🌍 The Price of Everything and the Value of Nothing: How Market Thinking Conquered Our World

Go deeper with additional material on the substack related to this episode. 

In this provocative episode of Heliox, we dissect Mark Carney's groundbreaking work on how our obsession with market values is eroding our humanity. 

We explore the dangerous shift from "economies that use markets" to "societies defined by markets" and examine how this transformation is reshaping everything from healthcare to climate policy. 

The episode dives into the "three lies of finance" that fueled the 2008 crash and connects these financial failures to our current environmental crisis. We contrast the staggering market valuation of corporations with the criminal undervaluation of natural resources like the Amazon rainforest, revealing a profound crisis of values. From the gold standard's collapse to the rise of cryptocurrencies, from the moral foundations of early economics to the hollow promises of modern finance, this episode challenges listeners to reconsider what truly matters in a world where everything—including human life—has been reduced to a price tag. 

Join us as we explore how reclaiming our core values might be the only way to navigate the fourth industrial revolution and build economies that serve humanity rather than consume it.

The Reith Lectures

Values: Building a Better World for All by Mark Carney

Homegrown Harmony  🎶 Carney

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Transcript

0:24

All right, welcome to the Deep Dive. We're all about helping you really grasp those complex topics without getting totally lost in the weeds. And today, we're going to do just that. We're going to take a deep dive into how we as a society think about value, especially in our economy. We've got some really interesting source material to work with here. Yeah, absolutely. We have Mark Carney's Wikipedia page, which highlights his Reith lectures, and also some pretty extensive excerpts from his book, Values. So our goal today is to really dig into how we define, how we measure what's valuable. We'll look at how these ideas have changed over time, and then we'll think about what all this means for us in today's world. Okay. So let's get into it. One of the things that really jumped out at me from both Carney's lectures and his book is this idea that there's been a big shift in our values, like what we consider important as a society. He argues that we've moved away from valuing what he calls intrinsic human worth, those qualities that make us human. And we've started to put more emphasis on financial worth, like how much money something or someone is worth. It's like we've gone from economies that use markets to societies that are completely defined by them. Yeah. And what's really interesting to think about is, if that's the case, how these ideas of buying and selling have started to creep into more and more parts of our lives, right? The sources we have point to healthcare, education, public safety, even our relationship with the environment, all being viewed through this lens of the market. And it's not just about physical things anymore. No, not at all. There's this quote from the book that I found kind of unsettling, honestly. It says, "Increasingly, the value of something, of some act or of someone, is equated with their monetary value." And it really makes you wonder, how are we actually assessing worth in all these different areas of life if we're just reducing everything down to dollars and cents? Yeah, I think that's a really crucial point. And one of the key insights that Carney offers is that when we treat everything as a commodity, something to be bought and sold, we're sort of assuming that our basic values as a society are just going to stay the same. Right. But he makes this powerful statement, "When everything is relative, nothing is immutable." Whoa. And that's kind of a warning, right? As we expand this market thinking, are we accidentally eroding the very values that actually make for a healthy society? So this whole idea of market society sounds a lot like what people often call market fundamentalism. Yeah, exactly. And if we connect that to some of the bigger events in recent history, the sources suggest that this way of thinking actually played a huge role in the global credit crisis. Right, 2008. Carney talks about what he calls the three lies of finance that a lot of people started to believe. The first one is, "This time is different." Oh, yeah. The second one is, "Markets are always right." And the third, and maybe most worrying one, is, "Markets are moral." And those lies really do seem to sum up the whole narrative leading up to 2008, don't they? Yeah. And the idea that this behavior was okay because, well, the market would always sort it out. Right. And the consequences were far beyond just the financial markets, right? There was this erosion of social capital, this idea that some banks were just too big to fail. Right. And equity markets seem to be favoring big institutions over individual investors. It really damaged trust and accountability. And arguably, that paved the way for more reckless behavior. It's interesting that the sources connect that financial crisis to another huge challenge we're facing now, the climate crisis. Yeah. Both are described as crises of valuation and values. Yeah. That's a really powerful connection. And the book gives this really striking example. It compares the massive market value of a company like Amazon to the value we only assign to the Amazon rainforest when it's destroyed. Right. So we only see its value in terms of like a cattle ranching or soy production. Exactly. And that's that's the point, right? Market prices completely fail to capture the true value of the rainforest, its role in regulating the climate, supporting biodiversity. These things are priceless, but they don't have a clear market value. Yeah, that contrast is really stark. We see the immediate profit from deforestation, but