To begin, a meddling externality is where others would be willing to pay in order to change or outlaw the behavior of others, essentially people are willing to pay in order to meddle in the lives of others. In practice this kind of externality is no different than being willing to pay for breathing less polluted air. You might say, yes but that is just in your head, but isn’t all value? What is the difference between being willing to pay $20 dollars for cleaner air, for coffee, for making is so others don’t watch pornagraphy, or that people can’t date outside a narrow set of criteria. These are all psychic harms and benefits when you get down to it. While I accepted this logically, in my heart I was never able to care about them the same as a regular externality.
I finally put my finger on why I tend to think differently about meddling externalities than other externalities. In economics we take preferences as a given, but in actuality they can change and be influenced in fairly predictable ways. I really doubt that in 50 years there will still be a lot of people upset by gay marriage. For civil rights at one point in time there were very large meddling externalities by bigoted whites about people of color being in their “proper place”, but even in the areas where such bigotry used to thrive, such meddling externalities have probably if anything reversed direction. I think if marijuana became legal in 50 years people would largely stop caring about others using it, indeed we are already seeing this. Allowing people freedom tends to result in meddlers changing their preferences, since often these preferences are not founded on anything aside from feelings about outgroups. And since this is the case, I would probably often permit behaviors that at the time might be inefficient due to factors of current taste if such tastes are likely to change due to ingroup outgroup dynamics.
Author: Titus Alexander
On Bears and the Perils of Modern Life
Economics is a powerful tool, but it does possess its blind spots. We assume that the choices people make are rational ones, and to a large degree this is likely true. But I fear that the modern world often lays before us an easy path, a path that our instincts compel us to follow and yet if we heed their call, we will find ourselves living an empty existence. The following is the tale of an anthropomorphized bear named Gordon that encapsulates the treachery of following the easy path. A similar situation has been observed in nature with baboon colonies near eco tourism resorts, the baboons breaking apart their social structures maladaptivly clinging to the easy nourishment found in bounty of human refuse.
Gordon awoke in his cave, hangover piecing his skull. He shuddered as he became filled with self loathing. Instinctively he reaches his paw to the bottles laying next to him to numb the aching chasm, but finds them woefully empty. Licking at an empty bottle he is forced into an uncomfortable clarity, at this point all he is empty, living each day as pointless as the last. He thinks back to his childhood as a young bear. Hunting, fishing for salmon, foraging for berries with his mother, playing with his brother. Those difficult times, those happy times.
Life had changed ever since the humans had built a campsite near him. He had discovered at first by accident what a simple thing it was, walking into an occupied campsite, watching as the humans fled before him, leaving behind their camping provisions. No chase, no frigid water, no gnawing at bushes, just food. He ate until sated reveling in the ease of acquiring the bounty before him. It was later that he would discover the fiery water they so often brought with them. That was the beginning of the end he reflected, that is what had transformed him from a noble beast into what he was now, alive, fat, miserable.
He reflected, he knew. He vowed, he vowed he would go back on the path, the path bears should follow. Rising from his cave to drink from a nearby stream he planned it all out, he would no longer take from the humans, he would once again hunt, once again fish, once again forage. As he thought this, he plucked up his massive shoulders and headed to a nearby river that he recalled from his youth. It had been a long time since he had walked this far, he could feel his limited endurance, but determined he pressed on. There were voices he heard, in the strange high pitch tone of man. He disregarded them and walked on, his legs growing ever more tired supporting his girth. “I must press on!” Gordon the bear vowed to himself.
A vow which started to decrease and decrease in volume, as it was drowned out by all of the justifications that began to flood his mind. It was okay he told himself, just once more, tomorrow would be another day. He turned around and headed for the voices.
He woke up, this time instead of childhood he thought of Guindalin.
She was a female, she was his mate, they had gotten along, but who would want what he had become? His heart surged, beating uncontrollably, he tried his best to suppress it, managing to do so only for a few scant minutes at a time. Today is his day to reform, he can’t give in, he lay there like that for an hour or two and then Gordon the bear could bear it no more.
Reaching for the bottles next to him he found there were a few left from yesterdays raid, he bit their tops off, desperately consuming them. It is okay he said, tomorrow will be a another day.
