A PCT View of Money

2. Trades and Value

Under what circumstances will a trade occur? Let's consider the trade between Sam, who has buttons (or a promise of them) and wants steak, and Bill, who has steak but wants buttons. Are buttons more valuable than steak? If so, Sam should not want to trade, but Bill will be enthusiastic. Is steak more valuable than buttons? If so, then Bill should not want to trade. Are they equally valuable? If so, why would either want to trade?

For Sam and Bill to trade buttons for steak, buttons cannot be more valuable than steak, buttons cannot be less valuable than steak, and buttons cannot be equally valuable. But trades do occur, so something is wrong with the argument. What is wrong with the argument is that buttons can be more valuable than steak for Bill the Butcher, who has lots of meat, while at the same time steak is more valuable than buttons for Sam, whose clothes hang together pretty well but who has a hungry family to feed.

Value cannot be a property of a thing that might be traded. It is a perception held by a person. The value of an item can change over time, even if the thing itself doesn’t change. To the person with growing hair, the value of getting a haircut increases over time since the last haircut, but to the person providing the haircut, the value of providing the haircut is very little affected by how long it was since the customer last had one.

Since the value of a thing to be traded is a perception in the mind of the trader, it is quite reasonable for Sam to perceive that giving buttons and getting steak increases the total value of his possessions, while at the same time Bill perceives that giving steak and getting buttons increases his overall value. What this means is that the value of goods or services cannot be measured according to any fixed standard. In particular, value cannot be equated to money.

Home Back Next