Wednesday, July 21, 2010

Intrinsic Value is a Contradiction in Terms

Jesse, of Jesse’s Café Américaine, is an eloquent and persuasive writer, whose writing I admire and enjoy. His article on Jim Grant’s analysis of recent Federal Reserve nominees is no exception to his usual high quality. It caught my eye though for the quotes he chose, in particular this part:

“These are people who I think are unlikely to propose novel solutions to our fundamental monetary dilemma which is that the US dollar is a faith based currency of no intrinsic value that is manipulated by the Fed, and the consequences of the manipulation are often quite distinct, different from what was intended. That’s the problem.” [My emphasis.]

People like Jesse and Jim Grant (I respect Jesse but don’t know Jim Grant) are trying to think outside the famous box, which is good, but they don’t go far enough in my opinion. All money is faith based. Nothing has intrinsic value. Even air, water and food are ‘valuable’ as a consequence of the web of life that has emerged on this planet. It is relationships and interdependencies that give rise to notions like value. Air in and of itself has no ‘value’ as one of its properties. Some other thing, e.g. with lungs, has to need it. And money, in any form, is far less important to humans than air, and as a medium of exchange has no intrinsic value. Money can only represent value. Furthermore, even if we overlooked the fact there is no such thing as intrinsic value, a commodity like gold, which in economic myth has instrinsic value, can be manipulated, and often has been. Also, gold’s value varies relative to other commodities. In fact there is no Value Foundation Stone against which all other things can have their value measured. When is mainstream economics going to get this? Ah the folly and illusion of control!

Jesse and Jim Grant warn of the dangers of group think. But there is only group think, albeit in varying degrees. No human can grow up outside all social contact with other humans and develop language. Without language no thinking is possible. Nothing we can do can alter this logical relationship. We can at best strive to be perpetually cognisant of this ‘pitfall’ of being a highly intelligent social beast, and improve our chances of preventing the emergence of the vested interests and frozen status quos, which so bedevil us now, by taking those painful and difficult steps away from elitism and hierarchy generally, towards the new egalitarianism hinted at by Open Source Software. It is in the gentle pursual of sustainable abundance that such a change can be realized, in the slow transcendence of ownership, shallow materialism, conspicuous consumption, the nation state and so on, that a new money and consequent new economics can be born and find lasting form. In his immediately previous post, Jesse suggests the same:

“The lifting of the veil from their scheme will be like the rising of the sun, as things long hidden become known. And we will look upon money and value in fresh ways.”

I dearly hope so. The question is, how fresh?


Edwardo said...

Your thoughts regarding "thinking outside of the box" and what does and does not constitute truly novel thought, particularly the conundrum in genuinely breaking free of conventional ideas, is spot on. And speaking of spot, you wrote:

"Also, gold’s value varies relative to other commodities. In fact there is no Value Foundation Stone against which all other things can have their value measured. When is mainstream economics going to get this? Ah the folly and illusion of control!"

I would like to propose the concept of relative intrinsic value such that gold, for better or worse, is as close to a Value Foundation Stone as humanity has managed, or, is likely to manage. I could go into why, but suffice it to say that because gold has so few practical uses-despite being enormously ductile-and happens to be amazingly resilient to the elements, and is potentially quite lovely when fabricated, it has served as an excellent store of value when measured against pretty much anything one can name.

And, it is, in my view, at least, fitting, and no accident, that the end stage of Capitalism, which, by my runes, has occurred over the last 70 years- roughly the length of a person's life, as fate would have it, in a capitalist country- has involved the demonitization, if not the demonization, of gold.

This is due simply to the fact that because gold comes from nature, and is therefore, despite the best efforts of some, simply not amenable to being rendered an abstraction, it stands firmly in the way of Capitalism's inherently, and unerringly, obsessive tendency to try and operate outside the restraints of nature. Capitalism may exist in nature, and it certainly exploits it, but, by gum, it simply will not, in what is certainly an enormous paradox, be limited by it. Or so it thinks.


Mr. Grant is a very intelligent man, but he, like quite a few others about the land, is quite bounded in his thinking such that, in my view, the arguments he constructs, and the logic he follows, lead him to conclusions that he assiduously veers away from at the moment of truth.

