Sunday, May 02, 2004

Tempus et Pecunia

As I mentioned in a previous post time has been much on my mind of late. And I have finally seen the sign that it is time to post some of those recent thoughts.

Physicists strive for a Universal Theory, a single elegant explanation of all phenomenon down to and past the Quantum level. An explanation for all that is in the universe and how it works.

This then, is at least the start of my Universal Theory of things Temporal. Of the classic questions of who we are and why are we here? No small task, I realize, and many great masters have come before me along this path. This is my own distillation and observation, my statement of my understanding of such matters.

At the heart of everything we do, all we observe, all we accomplish, is time. Time is at the very center of our existence. Almost every philosophical belief system I have run across, and most all religions agree on two principals. This is a material universe, and we experience the three dimensions of that universe through the fourth dimension, time. Even empirical science is based on these premises. The one aspect of commonality of the Atheist and the Theist, the Buddhist and the Baptist, the Mathematician and the Methodist are these facts. Time is the one common factor, the universal leveler. Ingvar Kamprad and Bill Gates have allotted to them exactly 86,400 seconds per day. The same amount of time as any beggar on a New Delhi street corner. (Kamprad, the founder of Swedish furniture company Ikea, has recently accomplished the seemingly insurmountable task of surpassing Gates as richest man in the world.) As many would attest, money at those stratospheric heights is just a way of keeping score. But what exactly are these 'points' that are being accrued? Admittedly, Hr. Kamprad and Mr. Gates have not had to worry about where there next meal would come from for quite some time. Does the nature of money change as one acquires more and more of it, or is there a single defining definition of what money is, that is unchanging, measurable and applicable at any level?

In other words, is there an empirical definition of money?

A quick Google with the search string: define money
(Note that these results may change by the time you read this. The wonderful thing about Google is the way it tracks changes in Internet patterns. The very act of you reading a website like this one and referring to it can affect the Google search results.) yields some interesting results:

the most common medium of exchange; functions as legal tender
wealth reckoned in terms of money
the official currency issued by a government or national bank

Hmmm, true enough. But this is money as we know it today. What about early US history before a National Bank existed? Did money not exist before governments and banks? Why yes, it did. These are definitions of how money works.

Further down we get to a very interesting definition:

Money is anything that is generally acceptable in exchange for goods and services. Money does not necessarily need to have any intrinsic value to serve as a medium of exchange. It is someone's willingness to accept it in payment that gives money its value in the exchange process.

Now we might be getting somewhere. Though many will claim otherwise, the true value of money is the fact that someone will accept it as payment. The fact that it is a coin made of gold or silver might be an influence in that person’s decision to accept that payment, but in the end the only true worth of gold, is as a commodity that makes electrical connections more effective. Most of the people trying to convince you otherwise are usually trying to sell you gold. You figure it out. In the end if no-one will accept your gold coin, because it is worth multiple hundreds of dollars, and they do not wish to make change, what is the worth of that coin? The fact that something is Legal Tender means they HAVE to accept the payment. Try convincing the attendant at you local gas station at midnight when all you have is a $50 bill…

Still this is not the full story. This answer is about why money works.

Right between these two sets of definitions are several results that contain a key word. I have chosen one of the three:
The accepted common medium of exchange for goods and services in the marketplace that functions as the unit of account, a means of deferred payment and a store of value.

Store of VALUE. Now there is a concept. Another of the definitions refers to Measure of Value. There, I believe, is the key word, Value. The WHAT of money is this storage of value. But then, what is this value? The easy answer would be the value stored is the ability to exchange goods and services. This does not ring true with me. In addition, it seems to be a circular definition. Not a good idea. I have a proposal as to what this value entails.

Many are familiar with the words in the preface of the Declaration of Independence:
Life, Liberty and the Pursuit of Happiness. The Constitution of the United States contains specific references to Life, Liberty and Property. These two concepts are not at cross purposes, they were both expressions of a common concept. The concept that your rights include not just your person, but the output of your work. The possessions you persue to achieve happiness.