Another morning another drunken haze, what is the point of this life? To follow the easy path was spiritual suicide. Today is the day, Gordon steeled his resolve. He headed for the stream again. This time, undeterred by the voices coming from the forest. He arrived at the glade on the way to the fishing spot, it was just as beautiful just as pristine as ever, but was it always so hot, where there always so many flies and mosquitoes? Pausing he listened for deer, remembering they were once prevalent there, but his dulled senses picked up nothing. He carried onward to the river and waded in, he did it, he made it, he was going to be a real bear once again. The water robbed him of his warmth more rapidly than he remembered, the fish moved faster than he remembered, his paws responded slower than he remembered. He decided to take a break from the cold water, just a break. He heard those familiar voices in the distance.
Tomorrow is another day.
continued here
How to be a Happy Sisyphus
This story is old enough that I finally feel comfortable enough sharing it.
Sometimes it feels like I am cursed. I have a disease known as Ehlers Danlos III which affects connective tissue, making it weaker. It isn’t all downsides as my extremely elastic nature has likely saved me from broken bones on more than one occasion, from crashing my bike several times going over 30 miles an hour, to being hit by a bus etc. Something like that happens, usually a few things will be thrown out of joint, I pop them back into place and walk (well limp) home. So why wouldn’t everyone have this quasi super power? Well the flip side of so much flexibility, is that this condition, is to put it mildly, extremely painful with many dislocations and sublexations every day. Normal things like standing can cause me so much pain that I can become drenched in sweat. When I stand, I picture my knees as two ropes slowly tearing strand by strand under the load.
I tried everything to deal with it, and everything to hide it. I have obviously become more open with it over time especially after I needed to start walking with a cane (which I no longer need! But that is a subject for another post concerning scientism) and outgrew some of my youthful pride. I started using knee brace at one point, which failed so catastrophically in class one day that they forced my knee out of socket while I was trying to explain international trade, which didn’t go particularly well for my composure.
So I stopped using them, only to find that the problem had gotten much worse. I remember to this day I was feigning my way through a conversation while walking to the dining hall in so much pain I thought I might faint. With almost every step separating my lower leg from my upper leg only for me to strategically put my foot down to force it back so I wouldn’t topple over. I remember this because lots of people with the condition end up on heavy doses of opioids, on disability, in wheelchairs, at that moment I vowed to myself that wasn’t going to be me. I vowed I would embrace any pain that would make me better, and I did. In particular I found biking to be a great way to both strengthen my knees and improve my mood by randomly exploring Beijing and the areas around it. I put a lot of love and care into that bike, it had an internal gear hub so you can change gears even when stopped, important for me because trying to start at a high gear really damages my knees. Walking was still not easy, I certainly couldn’t run, and taking the subway was far too painful, I came to see my bike kind of like a wheelchair.
Things were getting better, and after watching Jiro Dreams of Sushi I decided to treat myself to a tour of Japan including even a reservation at the place itself.
Then I started going blind. I had very good vision, but suddenly everything became blurry beyond measure where I could barely make out text or recognize faces. At the same time I was always hungry, always thirsty, and yet I lost thirty pounds in a month, my hair was falling out. I tried to stay in denial for as long as possible, I just started figuring out how to solve one problem certainly I didn’t need to develop a new one. But I did, my immune system at 26 had decided to declare war on my pancreas, and by god it won. Googling type 1 diabetes the first paper I came across discussed the lifespan decrease, which was… significant. I had to get used to giving myself constant injections, to constantly pricking my finger, to almost losing consciousness when I made an overestimate. My girlfriend at the time broke up with me for strictly eugenic reasons. I cancelled my trip, I didn’t want to be too adventurous when I was just learning to use my body whose transmission I had suddenly found changed from an automatic to a manual. Historically I have been very prone to depression, and it certainly didn’t help matters, I started to feel like Sisyphus when it looks like the bolder is about to reach its point of stability, it instead falls.
At some point I forced myself out of it, deciding to instead do a bike sushi tour of Beijing. That winter break I rode for many hundreds of miles, and befriended the head sushi chef at the place that turned out to be my favorite of the ten or so I tried. There I did it, that bolder is just about…
And then on one fateful trip to the grocery store my bike was stolen and it rolled right back down.
