Money is a medium that facilitates exchanges. It could be almost anything. We still have coins that are colored silver and are called dimes and quarters because we once used silver as a mechanism of exchange. One ounce of silver equaled one dollar. When the paper money supply, printed by the government, exceeded the value that could be gained by exchanging the paper, silver became more valuable than what it could be traded for as money, and people began to melt coins down and sell the silver.

There are some progressives who have proposed the government simply give everyone (or at least, everyone who progressives like) a certain amount of money each month. The money would be essentially “free.”

What does that mean in the world of reality?

When a medium called “money” becomes too common, it loses its value as a mechanism of exchange. Suppose we used seashells as money, and after a big storm, the beaches were covered with piles of them. Everyone could pick up as many as they wanted. A person takes a basket full to town and wants to use them to buy a pig. Another person shows up and offers two baskets of shells for the pig, and another offers four baskets. Soon the farmer refuses all seashells for his pig because they have become essentially worthless.

So, according to progressive deep thinkers, people should now receive “free” money. Does money then become a basket of worthless seashells, or … will it still buy things? Yes, but why?

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The “why” is fascinating. Not all money in a socialist Eden is free, even progressives won’t go that far. Some people still exchange work, goods, services and intellectual capital for money. So, money continues to reflect something real, and can still be used as a facilitator of exchanges.

However, the “free” money turns out not to be free at all, and this is not just a matter of the taxes needed to pay the bill. Every dollar of it that is used in exchanges has value only because of those who are still working. The value of the “free” money is taken from those who still earn their money. The progressives have simply proposed taking value obtained by work from one group and giving it to another.

But, what about the argument that the “free” money will stimulate the economy? Interesting idea, but did extra baskets full of free seashells encourage the farmer to raise more pigs?

“Free” money is essentially a hidden forced exchange. Forced exchanges ultimately destroy wealth. That fact can stay hidden for some time because of the complexity and extent of a monetary system. What the average person feels is a decline in their ability to buy things. It takes more and more money to engage in an exchange. If this goes on long enough, then life begins to look like modern Venezuela, or Germany in the 1930s.

The bottom line is simplicity itself. We can never get to Eden with freebies obtained by force.

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Dennis Clayson is a marketing professor at the University of Northern Iowa. The opinions expressed in this article are those of the author.

and do not reflect those of the University of Northern Iowa.



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