those long term costs to the planet, they're just not reflected in traditional accounting. Exactly. And Carney stresses that climate change is not just an environmental issue. It's going to force us to reevaluate how we value financial assets as well. Right. So companies that adapt to a zero carbon economy will thrive while others could face serious decline. It really highlights the fact that our beliefs, our values, they're not static. They're not set in stone. Right. They need to be nurtured, like the book says. Yeah. And the book actually warns that unchecked market fundamentalism, if we just let it run wild, it could end up devouring the social capital essential for the long term dynamism of capitalism itself. Wow. So we need those shared values, that social capital for the system to even work properly. Exactly. Markets alone won't create that. So let's dig into some of the history of these ideas. The sources mentioned different economic theories of value, like objective and subjective theories. OK, so let's break that down. Subjective theories, and these include thinkers like Aristotle, Adam Smith, and Karl Marx. They generally say that the value of something comes from how it's produced. Right. The labor, the time, the technology involved. OK. Aristotle, for example, he was big on the idea of justice and a just price based on the labor that went into creating a good. So the value is tied to the effort that goes into making it. Right. And then you have subjective theories, which are associated with neoclassical economists. They argue that exchange value, what something actually sells for in the market, that's what reveals its true value. OK. So in this view, value is, you know, it's in the eye of the beholder. It's driven by individual preferences and scarcity, how rare something is. And a key consequence of this view, as the book highlights, is that something which is not priced is neither valued nor valuable. And that brings us back to the Amazon rainforest. Exactly. If we don't put a price on its existence, it's seen as less valuable than the things we can extract from it. Right. The sources also touch on some other perspectives, like the canonists from the Middle Ages who tried to integrate economics with ethics and morality and the physiocrats who saw the economy as this interconnected system. Right. But then we get to, you know, the big one, Adam Smith, who's often called the father of modern economics. And the sources really stress that we need to look at both of his major works, the theory of moral sentiments and the wealth of nations together. So it's not just about the invisible hand and free markets. Right. Smith believed that our moral judgments, our values, they develop through our interactions with other people. Our desire to, as he put it, to love and to be lovely, which leads to mutual sympathy of sentiments and the development of our conscience. Interesting. He also made a distinction between the real value of labor and the nominal price of money. So even for Smith, value wasn't just about the monetary price. So even for Smith, value wasn't simply about price. Exactly. And the sources touch on Ricardo's labor theory of value and Marx's extension of it, which included the concept of surplus value. But the point is that how we understand value, it's been a complex and evolving conversation. All of this brings us to the very tricky quotient of non-market values and how they factor into public policy. Right. So if you're talking about health, freedom, a clean environment, how do you put a price on those things? Right. The sources talk about the knowledge problem. This is a fundamental challenge. Policymakers often use tools like cost-benefit analysis and the value of statistical life or VSL to try and assign a monetary value to things that don't have a market price. Right. But there are huge limitations and ethical concerns with these approaches, as the book points out. Sure. The sum of all market values does not equal total welfare. And money itself plays a central role in how we perceive value, right? Right. It's both a measure of value and a common unit of account. Exactly. Money allows us to specialize in what we do and avoid the inefficiencies of bartering. The sources describe the different forms of money we use today. Physical cash, electronic reserves held by central banks, and electronic deposits created by commercial banks, which actually make up the majority of our money supply. Interesting. It's fascinating to think that banks essentially create money when they make loans. Oh, right. This creation is based on trust, credere in Latin. So that leads us to how money has been backed historically, like the gold standard. Yeah. The sources briefly explain the history of gold-backed currencies and why that system eventually broke down. They mention the bullionist debate and the attempts to restore gold convertibility, which eventually led to the gold standard. Okay. But the key here is the tension that emerged between this promise of gold convertibility and the needs of the domestic financial system, especially as fractional reserve banking expanded. Right. So central banks were stuck between their obligation to exchange currency for gold and the need to provide more money during times of financial stress. Exactly. It's a reminder that even something as seemingly solid as the gold standard wasn't immune to changing economic realities. Now shifting gears a bit, the sources bring up the Magna Carta as a historical example of value conflicts. I wouldn't normally connect that with economics. Yeah. What's fascinating here is how they frame the Magna Carta. Initially it wasn't so much a foundational document of liberty as it was a desperate attempt at a peace treaty driven largely by economic forces and the self-interest of wealthy barons. Interesting. So it wasn't about some grand democratic principles? Not primarily. No. But they emphasize that it was actually annulled by the Pope and followed by the first barons