I had put so much work into it, even changed out the ball bearings in the wheels. After a few days when I realized the chance of its recovery was about zero, I went to the store where I bought it, they no longer sold internal gear hub bikes though… No one did, I checked, and I checked, and I checked. After about another month of wallowing in misery, both of my conditions were deteriorating. Eventually I broke down and bought a cheap $40 bike to take me to and from work, but it couldn’t exactly take me around the city at any reasonable speed. I tried normal bikes, but every unexpected stop or slowdown tore up my knees, not exactly a great thing in a city of 22 million.
My teaching assistant at the time, a caring girl called all over Beijing looking for a place that sold bikes with internal gear hubs. She finally found one! I had purchased the hub assembly earlier from the internet so all I needed was someone who could work with them.
What preceded was what I vividly recall as one of the worst days of my life.
I took some time off to leave work early that Friday, their website said it is located in Sanlitun, just about the busiest place in Beijing, especially on a Friday. I get there and… nothing no store. I called them in my less than perfect Chinese and found out that the previous week they moved 12 km south and didn’t update any of their information yet.
Getting a taxi those days could be really hard as the price of taxis was set too low. So I stood there holding my box with the hub in it trying my best to get a taxi for over thirty minutes. All this time a motorized rickshaw driver was hassling me, I kept telling him it was too far, he kept insisting otherwise. Exhausted from pain I called them and had them give him the directions, he says he knows where it is and quotes me about 15 dollars. Da Peng was his name, chain smoking Da Peng making off color comments about women, well I wasn’t paying him for the company.
He changed the price to 25 shortly after we started going, rickshaw drivers are not prized for their honesty so I half way expected it and simply acquiesced.
He had no idea where it was. Checking my app I saw he wasn’t even going in the right direction, pointing to the actual location he in shock told me, that is too far! Sigh. I negotiated with him to at least take me to a nearby subway station… which he couldn’t manage either. In frustration I just told him to stop, having made no appreciable advance towards my destination. He wanted to add my wechat (Chinese social media platform) which I grudgingly did, he then pressured me for all the money, even though he didn’t really make any of the trip, and so once again I grudgingly acquiesced, I am not one to fight. A general policy of mine is not to fight over surplus, if someone exploits me I find it cheaper to just let them and stop dealing with them in the future. Though I admit this particular instance still kinda bugs me, I never did accept his repeated friend requests, I think some people must be truly atrocious at reading a situation, I really do.
Eventually hours after my original departure I am finally in a taxi heading to the location, it would be worth it once I had a new bike. But as fate would have it, they had no idea how to work with the internal gear hub I brought, and only would work with a $5000 dollar model, attached with a $5000 bike for… $10000. Now I really wanted a new bike, with an internal gear hub, but my old bike was $130 and it got stolen… After about an hour discussion, I realized there was no way to convince myself to spend that much. I thanked them, picked up my box and found a taxi to take me to my favorite bar (now closed) which was on the way home, a bar I had discovered on a random bike ride during that winter break. I had a drink and talked with the bartender who was at that point a good friend of mine, but realized I had forgotten my insulin and blood sugar tester at home. So I left after one drink, outside the rain was pouring. Trying to get a taxi in Beijing when it was raining was like chasing after wild rabbits, just because you see them doesn’t mean you can catch them.
I was soaked, I had been cheated, I had spent so much money and got nowhere, it was hopeless, and all the standing put me in excruciating pain. There I stood in the middle of a thunderstorm without an umbrella holding onto my box. I reflected on how unfair life was waiting for a taxi that would never come. After 30 minutes I realized it was late, no taxi would come, and I should make it to the subway before it closes, maybe on the accursed day I will at least get a seat.
I walk into the station, it is practically empty, I spot an ice cream machine, one of those automated deals where you can watch it prepare a cone for you. I hadn’t tasted ice cream since diagnosis, I missed ice cream, they had rum raisin, I hadn’t had that flavor in years. I shouldn’t, I don’t have my insulin, for all I know the stress and pain has already made me a treat for sweet toothed vampires, but you know what? Screw it, just screw everything. I bought the ice cream and walked to the platform. There wallowing in my misery I saw a couple, the man was obviously blind, he was holding a trash bag, the woman was digging through the trash for recyclables, at 10:30 at night. My self pity immediately changed from feeling like a righteous response against an unjust world to overly indulgent petulance. I looked at the still unopened ice cream in my hand and thought, when was the last time they got to taste ice cream? I walked over and awkwardly gave it to them, she took a bite and visually sank into the flavor, then gave her husband a bite and I watched as his hardened continence transformed into a mask of youthful joy that only such simple pleasures as rum raisin can provide. I thought to myself, how much happier was it for me to give them the ice cream than I would have been after angrily consuming it for a minute and then subsequently basting in blood sugar for the hour ride home. Then I thought some more, I opened up my wallet to see what was left, about 300 yuan (45 dollars), I hand it to them, at first the lady gives a meek protest but then gladly accepts the money. The last train had arrived, and hey I got a seat. I sat and thought about things, I had gone from being at my most miserable, to in a state that was almost serene. Was there any use of that money that would have made me, in the very selfish and narrow meaning of that word happier or better off? No.
