Ethics and Economics Intersections:
Some Ramifications from

The Ethical and Philosophical Foundations of Economics

Rick Garlikov

 
Decent people often behave better and more cohesively during a natural disaster or hardship conditions than they do normally, and I think there are underlying ethical principles involved that can shed light on, and have significance for, economics in general. I want to discuss those here.

 First, however, I want to make the claim that economics, or economics theory and principles, can and should be viewed in the broader context of ethics and was from the beginning, but the ethical principles and psychology of human nature were at first mistaken and then later even more mistaken before being lost sight of altogether.  The behavior of decent people in times of natural disaster or hardship is one illustration of that. In all areas of life ethics (synonymously referred to here as morality) – discovering, knowing, and doing what is right – should be paramount, and, contrary to the view that ethics and business or economics are, and should be unrelated (as in the claim “this has nothing to do with ethics; this is purely a business matter”), economics or business and finance are no exceptions to that.  Work and trade, business from sole proprietorships to global corporations, government regulations, taxation, along with the use of money for investing, saving, or spending, should involve doing what is right and should comply and be in accordance with the same correct moral principles as any other act.  Stated overly simplistically just at the outset here, that means economics should be about productivity, fairness, and not violating rights, and, if and whenever these three elements conflict, it should be about working out the best possible ethical configuration among them.

 Making it sound as though productivity and fairness were incompatible, Winston Churchill is attributed with saying: “The inherent vice of capitalism is the unequal sharing of blessings; the inherent virtue of socialism is the equal sharing of miseries.” But the idea of economics should be to find some form of it that has the most reasonable blend of fairness and productive benefits or “blessings”.  And there is no reason this cannot happen voluntarily because decent people want to treat each other right and fairly and know, or should know, reasonably how to do that.  It is not about government overreach and overregulation, but about having ethics and ethical knowledge and deeper understanding be an integral voluntary part of everyone’s concerns, including their business interactions and relationships.

 And, since fairness is sometimes an elusive set of concepts, it is probably more reasonable to seek preventing gross unfairness of any sort than to achieving perfect fairness of all sorts.  You don’t want blessings created at the expense of justice; nor do you want fairness causing the equal distribution of only poverty. Clearly unnecessary poverty is not a virtue or a worthy goal, but you don’t want to overcome it by the virtual enslavement of some by others. As John Stuart Mill pointed out most powerfully in his Principles of Political Economy, in writing about the economic theory of communism (long before it was adopted by the Soviet Union in the brutal, authoritarian way it was) in comparison with the Dickensian capitalism of the time and what seems to be the same sort of exploitation today of impoverished workers in developing countries, such as those in the garment and the electronics industries:

"If ... the choice were to be made between Communism with all its [problems], and the present state of society with all its sufferings and injustices; if the institution of private property necessarily carried with it as a consequence, that the produce of labour should be apportioned as we now see it, almost in an inverse ratio to the labour --the largest portions to those who have never worked at all, the next largest to those whose work is almost nominal, and so in a descending scale, the remuneration dwindling as the work grows harder and more disagreeable, until the most fatiguing and exhausting bodily labour cannot count with certainty on being able to earn even the necessaries of life; if this or Communism were the alternatives, all the difficulties, great or small, of Communism would be as dust in the balance."

What should be sought is an economic system that is the most productive and beneficial, while avoiding gross unfairness in terms of opportunities for making a contribution to the whole and receiving a reasonable share of the distribution for it – in other words securing a fair distribution of burdens and benefits (which in economics often equates with labor and compensation) -- and while also avoiding the violation of rights.  There may be different models or components in them for achieving that, and there may be disagreements from time to time about the proper balance, or what will accomplish it, but this should be the overall goal. This goal seems to surface most noticeably under conditions of natural catastrophe or disaster- or storm-related hardships even if they don’t rise to the level of catastrophe or disaster.