war, which shows its initial failure. Its later romantic resurrection by legal scholars like Koch and its influence on things like the US Constitution came much later. Okay. Another key institution discussed is the Bank of England. Its evolution really reflects changing ideas about value and the government's role in the economy. Absolutely. The formation of the Bank of England and the period that followed where it didn't have clearly defined objectives was marked by significant inflation and financial instability. The sources highlight that maintaining trust in money requires strong institutions and public acceptance and that giving the central bank independence with clear goals is crucial for safeguarding the value of the currency. And that independence isn't just about setting interest rates, right? It also relies on public support as we saw with the bank node diversity controversy. The bank's efforts to engage with the public through regional visits and educational programs seem to be a response to this need for greater understanding and trust. Exactly. Okay, let's jump to the present day. The sources talk about how technology is shaking things up and the future of money, especially in light of the COVID crisis. Yeah. The pandemic really accelerated the adoption of digital technologies and highlighted the transformative potential of financial technology or FinTech as it's called. Right, right. Driven by innovations in cryptography and AI and this broader trend towards decentralized peer-to-peer networks, we're seeing a real revolution in how we make transactions. So what about cryptocurrencies? Do the sources see them as the future of money? The view presented is that while cryptocurrencies might not become the main form of everyday money, some like Bitcoin could be valued as assets, like a kind of digital gold. Interesting. Because of their fixed supply and low correlation with traditional assets. But this valuation comes with risks, of course, like changes in regulations or the emergence of new technologies. The emphasis seems to be on the potential for new payment systems to be cheaper, more efficient and secure. So it's more about the underlying technology and improving how we transact rather than the speculative side of cryptocurrencies. Exactly. The discussion then goes beyond just market efficiency and looks at the broader role of values in economics. That story about the Christmas gift was a great reminder that value isn't always about money. What's really interesting is this contrast between focusing purely on economic efficiency versus considering the social and emotional aspects of value. The sources critique systems that overemphasize individual success at the expense of collective well-being. They also bring up the idea of inclusive capitalism, which appeals to our sense of fairness. And it challenges the idea that economics is a purely objective science, separate from morality. Exactly. The sources argue that economics is actually a moral science built on underlying ethical philosophies often rooted in the idea of maximizing overall happiness. And the key point here is that the market is not some natural force. It's a social construct that depends on the rules set by governments and the values held by society. And if it's left completely unchecked, it can actually erode the very values it needs to function properly. This brings us to the discussion about the balance between governments and markets and how that shifted over time. There's this sense that the social contract, that unwritten agreement between citizens and their government, might be breaking down, especially with rising inequality. The growing prominence of markets in recent decades is definitely notable. The sources even mention this idea of the end of history, where market-based democracies were seen as the final stage of societal development. However, they also highlight the increasing sense that this social contract is under pressure, partly due to rising inequality, which can be exacerbated by things like technology and globalization, which can create winners and losers, potentially weakening community bonds. The 2008 financial crisis is then presented as a prime example of what can happen when values go wrong in the financial system. That senior banker's advice, "If it doesn't make sense, run," really captures the recklessness of that time. That anecdote highlights the importance of basic prudence, even in a complex financial system. The sources explain the difference between traditional banks, focused on relationships, and markets, which rely on confidence and liquidity. And the collapse of Northern Rock is given as a classic example of a bank run, fueled by excessive debt and reliance on short-term wholesale funding. And then there's the originate-to-distribute model, where banks issued loans and quickly sold them off, and the rise of shadow banking with things like Canadian ABCP and SIVs. Right. The complacency and focus on short-term gains before the crisis meant that a lot of what was happening in these less-regulated parts of the financial system just didn't make sense if you looked at the underlying risks. The events after Lehman Brothers collapsed and the need for those massive government bailouts really showed how interconnected the financial system had become, and the importance of really strong government intervention. It's hard to remember the pre-crisis faith in free markets, that Washington consensus, compared to the post-crisis push for greater regulation and the rise of institutions like the G20. Even Alan Greenspan's belief in the market's ability to self-correct is presented as a contributing factor to the crisis. And the consequences were huge, like a lost decade of income growth in the UK. The sources emphasize that markets only work perfectly in textbooks, and sometimes adding more markets, like with those complex financial derivatives, can actually make things worse. Regulation is necessary, but it's not enough on its own. There also