Ayn Rand's Philosophy on Money: Not the Root of All Evil

As promised an expert from "Atlas Shrugged" by Ayn Rand. Here the character Francisco D'Anconia is explaining the value of money and where that value comes from to guests at a dinner party, who are saying that money is the "Root of all Evil."

"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 looters, who take it from you by force. Money is made possible only by the men who produce. Is this what you consider evil?

"When you accept money in payment for your effort, you do so only on the conviction that you will exchange it for the product of the effort of others. It is not the moochers or the looters who give value to money. Not an ocean of tears nor all the guns in the world can transform those pieces of paper in your wallet into the bread you will need to survive tomorrow. Those pieces of paper, which should have been gold, are a token of honor - your claim upon the energy of the men who produce. Your wallet is your statement of hope that somewhere in the world around you there are men who will not default on that moral principle which is the root of money. Is this what you consider evil?

"Have you ever looked for the root of production? Take a look at an electric generator and dare tell yourself that it was created by the muscular effort of unthinking brutes. Try to grow a seed of wheat without the knowledge left to you by men who had to discover it for the first time. Try to obtain your food by means of nothing but physical motions - and you'll learn that man's mind is the root of all the goods produced and of all the wealth that has ever existed on earth.

"But you say that money is made by the strong at the expense of the weak? What strength do you mean? It is not the strength of guns or muscles. Wealth is the product of man's capacity to think. Then is money made by the man who invents a motor at the expense of those who did not invent it? Is money made by the intelligent at the expense of the fools? By the able at the expense of the incompetent? By the ambitious at the expense of the lazy? Money is made - before it can be looted or mooched - made by the effort of every honest man, each to the extent of his ability. An honest man is one who knows that he can't consume more than he has produced.

"To trade by means of money is the code of the men of good will. Money rests on the axiom that every man is the owner of his mind and his effort. Money allows no power to prescribe the value of you effort except the voluntary choice of the man who is willing to trade you his effort in return. Money permits you to obtain for your goods and your labor that which they are worth to the men who buy them, but no more. Money permits no deals except those to mutual benefit, not for their own injury, for their gain, not for their loss - the recognition that they are not beasts of burden, born to carry the weight of your misery - that you must offer them values, not wounds - that the common bond among men is not the exchange of suffering, but the exchange of goods. Money demands that you sell, not your weakness to men's stupidity, but your talent to their reason; it demands that you buy, not the shoddiest they offer, but the best that your money can find. And when men live by trade - with reason, not force, as their final arbiter - it is the best product that wins, the best performance, the man of best judgment and highest ability - and the degree of man's productiveness is the degree of his reward. This is the code of existence whose tool and symbol is money. Is this what you consider evil?

"But money is only a tool. It will take you wherever you wish, but it will not replace you as the driver. It will give you the means for the satisfaction of your desires, but it will not provide you with desires. Money is the scourge of the men who attempt to reverse the law of causality - the men who seek to replace the mind by seizing the products of the mind.

"Money will not purchase happiness for the man who has no concept of what he wants: money will not give him a code of values, if he's evaded the knowledge of what to value, and it will not provide him with a purpose, if he's evaded the choice of what to seek. Money will not buy intelligence for the fool, or admiration for the coward, or respect for the incompetent. The man who attempts to purchase the brains of his superiors to serve him, with his money replacing his judgment, ends up by becoming the victim of his inferiors. The men of intelligence desert him, but the cheats and the frauds come flocking to him, drawn by a law which he has not discovered: that no man may be smaller than his money. Is this the reason you call it evil?

"Only the man who does not need it, is fit to inherit wealth - the man who would make his own fortune no matter where he started. If an heir is equal to his money, it serves him; if not, it destroys him. But you look on and you cry that money corrupted him. Did it? Or did he corrupt his money? Do not envy a worthless heir; his wealth is not yours and you would have done no better with it. Do not think that it should have been distributed among you; loading the world with fifty parasites instead of one, would not bring back the dead virtue which was the fortune. Money is a living power that dies without its root. Money will not serve the mind that cannot match it. Is this the reason you call it evil?

