The Fable of the Ten Dollars

One day Sam woke up early.  It seemed like a good day for fishing, and he thought he’d try his luck.  He headed out to his favorite fishing spot, and before long caught a splendid fish.  He brought the fish directly to the village market, where it sold almost immediately for $10.

“Just what I need,” thought Sam, “to replace my old and nearly broken fishing pole.” He walked across the marketplace to the stall of Mike the woodcrafter. Sam picked out a new pole made of willow, and bought it with the $10 he’d just earned.

A little later that morning, Mike the woodcrafter had a hair appointment at Pete the barber’s. Mike got a haircut, and paid with the same $10 he’d received earlier from Sam the fisher.

At lunchtime, Pete the barber went to a nearby cafe, where he bought lunch for himself and a friend, paying the $10 that Mike the woodcrafter had paid him.

A few minutes later, the cafe owner, Sally, noticed she was running low on lentils.

She sent her assistant to the grocery to buy some.  “Here, take this”, Sally said, handing her assistant the same $10 that Pete had paid for lunch.

When Sally’s assistant arrived at the grocer’s, Angela the farmer was there with a delivery of apples.  Sally’s assistant bought $10 worth of lentils from the grocer, who   then paid the same $10 to Angela for the apples she’d just delivered.

One the way home, Angela stopped at store of Evan the potter, where she bought a watering pot – paying the same $10.  Later, on his work break, Evan went next door to the Chloe the masseuse.  Using the $10 he’d gotten from Angela, he paid Chloe for a relaxing massage.  Later, Chloe visited the baker, where, paying the same $10, she bought bread and pastries for a party she was having that evening.

Now this continued all afternoon and evening.  In less than a day, the same $10 changed hands twenty times. As a result, twenty people were enriched: some had delicious meals; some had new tools to make their work and lives easier; some had new clothes; some were better groomed; some entertained.  All were happier.  The total wealth gained by the village, measured as improved quality of life, had increased by $200.  All this happened because of the same $10.

That same day in another village, another fisher also woke up early.  He looked outside and thought, “What a nice day to sleep in. I don’t really need the money. Why work today?”  This fisher caught no fish, earned no $10, and bought nothing.  In consequence, many other people in his village — the barber, baker, grocer, and others — had an empty hour in their day, when nothing was bought or sold.  To fill the time, people napped, or watched television, or gossiped, or argued, or drank, or  fretted and felt depressed, or in various other ways wasted time or made mischief.

Now what may we conclude from this little story:

1. The wealth of a community is not a function of how much money people have. 

Here $10 bought $200 worth of actual goods and services. But that’s just the beginning.  In each transaction of our idealized story, there were two direct beneficiaries. The purchaser benefited by gaining a new good or service.  And the seller benefited from (1) the satisfaction of having served and made happy another villager, and (2) from the enjoyable time spent pursuing his or her vocation.

Each villager was passionate about his or her work.  Each person found greater meaning, purpose, dignity and self-respect by engaging in productive activity.

Sam, for example, liked fishing so much that, in truth, he would have paid $10 for the opportunity to fish.  Anyone with a passion for their work knows this to be true.

Therefore, if we were to include the value of the experience of working, the  wealth gained by the community was more like $400:  $200 for the receivers of the goods and services, and another $200 worth of satisfaction, enjoyment, and fulfilment by the producers.

Moreover, each transaction was itself a positive experience.  Each affirmed the integrity and usefulness of both individuals, and of the community as a whole.  Both parties felt respect for themselves and for the other.  Their trust and confidence in each other grew. Therefore we may add at least $2 gained – $1 for each person – as psychological benefit in each transaction.  Thus in twenty transactions, the community profited $40 more this way.

Further, we could consider how many harms the village avoided by keeping everyone productively and happily occupied.  In view of the crimes not committed, the problems not instigated, the vices not pursued due to idleness, we could easily allow that the village profited another $400 in avoiding costs associated with these problems.

Thus the $10 led to an enhancement in quality of life in the amount of $840.  Had we included a few more people, this could have as easily been $1000, or a two-orders-of-magnitude increase.

2. Rapid circulation of currency is more important than total capital. 

For example, if each villager had $1 million in the bank, but didn’t spend it, the functional wealth, measured in terms of improved quality of life, would not have increased at all.  Even if the money earned interest every day, it would just be an abstraction – numbers on a bank statement – unless it became a good or service shared with another.

3. The wealth of a community is the eagerness and willingness of people to work for one another.

In our scenario, people were eager to both supply and to purchase goods and services.  The only limits on how much total quality of life improved was the speed and skill which people performed their work, and their interest and efficiency in purchasing things from others.

In every economic transaction of our idealized, happy village, each person, whether buying or selling something or exchanging services, seeks not just to maximize self-interest.  Each party further wants the transaction to benefit the other; and, moreover, the entire community.  Each transaction becomes an opportunity to practice, affirm and develop a favorable community ethos.  Each is a re-affirmation of one person to another:  I live, I work, I derive my meaning not just for myself, but for you and others also.