In my Introduction to Ethics I develop a general moral principle by trying to take the best features of traditional principles in the history of moral philosophy while eliminating their flaws.  That is always a work in progress as new insights come to light which show amendment may be needed.   But there are common moral criteria with which all acts should comply and be evaluated:  

• the balance of benefits over burdens (or good over harm); i.e., the amount and significance of any good or harm done.  Normally one should be trying to do the most good and prevent the most harm for innocent and deserving people, where reasonable. There are exceptions, however, where the amount of good done seriously conflicts with any of the following other moral criteria.
• Fair (i.e., just or rightful) distribution of the benefits and burdens (good and harm)
• reasonable balance of benefits/burdens with people’s rights or with other obligations, particularly specially incurred ones
• no unfair or unreasonable burdens on people expected or required to perform acts or work

 What constitutes rights, reasonable distributions, fairness, reasonable and fair burdens, etc. all need to be worked out through rational ethical understanding, insight, and discussion, but “fair” doesn’t necessarily mean “equal” or that one necessarily gets anything if one does not contribute what one could and should. There are rational and productive ways to work out disagreements.  Rational ethical dialogue often eliminates or at least minimizes many of the initial disagreements or those that tend to be divisive in political or public debate which too often takes place at a shallow and often self-serving level, with each participant only seeing their own, or their constituents’, needs and not the good of the whole or the legitimate benefits and needs of others.  In too many cases people don’t realize that ethics applies to all acts, no matter how small, and they instead allow custom, traditional practices, company policies, and arbitrary or misguided rules, principles, assumptions, and laws to determine their behavior. In economics and business, as in any formal system, too often formal rules and laws (even if well-intended) take on a life of their own and become entrenched even though (they become) ethically counter-productive.

 In ethics courses I teach, most students these days have a very difficult time applying ethical principles to issues and acts normally guided by customary practices.  They don’t know how to apply the principles and don’t see why they should. It doesn’t even occur to them that ethics is involved.  When Vice President Spiro Agnew was asked about having committed crimes as governor of Maryland, he responded that he had not done anything wrong or different from his predecessors but that “morality had changed.”  But in truth morality (and laws based on it) had finally been seen to rightfully govern such acts and practices. It is blindness to the total purview of ethics and morality that is the only way I can understand how egregious business practices, which bring ruin to hundreds, thousands, even millions of innocent people, are carried out by people with the education and intelligence that should make them know better.  And it is this same blindness which accounts for why these practices are not made illegal or are not prosecuted under laws that might apply, by people also with the intelligence and education that should make them know better.

 However, I am not as concerned here with legality and prosecution as I am with the moral blindness and insensitivity that permit the outrages that call for them.  I don’t think a formal system of law can capture all of morality, and the law cannot prevent wrong acts anywhere nearly as effectively as a knowledgeable and understanding conscience can.  It is not fear of punishment that causes most of us to do what we believe or know to be right; it is simply wanting to do the right thing.  Unfortunately too few people realize morality applies, or should apply, to business and economics, and fewer know how to apply it reasonably, because many mistaken principles and presumptions have become commonplace in business and in economics over the centuries.  I want to comment here on some of the most salient of those and try to put them into perspective.

 The first economist, Adam Smith, showed how an economic system based on enlightened self-interest can flourish well, but unfortunately his message is misunderstood today by ignoring the “enlightened” part of the concept, which embeds far more ethical understanding than it might seem, because it involves knowing and doing what was right so that one was correctly seen to be fit to do business with.  And even “enlightened self-interest” lost its usefulness in economic self-policing once neighborhood and village censure, or the sort he wrote about, no longer applied to a customer base that expanded beyond local neighbors or a village to a population that is served by mass production and mass distribution.  It doesn’t matter to an immoral business person if a segment of the population discovers s/he is not morally scrupulous because s/he could rely on many more customers who did not yet know they were being cheated or who didn’t care that others were treated unfairly as long as they think they are getting what they want at a good price.  If you can clear $20,000,000 before being forced out of business without fear of prosecution, there is little long term business incentive not to.  And if one has no understanding or belief the practice is wrong, there is no incentive of conscience to refrain from it.

 Smith’s concept of the “invisible hand” does still have merit however, when individual choices in a system voluntarily coordinate well to make the whole system function for the most productive, fairest, and ethical ways. People pursuing their own desires and knowing their own needs are often more motivated to make things work and better able to know how to work with others to (mutually) meet their own needs. However, not all people are in equal starting positions, or positions of sufficient strength to be able negotiate fair terms for themselves in working with others. And also, as the coach of any team sport knows, individual efficiency, skill, and dedication only work within a larger system when there is a threshold level of voluntary cooperation toward a common goal.  Without that minimal level of cooperation and coordination, players may be working against each other, even unintentionally, or at least not working with each other as a whole team, though they may want to and think they are.

