Tuesday, July 26, 2005

Dollar power

I've always been wary of many people's apprehension towards equating value with money. Many, particularly liberal democrats, love to proclaim the worth of things like blue skies and watching a sunset, things that don't have a dollar value attached to them. The problem is, of course, that money is, by definition, a measure of value.

This is pretty self-evident, of course. We trade our time and productive effort for money, called wages, which we in turn spend on things we need to survive. Currency is simply the middle man that eases trade. Instead of working in an apple orchard for an hour to get my apples, I can spend a few minutes in a grocery store and use a small portion of the wages I've earned for spending my time elsewhere. Money allows us to trade more effectively and specialize in our craft.

It hardly goes without saying that there are other measures of value. For instance, one might not have much money to spend towards nature conservancy, but if one devotes one's time to an environmentally active cause, the same end is achieved. It likewise goes without saying that if there is something that I claim to value but that I'm unwilling to spend time or money on, then I clearly don't value it.

The one fleeting example where I can see that the relationship between money and value isn't absolute is when I get change after making a small purchase. When I get back, for instance, 75 cents, it is worth much less to me than a whole dollar in change. Obviously, the difference in value to me should be somewhere around 75 cents worth, but it is actually far more than that. I will give the cashier an extra quarter simply to be given a whole dollar in change. The only reason I would take the extra effort to pull out the extra quarter would be if I actually valued the whole dollar more than the change.

I think we can safely assume that most people would choose a dollar bill over 4 quarters, except in instances where payphones and video arcade games are involved (and these instances are increasingly rare with the rise and cell phone and PSP use). The stack of change I have on my dresser is practically worthless to me, but the few dollars in my wallet are worth every last penny.

Is the perceived difference between these two irrational? Is it simply logistical, as bills are easier to carry than coins? Or is there really a much greater relativity in the relationship between money and value than I realize?

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