Valuing nothingness
October 29, 2015 § 48 Comments
19 Their silver shall be cast forth, and their gold shall become a dunghill. Their silver and their gold shall not be able to deliver them in the day of the wrath of the Lord. They shall not satisfy their soul, and their bellies shall not be filled: because it hath been the stumblingblock of their iniquity. Ezekiel 7:19
I’m a metaphysical realist. What that means to me in very general terms is that I accept that things have objective essences independent of the subjective perceptions or projections of human beings onto things. It isn’t that the perceptions of the subject are irrelevant; it is that objective reality is not reducible to nothing but the perceptions or projections of subjects. Objective reality is not reducible to perception, will, or desire. Intentions and desires matter, but they are not all that is the case.
This affects how I approach everything, and in particular it affects how I approach questions about property, money, finance, etc. This puts me in conflict with all modern schools of economic thought, because all modern schools of economic thought are metaphysically anti-realist. To modern schools of economic thought, economic value is reducible to the subjective perceptions or projections of groups of people (markets).
So the fact that markets – groups of people – perceive gold as valuable and act on that perception is taken as proof that gold actually is just as valuable as they perceive it to be. And the fact that this value arises almost entirely from purely subjective evaluations, as opposed to arising from any useful objective qualities of gold, is taken as a virtue of gold qua ‘store of value’. Gold’s relative independence of any actual objective usefulness is the very thing that makes it a pure store of value.
The most pure form of anti-realist value is distilled and concentrated human subjective evaluation: value with no object. The only thing more pure than gold would be nothing at all, but of course even the most ardent anti-realist cannot escape from objective reality. Because he cannot store pure concentrate of human will in a vault, the anti-realist stores gold; because at least as an historical matter gold is the substance that human beings have most irrationally desired, desired in a way most purely disconnected from objective reality.
What is fantastically ironic about the whole situation, from my perspective, is that so many people flee to the idea of gold and gold-backed currencies in order to escape what they think of as the unreality of finance. Indexing all of economics to gold, they think, will somehow anchor economies so that they cannot be manipulated by banksters and plutocrats.
But you can’t escape from unreality by fleeing into it.
UPDATE: Added epigraph.
Zippy Catholic 
Gold by the way is fantastically useful in electrical connectors. It is a great conductor, makes clean contact, and is corrosion resistant.
But that has almost nothing to do with how it is priced.
gotta add that epigraph. you’re not a christian unless you lob a bible-verse quote into your writing now and again.
I think another legitimately valuable feature of gold is it’s difficulty in creating. Gold is naturally inflation-resistant because mining/finding/making it is hard.
Kidd Cudi:
Gold made a good (relatively speaking) ‘substrate’ for early currencies for that reason: because it is durable and difficult to counterfeit. Those pre-modern benefits can’t compete with modern authentication technologies though.
Bitcoins are also difficult to obtain but intrinsically worthless.
I think some folks want a difficult-to-obtain substrate for the issuance of government tax vouchers (dollars) because they want it to be difficult for the government to issue tax vouchers (dollars). In effect they are happy for (analogously) Google to be able to issue stock or options at will, but they insist that those options must be printed on gold bars so that the expense of doing it will limit the freedom of management to actually do it.
Basically liberals want any tool they can find to handicap authority, even if it means giving authority a disease. Poison is prudence.
One of the other consequences of modern anti-realism is to see scarcity as such as valuable. Even something otherwise useless is ‘valuable’ because of scarcity per se. Bitcoin represents the culmination of this anti-realist belief in the value of scarcity-as-such.
So then is bitcoin intrinsically worthless? Isn’t the proof-of-work that it represents valuable to some extent? Doesn’t the fact that other people value scarcity give scarcity *some* value, even if scarcity itself is not particularly useful for say eating, or living in, or wearing or what have you.
Are the beliefs of humans *real* things that have value? And do the beliefs of humans have the ability to create value where none was before?
Kidd Cudi:
Yes.
