Money is a social construct and money is a shared hallucination. what is wrong with these statements?
The misconceptions propagated by Marxians about economics, such as the notion that money is a mere social construct or a collective hallucination, are particularly egregious. These statements are fundamentally flawed because they fail to recognize the intricacies of economic systems. Marxism is based on a nonsensical labor theory of value (LTV) that serves as the foundation of its economic principles. This idea has gained recent popularity through the book “Sapiens” by Marxist anthropologist Yuval Harari. However, a more nuanced understanding of economics reveals the fallacy of Marxist pop-econ, and applying economic reasoning can shed light on the flaws of this brand of thought.
what would happen if people hallucinate that tree leaves are money?
Suppose individuals were to hallucinate that leaves from trees were a form of currency. As a result, the demand for tree leaves as a means of payment would increase, leading to widespread deforestation. The value of leaves would gradually decrease over time, rendering them virtually useless as a form of currency. Those who had used them as money would soon realize the futility of their efforts and be left with a significant amount of worthless leaves that no one would be willing to accept in exchange for goods or services. Regardless of how strongly the hallucination persists, the price of leaves would continue to plummet.
Inevitably, those who purchased copper as a form of currency will witness the market value plummet below their initial acquisition price. Individuals who persist in hallucinating copper as money, regardless of its abundance, will find themselves losing their wealth to copper miners. The longer these individuals continue to cling to their delusions, the greater their financial losses will be. The economic reality remains unaltered by hallucinations, including the concept of money. Money is simply another commodity, no different from any other good. Consider the hypothetical situation where people collectively hallucinate that pumpkins are cars. They might even buy and sell pumpkins as cars, treating them as such. Nevertheless, the mere perception that pumpkins are cars does not make it so. Even if they continue to trade pumpkins as cars, they will not function as automobiles. But what happens when someone snaps out of the hallucination?
The incapacity of Marxists to recognize the existence of economic reality and the dominance it holds over their emotional and ideological inclinations is evident. Their inability to comprehend that economic reality is determined by human action, not the fanciful conjectures of academics and theoretical constructs is striking. Despite any delusions they may have, copper miners will continue to expand production, leading to an increase in supply and consequent price decline, ultimately rendering copper unsuitable as a medium of exchange. It is the analysis of economic incentives and their effects on human action that distinguishes an economist from a Marxist anthropologist who draws conclusions from an imagined past with little substantiating evidence, ignoring the implications of human action.
David Graeber, a Marxist anthropologist, argues in his book Debt: The First 5000 Years that debt is the oldest means of trade and presents it as a form of money. He concludes that money emerged from debt rather than from barter since he found no evidence of the latter. Graeber marketed this as a discovery that undermines the foundation of economics, but he overlooks the fact that the absence of evidence of barter in any society is precisely what economics would predict. Once a society has developed enough specialization to leave behind historical records, it has already crossed the point where barter is possible. The emergence of money is explained by the impracticality of barter at any large scale. Although barter has always existed and continues today, it can only occur in small circles and in intimate relations. Beyond the scale of large extended families, a neutral medium of exchange is necessary. Money is a form of exchange that cannot be replaced by debt when it comes to strangers who do not intend to meet again. Debt may only serve as money in very small communities where people know each other well.
Money serves as a technology that enables the final settlement of trade, as it is the mechanism that releases both parties from all obligations upon transfer. Its functioning must remain independent of any social agreements. The importance of this independence lies in its necessity between people with no shared context. While money may not be necessary within a family or small community, it is essential when dealing with strangers, as any pretense of social consensus disappears.
If the debt is transformed into money, as governments have attempted in the past century, it raises pressing questions about the implications. There could be a huge overproduction of debt, and institutions that issue debt would have the power to print money. This idea is popular among these institutions, and it explains why absurd theories such as Graeber’s gain popularity in academia. If the debt is considered money, then the government and banks are not committing any wrongdoing when they create endless debt.
The usability of debt as money depends on a set of enforced rules and social structures. However, if you are forced to adhere to these rules without your consent, it amounts to enslavement. It is important to understand that debt is not a final settlement, but only money can extinguish it. Despite governments forcing their citizens to use debt as money, they themselves hold on to gold as a trusted asset for trade. This is because debt is not money, but gold is. These are not merely the clueless ramblings of miseducated Marxians, but a far more insidious issue.
Marxists have a long-standing belief that anything can be used as money, and this belief is rooted in their inability to think in terms of human action, and thus their inability to apply economic reasoning to understand the consequences of their faulty reasoning.
In the Communist Manifesto, Karl Marx’s fifth point advocates for the centralization of credit in the hands of the state through a national bank with state capital and an exclusive monopoly, which is essentially what the current Fed is, a cartel. Throughout history, every regime that has embraced Marxism has aimed to seize control of money and credit institutions, and every economist who subscribes to Marxism has desired the same. Socialistic regimes have confiscated the gold holdings of their citizens and enforced the use of government paper currency. The consequence of such actions has often led to hyperinflation in Socialist regimes.
Friedrich Hayek — ‘If socialists understood economics they wouldn’t be socialists.’
