Friday Philosophy

What Money Can’t Buy

An old joke expresses one of the most common criticisms of the free market. “What is the most beautiful word in the English language? Cash.” The free market, it is alleged, has no place for values that have no price in money. Karl Marx and Friedrich Engels in The Communist Manifesto offer a classic statement of this point of view:

The bourgeoisie, whenever it has gotten the upper hand, has put an end to all feudal, patriarchal, idyllic relations. It has pitilessly torn asunder the motley feudal ties that bound man to his “natural superiors,” and has left remaining no other nexus between man and man than naked self-interest, than callous “cash payment.” It has drowned the most heavenly ecstasies of religious fervor, of chivalrous enthusiasm, of philistine sentimentalism, in the icy water of egotistical calculation. It has resolved personal worth into exchange value, and in place of the numberless and indefeasible chartered freedoms, has set up that single unconscionable freedom—Free Trade. In one word, for exploitation, veiled by political and religious illusions, naked, shameless, direct, brutal exploitation. The bourgeoisie has stripped of its halo every occupation hitherto honoured and looked up to with reverent awe. It has converted the physician, the lawyer, the priest, the poet, the man of science, into paid wage labourers.

In this week’s article, I’d like to look at Ludwig von Mises’s response to this criticism. Before turning to Mises, though, let’s look at a feature of what Marx and Engels say in the passage above that is easy to miss. When you first read it, it sounds like they are completely condemning the free market. What is “idyllic” and “chivalrous” has been “torn asunder” so that only the “cash nexus” remains. But the condemnation can hardly be unreserved. The atheists Marx and Engels didn’t admire religious fervor, nor were they proponents of natural ties of superiority. The demise of “philistine sentimentalism” is no bad thing. The key word in the passage is “exploitation”; Marx and Engels say that capitalism, by reducing everything to trade in money, has ended the illusions of the past so that the reality of exploitation is easier to see.

Would it follow from this that Marx and Engels aren’t condemning capitalism, but rather praising it? Not at all. It’s evident they don’t like the cash nexus, despite its merits in getting rid of illusions. It’s also the case that they do not entirely repudiate the values of the precapitalist era; honor is not, after all, something to be disdained. To add yet one more layer of complexity to the passage, although the reality of exploitation is supposed to be easier to see in the free market than in the feudal period, Marx and Engels argue also that although exploitation of serfs is palpable, the exploitation of workers under capitalism is more difficult to grasp because it appears that they are entering into a voluntary contract in which they receive money in return for their labor. The illusion that this conceals Marx and Engels expound elsewhere. Understanding this involves the vital distinction between “labor” and “labor power,” which, you will be glad to know, I will not go into here. Whether all of these layers of meaning show that Marx and Engels were profound and “dialectical” or merely confused is, I suppose, I matter of taste.

Mises raises an important point in response to the “cash nexus” accusation. He says,

Economic calculation cannot comprehend things which are not sold and bought against money.

There are things which are not for sale and for whose acquisition sacrifices other than money and money’s worth must be expended. He who wants to train himself for great achievements must employ many means, some of which may require expenditure of money. But the essential things to be devoted to such an endeavor are not purchasable. Honor, virtue, glory, and likewise vigor, health, and life itself play a role in action both as means and as ends, but they do not enter into economic calculation.

There are things which cannot at all be evaluated in money, and there are other things which can be appraised in money only with regard to a fraction of the value assigned to them. The appraisal of an old building must disregard its artistic and historical eminence as far as these qualities are not a source of proceeds in money or goods vendible. What touches a man’s heart only and does not induce other people to make sacrifices for its attainment remains outside the pale of economic calculation.

However, all this does not in the least impair the usefulness of economic calculation. Those things which do not enter into the items of accountancy and calculation are either ends or goods of the first order. No calculation is required to acknowledge them fully and to make due allowance for them. All that acting man needs in order to make his choice is to contrast them with the total amount of costs their acquisition or preservation requires…. Money, money prices, market transactions, and economic calculation based upon them are the main targets of criticism. Loquacious sermonizers disparage Western civilization as a mean system of mongering and peddling. Complacency, self-righteousness, and hypocrisy exult in scorning the “dollar-philosophy” of our age. Neurotic reformers, mentally unbalanced literati, and ambitious demagogues take pleasure in indicting “rationality” and in preaching the gospel of the “irrational.” In the eyes of these babblers money and calculation are the source of the most serious evils. However, the fact that men have developed a method of ascertaining as far as possible the expediency of their actions and of removing uneasiness in the most practical and economic way does not prevent anybody from arranging his conduct according to the principle he considers to be right. The “materialism” of the stock exchange and of business accountancy does not hinder anybody from living up to the standards of Thomas a Kempis or from dying for a noble cause. The fact that the masses prefer detective stories to poetry and that it therefore pays better to write the former than the latter, is not caused by the use of money and monetary accounting. It is not the fault of money that there are gangsters, thieves, murderers, prostitutes, corruptible officials and judges. It is not true that honesty does not “pay.” It pays for those who prefer fidelity to what they consider to be right to the advantages which they could derive from a different attitude.

In other words, Mises says that the “cash nexus” doesn’t prevent anyone from devotion to nonmonetary values. It just lets him know what he has to give up for them. I will take Mises’s acuity and directness over Marx and Engels’s obfuscation any day of the week, and I suspect you will too.

Note: The views expressed on are not necessarily those of the Mises Institute.
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