The next day I decided to be more positive and once again thought about how I can be less miserable. Though my cheap bike couldn’t go fast I could try to explore the local area some more: I always went right or left at the subway line, but never straight, that is something to try, going straight. So I went straight and I passed by this little hole in the wall(literally) bike shop, just for fun I thought I would check it out. Turns out, the guy who ran it was deeply passionate about bikes, building custom bikes, and yes as unbelievable as it sounds, internal gear hubs. I commissioned two bikes from him and they are still the bikes I use today. To think what I needed had always been a scarce two miles away. So there, a happy ending. A weirdly almost scripted sounding happy ending. Well if we leave it exactly there anyway, but it is a lesson and a story that forms one of the core stories I tell myself to keep me moving forward, not that I don’t stumble still, it is natural to stumble but I always manage to pick myself up(so far).
Realize that we all suffer, realize we suffer unequally, realize life is unfair, but realize that there are those whose lives you would be horrified to switch with, that go about life, contently as they can, making the most of what they can. Don’t wallow in your own misery, even if it seems deserved, it doesn’t even help you, sometimes the best way to help yourself is to move your focus away from yourself, to others, to the world around you, to see what you can do to help. When bad things happen to me and I notice I have been focusing too much on my own narrow interests, I try to remember the story, snap myself out and open up rather than close down. I have found helping others to be the only sustainable way to improve my mood and outlook.
I still remember the line I had from my elementary school production of Shakespeare which seems apt (I still remember because hammed it up so hard while delivering the lines)
Thou seest we are not all alone unhappy:
For in this wide and global theatre
Surely there is a tale more woeful than thee
(While double checking I found that this is actually a bastardization of the original quote, but I like the bastardization better so tough)
What is a Moral Requirement?
You are walking home, in your pocket is the new iPhone XIII plus which cost you $2000, but it will be so worth it when everyone sees how cool you are. I mean the new phone is a bit big, and it is stuck in your pocket currently, but just wait until you get a pair of iPants! You are staying with a relative who lives in a rural area and on your way you come across a child drowning, you are a good swimmer and you could save them, but you can’t get your iPhone out of your pocket and you don’t have enough time to take your pants off to save the child. Would you save the child knowing it would destroy your shiny new phone? How would you feel about others facing the same situation who refuses to save the child?
For that same money you can actually save a child right now as philosopher Peter Singer is quick to point out, so in reality everyday of your life you are making this decision over and over and over. If you are morally obligated to save the child drowning, why would you not be obligated save the child you will never meet in some far flung country? You can try to create all the justifications you want, but at the end of the day, it is hard to say that a life is anything other than a life, be they right in front of you or thousands of miles away. Singer’s answer is that since it is a moral obligation to save the drowning child, you must also save the children far away if you want to live a moral life.
I agree that the moral logic of the one case must be the same as the moral logic of the other, but my answer is that in neither case are you obligated to save the child. His case is that intuitively you must save the child in front of you, and logically far away children are an extension of this intuition. If you take the logic of moral obligation to its logical conclusions there isn’t a single human existing who would not be immoral. Plugging my income into his website thelifeyoucansave (a great website BTW) I am told I should donate only about 1,200 dollars a year, though of course it is relatively easy for me to save and donate significantly more than that. So how then would the $1,200 fulfill my moral obligation? Following the logic, I am obligated instead to give as much as possible, indeed I should also try to earn as much as possible to give. Imagine we take it a step further and say I am morally culpable for the deaths that I could have prevented, in that case by choosing to be a teacher instead of working in finance I am likely responsible for more deaths than a serial killer who likely has a much lower earning potential and so the difference between the lives I am responsible for are greater, even though he actually killed someone and I probably save a few.
