The Great Conversation: Wealth
By Gabriel Blanchard
They say money can't buy happiness; still, most of us would like the chance to check.
Wealth is of course a very old idea, one that has seen several reinventions over the centuries. The most primitive idea of wealth is actually older than money: it referred to property, especially land and the crops or flocks that could be nourished on it. When money was invented, it was as a substitute for direct barter, which only worked if the people you were bartering with had something you wanted and vice versa. This allowed any good to be “translated” into a universal unit of value that everybody wanted. But the idea that money was only one kind of wealth, and a strictly subordinate kind at that, remained.
Aristotle codified this idea in the Politics. He wrote of wealth, like health, as being one of the elements of happiness and as being therefore limited and directed by that natural purpose. “Riches is assumed by many to be only a quantity of coin, because the arts of getting wealth and retail trade are concerned with coin. … But how can that be wealth of which a man may have great abundance and yet perish with hunger, like Midas?”
Discussions of wealth generally took this definition of money for granted for centuries. This, along with the Torah’s prohibition against charging interest, formed the basis of the traditional Christian doctrine that mostly condemned interest, or usury. St. Thomas Aquinas divided goods into those that are consumed by their use (like food) and those that are not (like houses). Since money as medium of exchange only exists to be exchanged for something else, money was a consumable good; and accordingly, charging interest on a loan was like selling someone a bottle of wine and then charging him for the right to drink it—selling the same thing twice, as he put it.
This definition persisted into the nineteenth century, and is not gone today. Adam Smith, one of the fathers of modern capitalism, and Karl Marx both espoused the labor theory of value: roughly, that the value of a good equals the work it took to make it out of its raw materials. Smith argued that intelligent self-interest would be an adequate restraint on people’s behavior to achieve a satisfactory economic stability without state interference. Marx asserted on the contrary that unjustly held wealth and state power tended by nature to coalesce, and advocated class equality through public ownership of the means of producing goods (means like factories or farms).
But around this same time, an Englishman named William Stanley Jevons helped initiate what was later called the marginal revolution. Take the “diamond-water paradox”: water is something we need to live, and thus a kind of wealth according to economists from Aristotle to Marx; yet diamonds command a far higher price on the market even though they are “useless.” Advocates of marginalism therefore defined value in subjective terms—value was to be understood, roughly, as what a person actually wanted, regardless of its uses or the lack of them. The conflict between these approaches to value has shaped the development of politics across the globe down to our own day. Probably no country on earth in 2020 has quite the same economic system it had in 1920.
If you liked this post, you may also enjoy our author profile of C. S. Lewis, this student essay on the themes of The Count of Monte Cristo, or this piece on Plato’s guidance in our children’s education.