Toby said...

Gold, and not e.g. potatoes, became our supposed store of value for the reasons you listed, but this does not mean it can be a store of value, for reasons I list elsewhere, the principal one being; it is a medium of exchange. A medium's function, by definition, is to represent, not to store. Language is a medium of exchange, and cannot contain the reality it seeks to represent. Let's not want any medium to be a store. It's silly, illogical, Cartesian! Value exists in relationships, not in things in and of themselves.

Capitalism is the long and unwitting process of trying to dominate nature for humanity's benefit. It was born in farming, which is about control of 'not-me' so that 'me' does not have to suffer unduly. It is the Tower of Babel as long term socioeconomic process, a fire slow-burning through raw materials in pursuit of Heaven for me and mine. As 'me and mine' becomes all of humanity, as our rapacious transforming of nature into commodities for consumption threatens ecosystems everywhere, so capitalism runs out of steam, becomes dangerous to me and mine. It was fun for some while it lasted. Let's not be loyal or romantic about this, it was just a system for distributing goods and services.

It needed to think though, that value could be stored in something like gold (as money). This is because farming is about cheating nature and the elements, about saving for a rainy day. Storing is built in to this process. And gold, wonderful gold does not rot, and is always pretty/shiny to boot. Nevertheless it cannot store value. It merely does not rot. One does not mean the other. You can neither eat nor drink pretty shininess. This is so obvious it seems pointless to say it, but culturally we have indeed forgotten this childishly simple truth. And yes mediums have value, but as mediums, not as stores. And yes I would accept that systemically money's 'intrinsic' value is its utility value as an enabler of economic activity, but this entire process comes at a cost, right now a very high one. We think money stores value when it does not. It consequently has become more important than the value it represents, and is a source of top-down elitist control that I am very sick and tired of.

So, don't look for any Value Foundation Stone whatsoever. Not until it's clear humanity needs one, and what the tricky consequences of such a thing might be. Life is non-linear and highly relative, interdependent, web-like. Our economics needs to reflect this, not ignore it come what may.

p.s. Recently, intelligence impresses me less and less. Experts everywhere seem totally incapable of using true, impartial intelligence to look beyond their training and the cultural paradigm du jour. We need brave thinkers, not predictable ones who also are, by chance, intelligent and eloquent.

Edwardo said...

In the U.S. gold will probably will never be a medium of exchange except in circumstances that involve a total breakdown of society and/or a very chaotic environment such that black markets somehow manage to thrive. I expect, but do not know, that it is a medium of exchange in large parts of the globe presently.

Mankind clearly can not function without mediums, which, by their very nature, change and distort that which they represent. And so we are always looking for better mediums but we generally just complicate matters in the process.

You wrote:

"And gold, wonderful gold, does not rot, and is always pretty/shiny to boot. Nevertheless it cannot store value. It merely does not rot.

-I think you perhaps underestimate the value, ah, there's that word again, of that which does not rot.

"One does not mean the other. You can neither eat nor drink pretty shininess."

I can't eat dirt either, but if it is of a certain quality (that which contains mineral nutrients-not necessarily gold-one values it highly. All this by way of saying that perfection, with respect to the project of finding the most valuable of valuables, will be reached the day after tomorrow.

I suppose that in saying that, I agree, in principle, with your view that "there is no Value Foundation Stone whatsoever." I also agree with you about being intelligence, and will put it in a manner Voltaire might appreciate, "High intelligence is often unintelligent"

Toby said...

I think we overestimate the value of that which does not rot. Rotting is part of the cycle of food-->waste-->food. Not to be a part of that cycle (though in the very very long run everything is) is not to be involved, not to give to or take from that which is going on everywhere. It is because gold does not rot -- at a speed which has relevance for us -- that it was such a good hook for the myth of intrinsic value, so important to our millennia long pursuit of the mastery of nature, that messy, rotting, seething thing 'out there' that so threatens and assaults us. We were once 'happily,' unquestioningly embedded in it, we then psychologically removed ourselves from it, and I think now we are learning a new way of accepting our total embeddedness in it again.