Most people are not even weak forms of effective altruists, but do their lives make the world a better or worse place? If the typical person living their typical life has worth and makes the world better, why would it be immoral?
I think the solution lies in this; each person is worth one person and them going about living their lives is morally neutral, unless they take some position of obligation for others, they are not obligated towards the welfare of others. However, with this logic since each person matters, how you affect other people also matters, not because of you, but because of them. We can see someone who saves millions of people and to a degree they matter more, not because they matter more, but because the people they help do. So certainly a life where you help others is morally better, and one where you hurt others is morally worse.
The difference between the two cases though is real, but it is one of moral judgment, not morality. It is perfectly normal to ignore the suffering of those we do not see, but ignoring suffering that we do see is a good indicator that we are callous and cold. As in the previous essay I argued that moral judgments primarily exist to judge others utility equation in order to assess how they will behave with regards to yourself (functionally this is how it works, obviously you are not thinking hey that guy is nice to his dog, if we had children he would likely treat them well, you think aww that guy is nice to his dog and feel a little more attracted). A person not saving a child in front of them gives you information that they are likely less compassionate and cooperative, a person not giving away all their money is perfectly normal so doesn’t tell us anything about the person. Imagine a world where every day you went to work or school you and everyone else passed by dozens of children you knew could be saved for $2000 dollars, how quickly would you and those around you become numb to it?
So it is good to do good for others, and better to do more good than less, but I think it is a mistake to make it a moral imperative as Singer does. But many things in the world are logarithmic, with quality on the Y axis and price on the X axis, simply avoiding money traps and being more conscious of how you spend money it is easy to save more and of those savings you can do some serious good. Imagine a video game with a quest that allows you to protect thousands of people from a deadly disease, in real life that is a quest most of us privileged enough to be born into affluent nations can complete.
I don’t think we should try to convince people out of guilt or obligation. Tying things to negative emotions I don’t believe is even likely to lead to the most people, giving the most the most effectively. Giving should be a positive thing if it is to be sustained. Instead I want to focus on empathy, and the benefits to the giver themselves, which will be the topic of my next post.
Repugnant Repugnancy
The repugnant conclusion is one of the clearest cases of realms where our natural moral intuition won’t work. It is very easy to picture happier people it is impossible to meaningfully picture more people.
We can’t even feel a difference between the idea of a thousand people dying and millions. Our intuition is important but it is equally important to realize our moral intuitive blind spots.
What Does More Mean?
Economic efficiency has some potential flaws, flaws I will certainly discuss but unfortunately most of the critiques of efficiency are not grounded on any real understanding. I still remember reading an article against “economic efficiency” that argued we should focus on higher quality rather than more which is… Anyway without further ado a crash course in what economic efficiency really is.
The essential idea of economic efficiency is that a more efficient state is a world with more, but this concept might be harder to fully understand than it first appears. Ten apples might be more than five apples, but which is more: a chair, or five chickens? Three ergonomic office chairs or one extravagant throne? In prior examples, we talked about how trade creates wealth even when we are just moving one object around with nothing being produced, but how can the same amount of stuff possibly be more? This concept is essential to an understanding of economic efficiency and its importance.
We tend to talk in terms of money: consumer surplus is willingness to pay in contrast to that which is actually paid, producer surplus is what the producer would accept for their sacrifices in contrast to what is actually paid to them. This though, can lead to several misleading thoughts such as a misunderstanding surrounding the importance of money. If a women who graduated from the top of her class at *insert high status university here* got a job offer to work in Wall Street for $200,000 dollars a year, but instead she decides to instead become a hermit meditating in the woods, the world in which she is a hermit is a world with “more”. Yes such wealth will not show up in any sort of economic measurement, but that reflects an impoverishment in our ability to measure, not a repudiation of the concept. Measurements, after all, are forced to focus on only that which may be easily observed and reliably quantified.