needs to be a renewed sense of responsibility throughout the system. The reforms after the crisis, led by the FSB, the Financial Stability Board, aimed to make markets more resilient, fair, and effective by addressing those risky parts of shadow banking. Right. And now, new vulnerabilities are emerging in some developing economies, with the growth of non-bank finance. So the discussion then shifts to these macroprudential policies and holding individuals accountable in the financial world. Yeah. So macroprudential policies are about looking at the risks to the financial system as a whole, not just individual institutions. Right, right. And then measures to make individuals more accountable, like linking bonuses to long-term performance and having clawback mechanisms, are seen as important for promoting responsible behavior. Okay. The COVID-19 crisis is then examined through the lens of our values, both in action and inaction. Yeah. It really showed how crucial government can be, and the high cost of not prioritizing things like resilience. The pandemic really brought core values to the forefront. Resilience, responsibility, solidarity. The sources point out the fundamental duty of governments to protect their citizens. And there were significant failures in being prepared for a pandemic, despite warnings from experts. Right. And the Global Health Security Index, it actually didn't predict very well how countries would perform during the pandemic. Interesting. This highlights that things like social trust, effective leadership, the legitimacy of the government, those are all really important factors in a crisis. So the challenges of reopening economies forced us to confront this tension between the economic damage of lockdowns and protecting public health. Yeah. It raised difficult ethical questions about how we value and weigh different concerns. It did. We need to consider fairness, long-term economic potential, especially for younger generations, alongside immediate health concerns when making those big policy decisions. And the pandemic really highlighted existing inequalities in our society. It did. It disproportionately affected different groups and raised expectations for greater fairness moving forward. The crisis was a real test of our values and the effectiveness of our institutions. This brings us to the climate crisis, which we talked about earlier, which is also framed as a crisis of valuation and a call for new values. Right. Achieving net zero emissions, that's fundamental necessity. The sources lay out how much we need to reduce emissions and the specific challenges in sectors like heavy industry and agriculture. Global data on carbon emissions show big differences between countries. The consequences of inaction are huge. GDP losses, more extreme weather, the problem of stranded assets in the fossil fuel industry. And beyond the purely economic impacts, there's the issue of climate refugees and potentially greater inequality. The tragedy of the horizon really emphasizes why we need to act now on climate change, even if the worst impacts seem far off. Yeah, because emissions accumulate over time. And the tragedy of the commons framework helps us understand the need for solutions like carbon pricing, privatization or supply management to address this shared global challenge. The sources discuss the current state of carbon pricing and highlight the need for prices to be both higher and more predictable. Right. There's been a shift in thinking within the oil and gas industry from resisting the idea of stranded assets to a recognition that they need to transition to becoming broader, big energy companies. The priorities for building a zero carbon economy include greening electricity generation, where renewables are increasingly the cheapest option. We also need breakthroughs in carbon capture and storage. The financial world has a key role to play by supporting this transition through sustainable investing and new financial products focused on climate impact. And it seems like shifts in values driven by social movements can really speed up change. Yeah. And it's up to governments to translate those values into policies like carbon pricing, aligning public spending and regulations. Now the discussion turns to leadership and values in navigating this rapidly changing world. Right. Different leadership styles are discussed, stressing the need for both effective execution and inspiring vision, along with strong emotional intelligence. It's not just about technical skills. There's been a decline in trust in institutions like government, the media and the financial sector. Yeah. People are turning more to personal networks and scientific expertise. This highlights the importance of transparency and clear communication. Absolutely. The sources also talk about the balance between central bank independence and accountability and their responsibility to be upfront about risks, even when it's politically sensitive. The sources really emphasize that effective leaders need to be driven by a desire to serve rather than a thirst for power. Right. They need to inspire their organizations with a sense of purpose, hope and clarity, humility, honesty about mistakes, authenticity. These are all really crucial qualities. So leaders who operate based on values are more likely to earn what's called social license to operate. Exactly. The discussion then broadens to the purpose of companies moving beyond just profit to consider stakeholders and responsibility for the wider systems they operate within. Right. They use the example of Josiah Wedgwood as a historical example of a purpose-driven business. And they trace how corporate focus has shifted from public benefit to more narrow private interests as corporations grew larger. Yeah. The concept of principal agent theory is mentioned, which looks at the challenges of aligning the interests of company leaders with those of the owners. This highlights the need for shared mission and values within an