 But a coach who micromanages loses the benefit of players being able to adapt to their specific needs at the most optimal time, and also risks causing dissatisfaction among players who want more freedom to do what they think best to do their job as they see fit.  Individual autonomy, as Smith saw, is very important.  But it is not automatically beneficial to a larger group without at least sufficient coordination, preferably voluntary, uncoerced coordination, to prevent people from accidentally working against each other or rowing in different directions.

 What this means, and what I want to explore here, is that for an economic system to operate optimally, there must be a balance of 1) freedom and autonomy of individuals on the one hand and 2) coordination toward commonly held, correct ethical goals – chief among them being the pursuit of greatest benefits and least burdens, most fairly and rightfully shared -- on the other. (1 and 2 are compatible when people voluntarily coordinate or collaborate whether by direct design or through indirect mutual accommodation as through networks of trade.) This is perhaps the broadest way to state it, but it is not the way economics and economic issues are normally thought of and discussed. 

 Instead economics is taken as a set of rules or practices concerning money, property rights, transfers of ownership, through what are considered to be voluntary agreements based on mutual consent.  Unfortunately, as with any formal rule-based system, the system does not always work beneficially, smoothly, fairly, and effectively.  I want to examine economics from an ethics perspective, beginning with how decent people tend to behave during natural disasters or disaster-related hardship conditions.  I say “decent people” because people who are not decent will try to take advantage of such conditions to loot whatever they can, over and above necessities to survive, not caring who they hurt or what is fair or right.  “Bad” people ruin things for good people and their (potential) behavior needs to be taken into account in any economic or legal system, but I think you don’t want pathological behavior to determine what the system should be; the ideal system should be based on what decent people do and prefer, and on trying only after that to prevent pathological behavior from disrupting it.

 Behavior in a Natural Calamity

In October, 2011 a very early, wet, heavy, huge snowstorm struck the northeast United States.  I was visiting my younger daughter who was expecting the birth of her first child. The idea was that I was going to help them by doing normal chores while they took care of the baby and while my daughter convalesced from giving birth insofar as was necessary. The day after I arrived, a week prior to her due date, the storm hit, and power went out in most of the state and large parts of surrounding states.  Power company workers, some from as far away as Oklahoma, brought trucks and equipment to reestablish power to homes and businesses.  It took nine days for power to be restored.  What I found interesting was that everyone pitched in to help each other, all voluntarily and all without regard for money or keeping score of who was working or working harder, etc. I want to discuss what I would say are the underlying ethical principle involved in that, which are important and which business and economics in general probably tries, but fails and then forgets to keep trying, to capture. 

 The storm did so much damage because it came early in the year when the trees, many of them old and huge, were full of leaves, and the snow stuck in such a way that its weight accumulated on those leaves and branches and broke them, knocking down the power lines under them.  In some cases wires themselves tore loose from connectors due to the weight of snow that fell and stuck to them.  Cable TV lines that were a quarter inch in diameter simply accumulated falling snow and ice that was an inch in diameter around them; the snow just stuck immediately to everything it hit. 

 So in my daughter’s neighborhood, there were downed power lines, downed phone and cable TV lines, and downed limbs, many almost as large as trees themselves.  Everyone was without power, but not everyone had trees down.  People came out to meet on the street to assess the damage, shovel the walks, and begin to remedy what they could.  Guys with gas power saws cut up limbs and others moved them to the curbs, people made sure power lines were not left dangling or lying where children might touch them if and when they became live.  They made sure people had food and shelter.  The homes which had gas heat and hot water were made available to anyone who didn’t. Two different families, one of which was complete strangers to my daughter and her husband, offered them use of their four wheel drive vehicles to get to the hospital whenever she went into labor. (The storm hit on a Saturday, and the baby was born on the following Wednesday, about half way through the power outage.  Mother and baby did well, even being at home for three days without power, but with a gas fireplace, water heater, and gas stove.)