"Money is your means of survival. The verdict you pronounce upon the source of your livelihood is the verdict you pronounce upon your life. If the source is corrupt, you have damned your own existence. Did you get your money by fraud? By pandering to men's vices or men's stupidity? By catering to fools, in the hope that getting more than your ability deserves? By lowering your standards? By doing work you despise for purchasers you scorn? If so, then your money will not give you a moment's or a penny's worth of joy. Then all the things you buy will become, not a tribute to you, but a reproach; not an achievement, but a reminder of shame. Then you'll scream that money is evil. Evil, because it would not pinch-hit for your self-respect? Evil, because it would not let you enjoy your depravity? Is this the root of hatred of money?

"Money will always remain an effect and refuse to replace you as the cause. Money is the product of virtue, but it will not give you the unearned, neither in matter nor in spirit. Is this the root of your hatred of money?

"Let me give you a tip on a clue to men's characters: the man who damns money has obtained it dishonorable; the man who respects it has earned it.

"Run for your life from any man who tells you that money is evil. That sentence is the leper's bell of an approaching looter. So long as men live together on earth and need means to deal with one another - their only substitute, if they abandon money, is the muzzle of a gun.

"But money demands of you the highest virtues, if you wish to make it or to keep it. Men who have no courage, pride or self-esteem, men who have no moral sense of their right to their money and are not willing to defend it as they defend their life, men who apologize for being rich - will not remain rich for long. They are the natural bait for the swarms of looters that stay under rocks for centuries, but come crawling out at the first smell of a man who begs to be forgiven for the guilt of owning wealth. They will hasten to relieve him of the guilt - and of his life, as he deserves.

"Watch money. Money is the barometer of a society's virtue. When you see that trading is done, not by consent, but by compulsion - when you see that in order to produce, you need to obtain permission from men who produce nothing - when you see that money is flowing to those who deal, not in goods, but in favors - when you see that men get richer by graft and by pull than by work, and your laws don't protect you against them, but protect them against you - when you see corruption being rewarded and honesty becoming a self-sacrifice - you may know that your society is doomed. Money is so noble a medium that it does not compete with guns and it does not make terms with brutality. It will not permit a country to survive as half-property, half-loot.

"Whenever destroyers appear among men, they start by destroying money, for money is men's protection and the base of a moral existence. Destroyers seize gold and leave to its owners a counterfeit pile of paper. This kills all objective standards and delivers men into the arbitrary power of an arbitrary setter of values. Gold was an objective value, an equivalent of wealth produced. Paper is a mortgage on wealth that does not exist, backed by a gun aimed at those who are expected to produce it. Paper is a check drawn by legal looters upon an account which is not theirs: upon the virtue of the victims. Watch for the day when it bounces, marked: 'Account Overdrawn.'

"When you have made evil the means of survival, do not expect men to remain good. Do not expect them to stay moral and lose their lives for the purpose of becoming the fodder of the immoral. Do not expect them to produce, when production is punished and looting rewarded. Do not ask, 'Who is destroying the world?' You are.

"... Throughout men's history, money was always seized by looters of one brand or another, whose names changed, but whose method remained the same: to seize wealth by force and to keep the producers bound, demeaned, defamed, deprived of honor. That phrase about evil of money, which you mouth with such righteous recklessness, comes from a time when wealth was produced by the labor of slaves - slaves who repeated the motions once discovered by somebody's mind and left unimproved for centuries. So long as production was ruled by force, and wealth was obtained by conquest, there was little to conquer. Yet through all the centuries of stagnation and starvation, men exalted the looters, as aristocrats of the sword, as aristocrats of birth, as aristocrats of the bureau, and despised the producers, as slaves, as traders, as shopkeepers - as industrialists.

"To the glory of mankind, there was, for the first and only time in history, a country of money - and I have no higher, more reverent tribute to pay to America, for this means: a country of reason, justice, freedom, production, achievement. For the first time, man's mind and money were set free, and there were no fortunes-by-conquest, but only fortunes-by-work, and instead of swordsmen and slaves, there appeared the real maker of wealth, the greatest worker, the highest type of human being - the self-made man - the American industrialist.

