LESSONS LEARNED #41: “The want of unearned money is the root of most evil.” -Old Pithy

Posted by PITHOCRATES - November 26th, 2010

Money is a Temporary Storage of Wealth that Makes Trade Efficient

People don’t want money.  They want what money can buy.  A dump truck full of money is useless when there is nothing to buy with it.  For money is nothing more than a temporary storage of wealth.

We make or do creative things.  Things or services that people want.  There is a world full of people making goods or providing services other people want.  Some people make cellular phones.  Some people make microwave ovens.  Others provide landscaping services.  And these are the things we want.  Not money.

Money is a tool.  We use it to make trading with each other easier.  People who make cellular phones don’t need to find someone who makes microwave ovens to trade with.  Instead, they receive money for the cellular phones they make.  And the microwave oven makers receive money for the microwaves they make.  Then the cellular phone makers and microwave oven makers can take that money and trade it for what they want.

Our Human Capital Determines the Size of our Paycheck

We call the skills we accrue over time that lets us make or do things that other people want ‘human capital’.  People that have human capital have jobs.  Employers hire them because they have valuable human capital. 

Some people have so much human capital that they start a business.  They’re very good at bringing together an idea, people and resources to make valuable things or services that other people want to buy.

People with human capital are traders.  Just like in ancient Mesopotamia.  Nothing has changed.  Except that we trade more efficiently these days because of money.

It’s Easier to Steal Money than Televisions and Mansions

Not everyone traded.  Some people stole.  Some fought.  When peoples came into contact with each other, they often fought each other.  And the winner took the spoils.

Not much has changed today.  There are people who still steal.  And they are peoples who still conquer.  The only difference really is the efficiency of some theft.  Again, this is due to money.  It is more difficult to steal a 42″ plasma television than it is to steal $750 (which they can use to buy a 42″ plasma television). 

Likewise, it is more difficult for a politician to steal a million dollar mansion than it is to steal money.  Either as bribes from some special interest.  Or from taxpayers.

Unearned – Evil; Earned – Good

Those who steal typically have little human capital.  But because they still want those nice things they steal money.  The problem with theft, though, is that stolen money is transitory.  If you have human capital, you get a recurring paycheck.  Once you spend stolen money, it’s gone.  And you have to steal again.

This want of unearned money is the root of most evil.

People who earn their money with their human capital improve the lives of others.  The more they buy, the more others sell.  And the more jobs these others create.  And these jobs allow other people to use their human capital to buy other things.  Or even make charitable donations.

This want of earned money is the root of most good.

Rockefeller and Carnegie Made and Gave Away Fortunes

John D. Rockefeller made a fortune with Standard Oil.  He was ruthlessly efficient.  No one could refine, transport and sell petroleum products cheaper than he could.  People benefitted from affordable petroleum products.  And after he retired, he gave away vast portions of his wealth to charitable causes.

Andrew Carnegie made a fortune from steel.  Like Rockefeller, he was efficient.  No one could produce quality steel at a lower price than he could.  His steel built the skyscrapers and railroads of America.  He made a fortune.  And gave most of it away to charitable causes.

Most of the politicians that make it to Washington leave Washington as millionaires.  They sell themselves to special interests.  Raise our taxes so they can buy political favor.  And their policies are notorious for the unintended consequences that destroy (e.g., Aid to Families with Dependent Children (AFDC) destroyed black families). 

High Taxes and Lottery Tickets Punish the Poor

The federal government has created such an entitlement mentality that some people can’t survive without government assistance.  To fund their destructive policies, they’ve raised taxes on the wealthy.  And impoverished the poor.

With taxes so high, charitable contributions have declined.  Sin taxes (on cigarettes and liquor) have hit the poor especially hard (as they have less disposable income).  Which makes the poor more dependent on government.

But the ultimate insult to the poor has got to be the lottery.  The government entices the poor with illusions of getting rich quick.  And this want of unearned money causes the poor to spend large chunks of their small paychecks or government benefits (that they can’t afford) on lotto tickets.  Hoping to win the big one.  With some of the worse odds in the history of gambling.  (People have a better chance of getting struck by lightning than winning the lotto.  And few people believe that they will ever be hit by lightning.  But they’ll keep buying those lotto tickets.)

But whether a thief, a politician or the poor, the end result is the same.  The want of unearned money makes people make bad choices.  And people suffer because of those choices.

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