An excerpt from It's a Jetsons World.
By Jeffrey Tucker
Checking out at the grocery store the other day, I paid for
my sack of rolls. The checkout person handed me my bag.
"Thank you," I said.
"You're welcome," she replied.
I walked away with a sense that something was wrong. Do check-
out people usually say, "You're welcome," and nothing else? Not usually.
Usually they say, "Thank you," same as the customer says. (Remember,
we are talking about the American South, land of politeness, here.)
I was left with an inchoate sense of: "Hey, I did something for you too."
When do we say, "You're welcome"? We say that when we give a gift
(a good or service) to a person without receiving anything in return. For
example, I might hold a door for a person. That person says, "Thank
you," and I say, "You're welcome." Another time might be at a birthday
party when the recipient of a gift expresses thanks.
These are one-way examples of benefaction. We are giving but not
necessarily getting anything tangible in return. What makes the case of
the commercial exchange different? Why do both parties say, "Thank
you"? It's because each side gives a gift to the other.
When I bought those rolls, this is precisely what happened. I saw
rolls available and I decided that the rolls were worth more to me than
the $2 I had in my pocket. From the store's point of view, the $2 was
worth more than the rolls being given. Both parties walk away with a
sense of being better off than they were before the exchange took place.
The checkout person is there to facilitate this exchange and speak
as a proxy for the interests of the store. The store was receiving a gift of
money (more highly valued than the rolls) and I was receiving the rolls
(more highly valued from my point of view than the $2 I gave up to get
them).
This is the essence of exchange and the core magic of what happens
millions, billions, trillions of times every day all over the world. It
happens in every single economic exchange that is undertaken by virtue of
human choice. Both sides benefit.
Each side is a benefactor to the other side. This system of mutual
benefaction, unrelenting and universal, leads to betterment all around. It
increases the sense of personal welfare, which is to say, it increases social
welfare when everyone is involved in the activity.
To be sure, a person might change his mind later. I might arrive
home with my rolls and discover that I'm out of butter and that I would
have been better off buying half as many rolls and using the rest of my
money to buy butter. I might decide to drop bread from my diet. I might
conclude that rolls are really not that tasty. All these things can happen.
Such is the nature of the universe that the future is uncertain and human
beings are inclined to be fickle. But at least at the time of the exchange, I
believed I was better off, else I would not have made the exchange in the
first place. I walked away with a sense of gain. The store owners had the
same sense of gain. We both expect to gain, which is enough to recommend
the exchange system, since no social system can guarantee a happy
outcome for every action.
Now, if all of this seems obvious and not even worth pointing out,
consider that most philosophers in the history of the world have missed
this point. Aristotle, for example, reflected at length in his Nicomachean
Ethics on the issue of economic exchange, but he started with the
assumption that exchange takes place when valuation is equal or commensurate.
But what about cases in which it seems obviously incommensurate,
such as when highly valued and rare physician services are
traded for something widely available like corn? Aristotle believed that
the existence of money serves to somehow equalize the exchange and
make it happen, when it should be apparent that money itself is only a
good introduced to make exchange more convenient.
The problem he faced was his initial premise that economic exchange
is based on the equal value of items in the exchange. This is just wrong.
If two people value goods equally, an exchange would never take place,
since no individual could be made better off than before. If exchange is
based on equal value, people are merely wasting time engaging in it at
all. Exchange in the real world is based on unequal valuations of goods
and expectation of being made better off. It is a matter of two people who
give each other gifts in their own self-interest.
The discovery of the correct theory of exchange had to wait until
the late Middle Ages when the followers of St. Thomas Aquinas saw the
logic for the first time. They saw that economic exchange was mutually
beneficial, with each party to the exchange seeing an increase in personal
welfare, subjectively perceived. Therefore the action of exchange on its
own becomes a means of increasing the well-being of all people. Even if
there is no new physical property available, no new innovations, no new
productivity, wealth can be increased by the mere fact of exchange-based
human associations.
As with many postulates of economics, this seems very obvious once
you see it but it is evidently not obvious at all. In fact, I've observed that
many people's underappreciation of the contribution of the market order
is rooted in the perception that buying and selling stuff really amounts to
nothing wonderful at all. It is just a swirl of churning and burning for the
sake of nothing in particular. Society could easily do away with it and be
no worse off.
I have a hard time figuring out what people who believe this are
thinking. Let's say that I proposed abolishing gift giving. Wouldn't it be
obvious that society would be worse off if I got my way? We would no
longer enjoy the material manifestation of the appreciation of others, and
we would all be denied the chance to show others our appreciation of
them.
Well, if it is true, as I've argued, that an economic exchange is a two-
way gift, an instance of mutual benefaction that is pervasive throughout
society, it becomes clear that society would be completely sunk without
as many opportunities as possible for economic exchange. Anyone who
champions the well-being of society should especially celebrate commercial
centers, stock markets, international trade, and every sector in
which money changes hands in exchange for assets or goods. It means
nothing more than that people are finding ways to help each other get by
and thrive.
As sixteenth-century Spanish theologian Bartolomé de Albornoz,
known mostly for his opposition to slavery, wrote,
Buying and selling is the nerve of human life that sustains
the universe. By means of buying and selling the
world is united, joining distant lands and nations, people of
different languages, laws and ways of life. If it were
not for these contracts, some would lack the goods that
others have in abundance and they would not be able
to share the goods that they have in excess with those
countries where they are scarce.
However, if we do not quite see the underlying logic of exchange and
how it works to help everyone, it is easy to underappreciate what market
trading means to society. This is a tendency in the circles that discuss
issues of social justice. The market is rarely given the credit it deserves
for helping humanity improve its lot. In fact, the market is nothing but
the cooperative interaction of humanity in improving the commonweal.
The fallacy of value equivalence in exchange has been refuted for
some 500 years, and yet it keeps reappearing. Economics is one of those
sciences that require careful thought. It can't be quickly intuited from
a handful of moral postulates. It must be studied and understood with
deductive tools and patient delineation of a wide range of concepts. It is
because of this that economics as a science was so late in developing. But
it is not too late for us to understand.
The understanding of economics leads to a direct appreciation of
the contribution of free markets to the well-being of all. If you read something
that seems to disparage the market economy, it is more than likely
that a fallacy such as the above is at the root.
At some point today, you will undoubtedly engage in some economic
exchange. Use the opportunity to reflect on what a glorious
dynamic underlies it. You can say, "Thank you." The person who takes
your money can say, "Thank you." Such opportunities account for most
of the peace and prosperity we enjoy this side of heaven.