Remember money itself is just a means that allows for an easier exchange of resources. We measure everything in terms of money, not because of money’s importance, but instead because of the real goods and services that the money represents. Remember we actually assume that money itself has no value; a giant pile of money that cannot be traded for real goods would be worthless. In the case of the woman, we can imagine what real goods she would purchase with that 200k as well as any discomfort from the work that would be required of her to do in order to earn it. She has the option between that real basket of goods and living a quiet life in the woods. It is impossible for us as outside observers to know which is set of goods is more. Her choice is the only way we can determine which set of real goods is more valuable to her and thus can be considered to be “more”. Though it is true that as a hermit she is exceedingly unlikely to create benefit for others, it is also true that her being unwilling to work in finance reflects that those who would benefit from her labors are themselves not willing to sacrifice enough of their own resources to compensate her for the difference between the two lives.
So let us try to run through an efficiency example using this idea and only real goods to hopefully get a clearer understanding of what “more” means and how trade can create more even when it is merely shuffling goods. Let’s say that we have a vastly oversimplified two-good economy with rice and meat, with two people about to make a trade. There is Jesse who wants to have more rice and is willing to trade some meat for it, and there is Stella who (conveniently enough for this example) wants to have more meat and is willing to trade some of her rice for it. For Jesse, he would value 5 kg of rice equally to 1kg of meat. That is, if offered those two sets of real goods he would be indifferent, if offered a little more rice or a little less meat he would certainly choose the rice and vice versa. Stella’s tastes are a little more carnivorous, she values 1kg of meat at a whopping 20kg of rice. As we should know from chapter three, the different set of preferences means they could potentially trade with 1kg of meat being valued anywhere between 5 and 20kg. Let’s say the bargain is struck where Stella will provide 10kg of rice to Jesse in exchange for 1kg of meat[1]. What is the surplus in this case, and why?
Stella would have been willing to give an extra 10kg of rice to Jesse. So now, she has something she values at 20kg of rice, but she only had to trade away 10kg. She therefore went from having 20kg of rice value to having 30kg of rice value (or 1.5 kg of meat value if you prefer), so her surplus is then equal to 10kg of rice (.5kg meat). For Jesse, he gets the rice he so coveted, sacrificing only half the meat he would have been willing to give up, so his surplus is 5kg of rice (or 1kg meat). We can then say that total surplus from this trade is equal to 15kg of rice or equivalently 1.5kg meat. To really understand why this is, imagine that instead the two could not trade, and that you were responsible for making sure that they had a collection of real goods that they would value the same amount as the one trade gave them. You would have to either create 15kg of rice, giving Jesse 5kg and Stella 10kg, or you would have to create 1.5kg of meat and give .5kg to Stella and 1 kg to Jesse. In either case, you would need to make more by the amount of surplus we calculated, in order to come up with a scenario that is equally satisfying to both parties as that which was arrived about merely by moving meat and rice between the two. So even though trade in this case does not alter the amount of rice in the economy, for this reason we can say the economy grew in wealth by the equivalence of 15kg of rice or 1.5kg of meat. It is in this way that we can say there is “more”.
Money makes all this easier because each person can only value a dollar as a dollar. Essentially anytime we transact for money, we are actually exchanging real goods for real goods with the world becoming wealthier each time by the difference between the sacrifice you would have been willing to make and the one you actually made. The benefit of money is that we don’t actually need to receive our goods from the person that we gave our resources to. Thus I can give economics lessons to students intent on learning it, and get my meat from ranchers, rather than scouring the world looking for a rancher desperate to turn meat into knowledge of demand curves and economic efficiency. It is really not very intuitive at all, but always try to look past money into the flow of real goods.
[1] The actual price is unimportant so long as it falls within the range of trade, as it just changes who gets what surplus but not the amount of surplus to be gained, if meat traded for an extra bag of rice it would just mean Jesse gets 1 more bag worth of surplus, and Stella one less.
King Midas and the True Nature of Money
I am going to tell you a famous story from Greek mythology that helps illuminate the truth of money.
King Midas one day saved the son of Dionysus, one of the major gods[1]. In order to show his thanks to the King, Dionysus offered to grant Midas a single wish. Midas, being covetous by nature, paused little before deciding that what he wanted to wish for was a golden touch. He asked the god to have everything he touches turn to gold. Dionysus warned the King to think twice before making the wish, but Midas was certain. After a deep sigh Dionysus laid the boon upon the King and then departed. Overjoyed, Midas touched a flower in his vast garden and marveled as it became solid gold. He went around his mansion touching all that he could think of, transmuting all within his touch instantly from their plain materials into lustrous shimmering gold.