I don't think it's relevant though that gold does not function as a medium of exchange right now, since we are discussing intrinsic value, which is like a discussion of intrinsic beauty -- there's simply no such thing. But as a medium of exchange, any money (be it a commodity-based or fiat (and commodity money is fiat too in a way)) can only ever be our best attempt to represent the value of things, as we (seem to) agree. That's the main point. Not-rotting shiny stuff is one part of the history that gave rise to the need for money as 'store of value.'

And I agree that mankind cannot function without mediums, but then nothing can (to take your point about soil a little further). Matter itself might be thought of as energy's (or spirit's) medium for doing Physical Universe. I suspect nothing could happen at all without mediums facilitating exchange. Mediums are very 'valuable' in that way; they are a necessary part of life, and yet "intrinsic" is still the wrong adjective.

In a way, this all harks back to my 'no individual' blog. The longer I dwell on that, the more certain I become that my position there is correct. The very word "intrinsic" is weak and problematic, rooted in a flawed Newtonian/Cartesian paradigm, as is "debt" in my view, as are many other words and ideas from the weird world of economics I'm struggling to understand. The very ways we try to explain reality and organize ourselves have grown out of the soil of thousands of years of inquiry, both wise and foolish. This makes zeroing in on meaning very tricky indeed. We cannot remove ourselves and how we became what we are from the inquiry.

"The master's tools cannot take down the master's house." Dealing with systemic problems requires an 'intelligence' that was not born of the problematic system. So yes, the type of high intelligence we need to unpick the knotted tangle of cancer and autism modern society has become, must be 'unintelligent' from the system's point of view. It's probably always that way...

Edwardo said...

Toby wrote:

"The very word "intrinsic" is weak and problematic, rooted in a flawed Newtonian/Cartesian paradigm, as is "debt" in my view, as are many other words and ideas from the weird world of economics I'm struggling to understand."

Well, now that you've throw down the gauntlet, perhaps you could explain your position.

Toby said...

I'm working on it, Edwardo. An earlier post on debt lays out my initial ponderings on debt, this post and others are my current position on "intrinsic." I'm hammering it out as I go, and these forays to straighten out exactly what my intuition is telling me are basically preparation for a book I'm working on.

The conversation we had on the individual atom a couple of months back was on this playing field. I think we discussed silver's shininess not being intrinsic because you need light and eyes to make up shine. The shininess is not in the silver, but in relationships between observer and observed, with the medium of light playing a role in delivering the shiny information. Ditto colour. Colour is not inside the object, not intrinsic too it. Neither is something like solidity. The Newtonian world view does not yield this interpretation, since it instead presents us with generic building blocks with intrinsic properties being stuck together with an array of forces to make up the elements and compounds we know. Descartes puts 'soul' inside the human body, and as a follow on from religion gives us dominion over inanimate nature. So, 'intrinsic' seems to me to belong to that paradigm, albeit not entirely, since systems seem to have 'intrinsic' patterns. To be redundant about it, things are what they are.

That'll do for now. I have to stop typing. I've been recently diagnosed with carpal tunnel syndrome in my left wrist, and I've got frozen shoulder on the right side. I've promised myself to take it easy so I can recover from these really frustrating handicaps. Anyway, I'd be interested to hear your thoughts.

Edwardo said...

I understand now why you assert that intrinsic properties such as shininess and solidity do not, strictly speaking, exist. However, even if the shininess of silver is merely a function of, as you put it, "the medium of light playing a role in delivering the shiny information", I maintain that since we have no other way to experience the effects of light on physical objects except via the medium of our eyes, the shininess is, for all practical intents and purposes, an intrinsic property. From a scientific standpoint, silver is not "shiny" but that is simply not all there is to the matter, pun not intended.

In the meantime I'm sorry to hear about your physical maladies. May you recover from them as soon as possible.

Toby said...

Yes I agree with you, with an important qualifier: to most human intents and purposes. That may seem weaselly but I think not. We have a myth about ourselves as outside nature looking on, a myth which pervades most everything scientific, philosophical and economic that we do, and this myth lies at the heart of the current crisis. We need to recognize this and do our best to remain cognizant of it in our more serious communications (science, philosophy etc.) with one another.