 Everyone worked together out of kindness, but I think there was more to it than that – underlying moral principles pertaining to work, productivity, and fairness. 1) Everyone knew that it was just a matter of luck who was hit the hardest and who was not – whose trees were down and whose were not, and 2) everyone knew that if they were the ones hit the hardest, or if they would be next time, everyone else would be helping them. 3) There was a sense that everyone was deserving of help, based in part on personal knowledge of neighbors, but also just from general behavior as people were friendly and helpful to each other.  (In this way it was behavior opposite that often seen on busy roads or in malls at Christmas time, whereby some people show lack of consideration and general civility or kindness.  Here civility, kindness, and friendship were most evident. I never met anyone trying to be selfish or take advantage of others for their own gain. Probably it happened in some places or under more dire conditions, but not that I saw.)  The work everyone did for each other was something like a mutually understood insurance policy that had no premiums other than kindness and good will and that required no payback other than for everyone to do the same if it happens again to whomever it effects most next time. 4) There was a sense that “everyone was in the same boat”, in some essential way, all hampered by the storm conditions, and that working together would help everyone, not just the person benefited by a particular task’s being done at a given time.  5) Everyone did what they could, with stronger, younger adults doing more of the heavy lifting, but with everyone supplying whatever else they could. 6) There was a certain joy in doing all this together, rather than its just being work, in part because fortunately no one had been hurt and it was a matter of pride to be able to cope. 7) No one felt exploited, put upon, or overly taxed in their work. 8) Everyone was appreciative of what others did.  One man in particular, who was a fireman, had a power saw and other power tools that he loved to use, and his wife had always said that if the neighbors would have let him snow blow their walks and cut down their trees, he’d have done that for the whole block.  Now was his chance to do much of that, and he was happy as a clam cutting up limbs for others to drag to the street in all the yards that needed it. My daughter’s next door neighbor was eventually able to find and buy a generator and he ran a line from it to her house so that we could have sufficient electricity for lamps, TV, computer, and cell phone charging, to get along fairly comfortably with the gas fireplace, stove, and hot water heater already in place. 9) Because the storm hit on a Saturday, many people were home anyway instead of at work, and thus they had time to help. Typical weekend events were basically cancelled anyway.  Also, even during the ensuing week, most things were shut down and there was not even TV to watch other than for people who had generators.  In short, people had time to help which did not take them away from anything more pressing or important. That put into play my idea of “win/not lose” rather than, or along with, “win/win” as an operating principle, which I think most people who are decent live by – where they will help others if it means a lot to the other person, as long as they are not themselves unnecessarily harmed or seriously disadvantaged by helping. It is not that one necessarily or always needs benefit from helping others, but one needs not to be (badly) harmed by doing so.  In some cases, some people will even make serious sacrifices for others, but that is not the norm and cannot be expected nor required, apart from specifically incurred obligations, such as honoring an agreement or keeping a promise, finishing something started that needs finishing, etc.  But most people will willingly help others if “it is no skin off their teeth”, meaning if the cost is not too great for them.  (This is the basis for the “what is fair and reasonable to expect of an agent” portion of my general ethics principle.)

 The nine principles above, perhaps particularly 2, 3, and 4, are key to allowing people to afford to be generous, because they know that such generosity will be extended to them if necessary and if people are available and able to help them. There is no need to store up credit or wealth in the form of money, which is sometimes precarious and which is of no use when help is not available anyway.

 Outside the neighborhood, a few businesses in the downtown area had power, and opened up, not just for business, but also to let people recharge cell phones and laptop batteries and go online to the Internet.  People who needed to do that shared tables, sat around on the floor, shared surge protectors that multiplied the power outlets, and did whatever they could to help each other, all in friendly, civil ways.  One restaurant let me stay at the table longer after lunch so that I could do my online teaching, and when I gave them extra money for allowing me to do that, they didn’t want to accept it.  When I insisted, they took it, but then brought my daughter and me ice cream as a token of return appreciation.   

 Fortunately even though the power was out for the nine days, there was no additional snow besides the initial 12-18 inches, and the streets and sidewalks were all cleared and passable by the end of the first day.  So you could walk or drive anywhere you needed to, but not many gas stations had power to operate their pumps, so no one drove any more than they had to.