Bastiat states it in a slightly different way: Life, Faculties, Production.
He states:
“We hold from God the gift which includes all others. This gift is life — physical, intellectual, and moral life.
But life cannot maintain itself alone. The Creator of life has entrusted us with the responsibility of preserving, developing, and perfecting it. In order that we may accomplish this, He has provided us with a collection of marvelous faculties. And He has put us in the midst of a variety of natural resources. By the application of our faculties to these natural resources we convert them into products, and use them. This process is necessary in order that life may run its appointed course.
Life, faculties, production—in other words, individuality, liberty, property — this is man.”

And how is it that we accomplish this Production? It is the application of our faculties for a given amount of TIME…

I give it to you that the inherent Value Stored in Money is exactly this. That the old phrase ‘Time is Money’ is exactly backwards.

Money is TIME.

You may accuse me of mere semantics (an Oxymoronical phrase I will go into in the future) but think about it. When you state it in the more common fashion, time is marginalized, and the really important item, money, is what is wasted. Given the finite nature of time and the ubiquitous nature and unequal allocation of money, how could this be true?

In the new ordering the true nature of money is revealed.

Observe, you trade a certain amount of your time in return for an amount of money. You then use this money as a medium of exchange to purchase goods and services that you either can’t (you lack the capacity) or don’t wish (you value the convenience) to accomplish yourself.

It is not just time, your faculties are also involved in this transaction. Say I have a volume of earth to be moved as part of the construction of a building. I can hire a number of workers with shovels to accomplish this task. I can also make use of a large earth-moving machine (capital investment, i.e. money) and the services of a worker trained in the use of such equipment (faculties). The same amount of dirt will be moved in each case. Why is the heavy-equipment operator paid more than the unskilled ditch-digger? Because she accomplishes the task in less time.

Even in the realm of high-tech automation the same principal holds true. My cousin-in-law is a skilled tool and die maker. (Hi Ed!) Even in the modern day world of imbedded computing there are still plenty of machines out there. (The Jetsons had it right, even in space, we still need cogs and sprockets...) In today’s world the machining is more and more complex. Beyond what any human could accomplish manually. Enter the capital investment of highly automated computerized machining. Ed has applied his faculties to the operation of this machine and can produce items of a highly complex nature with tolerances unheard of when he started this career path over 30 years ago. Ed is, justifiably, very well paid for his work.

Now, if I am a heavy equipment operator and you are a butcher, the only way I can get a cut of meat through barter is if you need a foundation dug. If Ed needs a new car, but you the car dealer don’t need him to make you some parts, he has but one recourse. Find some third party who does need parts and provides some goods or services your car dealership requires. Not a very efficient system. Hence the concept of money.

I give you this fundamental truth: Money is the collective recognition by society of the Production (faculties * time in mathematical terms) of individuals. And by the recognition of this Production in terms of the value of the faculties and time involved, the fair exchange of said value for the goods and services available from others.

Money is an expression of you as a human being, a representation of your faculties and the TIME you spend applying them.

In the larger scope of things it is not Hr. Kamprad and Mr. Gates money that is their most prized possession, it is the finite amount of time they are allotted.

Likewise, the true measure of the meaning of a life is not, as society would have it, in the amount of money one acquires. It is in the accomplishments of your faculties. Your Production. And this Production can be measured in many ways, beyond monetary rewards. Pat Tillman realized this, as do all in military service. Police Officers and Fire Fighters realize this, as do Teachers and Pastors. The examples are legion.

How many lives do you touch? What is the impact of your interaction with that person? This is just as valid a measurement of faculties and time as monetary profit. The time you spend with your children, your family, your friends. Your precious, precious time.

As they say, no one ever said on their death bed, “I wish I had spent more time at the office.”

It is obvious when people of substance make large donations for Philanthropic efforts. And, certainly, much important work is accomplished through these donations. It is more evident what is truly important to you by observing where you make donations of your time. Where you volunteer. Your church, synagogue, mosque. The YMCA, Boy/Girl Scouts, your local library or school. These are the richest organizations in the world, for the personal donation of the most precious resource shows their true value.

And by their works, shall ye know them.

So, there you have it. Money is Time. Is it as earth-shattering as Einstein’s revelations regarding energy and matter? Who knows? I do know it has changed my thinking and provides a starting point for evaluation of many other questions. Those, we will delve into in the future. I hope you have not found this little treatise a waste of your time, as that, one might conclude is an unforgivable sin.

For now there is only one more question to ask.

What are you going to do now? ;-)