Value

Clarence

Clarence the angel from the movie It’s a Wonderful Life asks if George Bailey can help him by letting him help George. George says “I know one way you can help me. You don’t happen to have 8,000 bucks on you?” Clarence answers “No, we don’t use money in Heaven”; George responds “Well, it comes in pretty handy down here bub!

 

The most fundamental question in economics: What exactly is value? Economists view value as a theory of price formation. Old school economists thought cost of production determined value.   That’s the “labor theory” of value. It’s only part of the modern concept of value but it’s still good to remember that what gives money value is somebody worked to obtain it. Economists now use the marginal production cost or marginal utility to better understand pricing and value.

 

But there’s a deeper concept of value, beyond just money.

 

An Israeli day care tried to reduce the number of parents who picked up their kids late. So they instituted a penalty fine for parents who showed up late. Makes sense – discourage behavior with a financial disincentive. To everyone’s surprise, tardiness dramatically increased after the penalty was put in place. Apparently, the parents felt it was OK to show up late if they paid the fine. Economists would say the “moral cost” of tardiness was reduced or eliminated by the fine. The same idea applies to taxing carbon emissions. Factory owners may say fine, now we can pollute like hell because we’ll just pay the tax.

 

We live in a time in which almost anything can be bought and sold. But should everything be for sale? Can you put a price tag on human organs, prison cell upgrades, access to the car pool lane for single riders, the right to shoot an endangered animal? Pure, cold hard cash is necessary (it comes in pretty handy down here bub!) but there is much more to life. Values are the things we believe are important in the way we live and work. Money doesn’t buy love or happiness and it’s no substitute for morality. That comes from within – and from above.

 

Merry Christmas from the Estate Planning War Chest!

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