Fungibility of money -> efficient sorting of dominance hierarchies
My favorite (now former) Twitter user, Mimetïc Value, tweeted the following. (It appears he took the tweet down for unknown reasons, so be aware this may not represent his current views):
Without money, ascertaining your status is tricky business. First, compare yourself to someone else. Then, for reference, compare that person to someone else. Continue in a long regress of comparisons.
Expressed in computer science terms, the process has a runtime of O(log n).
Money makes this process easier. You don’t have to compare yourself to anyone. Just look at how much money you have. The runtime is only O(1).
You may not know how wealthy you are relative to others, but that wont matter, as I’ll explain next.
Honor and resource allocation
What I called “status” is really what should be called honor. Status is superficial, honor is deep.
When you read the next section, you may wonder, “why do people in certain cultures care so much about honor?” I will answer by invoking an economics term: allocation.
How are resources allocated in a money-dominated society? By a complex network of trades we call the “market.” How are resources allocated in a non-money-dominant-society? By some communal process.
But you cannot give everyone equal say in that communal process. The people that decide “who gets what” are naturally going to be those with the greatest esteem, respect, i.e., honor.
But honor is relative. Therefore, honor is zero-sum. Consequently, people will risk “head-to-head conflicts” to continually assert it. These conflicts manifest as both intricate signaling and brute force.
Of all that money can buy, there’s one thing only money can buy: absolution from this process.
I first became interested in the concept of honor cultures after watching Jonah Haidt explain it in this video. From 2:22 to 5:14, he explains our evolution from an honor culture to a dignity culture, and finally, to a victimhood culture.
In a dignity culture, a man of pride will “let things go,” have a “thick skin.” In an honor culture, any small slight against you must be escalated quickly in defense of your reputation.
Much has been written about the nature of honor culture specifically, such as Why Honor Matters by Tamler Sommers.
In ancient history, the “rich” were not necessarily defined by monetary (read: liquid) wealth, but rather, their land, status, and number of subjects.
For a reduction in intra group conflicts, money had to replace honor as the marker of status. The problem: in many cultures, engaging with the market like a merchant or businessperson was seen as a dishonorable thing.
To rationalize this, we have to understand the role of nepotism. Do you hire your cousin’s friend, or the person best for the given job? In a money-obsessed market, hiring your acquaintance is considered dishonorable, “nepotism.” But in a culture of honor and tribal kinship, to not hire your acquaintance is the dishonorable thing. They will say you are placing self-enrichment above the wellbeing of family of friends.
An efficient market will be meritocratic and non-discriminatory (not based on tribal kinship). That is not the default inclination of humans; it is a culture change that had to be inculcated.
A book that offers insight into this topic is Bourgeois Dignity by transgender author Deirdre McCloskey.
According to McCloskey, Bourgeois Dignity is not written for people who are already sold on free market principles. Rather, it is written for modern intellectuals, what she calls the “clerisy,” (what I simply call the left). McCloskey’s book seeks to answer the following question: what explains the prosperity of the modern world?
And the modern world is prosperous in a way unprecedented in world history. In 1800, the average wage in the world was $3 a day (adjusted for inflation, ±$3 depending on location. People are still that poor in some countries, though that number of people has been halved.) In the US today, that same number, the average wage, is ~$130 a day. The world we live in is abnormally rich relative to that of our ancestors.
The poorer countries, like China and India, are becoming richer fast, now that the switch has been flipped. What is that switch?
McCloskey argues that most common explanations for the rise of prosperity do not fit the evidence. Theories of exploitation and colonialism do not explain the industrial revolution. Nor rising savings rates, “capital accumulation is not what made the modern world.” Nor traditional wisdom about institutions, nor the “protestant work ethic,” not even peace. So what would McCloskey argue did cause modern wealth?
It was respect for monetary wealth, and business-like mentalities. This explains why the industrial revolution occurred in western Europe, not in the confucian China that scorned merchants.
The common market
In pre-modern economies, there was little to no room to profit from innovation. The conditions of the market (what you could sell, how much, and for what cost) were tightly controlled by guilds and other such organizations.
The revolution that brought us the modern world (I believe, roughly) occurred in the order below, with each step causing the next. (I believe McCloskey’s arguments are not complete. Bourgeois Dignity is pertinent to stage 3):
- Genetic or cultural changes
- Reduction in clan-like organization; replaced with individualism (or the nuclear family, the smallest unit in society independently capable of progeny)
- A shift from a clan reputation-based economy to a more open financial system based on innovation
- A common market – goods are produced farther distances from where they are sold
- Mass production, large factories, assembly line production, and much specialization
- A change in the work environment. There are not just workers, there are “jobs.” When one man leaves a position, a stage on the assembly line, another person must take his place
- Universal education is promoted to create a steady supply of workers for these jobs
- Scientific advances, most importantly to public health, through plumbing and improved medicine
- Democracy, separation of powers, and broadly decentralized political structures