"If you ask me to name the proudest distinction of Americans, I would choose - because it contains all the others - the fact that they were the people who created the phrase 'to make money.' No other language or nation had ever used these words before; men had always thought of wealth as a static quantity - to be seized, begged, inherited, shared, looted or obtained as a favor. Americans were the first to understand that wealth has to be created. The words to make money' hold the essence of human morality.

"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."

Pretty powerful view of economic theory and the value of people in relation to money, no? The above expert comes from pp 411-414 of Atlas Shrugged. A good book, in my opinion.

Let me know what you think of the above passage by leaving a comment below.

More astonishing housing market statistics

This article in the LA Times surveys a cross section of people to discover their housing purchasing plans and stories. It gives a number of statistics about home ownership and the increasing reliance of Americans on debt.

Toward the end of the article, the risk of all of this debt is mentioned. While debt can be perceived as a tool, it should also be perceived in the context of its inherent risk. When you borrow money, you have to pay it back. If something happens to your income stream (you get laid off, you need to change jobs, an accident, etc.) that debt that was liberating you and helping you have the lifestyle of your dreams becomes a weight around you neck dragging you down and forcing you to either try and sell what you bought or declare bankruptcy.

If the market turns down and people's houses are "flipped" the opposite way (they owe more than the house is worth), we as Americans are going to see a lot more bankruptcies and hard times.

It makes me mad and sad at the same time when I read about why people are living this risky lifestyle. Here's a quote:

Irvine-based Financial Freedom Corp. says one of the major reasons people buy its reverse mortgages is "lifestyle enhancement" — extra money to have fun. Financial Freedom says it is on track this year to nearly double the 5,000 reverse mortgages it sold in 2004 in California.

Read the article and leave a comment.

Alan Greenspan warns of potential housing market crash

At a speech in Wyoming, the chairman of the Federal Reserve Board, Alan Greenspan, warned that the housing market could suffer from a serious crash. He warned of people buying houses as a "one-way bet" on making money. Greenspan mentions that "history has not dealt well with investors who ignore risks."

The article, from the (London) Times mentions that over a third of US housing markets are overpriced. I don't own a home, but sometimes, I wish I had bought one three years ago when I moved to Iowa City. This market has grown rapidly during that time and I probably would have seen a nice appreciation. At this point, though, if prices do fall or flatten, I might be better off. We'll see.

Econ4U helps educate people about money

I received this in my inbox this morning and thought it was appropriate to post here. Looks like an interesting program and one that is right in line with the goals of this blog. Visit them and let me know what you think:

Econ4U Takes Unique Approach to Increase Financial Literacy Among Nation’s Youth

With a steady decline of financial literacy among young Americans there should be little doubt as to why our personal savings rates are at an all-time low and bankruptcy rates are at an all-time high. Basic economics classes are only required in 15 states, and studies prove those who need this information most aren’t getting it elsewhere.

Many may say “information is out there, it’s not my problem.” But in fact it is an American problem that’s not going away on its own. American consumers now spend a record 18.1 percent of after-tax income just to cover existing debts! What does that mean for you? As their disposable income decreases they are most likely borrowing more and more just to stay afloat. We as consumers end up paying for their “forgiven” debts through higher fees and interest rates when they get in too deep and file for bankruptcy.

As many American families try to “keep up with the Jones,” they find themselves in a cycle of debt, passing their bad financial habits onto their kids. And how would they know any better? Media culture encourages spending, not saving. Young people are marketed to with promising offers like “no payments for one year” without understanding that when they don’t pay off the entire balance within that year they’ll probably be charged 20% interest from the date of purchase. Unfortunately many young Americans see these offers as free money today that they’ll worry about tomorrow. And frankly, nobody’s stopping them.

If you don’t know better you can’t do better. There are volumes of information available on how to repair credit scores and file for bankruptcy, but if this is the information you need, you’re probably already in over your head. You’re wishing you had better information before you made bad financial decisions in the first place.