And added to this benevolence, magnanimity, or whatever we choose to call it, is another virtue, namely that of promptness, energy, and industriousness in work.

This again is an attitude or ethos that may permeate a whole community. We have described more than just a community of people with good intentions and positive sentiments.  We’ve described a community of hard-workers. There are few, if any, stronger motivators of human activity than a loving desire to help others.  This is how human beings are designed:  to work, to work hard, to enjoy work, and for all this to serve others.

4. Every economic transaction was direct, person-to-person. 

This further encouraged and supported the villagers’ natural tendencies to act ethically and pro-socially.  When doing business with an anonymous entity – some corporation or bank – these positive social forces don’t operate. If one buys something from a fellow villager, it pleases one to know that the money will improve the quality of that person’s life.  Doing business with a corporation, this is not so.  The money may just sit in a bank, be put to questionable use, line the pockets of someone who is absurdly rich; or be sent out to anonymous stockholders who will little appreciate either the money or its source – namely the dedicated labor of a fellow human being.

If it is a good corporation, say a producer of clean energy, some of these problems are offset or not present; however there is still lacking the reinforcement that comes from positive, person-to-person interaction.  We see no smile, no light in the eyes of a corporation, or, usually, not even in an employee of a corporation, however benevolent it may be.

We may work out of love for each other; but we cannot work out of love for a corporation, a government, or another anonymous entity.

5. The economy is stimulated by ethically positive work.

Essential to the scenario is that the work performed in each case was productive and ethically positive.  If we were to insert into the sequence say, Zack the adulterated cigarette maker , it would break down:

• First, Zack himself has a conscience, and would know that what he is doing is morally questionable.  This would make him enjoy his work less.

• Second, to the extent that Zack was conflicted and internally divided, it would impair his productivity.  His heart wouldn’t be in it.

• Third, people who did business with Zack would feel guilty, either consciously or subconsciously, because they are asking him to do something which is not good and emotionally fulfilling for him.

• Fourth, people who supply goods and services for Zach’s business might feel uncomfortable knowing that they are, at least indirectly, supporting Zach’s questionable work which harms others.

• Fifth and finally, the opportunity for Zach to be delivering some other, truly productive service to the community is missed.

In closing we consider two more speculative points.  Concerning these the author is more hesitant, having no firm opinion whether they are correct, or whether some other interpretation would be more accurate.  However they suggest general lines of thought suggested by the fable which might bear further investigation.

6. Some forms of taxation are intrinsically unfavorable.

Taxes are a necessity, but are problematic in our village.  In theory, taxes are used to help the community.  If a person saw that 10% of every dollar spent went to feed the hungry or treat the sick, and that this had a demonstrable benefit on the recipient’s quality of life, there would be no difficulty.  One would be no less psychologically motivated to purchase goods and services.  One would work just as hart to earn money with which to purchase things.  The loss in purchase power, such that 1/10 of every dollar went to the taxing agency, would be offset in seeing the benefits of taxes in the lives of others.

However, to the extent that taxes are unfairly high, or revenues are mismanaged, so that they do not improve the lives of community members, then this benefit is lessened.  It is also reduced to the extent that tax-payers do not personally know the recipients of tax-funded community programs.  A merely abstract charity – whereby one believes that one’s money is helping some anonymous others – is much less potent a psychological reinforcer and motivator than a personal charity – where one directly sees the effect it has.

As for modes of taxation, a sales tax on each transaction would seem to have the worst possible effect on our ideal village economy.  The miracle of the $10 occurs precisely because people seek commerce: all other things being equal, it is better to include more, not less people in the chain of transactions.   A sales tax, however, produces an incentive to reduce the number of transactions.

An income tax, provided that expenses (purchases) are exempt from tax, would not have this effect.  This would amount to a profit tax, rather than an income tax.  Note that this has the effect of discouraging saving currency, i.e., making profit.  However, in our model, profit per se, if that means accumulating more money than one can spend on natural (community-harmonious) goods and services, is something, arguably, to be discouraged.

7.  If there is a lull in the economy, the government should not try to remedy this by creating jobs.

One can create a job, but one cannot create a vocation or a passion. Passion is something either God-given, or develops instinctively in the context of a community of people with needs and interests.  Passionless jobs immediately remove half the value of work – the value to the workers in the enjoyment of their labor.  Unmotivated workers are slower and less efficient.  At the end of the day they go home exhausted and depressed, not much interested in improving their quality of life by purchasing goods and services of others.

The rejoinder might be:  what if the government could create jobs that people find fulfilling?  The answer is obvious:  nobody needs to create jobs that people like to do.  They will do them anyway, given the chance.  If anything, the government should seek to remove obstacles to people being able to follow their own chosen vocations.

A government could, however, act constructively and supportively in other ways:  for example, by promoting education and culture, building a marketplace for the exchange of goods; constructing and maintaining roads and infrastructure, etc.