organization and the increasing importance of transparent reporting on their purpose and ESG performance. ESG, environmental, social and governance factors. Yes. Right. The limitations of short-term executive compensation are noted. And there's a lot of discussion about the benefits of integrating ESG factors into financial reporting. Right. Companies with a clear purpose, they tend to be less risky, have more motivated employees and be more innovative. So ESG investing is becoming really important. Investors are actively looking at these factors when deciding where to put their money. Yeah. And there's also impact investing, which goes a step further and aims to create positive social and environmental outcomes alongside financial returns. Right. Although measuring those non-market values can be tricky. The sources conclude that companies and assets will be increasingly evaluated through the lens of the transition to a zero-carbon economy. So basically a new asset class based on their contribution to or detraction from global warming. Exactly. And existing ways of measuring climate-related performance have their limitations. So we need better ways to assess how well companies are aligning with a net zero future. The final section focuses on the fourth industrial revolution and this idea of reclaiming our values as we navigate it. We're talking about the huge disruptions of previous industrial revolutions and the profound changes expected from this new era of AI, robotics, and other advanced technologies. Canada's unique position in this changing world and the need for institutional changes rooted in Canadian values are also highlighted. And what about the impact on jobs and the workforce? That's a big one. The potential impact on the labor share of income is a key concern. Creating new jobs, making sure people have the right skills, that's all critical. And the COVID pandemic actually accelerated the pace of this fourth industrial revolution. It transformed how we work. So while government support was necessary during lockdowns, the focus now needs to shift from support to direction, using public resources wisely and thinking about the long-term implications for national debt. Exactly. And the sources really stress rebuilding social capital and reevaluating how we measure value, focusing more on societal well-being to create prosperity for everyone. What about strategies for managing this transition in the workforce? So understanding the new skills that will be needed, having tax systems that encourage skilled employment, and steering technological development in a way that complements human capabilities are all crucial. The importance of adapting international financial reforms to the Canadian context and fostering greater responsibility among market participants is also discussed. Systems like the UK's senior managers regime are mentioned as a way to enforce codes of conduct. The sources emphasize that you can't just mandate social capital. Right. Integrity and trust have to be built. So what are the keys to building resilience in this new era? Ending too big to fail, strengthening cybersecurity, conducting climate stress tests, having robust social safety nets, and planning for failure through those stress tests and simulations, making the results public. Reinvesting profits from traditional energy into future opportunities, partnering with indigenous communities, and implementing fiscal and regulatory policies that support the transition to a net zero economy, like carbon pricing, infrastructure investments, and frameworks for intellectual property. The takeaway is that navigating these global shifts requires a strong foundation in our values. Fairness, responsibility, resilience, sustainability, dynamism, and solidarity. And finally, the last value explored is humility. It's presented not as a weakness, but as an essential attitude for leaders. It's about recognizing that we don't have all the answers and that unexpected events are inevitable. Right. Those unknown, unknown. And that makes planning for potential failures even more important. Absolutely. And humility is also closely tied to adaptability, which is crucial in this rapidly changing world. You shared that personal anecdote about becoming governor of the Bank of Canada with a degree of overconfidence and then being quickly humbled by the financial crisis. Yeah. A good reminder that we need to be open to the possibility that we might not have all the answers. Exactly. Even seemingly simple economic concepts can have surprising implications, like the law of comparative advantage. It sounds straightforward, but it has some counterintuitive aspects, which emphasizes the need for intellectual humility. So this deep dive into the sources really highlights this ongoing shift in how we define and prioritize value, from ethical foundations towards a more market-driven approach and the consequences that come with that. We've explored the risks of unchecked market fundamentalism, the importance of those non-market values, the history of economic thought on value, the changing role of money and central banks, the lessons from financial crises, the challenges and opportunities of the COVID and climate crises, and the crucial role of values-driven leadership in strong institutions. It leaves you with a big question to ponder. How might a renewed focus on core human values reshape our economies and societies in the years to come? It's about finding that balance between market efficiency and the well-being of society as a whole. We encourage you to think about how these principles might apply to your own decisions in your work, your personal life, how you engage with the world around you. And if you're interested in learning more, we encourage you to delve deeper into any of these topics, specific economic theories, the impacts of climate change, ethical frameworks for decision-making. It's a fascinating area to explore. Thanks for joining us for this deep dive. It's been a pleasure. Take care.