 Stores that were able to open, of course stuck with their standard business model in terms of selling their goods and services, but they and everyone else went well beyond that to offer for free whatever they could because, I think, of the principles above, along with a sense of community and compassion.

 And I want to add that under conditions of these sorts, people of all different backgrounds chip in and have a basic humanity and ethic.  There was a sudden extremely heavy snowstorm in January 1982 in Birmingham, Alabama, and my wife, an elementary school teacher was pregnant with our first child.  She decided to drive the back way home, after working past the time when school dismissed for the blizzard, and when she got to an impoverished area of the county, it turned out that cars were getting stuck trying to get up a short but steep hill after a curve in one spot near the railroad tracks.  Men and teenage boys from this neighborhood were out helping push cars through the sticking point so that the drivers could get home in the storm. They did not ask for payment, though those they helped who could afford to should have rewarded them with it. They were simply there to help.

 I think there are underlying principles, such as the one above, at work in these natural disaster and/or other emergency types of responses. I want to try to look at standard economics and business in light of those underlying principles because I think that business and economics, when done ethically, tries to make everything operate this way. But by using a formal system of checks and balances to insure fairness and productivity, conventional business and economics tend to be an ethical failure because of inherent flaws in formal systems and because people who have long ago lost sight of the ethical purposes of the formal system, in this case economics, confuse the formal system with its purpose --the means with the ends-- and the system takes on an arbitrary, pointless, rule-governed existence and false ethics of its own.  Examples are 1) the criminal justice system when the rules of evidence allow the obviously guilty to go free or permit the conviction of the likely innocent, and 2) sports, in those cases where there is no way to remedy obviously wrong official calls or prohibit forms of play that meet the letter of the rules but clearly violated the spirit of the game.

 The purpose of business and economics should be to help people work and trade together in order to produce the most benefits with the least burdens, all rightly and fairly distributed as much as is possible and reasonable.  The basic ideas are that that 1) people working in concert or in combination (even if only indirectly in combination, as via “the invisible hand”, which can actually be explained through “visible” links combining groups of people who voluntarily work with each other for mutual benefit into a growing network) can accomplish far more and each benefit from it far more than if everyone had to meet all his/her own needs him/herself, 2) when people work in any way that is collectively beneficial through the contribution of each, the distribution to each of the benefits should be commensurate with the contribution made by him or her, apart from special circumstances. While that is not easy to measure, grossly unfair distributions should be avoided or remedied.  That is difficult to do once the system becomes formalized and people confuse the formality of the system with its underlying purpose.

 Special circumstances involve those who cannot contribute (very) much – such as the young, the disabled (whether through age, infirmity, or injury), etc.  I realize there have been various failed attempts to create such a system, but sometimes that was because the system was forced on people rather than voluntarily chosen by them, and sometimes it was still not fairly or reasonably operated or became too bureaucratic or formally rule-governed. Sometimes it placed too much emphasis on equality or fairness while ignoring productivity; sometimes the reverse. While an ideal system may not be possible, it seems we can at least try to approach it and history seems to show various advances in the systems we have. Labor unions and child labor laws, for example, helped prevent some of the worst exploitive excesses of Dickensian or Darwinian free market capitalism.  Decreasing length of the work week helped divide the greater leisure made possible by machinery. At the very least we should know what the ideal is that we are trying to approach and achieve.  Too often there are political battles waged over poorly or partially formed, or poorly or partially articulated, notions of what is right economically.

 Now this distribution of burdens and benefits needs to be considered over time and not just in slices of it.  For example, if some work you did and were paid for has unexpected benefits for everyone, you should receive remuneration for your contribution to those as well, not just what you were paid at the time based on the expected benefits.  E.g., if actors help you make a low budget film by accepting very little remuneration, if any, and the film unexpectedly becomes a box office smash hit, you should share the profits with them.  Cases like that are fairly easy to quantify.  It is more difficult to quantify less tangible, or long term infrastructure, contributions such as building roads and bridges, serving in the military, being a nurse, or teaching third grade.

 Yet it is important to be able to quantify them in some way or at least to recognize them because people seek security over time, and that is not the same thing as storing or investing money made early to have later.  Money put into an unpaid loan or to a failed investment makes it appear as though one never made a contribution to the social good and are then undeserving of benefiting from it.  Even in the short term, being underpaid gives a falsely low indication of the amount of contribution one has made to the public good and therefore what one deserves in return for it. 