Econ4U is a public economic education campaign designed to do just that. It brings basic economic facts to young Americans—those who will not seek this information on their own until it’s too late—when they are captive and comfortable. Most young people find economics courses complicated and dry. That is why Econ4U takes an innovative approach to teaching about personal finance, government spending and business economics.

For example, instead of unscrambling movie titles as they wait for the feature presentation to begin, a moviegoer will now learn that it will cost them 46 years to pay off that $5,000 credit card bill if they only pay the minimum balance each month. Teens are exposed to the miracle of compounding interest on their tray liners in fast food restaurants. Average profit margins are explained on scoring machines as bowlers wait for their scores to be calculated. By putting this information in front of people in a way that they can easily understand and retain, Econ4U reaches young people with vital financial information before they make mistakes we’ll all pay for.

Go to econ4U to learn more about how you can support the Econ4U program. And while you’re there, tell us what you think young Americans should know about their finances. Submit new questions by September 7, 2005 for your chance to win business-class airfare to anywhere Delta flies worldwide, tickets to the Outback Bowl in Tampa, FL with a ride on the Outback blimp, or round-trip tickets on JetBlue Airways.

University of Iowa a good ROI

Here is an expert of an article Agent Disco sent me:

Forbes Magazine Ranks Tippie MBA An Excellent Return On Investment

Graduates who receive their MBA degrees from the University of Iowa's Tippie School of Management received $102,000 in additional pay between 2000 and 2005 as a result of the degree, according to a new survey by Forbes Magazine. That figure places the Tippie MBA in the 12th spot overall in Forbes ranking of business schools, up from 26th in the magazine's most recent survey in 2003. That ranks the program third among public universities, behind the University of Virginia and the University of Texas; and second in the Big 10, behind only Northwestern.

Check out the entire article here.

Being a student of the University of Iowa, I sure hope this is true. Wouldn't want to get out into the real world and realize I've wasted my time!

Vioxx to cost Merck at least $250 million in jury case

According to this article, the wife of a man who died from taking Vioxx, a pain-killer, was awarded $253 million for lost wages, lost companionship and emotional anguish. While Merck should have tested their drug better, and the FDA obviously let the ball drop on approving this medicine, I think the award is significantly severe and a bit over the top. This case has obviously hurt Merck, as their shares dropped more than $2 to $28.06 today.

Wired News added to Cashtalk's list of links

Wired News on-line is a great, alternative site to keep up with fads and trends in the technology and business worlds.

This article talks about Amazon.com getting involved in the DVD rental business as a direct competitor to Netflix. Agentdisco and I have done a little research on this. We speculated that Netflix ended its relationship with Wal-mart because of this impending move by Amazon.

Is futuristic, 3-D, full sensory television going to be on the market by 2020? According to this article it will be.

With the impending end of the Space Shuttle program, NASA turns to smaller companies to offer up ideas on cheaper, safer ways to carry supplies into space. Read about it here.

I've added the link to those at the right and encourage you to check it out.

Gas Prices Keep Going Up...

Some people might find that living in Venezuela would be nice right about now, as their average gas price is only $0.12 a gallon. The most expensive place in the world for buying gasoline is the Netherlands at $6.48 a gallon! An interesting spectrum of prices CNN posted on this list. Check it out and let me know how much you're paying for gas right now. (I'm paying $2.49 a gallon in Iowa City.)

It's been a while...

Hi everybody! I hope everyone is having a good summer. I just got back from a trip to sunny Mexico. We did a little snorkeling, swimming, climbing and a whole lot of relaxing. Fun stuff!

I'm reading Ayn Rand's masterpeice, "Atlas Shrugged" as my summer reading material. It is a very interesting book with a lot of ideas about the way business and ultimately society should be run. I don't agree with everything she says, but a lot of it makes sense from a practical point of view. I'll post an exerpt I found quite interesting about the philosophy of money. I'll try and get that up in the next few days.

Agent Disco and I would like to start another Stock Market contest. We learned a lot from the last one, and want to continue to learn about stocks, bonds, options, and all the related stuff. We hope this one will go longer than a month and we'll have a lot of people participating. I'll post more details in the near future.

I hope you are all having a good summer. If you have any questions or thoughts on the economy, business, or money, feel free to post!