If I were to ask you “What is money?”, how would you respond? Recent conversations over this topic have led me to conclude that many people have fundamental misunderstandings about money. To answer critical questions such as “Is money evil?”, it is important to understand what money is and why it is necessary. According to Webster’s Dictionary, money is “something (such as coins or bills) used as a way to pay for goods and services and to pay people for their work.” From this definition, we can see that money is a medium of exchange (ex. a currency) used to pay people for goods and, by extension, facilitate trade. Furthermore, money is a representation of wealth that someone owns. By understanding what wealth is and how it can be converted to currency, we can delve into some of the ethical questions surrounding money. The path between wealth and money is quite lengthy, but one cannot truly consider money’s value before understanding the connection.
What is wealth? According to Webster’s Dictionary, wealth is “all goods and resources having value in terms of exchange or use.” We see that wealth is defined explicitly as goods/resources having value to man or other men. These goods and resources can either be created by man using his ingenuity, labor, and skill to produce goods and services or wealth can be created via trade.
Trade is a win-win situation defined as “voluntary negotiation and then the exchange of one’s goods and services for desired goods and services that someone else possesses.” Trade is a win-win situation because it creates both consumer and producer surplus. Both parties are mutually agreeing to trade goods with one another because they value the other party’s good more than their own. Money is a tool of facilitating this to represent wealth rather than having to barter inefficiently with poorly divisible/fungible goods. With this, trade is a key component of wealth creation. For example, one of two men on an abandoned island who has become very good at making sharp spears out of branches has too many and would rather have some vegetables instead of his extra spears. Therefore, he trades spears for vegetables from the other man who created a garden. Both men have increased their relative wealth and quality of life because of the surplus created by trade.
Currency, the most recognizable form of money, is a valuable component of facilitating trade, but not essential. The dollar is a good example of high-quality currency because it is fairly durable, it can be transported, it can be broken into smaller pieces (each with proportional value), it is fairly scarce, and it is recognizable. For a form of money to take prominence, it must have these and more characteristics.
Currency, as a form of money, derives value from the wealth it represents. As people accept currently as a representation for their wealth (recognizability), the currency as a whole achieves a market cap equal to all the value it represents. For example, the market cap of Bitcoin is slightly about $12 billion. If more currency is created out of thin air (as is common with the US Treasury and Federal Reserve), the value of the currency as a whole remains the same while each individual unit is worth less.
We are now able to turn to some of the ethical questions surround money. For example, some may claim that money “is the root of all evil.” Money = wealth = valuable goods/services = man’s labor, skills, and ingenuity. With this, it seems hard to call money the root of all evil. Money is only made possible by those who produce. As we have seen, wealth is not made by currency printing machines, welfare programs, or thieves, but rather transferred. It has value because those who produce give it value. The root of money (man’s innovations and creations) seems to be the opposite of evil. Violence, theft, and the destruction of man’s creations seems to better fit the label of evil.
Where did the phrase “money is the root of all evil” come from? Most have heard it. Surprisingly, it is actually a misquote from Timothy 6:10 in the Bible which states “For the love of money is a root of all kinds of evil.” It is important to note the following sentence in Timothy 6:10: “Some people, eager for money, have wandered from the faith and pierced themselves with many griefs.”
What about the great inventors of history who accumulated tons of money, but left us with innovations that lived on long past their lifetimes? Let’s take a look at one of the greats, Thomas Edison, inventor of the phonograph, motion picture camera, and electric light bulb (along with much more). He made up to six-figure revenue on some projects which was unheard of in the 19th century. However, after his passing in 1931, his discoveries/inventions live on to this day and continue to enhance the quality of lives of billions around the world. Monetary gain is temporary while inventions and ingenuity get passed on to the world for future generations. Those who produce substantially in an honest fashion contribute substantially to society as a whole.
Another important topic to address is unearned inheritance. This occurs when people who labored and produced to create that wealth voluntarily give it to others. Is it evil to voluntarily give money to others? If so, then charity must be evil. Nevertheless, what is important to know is that money, in itself, cannot create values, purchase intelligence, or provide a purpose in life. It can enhance someone’s life who has clear values and a purpose. If a person knows what they enjoy and value, money can help. Otherwise, money can destroy. Eventually, if someone does not fit or deserve their money, a rapid, natural correction will begin. Take a look at the countless stories of celebrities, athletes, or rich children who did not fit their money and ended up with drug, alcohol, or related problems. Money is a tool; how it is used depends on the individual.
By examining money’s roots and posing some questions to those who attack it as evil, we have explored money’s role in society. Regardless of where you stand on the never-ending debate over money, it is critical to understand how money developed in society and why it may not be the evil many make it out to be.