 Money is not simply a medium of trade, but it also serves in some ways as a form of scorecard about how much good you supposedly have done for the community and thus how much the community owes you in return when you have wants and needs for which you will spend that money.  Theoretically, if one considers money as a measure of productivity, the more money someone has, the more goods and services they have supplied to the community (or the more important the goods and services are which they have supplied) for which they were paid.  But money doesn’t always match up that way.  It doesn’t when workers are exploited and it doesn’t when luck or chance or historical “accident” is involved.  Luck has to be taken into account in some way, since much success (and failure) depends in part on luck, even when skill and effort are also involved.  The fact that athletes and (other) entertainers, for example, can make so much money depends on inventions that mass produce and distribute their services – television, recordings, digital distribution, etc.-- in ways not open to nurses, soldiers, coal miners, most teachers or anyone else whose work has to be individualized and “delivered” or provided in person because no invention has yet been contrived that will allow them to have an hour of their labor serve millions of people (customers/clients/patients) at the same time, in the way recordings and live broadcasts via television or Internet allow the work of athletes and entertainers to do.  Hence, fictitious police on television or in movies can make far more money than real cops, and even real physicians cannot make nearly as much money as television doctors Kildare, Welby, Casey, and House.

 And the fact that one form of entertainment or one sport is more popular than another at any given time and place also involves a certain amount of luck. And it often takes great effort by many people to make any given form of labor a desirable spectator activity.  Football in America took on far more popularity with the advent of color television, and slow motion and stop-action instant replay, cameras with long lenses, high resolution, and its promotion by television networks such as ABC. Prior to that, nationally televised football games were rare (other than the primary bowl games) and had small audiences.   Look at the amount of work it takes for television networks not only to broadcast football games, but to explain and promote football, before, during, and after games, to make it more intelligible and interesting to fans, as if it were as complex as nuclear physics. Even the most talented football players today would not make nearly the income they do if none of that had happened.  Yet they had nothing to do with any of those developments.  Similarly, “March Madness” – i.e., the NCAA basketball championship – is now big business in America, but started in the following way in 1961, as explained in the New York Times (http://www.nytimes.com/2013/04/07/sports/ncaabasketball/eddie-einhorn-seized-on-broadcasting-college-basketball-games-in-1960.html?pagewanted=all&_r=0):

 “[Eddie] Einhorn began broadcasting the early rounds of the tournament when there was no market for the games. Even for his first championship game, between Ohio State and Cincinnati in 1961, he said he paid the N.C.A.A. only $6,000 for the rights, but he could not find a station outside Ohio and Kentucky to show the game.

 ‘He was ahead of his time, plain and simple,’ said the broadcaster Dick Enberg, who called games for TVS and introduced Einhorn when he was inducted into the National Collegiate Basketball Hall of Fame in 2011.

 Bryant Gumbel added: ‘It wasn’t that long ago that no one was interested in putting these games on TV. It doesn’t seem possible now, but nobody cared.’ ”

 In short, the money involved now in sports is not just because of the skill of the athletes who are playing.

 Somewhat similarly, some work is incorrectly considered more important than others, and people with money or access to money (e.g., through participating in insurance plans) will willingly pay more for it.  Hence, physicians will make far more than nurses, even though good nursing care may be just as, or even more, vital to a hospital patient. Physicians will make far more than police, soldiers, or firemen, even though the latter three also save lives, and at risk to their own in addition. Cosmetic surgeons doing beauty enhancement in Los Angeles will make more than public health physicians or internists in rural areas or inner cities. Administrators will make far more than the people who do the work, even if the administrators contribute far less to the success of the work.  Good teachers make little in comparison to their value and the contribution they make to the next generation.  Women often in general make less than men, even when doing the same work.  Etc.  Physicians made far less money before the advent of wide-spread health insurance programs that began after WWII.  Many incomes are in some sense as much, if not more, the result of accidents of history than to relative contributions to society.

