are economically inefficient. Slavery actually held the South back from becoming as wealthy as the North. By the way, Ayn Rand’s major in college was history and she was a keen observer of it.
3. Money is a tool specifically of trade. This use is what brings it under the concept of “money.” Simply because something is a piece of paper with a famous person’s picture on it, or chunk of gold, does not make it money. What makes it money is the fact that it is traded for things of value. When precious metals are forcibly taken and kept as loot, they have effectively ceased to be money. Money is the “base of a moral existence” because it is the medium through which win-win trades are conducted in the modern world. Francisco is not saying here that a person’s morality is determined by how much money he has.
4. Francisco isn’t denying that money can be used inappropriately. What he’s saying is that when money is spent on unproductive activities, the value of the money is destroyed. When money is forcibly extracted by government from those who produced the value, its value also tends to be destroyed.
5. So you think it’s inevitable that people will use government to rob each other? They can’t decide not to?
6. When Francisco says that “money is the product of virtue” he means that the value of money is produced by virtues of character employed in material production and innovation. To see what he means, let’s consider this question: “How much money is a dollar?” If you spent a dollar on a car in 1909, that dollar was 1/850th of the price of the car. If you spent the dollar on a car in the early 1920s, that dollar was 1/260th of the price of the car. Isn’t that dollar “more money” in a sense, after Ford introduced mass production? Certainly, that dollar is “more money” with respect to cars.
Note that Francisco does not say that money is the measure of an individual’s virtue, but that “money is the barometer of a society’s virtue.” If a society is free and highly productive, then the money in that society tends to have a high value. (Due to differences in fiat monetary units, this is best measured in average daily wages. Though it’s also true that irresponsible, power-lusting governments tend to hyper-inflate their currencies into worthless nominal units.)
7. Economics is the science that studies free, human (productive/trade) behavior in everyday life, not game theory. Game theory studies decision-making when people are artificially restricted to a certain, limited set of choices. (Prisoners’ Dilemma, for example, doesn’t allow for enforceable contracts, an important part of a free market.) By the way, if you’re going to study economics, I recommend Austrian economics (Hazlitt and von Mises), rather than Keynesian (Krugman.) Keynesian economics succumbs to various fallacies such as the belief that consumers’ desires increase overall production and the Broken Window Fallacy.
Hey Apollo, It’s good to hear from you. I had feared that we had lost you. Here’s my responses:
1. & 3. I believe that we’re in at least partial agreement on these. Money is a useful concept and gold is desirable enough on its own that enough people will accept it for itself that even those people who don’t want it for itself, find it useful to trade in. It’s value comes from the people who want it, rather than intrinsic.
2. I think you’re conflating “should” with “did.” The fact that America should not have been founded by a slave-owning society, for both economic and moral reasons, does not change the fact that it was founded with slave labor.
3. & 6. I agree with you, Sword of Apollo, that a strong currency system is a sign of virtue on a societal scale. But I disagree with Francisco, because I continue to believe that he is arguing that money is a direct measure of virtue on the individual scale. He says: “Do not envy a worthless heir; […] Money is a living power that dies without its root.” And “Money is the product of virtue, but it will not give you virtue and it will not redeem your vices.” And “money demands of you the highest virtues, if you wish to make it or to keep it.”
4. You wrote: Francisco isn’t denying that money can be used inappropriately.
Francisco said: Money allows no power to prescribe the value of your effort except the voluntary choice of the man who is willing to trade you his effort in return. Money permits you to obtain for your goods and your labor that which they are worth to the men who buy them, but no more. Money permits no deals except those to mutual benefit by the unforced judgment of the traders. Money demands of you the recognition that men must work for their own benefit, not for their own injury, for their gain, not their loss […] Money demands that you sell, not your weakness to men’s stupidity, but your talent to their reason; it demands that you buy, not the shoddiest they offer, but the best that your money can find.”
I stand by my statement that Francisco thinks money cannot be used inappropriately. Maybe he is also conflating “should” with “does.” I certainly agree with him that this is the way that money should work. I just don’t agree with him that it is the way that money does work.
5. So you think it’s inevitable that people will use government to rob each other? They can’t decide not to?
The exact reverse actually: I think it’s inevitable that people will work cooperatively together. If I cook dinner, you’ll clean the dishes, money will not be involved, and this is not a bad thing.
I think we have a basic disagreement on terms here. In my understanding, economics is the science that studies human behavior and decision making in a set environment limited by what can be monetized. Game theory is the more extensive theory of how people make decisions in any scenario, whether monetized or not. And the most basic models in either study are extremely simplified. Your example of the worth of a dollar as defined by the worth of a car, for example, is a useful model even though it doesn’t take into account the way cars have been making a transition from a luxury to a necessity or the way different cars companies compete with each other and how different car models feature different strengths and weaknesses. It’s a very simplified model, and yet, it is still an extremely useful one. The same is true for the Prisoner’s Dilemma. The exact scenario is unlikely to come up much in the real world, and yet the lesson is still valid: iterations matter.
The “Broken Window Fallacy” actually reminds me of the “Trickle Down Economics,” both of which suffer from the same flaw. This view of economics assumes that all money is in circulation. For a small businessman like a baker or the part of the population dependent upon their weekly or monthly paycheck, this is accurate. It also used to be accurate for the extremely wealthy. In prior generations, a wealthy individual would save their money in the form of companies and spent on high-end goods and services that required workers. Increasingly, however, a great deal of wealth is saved in the form of interest-bearing government bonds and the wealthy face social expectations to demonstrate frugality and not spend down that wealth.
I see it a bit like trying to give the same health advice to an anorexic person and an obese person. While a poor person should make attempts to save funds for an emergency, a wealthy person should make attempts to keep their funds circulating.