February 16, 2022 • 3 minute read
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How to imagine a thing's value.
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It is helpful to imagine a thing’s value as a dotted line extending to another thing, connecting them invisibly. Value is always relative. It is a two-way link.
For example, you can think of gasoline’s value in relation to the amount of money one has to trade for it. “How many dollar bills is this 1 gallon of gasoline worth? Does this 1 gallon of gasoline trade for $3.00 or $5.00?” Or the reverse perspective. Think of the money’s value in relation to the amount of gasoline. “How many gallons of gasoline is this $5.00 bill worth? Does this $5.00 bill trade for 1 or 2 gallons of gasoline?” Both are valid questions. We can measure a thing’s purchasing power in units of money or in units of goods. Each is a proper measure of value.
In the example below we measure the purchasing power of 1 gallon of gasoline in units of money. The 1 gallon of gasoline has a value of $3.00.
And in the next example we measure the purchasing power of a $5.00 bill in units of goods. The $5.00 bill has a value of 2 gallons of gasoline.
Value is not limited to being measured in units of tangible objects like money or gasoline either. Services or temporary actions can also be valuable. “How many dollar bills is 1 hour of automobile repair worth? Does 1 hour of auto repair trade for $150.00 or $250.00?” And likewise, money’s value can also be measured in units of services. “How many hours of automobile repair are these $250.00 dollars worth? Do these $250.00 dollars trade for 1 or 2 hours of auto repair?”
In the example below we measure the purchasing power of 1 hour of auto repair in units of money. The 1 hour of auto repair has a value of $150.00.
And in the next example we measure the purchasing power of $250.00 in units of services. The $250.00 has a value of 2 hours of auto repair.
Many people, both young and old, when asked, “How much is a $1.00 bill worth?” would balk at the question. The reply would come as something along the lines of, “A $1.00 bill is worth one dollar, obviously.” However, this exposes a hazy perception that money’s value somehow arises intrinsically from itself—a common but fundamentally incorrect notion.
During times of civil strife this mentality can snowball and lead the masses to assume that those who control the money are by extension the insidious puppet masters of society, and that it is the financiers who clandestinely pull the strings of entire nations behind the scenes. But the critical fact in this matter is that any product of value will “control” the money, and therefore any seller or buyer by some small or large extent exerts influence over a society and a nation—not just financial services.
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