 Or suppose different pharmaceutical companies and different researchers all pursue different promising paths of research for a treatment for some disease, and only a small percentage of that research, no matter how well-designed or how intelligently pursued, will pay off in the discovery sought.  Since no one knows ahead of time which research path will be fruitful, and all has to be done in order to find the one or few that are, isn’t the work of those who fail just as important as the work of those who succeed?  And isn’t success partly determined by luck in cases of that sort?  Should permanent financial reward be attached to the luck rather than effort involved in the reasonable pursuit of the accomplishment? If so, to what extent?

 Money

There are practical benefits of using money as a medium of exchange, as introductory economics books typically explain, but I try to point out that there are two other aspects of money in a free enterprise system: 1) money is used as an incentive to channel labor voluntarily; i.e., rather than dictating that people work at some job, money is used as an incentive to entice them to do it willingly.  It is of course perhaps more voluntary, and certainly more ethical, when higher wages, or at least fair wages, are offered for worthwhile work to people already doing well financially who want to do better, than it is when slave wages are offered to exploit those who are in financial dire straits who have to work for whatever they can get.  2) Money, because it is in some ways a mathematical construct which is not necessarily related to physical or moral reality (as in market “bubble” prices, usurious interest rates, and inflation), can flow into or collect and pool in places where it would not in a barter kind of situation or where it is not helpful in improving trade and the collective outcome of goods and services.  Moreover, wealthier people can channel labor toward luxuries, diverting it away from working to meet the needs of the (working) poor.

 The unintelligible financial instruments that helped prompt the 2007 United States financial meltdown are an example of the use of money that doesn’t coincide with actual work or available labor.  And hoarded money is an example of how money can disrupt or halt trade (and collective work) rather than facilitating it.  Another example of the latter is when people who need work done have no money to hire the people who could do the work, and those who have the money don’t need the work done by the people looking for work.  Money can get skewed or be just as out of place as barter can be when those who have goods to trade and needs to be met cannot line up with the people who can meet their needs and need their goods.  It seems that there needs to be ethical, voluntary, non-market mechanisms to re-channel money when it gets skewed in any of these ways. That is different from merely political, typically involuntary and coercive, redistribution mechanisms, and the alternative is to let the economy suffer just in order to uphold failed policies and rules for the sake of some false sense of ethical objectivity and an unwarranted reliance on self-interest, even enlightened, self-interest and voluntary mutual agreements to promote the greater good for all or even for the individuals pursuing them.

 One of the problems with associating money with amount of contribution to the public good is that those who work in industries amenable to mass production/distribution or who otherwise acquire wealth through luck, are given far more credit and power and influence than the actual contribution their own labor warrants. This influence is both in the form of how they spend their money and thus how they channel labor, and in the form of positions they are given on powerful boards or in government office.

 Money is also in some sense “storable” or potentially lasting over time in ways that some products of labor are not. That is important for when one is not working or can no longer work. But, it does not necessarily do the job.  What working people seek is some sort of ongoing security through time that they earn through their labor; then they can spend with confidence any excess at any given time.  But they don’t get that because of fear of others’ greed, because of changing conditions, because of inflation or fear of it for fixed income, and because of the precariousness of investment or other forms of storing money, plus, increased cost of living based on other factors of social and technological progress that were not built into your previous income’s anticipation.  These things affect the flow of money and thus affect the economy, often in ways that are harmful rather than helpful. 

 What should really be the goal of an economic system is that all able people should be at work meeting the reasonable needs and desires of everyone and receiving a fair proportion of the total good they are helping to create; and that means that each person receives is their fair portion of the fruits of labor available, which may or may not have to do with the amount and location of money in society at any given time.   It does no good to have lots of money if there is no labor available to meet your needs, and there is something wrong if money is skewed in some way so that labor that is available cannot be employed for good and useful purposes. 

 The only real security is living in a society where people are willing and able to meet each others’ needs in some reasonable, fair, and productive ways.  That is not necessarily assured by money, and is in fact sometimes thwarted in a system where rules of money take on a life of their own.  Inflation and investments that fail through company mismanagement and greed, or simple market failures for any reason, for example, basically rob people of what they deserve in the future from the actual fruits of their labor that helped better the lives of others in the past and present. Decent people helping each other in a natural disaster or time of crisis understand, subconsciously at least, the ethics of all this.  That ethical understanding needs to be brought to the surface and made clear to everyone so it will voluntarily apply under normal conditions as well. That is no easy task.

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