money (economics)

why is money important in our world?

money came as a direct result of civilization i believe. like language, it was a standardized way to do something, in this case give value to something. before this, it was bartering but the difficulties of that is that both parties may not have the desired product the other party wants. money made trading much easier.

how do we determine the monetary value of something?
wikipedia has many answers because it is a very important question.

the terminology in the article on value is supper confusing because this theory has been discussed by so many economists so i’m going to use some of my own terminology.

but even if you’ve taken only one class of econ, you know the following: supply vs demand curve gives you price.
in the beginning, value was determined by only the supply side.

imagine you live in a village, and you want to buy some fish from another villager. because you’re all friends, you know how much work your friend does to get all of that fish. you also know how long it would take you to catch the same fish and the price you would get for it. in this case, the price you get for it is pretty much equivalent to the value of all the work he did or else you wouldn’t buy it. this is called Labor theory of value or Cost of production theory of value.

but you see, the important assumptions made here is that you know how much work was done to get that fish, and you also know how much it is supposed to cost, and you don’t actually care if you get that fish or not. it makes sense for staples, goods needed for survival, but is not quite as applicable for luxury goods, so this model has to be modified, we add in the demand curve.

similarly, the supply curve is related to the cost into creating or obtaining the product (or the intrinsic value if you will. it’s called “value” in marx’s theory)
the demand curve is related to the subjective value of the product determined by the buyer, AND the value to which the buyer associates from obtaining the product (or the subjective if you will. it’s called “use-value” in marx’s theory)
both of these are values of the object. but they are useless on their own. the BUYER and SELLER need to compromise until they can agree on an exchange value (, value for which seller will sell) is settled on.

to make this theory slightly more beautiful, we need to treat it a bit like calculus, to consider the infinitesimal step. this comes from the consideration that each subsequent unit of the product obtained (supply part) may have a different subjective value (demand part) associated to it. one car is nice, two cars is awesome but three cars is too many. this whole second part is called marginal utility, and seems fine.

but the implications of the concept of money is huge. everything is now relative to this abstraction. the construction of the price an of objects can now be infinitely complex. previously, we only considered the simple example of buying food in a village. but let’s consider the price of a mac laptop. how did we come to the price? of course, there’s the buillding cost of the actual laptop. but then it gets complicated: the other costs related to the marketing, operations, r&d cost recovery of the product. psychological pricing ending in 99.99, premium pricing for the specific market segment, price discrimination because of currency differences etc. there can be infinitely many and infinitely complex pricing factors.

the thing you should take away is that pricing can be so complex that it is almost arbitrary. but pricing is usually determined by the masses, personalized pricing happens less often. even healthcare, the cost maybe tailored to your health needs, but the price of each service has been determined by someone else already.
however, each person’s subjective value of things can be different. we can exploit this economically and purchase things that have a low price determined by the masses, but you think has a higher value.

decision making in life works like the pricing theories above. you assign a cost to everything you do, and the return it gives you or its value to you. for every action you do, as long as the cost is lower than the return, then you will keep doing it until there is no more advantage.
studying until you ‘re too tired to do so anymore. following your dreams until you are too financially broke. a human’s value system is always changing so these decisions are also always changing. you assign a higher value to intoxicated fun when you are younger and in college. you may regret things you did in the past because your value system was different. the most important thing is to know what your value system is.

life, no correct way to live it.

this is a sequel to the previous post.
looking back at that post now, i feel like my conclusion was pretty crappy.
“I would like to have the choice to live many human experiences, feel all the human emotions, explore the universe with human knowledge and engage in a life of giving.”
that’s because living “different” experiences is really ambiguous, and anything we do including living on the streets, being incarcerated can be said to be living another human experience. so i realize i was being a bit vague there.

there’s also unresolved issues related to money, to what extent should you base your choices on money. i talked about money previously and how we need to rely on to a large extent, money to live in this world,
money is strangely powerful. there’s a chinese saying that is 钱不是万能,但没有钱万万不能,which translates to money cannot accomplish everything, but you cannot accomplish anything without money.

as i said before, i don’t think money itself is evil, because eventually there had to be an abstract quantifiable construct that was used to signify value. this was the only way for trade to happen. but money should never be the reason you decide to do something, so not 100%.

i had prepared to talk about value in economics in this post but that explanation got too long and is now included here. but the important thing to realize is that value in economics is very similar to value we assign to choices when we’re making decisions.

the value of something has multiple contributing factors. a pair of canvas shoes may be x, but a pair of Toms cost more because we added in how much extra we are willing to pay for their charitable work of giving another pair of shoes to kids in developing countries.

another thing to get out of this is that value is also a subjective measurement. your value of something for various reasons is different from the other persons which explains everyone’s unique course of action.
we do things differently because we have different value systems. we have different value systems because we have different beliefs, which means life means something different to everyone. you can look at the collection here on wikipedia. Really, go take a look at the list of Popular Views.

i said this before, but if you think about it, there really is no reason for life. why are we alive from the perspective of the universe? or even, why are we alive from the perspective of the creator of this universe if there is one. i believe there is no ultimate meaning to life, except to live. if that is true, that means we can pretty much do anything we want because there is no objective for us to really fulfill.

the answer to the question how to live life is that there is no answer. the only thing we can come to a conclusion is that you should do whatever you like only because doing what you don’t like sucks a lot.

the things i wrote in the previous post were my attempts of trying to come up with a perfect answer but i realize there is none. so i’ll try again and present my own ideas, and not same universally applicable theory.

(optional)
so here are my personal opinions which you are welcome to listen to

i want to give, comes from a world view that the world is unfair and i should help those less fortunate. i do wish this world was a more beautiful place and i hope i can push it more that way. i want to do something that may not have been possible if it wasn’t for me.

i don’t believe in pursuit of happiness or pleasure, because i don’t think it’s possible to appreciate happiness without going through sadness. and you can’t find happiness by pursuing it directly. you encounter it on the side.
and plus humans can never stay happy. we always naturally return to the same level of happiness, hedonic treadmall

i don’t believe in blindly pursuing success. because blindly pursuing it will change you if you’re not following it with your heart.

why should you ever do something? decision-making works like economics, explained in more detail at bottom of this post. if you think the cost of doing something is lower than the return, you will do it. i’m probably saying something very obvious, but everyone ascribes a value to every decision he/she make. ultimately, you pick the one with the highest value. this value consists of many things but my biggest factor is is this what i love. even 3 idiots knew that. my second factor is that whatever i need to live because i love life. money is unavoidable in that extent. to what extent should you base your choices on money? to the lowest extent which is personally allowable.

all decision making is based on the belief we can control our lives. but i realize  we are infinitely small and life is a hodgepodge, you can never expect what will happen next, because of a very fundamental property; atoms move based on probability. you need the courage to pursue an idea, but have also the same courage to let it go. don’t be jealous of anyone and don’t have pity for yourself. some people have the privilege of not knowing what they should to do or have to do. others are forced to be realistic at a young age. things happen in life for no apparent reason. a friend taught me this: you can always learn something no matter what you do. always keep an open mind. regret things you have done but never have pity for yourself.

enjoy it.