A PCT view of money

The destruction of value

Money can be destroyed by bankruptcy and dept repudiation, but can value be destroyed? Value is a perception, after all, and cannot be compared across people. Nevertheless, it is possible to argue that value can be destroyed, and moreover, that value ordinarily decays over time, whether it be the value of a tangible good or of a service.

The perception of the value of an item represents the degree to which the item enables the owner to achieve some current or future goal. Consider first a service. The typical service enables the person served to satisfy some goal that existed at the time. The effect of such a service dissipates fast, as goals change. The value of having had one’s hair cut becomes less as the hair grows long again; the value of being given a programme for a play becomes less as the play progresses. Some services have longer value, of course. The value of being taught a skill may stay for a very long time. But for the most part, the value of a service declines toward zero with time since the service.

Consider a tangible good. When it was acquired, it served to bring some perception nearer its reference value at the time.That was its value to the acquirer. As tiome goes by, controlled perceptions change, and the reference values change for perceptions that remain controlled. While it is possible that the tangible good increases its effectiveness in controlling the owner's perceptions, it is more probable that it becomes less effective, and therefor of less value. The owner has "moved on". Moreover, the good itself is subject to decay and damage, which will decrease its value if not corrected (a perception of its quality being controlled by the owner). So, on average, the value of a tangible good, like that of a service, is likely to decline over time. Exceptions exist, of course. Part of the value of a good (or of a skill) is the possibility that it may be exchanged for money, so the more value the money-equivalent has to the possessor of the good or skill, the more valuable that good or skill. Antique goods, in particular, are more likely to increase in money-equivalent value than to diminish in money-equivalent value over time, and this increase may more than compensate for any decrease in other contributions to its value.

Since, with some notable exception, both services and goods are more likely to decline rather than to increase in value over time since their acquisition, it follows that if the overall value of an economy is to be sustained, compensating value must continually be created. It has been argued earlier that this compensating value derives from two sources: (1) the increase in value to each partner in a mutually agreeable trade, and (2) the work involved in creating structure from natural resources. Increases of the first kind have a natural limit, inasmuch as things and services tend to decline in value over time, so even as the fit of the goods and services to the needs of the people improves, the usefulness of the goods and services is declining. If this is true, then stability in an economy can derive only from the work that is put into enhancing the usefulness of natural resources, including the reworking of discarded goods, and the enhancement of skills.

Home Back