No. The reductio of that kind of subjectivism which I used in the Usury FAQ is that although the arsonist values his activity, his activity objectively destroys economic value it does not create it. Examples could be multiplied: a purely subjective theory of value implies that objectively destructive activities create economic value simply because those activities are subjectively valued. But destructive or wasteful activities consume economic value, they do not create it.
Mind you I am not proposing some comprehensive alternative theory here. I am not a positivist. I am just pointing out that purely subjective theories of economic value are false.
So yes, bitcoins are worthless in the sense of having no intrinsic, objective value. The activity of creating them may be entertaining or gratifying to people, as arson is gratifying to the arsonist. But the product of that activity is not something of enduring and objectively grounded economic value. Creating bitcoins is consumption, not production.
“Intentions and desires matter, but they are not all that is the case.”
How common is it that intentions and desires are the overwhelmingly important determining factor in the value of something? Is that the case in money? Always? Sometimes?
Further, if this is possible (that human thoughts are *basically* all that matters in the value of a thing), is this a necessarily bad thing? As in, should this (potential) state of affairs be considered an abnormality to be removed (much like a bubble in the value of tulips) or is it just a thing that doesn’t matter that much? Or does it just depend? It probably just depends.
> But the product of that activity is not something of enduring and objectively grounded economic value.
Mathematical proof-of-work is enduring. It’s use is as a medium of exchange. Mediums of exchange have “objective” value. Thus, bitcoins are enduring, objectively grounded valuable “things.” Thus, bitcoins are not intrinsically worthless.
What is the flaw in reasoning here?
Kidd Cudi:
As always, the implications of a basic metaphysical error in particular circumstances depends on the circumstances. But generally speaking the anti-realist error in economics, in addition to being false and worth rejecting for that reason alone, leads to all sorts of terrible consequences.
Kidd Cudi:
I might be willing to concede that a bitcoin objectively has the same kind of value as a photograph of an arsonist burning property, or the ashes of the property that the arsonist burned.
Arson is a difficult and risky activity. Therefore authentic photographs of arson being committed are difficult to obtain.
But that doesn’t turn arson into a net producer of economic value.
But you could probably make pretty good money selling the photographs.
Kidd Cudi:
That you might make money selling photographs or records of things being destroyed doesn’t mean that things are not being destroyed. The fact that you can make money selling a documentary about the 9-11 attacks doesn’t mean that the 9-11 attacks were in themselves economically productive.
More generally trophies or records of consumption might have some value, but that doesn’t turn consumption into production.
I agree. I was just quipping from my standard point of view: “how can this knowledge be profitable?”
Bitcoin is destroying electricity in order to be sustained. That is its cost. Its objective value, whatever that means, is negligible compared to that cost. However, apart from objective value, people consider it useful. Useful for anonymous transactions, useful for storing value, useful for speculation–useful as money. To me the, fact that people actually do make real transactions with bitcoin seems to imply that bitcoin is useful for that purpose.
How can a thing be useful for a purpose, and not be objectively valuable? What is the semantic distinction between “useful” and “valuable”?
To me, it seems that the only drawback in using bitcoins, something with “no objective value” is that the value of a bitcoin essentially becomes a bubble. But moldbug says that all money is a bubble. Not that moldbug is always and everywhere correct. Money is the thing that we value specifically because it is useful as money. Money is worthless if the medium of money changes. That’s just how money works. Gold is worthless when silver is the coinage. Bitcoins are worthless when they are illegal. Is all money a dangerous, anti-realist bubble? Wanna barter my goat for your cow?
Kidd Cudi:
That is idiotic.
That isn’t actually true, though I used to ‘believe’ it myself (where ‘believe’ is more a matter of having not really thought about it and just taking a conventional view as given). I was never especially comfortable with the idea, and I’ve come to understand why better in recent years.