He called a great feast in order to celebrate his new found power. Before him on the table there laid the finest wines, meats, fruits, and assorted specialties from all around the kingdom. He touched his wine goblet which became golden, and with a beaming smile he made a toast to the immense fortune both he and his kingdom had to look forward to. Placing the goblet to his lips, however, revealed a horrible surprise: the second the wine touched his lips, it too, became transmuted into gold. Gold would not slake his thirst. He quickly grabbed for food, but anything that he laid his hands on became solid gold. Desperately he had a servant try to feed him directly, though to no avail—the second any substance touched his mouth, whether it be the sweetest grapes or the juiciest meat, it instantly became cold, tasteless gold. Gold would not satisfy his hunger.
He ran out into his garden to his favorite bench and sat down amongst the lifeless golden flowers, cursing his fate, thinking again and again of Dionysus’ warning. His daughter came to comfort her father, laying her hand on his shoulder in order to give him solace. In that moment she was transformed from a lovely sweet girl into an unspeaking, unfeeling golden statue.
At this, Midas broke down, and in between his sobs he implored Dionysus to come again and take away his golden burden. As the god had initially wished to bestow a blessing on King Midas, not a curse, he came to the King and told him to wash his hands in a nearby river to take away his power. Midas, following Dionysus’s instructions, immediately set off, and after finding the river, washed his hands. Gold came shimmering from his skin as he made contact with the flowing water, and once it had stopped, he ran back to his palace as fast as his legs would carry him. Much to his relief, his daughter was there to greet him when he returned, with the flowers of his garden once again swaying in the breeze.
There are many lessons that can be taken from this story. When I first learned it as a child, the morals of the story that were emphasized were about being careful what you wish for as well as the hazards of greed. These are good lessons to be sure, however, unfortunately, they are not very pertinent to this chapter. I did promise to relate the story to the true nature of money after all, didn’t I?
Let’s relate this story to the 5th point of thinking like an economist: “People Don’t Care about Money”. What is the use of the gold to Midas? Nothing. If you can only have money and nothing else, you will have a very poor life indeed. It is instead the things that money can buy, like the wine and the food that are of value. Having money without goods is like having the poker chips from a bankrupt casino.
But what if Midas had been a little wiser in his wish? For the below story, let us assume that like modern currency, gold is only used as money to avoid unnecessary complications.
Dionysus offers him a wish of his choice. Midas quickly says: “I want everything I touch to turn to gold!” Dionysus gives the king a skeptical look and replies: “everything?”
Midas, instantly realizing his mistake, he says: “oh no, that would be horrible, I couldn’t eat or drink! I might even accidently turn my lovely daughter into gold! How terrible that would have been! Instead, how about you grant me the ability to turn anything I desire into gold?”.
The god says: “sure, glad you caught that error!” Under his breath he mumbles: “though you still might consider taking an economics class.” “What was that last part?” The king asked, to which the God replied: “nothing, never mind, poof it is done.” Midas turned many things into gold and enjoyed a fine banquet of only the best food and wine with the company of his daughter that day.
This version of the story might at first look like a happy ending, but let us analyze it further. Question: how does the gold speed the craftsman’s work? The farmers’ growing of food? It is true that more gold will allow Midas to purchase more things, but where do those more things come from? Since the gold does not actually make it so that more can be produced, it must mean that, instead of changing how much is produced, it is changing who gets what is produced. In this case, Midas is getting more, which means less for people who are not Midas. Money is a claim to goods and services, an increase in the claims without a corresponding increase in goods and services means each of the claims are worth less. So in this instance, the new flood of gold will make it so that a given amount of gold will be able to exchange for less real products than from before. He is taking the real value he receives from the gold holders in his kingdom, and could have achieved the same result by taxing them without using magic wishes.
Midas is actually acting precisely in the same way as someone who counterfeits money. One might imagine as a result, silver might become a more valuable metal. Perhaps then he might think that he should have asked for the silver touch instead. Hopefully you understand why this would also be folly.
Imagine we go far back in time to when humans first started farming and we dropped several tons of gold onto the early farming villages. What would it have allowed them to do? Now imagine instead that we instead gave them the wheel thousands of years before its invention. Money may be what makes an individual rich, but real things are what make a society rich. Money is just a claim to some of societies real goods.
[1] Specifically the god of wine, revelry, and … well many other things.
