Source of Money

What is the source of money?

I ask myself this question hoping that, by finding the source of money, I might find a way to get me some.

I begin my investigation with the scientific method.

Perhaps, through random experimentation, I will stumble on the secret nature of cash.

Readers who've taken high school chemistry know that the scientific method has something to do with Bunsen Burners.

So, I start by scientific investigation of cash by carefully lighting a Bunsen Burner.

I place a five dollar bill in the flame.

I methodically measure the heat given by burning currency.

That done, I then compare it to the heat generated by burning a one dollar bill.

The energy produced by burning a five spot and a one spot appear to be the same.

I burn a sheet of plain white paper that has the same weight as the bills. It seems to produce the same amount of heat as burning currency.

I thought I noticed a slight change in the color of the flame in burning currency as opposed to burning plain white paper. The slight color difference might be explained by the ink.

I pull a twenty from my wallet for the next phase of the experiment. I get ready to put it near the flame. But decide that maybe it would be wise to test coins first.

With a sense of relief, I stuff the twenty back in my shirt and pull out some change.

Pennies, dimes and nickels seem to discolor in the heat, but don't burst into flames.

Paper money burns. Metal money does not.

I scribble an important lab note in my little scientific journal:

The actual physical attributes of the cash does not seem to be related to the value of the cash.

I am really glad I didn't burn that twenty.

Rather than just experiment with money. I decide to see how money interacts with different objects.

In biology, scientists do a lot of things with white mice. I don't have white mice, but I have a bird cage.

I line the bottom of a bird cage with currency of difference denominations.

The birds in the cage deposit a mysterious white substance on the ten spot.

I then line the cage with some newspaper. The birds deposit a similar substance on the picture of the Governor. This seems profound, but after several repetitions of the experiment, I could not any discernible pattern as to where the birds decide to deposit the mysterious white substance.

The source of money is people.

People are the only things that interact in money in any meaningful way. Vending machines and web sites might interact with money. They only do so as they were programmed by people.

Money comes from people. It is a manifestation of our personal values.

The value behind the dollar does not come from a bank. It does not come from the government. The value behind money is created by the people who use the money.

The understanding of the origins of money is the key for developing an economics of prosperity.

If money comes from people, then the secret to becoming wealthy as a society is to develop the people within the society.

Although money comes from people. It is quite apparent that not all people have the same amount of money. Having a ton of children does not make a person rich. Looking at the world, we often see a large disparity in wealth between people living in different communities. Likewise, there is often a disparity of income between different social groups of people. The folks living in Pioneer Park tend to have a lower net worth than those living in Federal Heights. The people living in Hawaii have more money than those living in Somalia.

The large number of rags to riches and riches to rags stories that fill American lore seem to indicate that the ability to create wealth isn''t limited to a certain genetic makeup, nor is it limited to people of a certain social class. We all have the mysterious ability to interact with the economy and to create or destroy wealth.

Realizing that the different ways that people live their lives affect the amount of wealth they bring into to the world strongly implies that improving people will improve our economy.

Societies where people are free to choose their own destiny tend to have a better quality of living than those with forced labor and strict government controls. Allowing people the freedom to maximize their resources tends to maximize the resources of the country. This observation is the key point of Adam Smith''s The Wealth of Nations. It is a point that appears to have been amply demonstrated by different social experients. The strictly controlled East Germany was impoverished while West Germany thrived. North Korea wallows in poverty while the south enjoys economic boom.

The observation that freedom leads to wealth lends credence to my vague notion that money comes from people. Giving people the freedom to follow their own paths creates an environment where they bring greater wealth into the world.

When speaking of the logical foundations of a monetary system, many economists concentrate first and foremost on scarcity. Gold is scarce. As such, gold makes a could foundation for the value of a coin.

Sea water is plentiful and devilishly difficult to pound into the likeness of the queen. Sea water does not serve well as a means of exchange. I suspect that mankind would be worse off if all the water disappeared than if the gold disappeared. However ounce per ounce the scarce commodity of gold out weighs seawater.

