What Money Cannot Purchase

A well-known joke encapsulates one of the most often leveled complaints of the free market. "Which word in the English language is the most beautiful?" Cash.” The free market, it is argued, has no room for non-monetary values. 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.

I'd want to examine Ludwig von Mises' reaction to this critique in this week's essay. Before we proceed to Mises, let us consider one often-overlooked aspect of what Marx and Engels state in the passage above. At first glance, it appears as though they are entirely rejecting the free market. What was once "idyllic" and "chivalrous" has been "ripped apart," leaving just the "cash nexus." However, the censure can hardly be unconditional. Marx and Engels, as atheists, did not like religious enthusiasm and were not proponents of natural superiority ties. The abolition of "philistine sentimentalism" is a positive development. The passage's crucial phrase is "exploitation"; Marx and Engels argue that by limiting everything to money transaction, capitalism has destroyed the illusions of the past, making the reality of exploitation more visible.

Would this imply that Marx and Engels are endorsing capitalism rather than denouncing it? Certainly not. They clearly dislike the monetary nexus, despite its benefits in dispelling illusions. Additionally, they do not fully disavow precapitalist ideals; honor, after all, is not something to be despised. To add another layer of complexity to the passage, although Marx and Engels argue that while exploitation of serfs is palpable, exploitation of workers under capitalism is more difficult to comprehend since it appears as though they are entering into a voluntary contract in exchange for their labor. Marx and Engels elaborate on the illusion that this conceals elsewhere. This requires an understanding of the critical distinction between "labor" and "labor power," which, you will be relieved to learn, I shall not discuss here. Whether all of these layers of meaning demonstrate that Marx and Engels were sophisticated and "dialectical" thinkers or just confused is, I believe, a question of personal preference.

In response to the "cash nexus" charge, Mises makes an essential argument. He asserts:

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 maintains that the "currency nexus" does not exclude people from devoting themselves to nonmonetary interests. It just informs him of what he must forego in order to have them. I prefer Mises' clarity and directness to Marx and Engels' obscurity any day of the week, and I expect you will as well.

======

Related Video: