Friday, March 20, 2009

Would it be better if we were on the barter system?

If I were to put 6 cans of Coca-Cola in a college dorm refrigerator, they would be gone within about a day, taken by people who did not own them. If I put 6 $1 bills in the same refrigerator, they'd still be there a week later. As good, honest people, we are far more comfortable taking objects that do not belong to us than taking money directly.

Last year Dan Ariely wrote a book titled Predictably Irrational where he explains and presents his research in the field of behavioral economics -- how economic factors effect our behavior. The book is incredible and if you're at all interested in economics and how price effects us, it's worth picking up. Some of his findings are presented in the talk he gave at TED this year. It can be watched here.

One of the most fascinating findings of his research is how people reacted towards cheating with non-monetary rewards. When given a direct monetary reward, they cheated a little bit. When given a non-monetary reward that was then exchanged for money across the room -- literally 15 feet away at a different table -- people cheat in much larger degrees. A similar, yet significantly less scientific, study that he conducted was putting the 6 cans of Coke in the dorm refrigerators that I just mentioned.

This should come as no surprise. We don't think twice about taking a pen from work but none of us would take $0.10 out of the cash register, even though the monetary amount is about the same. Companies and managers are the same: I can't think of a single office or workplace manager that would fire an employee for taking a pen, while taking any monetary amount from the cash register or safe would be grounds for immediate termination and even legal action.

There is no direct explanation for why this phenomenon occurs. Why should we be more comfortable stealing something for $1 than stealing $1 itself? The value is the same. If anything it would seem more likely that the money would be stolen more often because it is something that everyone can use and enjoy. Beverage choices are personal and some people might not like Coke. From this simple logic we can definitively say that a $1 bill has a higher demand across society than a bottle of Coke. (I changed to bottle from can because a 20oz of Coke is usually priced around $1, thus making them more equal in monetary value.) Yet research indicates otherwise.

One possible way to avoid this would be simply to remove money altogether. Make the goods themselves the money. That way, stealing goods would be -- in what is perhaps the weakest theory I have ever proposed -- stealing money. People who think of themselves as good and moral should then be less likely to cheat or steal in any degree. If there is no money in society, and in fact the objects themselves are bartered and traded directly, then the objects themselves should be respected as money is. Of course this poses issues with things like defining "value" -- if I don't like Coke, I might not be willing to trade a single Snickers bars for a 12-pack of Coke. Or conversely, if I'm starving I may be more willing to trade my Macbook for a five-course, gourmet meal. While today the same situations may produce the same results, if I were to give my Macbook to a store for a meal, they would most likely credit me with several free meals as well. My Macbook has a monetary value -- a standard value that can be directly compared to the value of the meal and thus we can know what quantities should be traded fairly.

Money is simply another form of bartering. But it's viewed with a respectful reverence. We respect money that belongs to our friends. My old roommate and I used to find spare change lying around the house and we'd put it on the coffee table, assuming it belongs to the other person. Quarters, dimes, and nickels would sit on that coffee table for weeks going unclaimed because we always assumed they belonged to the other person and we didn't want to steal from each other. But we never thought twice about taking objects of the same value (a glass of milk) from the other.

One explanation for this is the money is seen as more valuable, going off the Coke explanation earlier, and as such we're less likely to take it. This is comparable to saying that you'd take a friend's Bic pen, but not their DVDs. The Bic pen is worth $0.10, the DVD is worth $15 -- 150x the pen's value. This would imply that there must be a value, not necessarily a monetary value, to which we won't cross when it comes to dishonesty. Money is universally accepted and as such has a greater value than objects, this could explain why we don't take money. Higher value means we're more respectful. If we standing next to a new Porsche 911 we'd probably be more respectful around it than a 1992 Honda Accord. The Porsche has a much higher value, and higher values lead to us giving more respect.

If we were solely on the barter system, would the same ethics transfer over? Would we become more respectful of others' property and their belongings, since those belongings would then become what they need to use to survive? I would argue yes, they would. I'm more willing to drink a bottle of Coke from a friend's place because it's a bottle of Coke -- all you can do with it is drink it. I suppose in theory I could take it to the grocery store and demand they give me a cash refund for it, but the monetary value of it is hardly worth the effort I'd have to put into it. That argument also falls apart for things that cannot be returned, like a gallon of milk. Once opened I can't return it for money. The only thing I can do with it is drink it. It has lost significant value because it is limited in functionality and usefulness. If it were more valuable, it may cross the threshold of value above which I would feel comfortable crossing.

As a people, we're ok cheating/stealing a little bit. That much has been revealed by research. When money is removed, even by one step, we're more likely to cheat/steal larger amounts. The value of objects is less than that of money itself. If we remove money from the system, we raise the value of the objects, thus reducing the amount by which we're willing to cheat/steal. An advanced society with laws and a moral code based on the barter system should have a lower rate of loss in business and theft.

[This is only a quick idea. Before expanding any further I would like to see data on theft rates and honesty in societies that still use the barter system. Though social factors could hinder such things because if any locations do use the barter system they wouldn't be advanced societies, so cultural and societal factors may raise the level of criminal activity and ethics. I have also left out the subject of criminals and directly dishonest people, speaking solely of those who believe themselves to be good, honest people. Factoring in criminals may completely destroy this theory.]


nae4blue said...

On the last note, the Dakota used to hold potlatches where they would give up their posessions to others in the community who needed them more. But they were a very nomadic group who placed greater emphasis on basic survival than developing luxury items that an affluent society would have.

You can't go to a barter system again. For one, because we have one. Also, money is sacred.

One of the best parts of Atlas Shrugged is the extended "money speech" by Fransisco d'Anconia:

"So you think that money is the root of all evil?" said Francisco d'Anconia. "Have you ever asked what is the root of money? Money is a tool of exchange, which can't exist unless there are goods produced and men able to produce them. Money is the material shape of the principle that men who wish to deal with one another must deal by trade and give value for value. Money is not the tool of the moochers, who claim your product by tears, or of the looters, who take it from you by force. Money is made possible only by the men who produce. Is this what you consider evil?


"Until and unless you discover that money is the root of all good, you ask for your own destruction. When money ceases to be the tool by which men deal with one another, then men become the tools of men. Blood, whips and guns – or dollars. Take your choice – there is no other – and your time is running out."

Tim said...

And that's all well and good if I agreed with Ayn Rand.

You'll also note I never said money was the root of all evil.