Philip Goodchild on money, trust, and self-interest

Goodchild, Philip

LSE Research Online

Does Money Make Us Selfish?Philip Goodchild on money, trust, and self-interest‘People are naturally selﬁsh’. The contemporary evidence seems overwhelming. And yet, eventoday, most people devote some of their lives to others as parents and carers, and many also asvolunteers. Prior to the modern world, people frequently led lives governed by custom, duty,compassion, or faith, in societies where there was limited scope for the pursuit of self-interest. Sois the overriding pursuit of self-interest a modern phenomenon, or is it rooted in human nature?An extensive division of labour, as we ﬁnd in the contemporary global economy, presents apractical problem: each individual is dependent upon the assistance and cooperation of amultitude of strangers, and yet needs, intentions, and trust have to be communicated to otherswho are only met brieﬂy, if at all. The canonical solution to this problem was offered by AdamSmith: it is market exchange.Give me that which I want, and you shall have this which you want, is the meaning of everysuch offer [. . .] It is not from the benevolence of the butcher, the brewer, or the baker, that weexpect our dinner, but from their regard to their own interest.Of course, what is offered is usually money, and if people are generally reluctant to care for andtrust in strangers, they may be generally willing to care for and trust in money. It is the nature ofmoney, like that of consumption goods such as meat, beer, and bread, that it can only bepossessed by one person (or corporation) at a time: if it is mine, then it is not yours. Likewise, it isthe nature of exchange that it transfers property. So this suggests a hypothesis: could it be that ourvery dependence on strangers makes us self-interested? For we can only beneﬁt from themthrough the use of money, and money can only be used to purchase things that are either mine oryours. Instead of seeking the common good, the use of money gives us a simple choice betweenself-interest or other-interest, selﬁshness or altruism. For money enables us to interact withstrangers beyond the normal frames of reference for the common good: the family, the institution,the city, the region, and the nation. Traditional moral teaching, which applies within such a limitedframe of reference, is difﬁcult to apply in our frequent interactions with complete strangers. Insteadof trusting strangers on the basis of shared participation in a group or a belief, we simply have totrust that they also trust in money.This modern situation is thrown into relief by a contrasting one. In England in the seventeenthcentury, trade was generally booming, and yet there was an acute shortage of money. Peoplerequired coins to pay debts, rents, tithes, and taxes, and merchants required money for importanttransactions. As a result, people tended to save or hoard up the coins they received to fulﬁl theirmost vital obligations, and so there were less coins available for daily transactions. Many dailytransactions took place on credit with an agreement for deferred payment. Eventually, multipledebts could be ‘reckoned’ or cancelled out, allowing some exchanges to take place without the useof money at all, and others with just sufﬁcient coins to settle the remaining balances. Mostmerchants operated with a large number of credits and debts, sums owing and sums owed. DanielDefoe, in The Complete Tradesman of 1720, imagined that it was simply impossible to carry onany trade without giving or receiving credit, by keeping one’s ‘whole estate in one’s shop’. Instead,wealth was kept with others in the form of their debts and obligations. Credit was essentially amatter of a reputation for punctual payment, hard work, and honest dealing, for one did notpurchase with money but with the promise of money. Wealth was not a private possession, butwhat people thought of you. Credit was[…] the choicest ware [a tradesman] deals in, and he cannot be too chary of it when he has it,or buy it too dear when he wants it; ‘tis a stock to his warehouse, ‘tis current money in hiscash-chest, it Accepts all his bills; for ‘tis on the fund of his credit that he has any bills toaccept [. . .] in a word ‘tis the life and soul of his trade, and it requires his utmost vigilance topreserve it.In such an economy, the primary aim was not to acquire money or possessions, but to acquire areputation. Piety, diligence, and thrift were the highest values, since they implied the capacity topay debts.Such a situation was rather fragile, for a rumour or false accusation could easily affect one’s credit.Moreover, a proﬂigate relative or a misfortune occurring to a debtor could easily compromise theposition of the most honest tradesman, and debt defaults would spread by contagion. In thisrespect, the ﬁnancial probity of each individual was a direct concern of all, since all could beaffected by the contagion of debt default.  The individual virtues were the condition for the commongood. The rate of litigation was high, affecting nearly every household in the country, even thoughfew of these cases proceeded as far as trial. Yet at the end of the seventeenth century, two eventsoccurred that had a remarkable effect. Since the coinage was so old, worn, clipped, and debased,it was agreed in 1695 that it should be recalled for a complete reminting—but it was in such aparlous state that although around £6 million was called in, only £4 million standard silver coinscould be minted. The shortage became acute. As a crisis response, in 1697 the newly formedBank of England was permitted to print a note issue for its depositors, even though those depositshad already been lent to the King for the war in Ireland—it was as though the value of the samedeposit was in two places at once. Bank notes circulated in place of coins, and with further noteissues, achieved by merchants borrowing notes instead of coins, the shortage of cash could beovercome.  As a result, the most pious, diligent, and thrifty individuals were able to pay on time incash, acquiring credit and reputation by their acts of payment. The best way to serve the commongood, averting any dangers of debt contagion, was to acquire cash and pay in cash, acting as ifone was a self-interested individual. The ﬁnancial revolution in England changed the meaning ofwealth from reputation, which is a common good, to possession, which is an individual good.Instead of the butcher, brewer, and baker offering goods on credit for the sake of their reputationas a socially conscious individuals, they had to be persuaded by money.Of course, such a fundamental social transformation simply displaces trust from the character ofindividuals known personally or by reputation to money. In today’s economy, there is no base ofvaluable metal that supports the value of money. Instead, its stability is managed by central bankswho create reserves by means of complex exchanges of government debts with commercialMonday, 6 March 2017Share This Story, Choose Your Platform!Related Postsbanks. The state, with its power of future taxation, together with the central bank, with its power tocoordinate clearing operations through the use of reserves, and commercial banks, supported bythe power of market exchange, all combine to provide a basis for money—but they do so in amanner comparable to the seventeenth-century merchants. Reputation is all. The pursuit ofindividual self-interest, measured in terms of the value of money, is made possible by a highlycentralized group of institutions. Individual and common interests remain intertwined, for if moneyloses its value or stability, then so does individual wealth.So are people naturally selﬁsh? Probably, but they are also naturally caring and naturally social.Nowadays, people are willing to serve the needs of others because they trust in the value ofmoney. Yet the organization and grounding of such trust is entirely artiﬁcial and, as has beendemonstrated in recent years, highly fallible. While the use of money to interact with strangersexaggerates our self-interested concerns, trust in money is a collective and participatory good: wetrust money, to a signiﬁcant extent, because we trust that others will also trust it. Moreover, we canonly access the value of money when we spend or invest it, that is, when we transfer it tosomeone else. Of course, few think of where the money will go when it leaves them. But it is theroute that money takes—whether it falls into the hands of those who most need it, or whether itaccumulates on the balance sheets of ﬁnancial institutions—that determines whether our pursuit ofself-interest actually assists others or conﬁnes them to ﬁnancial exclusion.Philip Goodchild is Professor of Religion and Philosophy at the University of Nottingham. This postis partly based around his article ‘On the Origins of Modern Debt and Value’, published in theJournal Continental Thought and Theory. His research interests include philosophy of religion,philosophy of political economy (especially credit and faith), and the philosophy of Simone Weil.Image credit: Humphrey King, ‘Stop Watch‘Powered by TCPDF (www.tcpdf.org)

Does money make us selfish?

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