Money is a tool for measuring value. It creates an empirical framework, making it possible for individuals who have different hierarchies of values to be able to trade to their mutual benefit. Money creates a baseline which entities with different ends in mind can gauge the fairness of their transaction.
For example, suppose you are hungry and go into a deli to purchase a sandwich. The owner of the store charges you $5. To him, that $5 represents the cost of materials used to make his product, the cost of the labor involved in creating and selling it and, hopefully, some profit that can be reinvested in growing and improving his business. To you, that $5 represents utility: it is a means for attaining a good that will satisfy your need: hunger.
Money bridges the gap between different systems of value-judgment and allows individuals with disparate desires and needs to trade fairly with one another. Recognizing that money, even though it has a standard empirical worth in society, also reflects pluralistic and competing value-judgments is crucial to understanding the inherent moral good done to the individual through free trade.
Unfortunately, the populist sentiments that have burgeoned during the past few electoral cycles see money purely in terms of its political utility. To them, the worth of a dollar is rigid and inflexible. This promotes a vary narrow definition of value, one that is bound up with collective American interests. It imputes more value to American goods simply because they’re American, and goods from other countries are intrinsically of less value. But this excludes individual discretion: this removes the ability of consumers who have unique needs to make purchases that are reflective of their own sensibilities. This takes away the extrinsic value of currency, which changes depending upon who is giving a dollar to whom, and only sees the intrinsic value of the dollar.
However, a dollar is a largely arbitrary construct; it only has that value because government declares that to be so. And, to some extent this is a positive. It allows economies to grow exponentially larger than do those systems which are based on barter. A barter system, although also based on valuation, requires direct communication between a producer and a consumer, making it much more difficult for a system to grow beyond a certain level. The creation of a monetary system allows value to be stored in a unity of currency; it helps create a recognizable hierarchy that organizes economic activity and makes it possible on a mass scale.
But that doesn’t exclude money from being influenced by individual codes of value. Something that costs five dollars is less than something that’s worth twenty values; it is less valuable. But this is true only in one sense. The value of a unit of currency is intrinsic; it is an end to itself.
But there are also other variables at play in economic interactions. For a start, value is dependent upon the broader scale of a currency: a penny is worth one fifth of a nickel, which is worth one twentieth of a dollar, etc. These values, although they are fixed, change in relation to various social, political and economic factors, i.e.: inflation.
Additionally, however, while there is empiric worth to a dollar, its value fluctuates with the circumstances in which it is spent. Objectively, a loaf of plain white sandwich bread costs maybe three dollars. It’s worth less than a brand new hardback book that’s worth thirty dollars. Unless, you’re starving, in which case, the loaf of bread is more valuable to you than the book, which does not fill an exigent need.
Value can also fluctuate with individual ideology. A good that embodies an ideal, or the value of an ideal, is going to be worth more to you than something that doesn’t. This can be true even if the monetary value of the object that embodies the ideal is less than the object that doesn’t.
For example: let’s say you have a painting and a book. The painting is by a famous artist, but you don’t like the aesthetic style of the painting and you find the personal conduct of the artist unpalatable. So, even though purchasing the painting might be a good investment as it’s deemed valuable by others in society, you probably won’t be hanging it prominently in your living room to gaze at every day. At the same time, a cheap paperback edition of a book that you found at a rummage sale could be of substantial value, even though it has little commercial worth. If the theme of the book is a message you feel strongly about and the writing style is exceptional, you’ll likely gain an immense amount of pleasure reading it and thinking about the story and the message. The book, even though it has little objective worth, especially as compared with the painting, has a great deal more value to you.
Herein lies the problem with economic protectionism: it does not allow for the recognition of extrinsic value, which prevents individuals being able to express themselves and their core beliefs through economic transactions. Given that economic protectionism is often undertaken in the name of improving quality of life, this is actually a more serious problem than it might initially seem. How can your quality of life be improved if you aren’t in control of the decisions about what goods bring you the most value and if you can’t exercise your judgment when purchasing them?
The problem with protectionism is it abrogates not only individual freedom of choice, but even the intellectual ability to make that choice about what constitutes a value. Instead, one value is established and promoted.
Also published on Medium.