The Intrinsic Value of Nothing, Part One

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Intrinsic Value of Nothing“Action is purposive conduct. It is not simply behavior, but behavior begot by judgments of value, aiming at a definite end and guided by ideas concerning the suitability or unsuitability of definite means. . . . It is conscious behavior. It is choosing. It is volition; it is a display of the will.” – Ludwig von Mises

Reach in your wallet, and pull out a dollar bill. Look at it for a moment. Now ask yourself, what is this worth? Next, consider the intrinsic value of nothing — because the idea that anything has “intrinsic value” is a fallacy.

This isn’t a trick. Don’t think about anything but that dollar in your hands. Don’t think about a soft drink. Don’t think about a bag of chips, or a handful of screws at the hardware store. Think about that dollar in your hands — without thinking about what it can buy. Can you do that? It’s pretty difficult, isn’t it?

That’s because a dollar, qua a dollar, isn’t worth anything more than the paper and ink on which it is printed. And even the value of the paper and ink must be expressed in terms of some medium of exchange. Thus, we dive deep into the epistemological implications of the human perception of value.

Do you really believe a dollar is valuable on its own? In other words, do you believe that a dollar is valuable, just as it is – simply because the government says so? Or do you believe a dollar derives value from the goods and services for which it can be exchanged?

You would be amazed at the vast number of people in the world who have never considered this question. As tautological as it may seem, most people believe currencies are valuable simply because they are valuable. That is to say, most people believe – explicitly or otherwise – that currencies are intrinsically valuable, for no other reason than governments decreeing them as such. And pardon me for saying so, but that is simply absurd.

And yet, this is precisely what Ben Bernanke and Barack Obama want you to believe about the currency in your wallet. In fact, their jobs depend on it, because if the majority of people stopped believing the dollar was valuable “just because,” we’d have some big problems.

The United States Government – under Ben Bernanke, George W. Bush, and Barack Obama — has committed to spending $13 trillion of your money to battle this, the worst economic crisis in 80 years. And this $13 trillion to which I am referring has been allocated to the current economic crisis, alone. It will not be used for historical obligations, nor will it be used for future budgets. This is how the government has planned to solve this recession: by spending more money, in a shorter period, than ever in history. It’s important to understand that I am speaking in real dollar terms.

According to the U.S. Census Bureau, there are currently about 308 million citizens of the United States. This means the U.S. would have to obtain just over $42,000 for every single man, woman, and child in the country (and abroad) just to cover the $13 trillion to which it has so recently committed. I’m not talking merely about productive, working Americans; I’m talking about $42,000 from every single human being – comatose, bed-ridden, crawling, suckling, or paralyzed. Everyone.

You may be one of the multitudes of people who believe the crisis is over, and that we are currently experiencing an economic recovery. You may believe everything is magically going to fix itself. If you are one of those people, please allow me to disabuse you of any notion that this crisis is anywhere near over.

This entire, elaborate fiasco called quantitative easing that governments all over the world have foisted on the entire global human population is an illusion. It is based on nothing more than the common misperception that currencies have intrinsic value.

There are two theories of value:

1. The Bad Theory. This is The Labor Theory of Value – which is most closely associated with Marxism and socialism. The Labor Theory maintains that anything involving labor has an intrinsic value. And, in fact, most egalitarians believe that everything has intrinsic value. So, maybe you sit in your back yard all day slapping a mule with a garden hose. According to the proponents of the Labor Theory, not only do the mule and the hose have value, but so does your labor. Intrinsically. No matter what.

2. The Good Theory. This is The Subjective Theory of Value – most closely associated with The Austrian School of Economics. The Subjective Theory maintains that value can only exist because two or more interested parties involved in an exchange willingly participate. Thus, at that moment (and only at that moment) does true value exist. All other perspectives of the exchange are interpretative, and can only be used as general guides. So, to continue with our example: you can slap your mule as much as you want, but unless someone wants to pay you for your hard work, it’s not worth anything.

Nothing in this universe has intrinsic value; every single thing you possess, want to possess, use, can use, have used, can offer, have offered, or will offer is valuable only if someone else finds it valuable.

Try to imagine a universe in which no sentient creatures exist. How much would a “car” be worth? The answer is nothing. This type of question is the general foundation of subjective value, and it is also the foundation of the most significant economic movement in history: the Austrian School.

There are many varying schools-of-thought in the practical and academic economic communities around the world. For instance, there’s the Chicago School – perhaps made most famous by Milton Friedman. There are also the French Liberal, German Historical, and English Historical schools. And, of course, there are Keynesianism, socialism, and communism. And then there’s the Austrian School, which was probably made most famous by Nobel Laureate, F.A. Hayek, as well as another of my heroes: Ludwig von Mises.

In an interview not long ago, the contemporary economist and money manager Peter Schiff was asked about Austrian Economics. His reply was as elegant as it was short: “…saying ‘Austrian economics’ makes as much sense as saying ‘Chinese physics.’ Austrian economics is economics, period!”

That is the point of this article: some things are simply self-evident; there is no obvious way to refute them. For instance, how does one go about replacing the theory of Natural Selection with something better? Wouldn’t replacement itself be Darwinian – at least in the Dawkins sense?

Austrian Economics is economics; it is the most elegant and simple explanation of how resources can and should be used. Unlike other schools, it eschews dogmatism and absolutes, adopting instead tendencies and trends.

Austrians don’t actually get to the places we’re trying to reach – we merely approach them…places like equilibrium, and parity, and inflation aren’t fixed points in the universe. Rather, these conditions are tendencies which we can only approach. The closer we get, the more we affect the actual objective we are trying to achieve or observe – thereby changing not only the conditions, but also the outcome.

For those of you initiated in subatomic physics, this should sound familiar. The similarities are so fascinating, in fact, they inspired me to write a book.

Unfortunately, Austrian economic theory is relatively unknown. And of the people who have heard of the Austrian School, still fewer truly understand its tenets. But it fits in elegantly with our original issue: $13 trillion.

Now that the government has committed to spending this nearly incomprehensible sum of money – and probably a lot more than that – we must face the biggest part of the problem: where are they going to get $13,000,000,000,000?

They obviously can’t tax us for it; most people aren’t able to write a check to the government for $42,000 “just because.” So that leaves two choices: borrowing and printing.

And therein lies the problem, because both borrowing and printing have mysterious ways of creating something called inflationary price-increases. And this is why Bernanke and Obama want you to believe the dollar is valuable just because they say so. You see, the more you believe the dollar is almighty, the longer they can put off the inevitable inflationary pressures that will come with so-called quantitative easing (borrowing and printing).

I think this is enough for one session. Stay tuned for Part Two of this two-part series, in which I will delve further into Austrian dogma – specifically the work of Ludwig von Mises and his Economic Calculation Argument. 

If I do my job, all this will help you understand more clearly why all this quantitative easing business is going to be the dollar’s undoing.

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