WEBVTT

NOTE 5. A Society of Mutual Benefactors

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A Society of Mutual Benefactors

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Checking out at the grocery store the other day, I paid for my sack of rolls.

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The checkout person handed me my bag.

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Thank you, I said.

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You're welcome, she replied.

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I walked away with a sense that something was wrong.

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To check out, people usually say, you're welcome, and nothing else?

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Not usually.

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Usually they say, thank you, same as the customer says. Remember, we're talking about the American

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South, land of politeness here. I was left with an inchoate sense of, hey, I did something for you,

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too. When do we say, you're welcome? We say that when we give a gift, a good or service to a person,

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without receiving anything in return. For example, I might hold a door for a person, that person says,

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Thank you, and I say, you're welcome.

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Another time might be at a birthday party when the recipient of a gift expresses thanks.

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These are one-way examples of benefaction.

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We are giving, but not necessarily getting anything tangible in return.

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What makes the case of the commercial exchange different?

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Why do both parties say thank you?

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It's because each side gives a gift to the other.

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When I bought those rolls, this is precisely what happened.

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I saw rolls available, and I decided that rolls were worth more to me than the two dollars

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I had in my pocket.

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From the store's point of view, the two dollars was worth more than the rolls being

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given.

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Both parties walk away with a sense of being better off than they were before the exchange

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took place.

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The checkout person is there to facilitate this exchange and speak as a proxy for the

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interests of the store.

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The store was receiving a gift of money, more highly valued than the rolls, and I was receiving

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the rolls, more highly valued from my point of view than the $2 I gave up to get them.

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This is the essence of exchange and the core magic of what happens millions, billions, trillions

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of times every day, all over the world.

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It happens in every single economic exchange that is undertaken by virtue of human choice.

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Of Sides Benefit Each side is a benefactor to the other side.

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This system of mutual benefaction, unrelenting and universal, leads to betterment all around.

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It increases the sense of personal welfare, which is to say, it increases social welfare,

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when everyone is involved in the activity.

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To be sure, a person might change his mind later.

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I might arrive home with my roles and discover that I'm out of butter, and that I would

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I might decide to drop bread from my diet.

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I might conclude that rolls are really not that tasty.

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All these things can happen.

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Such is the nature of the universe, that the future is uncertain and human beings are inclined

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to be fickle.

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But at least at the time of the exchange, I believed I was better off, else I would

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not have made the exchange in the first place.

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I walked away with a sense of gain.

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The store owners had the same sense of gain.

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We both expect to gain, which is enough to recommend the exchange system, since no social

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system can guarantee a happy outcome for every action.

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Now, if all of this seems obvious and not even worth pointing out, consider that most

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philosophers in the history of the world have missed this point.

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Aristotle, for example, reflected at length in his Nicomachean Ethics on the issue of

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economic exchange, but he started with the assumption that exchange takes place when

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valuation is equal or commensurate.

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But what about cases in which it seems obviously incommensurate, such as when highly valued

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and rare physician services are traded for something widely available like corn?

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Gold believed that the existence of money serves to somehow equalize the exchange and

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make it happen, when it should be apparent that money itself is only a good introduced

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to make exchange more convenient.

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The problem he faced was his initial premise that economic exchange is based on the equal

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value of items in the exchange.

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This is just wrong.

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If two people value goods equally, an exchange would never take place, since no individual

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People could be made better off than before.

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If exchange is based on equal value, people are merely wasting time engaging in it at

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all.

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Exchange in the real world is based on unequal valuations of goods and expectation of being

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made better off.

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It is a matter of two people who give each other gifts in their own self-interest.

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The discovery of the correct theory of exchange had to wait until the late Middle Ages, when

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And the followers of St. Thomas Aquinas saw the logic for the first time.

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They saw that economic exchange was mutually beneficial, with each party to the exchange

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seeing an increase in personal welfare, subjectively perceived.

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Therefore the action of exchange, on its own, becomes a means of increasing the well-being

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of all people.

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Even if there is no new physical property available, no new innovations, no new productivity,

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Health can be increased by the mere fact of exchange-based human associations.

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As with many postulates of economics, this seems very obvious once you see it, but it

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is evidently not obvious at all.

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In fact, I've observed that many people's underappreciation of the contribution of the

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market order is rooted in the perception that buying and selling stuff really amounts to

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nothing wonderful at all.

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It is just a swirl of churning and burning for the sake of nothing in particular.

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Society could easily do away with it, and be no worse off.

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I have a hard time figuring out what people who believe this are thinking.

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Let's say that I proposed abolishing gift-giving, wouldn't it be obvious that society would

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be worse off if I got my way?

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We would no longer enjoy the material manifestation of the appreciation of others, and we would

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would all be denied the chance to show others our appreciation of them.

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Well, if it is true, as I've argued, that an economic exchange is a two-way gift, an

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instance of mutual benefaction that is pervasive throughout society, it becomes clear that

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society would be completely sunk without as many opportunities as possible for economic

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exchange.

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Anyone who champions the well-being of society should especially celebrate commercial centers,

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Stock markets, international trade and every sector in which money changes hands in exchange

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for assets or goods.

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It means nothing more than that people are finding ways to help each other get by and

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thrive.

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As 16th century Spanish theologian Bartolomé de Albenuz, known mostly for his opposition

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to Slavery, wrote,

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Buying and selling is the nerve of human life that sustains the universe.

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By means of buying and selling, the world is united, joining distant lands and nations,

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people of different languages, laws and ways of life.

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If it were not for these contracts, some would lack the goods that others have in abundance,

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and they would not be able to share the goods that they have in access with those countries

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where they are scarce.

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However, if we do not quite see the underlying logic of exchange and how it works to help

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everyone, it is easy to underappreciate what market trading means to society.

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This is a tendency in the circles that discuss issues of social justice.

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The market is rarely given the credit it deserves for helping humanity improve its lot – in

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fact, the market is nothing but the cooperative interaction of humanity in improving the common

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wheel.

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The fallacy of value equivalence in exchange has been refuted for some 500 years, and yet

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it keeps reappearing.

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Economics is one of those sciences that require careful thought.

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It can't be quickly intuited from a handful of moral postulates – it must be studied

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and understood with deductive tools and patient delineation of a wide range of concepts.

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It is because of this that economics as a science was so late in developing, but it

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is not too late for us to understand.

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The understanding of economics leads to a direct appreciation of the contribution of

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free markets to the well-being of all.

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If you read something that seems to disparage the market economy, it is more likely that

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a fallacy such as the above is at the root.

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At some point today, you will undoubtedly exchange in some economic exchange.

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Use the opportunity to reflect on what a glorious dynamic underlies it.

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You can say, thank you.

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The person who takes your money can say, thank you.

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Such opportunities account for most of the peace and prosperity we enjoy.

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This Side of Heaven