2.3. How Money Works

Despite the fondest wishes of libertarians and free-market advocates, there are flaws built into the way money works that have to be addressed.

Let’s talk about money.

Let’s talk about what money is supposed to do…and what it actually does.

There’s a reason money’s been around for a long time. It takes something that can be really varied and subjective—value—and translates it into one, objective dollar amount.

The problem is, not everything is so easily translatable.

It’s a lot easier to take something concrete, like an iPhone, and give it a pretty accurate dollar amount, than it is to take something more abstract, like your health or your education, and turn that into dollars and cents.

Notice how, whenever we feel like some job is way over or underpaid, or something is way cheaper or more expensive than it should be—it’s because we’re dealing with things that are hard to quantify.

And it’s especially difficult when we’re dealing with something people pretty much have to have, like health care or child care.

Because in a free market system, people are going to charge whatever they can get away with charging. There’s an optimal price point, where they’re going to make the maximum profit.

The problem with that is, mathematically, that optimal price point is always going to be too expensive for a lot of people. Always.

It isn’t such a big deal if a lot of people can’t afford iPhones. But without some form of price control, the market pressures are going to make it so not everyone can afford a place to live, health care, child care, or an education. And that is a big deal.

There’s one more big problem with how money works in practice.

In theory, you aren’t supposed to be able to make a lot of money without delivering a lot of value. But in practice, we know it’s totally possible for people to make way more money than the actual value they’re delivering.

There are tons of hacks and cheats businesses can use.

You can lie to or mislead people about how valuable your product really is.

You can make people sick from pollution, instead of being environmentally responsible.

You can throw thousands of people out of work to increase your profits by a fraction of a percent.

You can focus only on what’s profitable right now, instead of what’s going to be better and more valuable in the long run.

There comes a point where, instead of spending more money to improve the actual value of their product, businesses are going to make more money by using one of those hacks or cheats that don’t deliver any real value. Is it really so surprising that that’s what so many of them do?

The big point here is, despite the fondest wishes of libertarians and free-market advocates, there are flaws built into the way money works that have to be addressed.

They’re systemic. They’re unavoidable. Money can’t not work that way.

We can either let those flaws proliferate unchecked—or we can figure out, as a society, how to responsibly regulate those markets, so we can have more of the good they produce and less of the bad.

 

This is the 31st in a series of over 150 videos about how to create real, lasting social change. Click here for a list of all titles, videos, and transcripts.

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