The Three Modes of Exchange -- Part One

There are only three ways one can part with their money. The three modes of exchange are very simple: one can give things away through unconditional voluntary charity; one can willingly take part in trade/exchange/barter; or one can have something taken away from them through theft or collusion.

The first mode, charity, is very interesting. One may not receive anything material in return for their voluntary giving, yet, there is a payoff: the warm fuzzy feeling of having done something good in the world, the afterglow of gratitude.

The second mode, free trade, is essentially the accurate definition of capitalism. This oft-maligned concept is frequently mis-represented today, as detractors try to misrepresent it as the source of greed and corruption. More on that later.

The third mode, theft, is the defining concept on which our modern political/economic system is built: taking from one source and giving to another, usually in the name of “good”. As the old saying goes, the road to hell is paved with good intentions. Yet, no matter what the ends, I would argue theft is still theft.

The first two modes are voluntary and require all parties involved to participate freely without coercion or use of force. The third mode is only achieved through use of force. People are required to relinquish their property or be punished.

There are many fallacies that can be exposed by these three simple definitions of exchange.

Let’s start with charity. In reality everything we do, we do for a reason. Everything we do, we do because we profit from it, including charitable giving. People who are very philanthropic are so because they find reward in it. The very definition of success is the recognition that, no matter what one may acquire materially, it is all meaningless without gratitude.

Charitable giving is the outward display of this gratitude. We share with others because of our recognition that we, ourselves have more than we need and are grateful for it. Some people mistakenly feel guilty when feeling good about giving. They shouldn’t. Ultimately, giving has two winners, the giver and the receiver. I would argue that is a good thing.

Essentially, those that give do so because they are happy with their lives and those that don’t, are not. Although we need more happy people in this world, that still does not change the fact that what is yours is yours. What you chose to do with what you have is your voluntary choice.

Our second mode, free trade, is often mis-defined. Free trade is, by it’s very definition, free. There is no coercion. Two people chose to exchange their property of their own free will. So why do people hate capitalism? I would argue that they don’t. They just have an incorrect definition of what capitalism is.

In free trade, there is risk and reward. Am I getting my money’s worth? Will I like my end of the bargain? Is this exchange beneficial to me? Those are choices individuals have to make. These choices require personal responsibility. These choices also require we suffer the consequences, good or bad.

Unfortunately, we try to allay that responsibility by getting someone else to “regulate” our interactions. Doing so makes free trade no longer “free”. Trying to mitigate risk creates a hybrid between control and free choice.

What we often fail to realize is that risk is good. Risk is what creates fear. Fear is what keeps us from making bad choices. Fear is what “regulates” our greed. Therefore, capitalism does not create greed. Regulation meant to diminish risk creates greed. The elimination of risk creates an artificial barrier to fear, fear that would normally hold the expansion of greed at bay.

Yet, why do so many people incorrectly associate capitalism with greed? I think it is a simple case of believing what we are told rather than thinking it through for ourselves. It is easier to subjugate to someone else’s regulation than to think for ourselves. Rather than be personally responsible for them, it is easier to convince ourselves that free choice is a bad thing.

Which brings me to the third mode, our new modern American way of exchange: involuntary coercion, better known as theft.

That will be part two.