All paper or electronic currencies (other than bitcoin) have intrinsic value, because they are all options which entitle the bearer/owner to something else – something other than the currency itself – which is (that something else) of value. Fiat currency entitles the bearer to settlement of tax liabilities. Deposits entitle the owner to on-demand access to fiat currency, backed by the balance sheet of the bank. Stock (often used as currency) entitles the owner to profits from a business and liquidation value of any excess over liabilities. Stock options entitle the owner to the purchase of stock at a particular price. Etc, etc.
Bitcoins entitle the owner to nothing at all.
Here’s a thought:
Arsonist Annie values burning Hugh’s house. Hugh values having a house. Annie burns Hugh’s house down.
Subjective theory of value interpretation:
Hugh has experienced a huge loss in subjective value. Annie has gained in subjective value.
(Presumably) your theory of value interpretation:
The world is less one house. Value has been destroyed. Annie only thinks she’s gained. She hasn’t really. Hugh correctly feels the loss, but because he’s human, he probably doesn’t accurately gauge how much he has really lost, because his subjective attachment to the house overvalues how much the house was objectively worth. Nevermind that Hugh valued his house way more than everyone else. Hugh’s an anti-realist idiot.
Okay, there might be a bit of straw-manning going on here, but I think you get the drift.
Why is Zippy theory of value better than Subjective theory?
I can only sell my house to an actual person, and he will only buy it for whatever he thinks it’s worth, so his subjective valuation is mighty important.
Kidd Cudi:
Sure, to you qua radical individualist. But I am also not a radical individualist, nor a radical reductionist; and economics in general is about aggregations and flows of economic value in society not just individual transactions.
Burning down perfectly good houses destroys houses. It is consumption of economic value, not production of economic value.
Why is Zippy theory of value better than Subjective theory?
Individual transactions are the base unit from which economic aggregations must proceed.
And I never said that burning house produced economic value in general. I said that under a subjective interpretation, house burning produced value *for Annie* and for her alone.
Net, (as if two subjective value systems could be easily aggregated), it is a loss as Hugh is hurt far more than Annie is helped. But Annie is helped. Or at least she thinks she is.
I am saying that your theory seems to write off people’s subjective thoughts/feelings as entirely (or at least mostly) irrelevant. And that seems naive, because subjective opinions are how people make real decisions in the real world. And trying to understand human interaction while ignoring the subjectivity inherent in that process seems like a mistake.
Kidd Cudi:
You are reading your own biases into it. I don’t actually have a full fledged theory; but my basic contention is that I deny that economic value is reducible to nothing but subjective evaluations. Realism is not a denial of the subjective. It is a denial that the subjective is all that is the case and/or all that can be known.
And when it comes to economic value, all of the modern theories are infected with anti-realism.
I will cop to individualism, though what’s radical to you is merely instinctive to me.
[…] Source: Zippy Catholic […]
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Individualism can be both radical and instinctive at the same time.
Actually, considering the excess of individualism in the culture, I don’t doubt that the two go together fairly often.
Quantification is a good thing but it is not sensible to quanitfy everything.
Similarly, some things depend upon human evaluation per se and it is silly to quibble. Things are valuable, literally speaking, if humans value them.
vishmehr24:
A metaphysical anti-realist cannot tell the difference (or pretends not to be able to tell the difference) between things subjectively valued for their objective qualities and things subjectively valued for irrational or destructive reasons; because for a metaphysical anti-realist man is the measure of all things. This metaphysical commitment, constantly and ritually reinforced through modern economic life, has grave consequences in economics and beyond.
I’m still catching up with your recent flurry of posts. But for me this was a money quote deserving to be posted on it’s own.
vetdoctor:
That’s pretty punny.
And the money quote actually did get its own money post, heh.
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The intrinsic value of gold is very low. Bismuth is only twice as abundant as gold, yet sells for about 1/3000 the price because no one sees it as a store of value.
But people need to save something, so as not to be left begging for handouts when they’re old and feeble. Why not hoard gold? Would you rather they hoard something of high intrinsic value, like housing? I pity the young adults who, because they arrived late to the housing market, are forced to live with their parents or share rooms in tiny apartments. There lies the way to Japanification and extinction.
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