It is very easy to conclude that the backing for money comes from scarcity. This is the argument of those who support the gold standard. Paper money is easy to print and devalue. Gold is limited by nature.

Certainly, scarcity plays an extremely important role in economics. However, scarcity itself is not the origin of value. It is the human mind that assigns greater value to scarce resources than abundant resources. Palladium is scarcer than gold, but the substance had no economic value until we were able to assign the substance value. The scarce resource itself does not create the economic value. The human mind creates the economic value.

Saying that scarcity is the foundation of money leads to an interesting logical paradox.

If scarcity is the foundation of money and hence the foundation of wealth, then the way to create more wealth is to make things scarcer.

Oddly enough, this paradox is the basis of cartels, monopolies, unions and other counter productive institutions. Such institutions attempt to create more by cornering the market and creating less. It is not a surprise that the proliferation of such groups tend to reduce the over all wealth of the society. They do not enhance it.

People who believe in the theory of scarcity would have to conclude that the richest society on earth would be the one where everyone died of starvation.

Marx''s theory of labor is a step in the right direction. The theory basically says that the economic value of an item is a result of the difficulty to obtain the item. Essentially, the dollar value of gold is created by the amount of effort needed to run off and secure and amount of gold.

This theory of labor is moving in the correct direction. It turns us away from focusing on material to people, and it just so happens that people assign a great deal of value to their personal time. However, the theory of labor still misses the point that value itself is coming from the human mind. Man values his labor, hence labor has value.

BTW, I''ve learned in my dealing with bosses and clients that while I might assign a great deal of value to my time. They do not. It is not a simple case that x number of hours of work create y amount of wealth for the nation. Employing people (i.e., buying their time) releases economic value, but the economic wealth does not simply come from the consumption of human time. The source of value is still the mysterious set of values that people establish within their life.

To be able to discuss a subject we need terms. I decided to call this mysterious ability of people to assign value the sense of value.

With a shiny new term in hand, we can make some rather interesting statements about the foundation of economic theory. For example, we could create some of the following arguments:

Money comes from people. Throughout their lives, individual people develop a sense of value. Using this sense of value, they prioritize the use of their resources. Over time, people have developed economics using money to help express and set their values.

Money has proven to be an extremely valuable tool. It allows people to quantify and more objectly prioritize their resources. It serves as a tool of exchange. Since people try to use money a benchmark, overall stability in the monetary supply has been a critical issue.

Although money is a manifestation of the people''s sense of value, money itself exists outside the individual. An economic system that concentrates wealth in a few hands tends to improverish the society as it limits the ability of people as a whole to participate, express and develop their values.

Our economic wealth is not simply about the amount of things that we have but about the values that we as a people have developed.

There are many positive things we can say about a philosophy that recognizes human values as the source of wealth. Such a philosophy tends to imply that the way to create a wealth is to its people. Again, history tends to show that there is generally a positive return for investing in people. This increase in wealth doesn''t merely happen because people work smarter, but because education broadens one''s horizons and creates a deeper appreciation for things within this world.

One of the things I like about the theory of the "Sense of Value" is that it provides a path for us to move beyond materialism.

The theory itself starts with the values that we develop as people, and our values extend beyond simple material wealth. We might value a good hearty laugh. We might value friendship. We might value the beauty of wilderness.

The process of defining these values creates wealth.

I developed this based on the sense of value in my attempts to explain the value of a liberal arts education. Now, unfortunately, I have to admit to some laziness here.

While I form my own philosophical approach to life, I really am not that good on citing resources. What I present here is an attempt to put into words things that I as a human value. Considering that liberal arts education has been a mainstay of western civilization for several millennia, I am sure there are others who have found better wording for the idea.

Being lazy at heart, I really have no resources to point out. It is simply my hope that I help you in your wording of your personal philosophy.