OnWords: How Much Is Wealth Worth?

Jul 16, 2013

Château de Maisons-Laffitte
Château de Maisons-Laffitte
Credit Wikimedia Commons

Wealth is a social relationship.

For as much as we obsess over the subject, you'd think we'd know this by now.

Consider the time and energy CNN, CNBC, Bloomberg and others spend on the ebb and flow of markets, the widening gap between rich and poor, and the politics of taxation and job-creation. Given such constant scrutiny, you'd think we would see wealth as substantively different than, say, the weather.

To be wealthy, after all, is simply to have a lot of what someone else wants.

50-odd acres of broken-down cars is worthless to you until you need a part off of one of them. And Florida is wealthy in sunshine and mild temperatures, something of value to Minnesotans in January, but not in mid-July.

I recall having a lunch conversation with a former colleague in 2008, after the massive collapse of the mortgage-backed securities market. He wondered what happened to all the money after the bubble burst. My take on it was that the money never really existed, at least not in the sense a ham sandwich or a grape soda exists. The money was a useful fiction, a representation of the social relationships that created the value of the securities.

He countered that gold, perhaps, is real in the ham-sandwich-and-grape-soda sense. And it is--except that its value is no different than a mortgage-backed security.

I countered with this example: if you were starving and all you had was a bar of gold, and I had a ham sandwich and a grape soda, what would your bar of gold then be worth?

And who would be the wealthier man?