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    The Disaster Girl Guide to Selling Online Assets in a Global Market

    Why Nominalism Can Be Good but Is Mostly Bad, Probably

    By Anthony M. Barr

    October 17, 2021

    For the Old Testament prophets, the proper way to evaluate the success of an economy was not the number of transactions, the ratio of imports to exports, or the amount of gold held in reserve. Instead, the prophets were primarily concerned with whether the poor could afford to buy food. Again and again, prophets indicted Israel for robbing the poor, mistreating the economically vulnerable, and exploiting the worker. These prophets understood that political economy – the chosen legal, political, and social structures that shape markets – is not morally neutral. Instead, the specific ways we collectively structure economic activity as a political regime expresses justice or injustice, over and beyond the ethical dimensions of our individual decisions about buying, selling, borrowing, and saving.

    It is therefore fitting that in its origins, the discipline of economics as established by figures like Adam Smith was understood to be a branch of moral and political philosophy. Today, however, economics is dominated by inaccessible complex math and technical jargon that conveniently shields its ideas from moral critique. Its inaccessibility is especially pronounced in consideration of financial markets – a catch-all term for the buying and selling of assets ranging from stocks and bonds, to bundled mortgages, to repackaged medical debt.

    Outside the ivory tower, many of us have only a dim understanding of how these financial markets operate. And while the 2008 market crash taught us that these markets can have direct influence on our lives in the form of lost jobs amidst lengthy economic recessions, it can be difficult to piece together the exact relationship between those markets and our everyday experiences. How can we think through the ethics of financial markets when we can barely understand them?

    To begin, let’s think about a medieval theological debate with profound implications.

    Don’t like internet memes? Blame this medieval friar!

    If you ask many contemporary conservatives in the academy to pinpoint the origins of the perceived decline of Western Civilization, many will direct you to a medieval friar named William of Ockham. As the story goes (in accounts such as the one found in Rod Dreher’s The Benedict Option), Ockham’s nominalism destroyed the simple belief (realism) of the ancients that there are knowable, objective, universal essences which can be understood through reason and communicated in language. For Ockham-haters, this fundamental error has led to every social phenomenon conservatives object to, running the spectrum from modern art to gender-reassignment surgery. While my description here is a reductive (and likely only partially accurate) summary, the general point is that almost everyone who isn’t a Platonist or a Thomist is convinced that the relationship between sign and signifier in language and thought is fully arbitrary (and therefore a product of will rather than reason.) Seen in this way, “nominalism” has largely won the day.

    Nowhere is this victory more evident than in the explosion of the non-fungible token (NFT) market. NFTs are unique, digitally encoded certificates of original ownership for digital assets such as photographs that cannot be legally replicated (hence “non-fungible.”). In the offline world of art collection, much of the value of owning an original Monet painting (as opposed to a facsimile) is that I alone have the original painting. In the online context, where there is no such organic scarcity, NFTs seek to create scarcity for market purposes. No longer is possession of the artwork itself what is of monetary value. Instead the value is in the token, which is only a snippet of encrypted code merely representing original ownership. The artwork, on the other hand, now functions as some kind of postmodern trace, a graven image no longer performing any of the three basic functions of money that economists describe; neither being a store of value, a unit of account, nor a medium of exchange.

    In April, the now-college-aged young woman depicted in an iconic photograph known as “Disaster Girl” sold an NFT of the original copy of the meme via cryptocurrency in a sale valued at almost $500,000. Now, I’m happy enough that the disaster girl herself has a new windfall with which to avoid the scourge of student debt (would that we all were so fortunate). But the very existence of NFTs is objectionable to me. For if, as Plato taught, art is a shadow of a shadow [our perceptions] of reality, then NFTs are a shadow thrice removed. Worse yet, these shadows can have very real negative consequences in global financial markets and economies, for at least three distinct reasons.

    NFTs enable money laundering

    The NFT market is an ideal mechanism for global money laundering. Art in general is prime for laundering (including by terrorists and foreign oligarchs dodging US sanctions) in large part because the price valuations are more subjective, (with fair market value harder to pinpoint for more abstract pieces, *cough, nominalism*) so it’s harder to detect price manipulations. When you combine that with the level of anonymity provided by cryptocurrency, you end up with the perfect recipe for laundering.

    Inasmuch as this laundering is used to clean money unreported in tax earnings, this deprives governments of tax revenue. Beyond that, extensive laundering that floods financial institutions like banks with money can undermine the internal coherence of financial markets and create economic distortions that affect interest rates, which can then reverberate in the real economy in the form of shrinking companies laying off workers.

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    Photograph by Tyler Easton (edited)

    In addition, there’s also the more obvious problem that since laundering is basically a necessity for international crime syndicates, crime (and all the damages that entails) can thus be viewed as a negative externality of this particular market. This is an externality paid for twice by each nation’s taxpayers, first in the costs to society that crimes create (e.g., the health costs associated with drug usage) and then in the subsequent costs of increased law enforcement in response to that crime.

    Worse yet, the problem of global money laundering tends to hurt developing nations the most, because they already have less tax revenue to fund government services even before this lost revenue, because they often have greater levels of government corruption in the first place (generally due to the very wealthy who are evading taxes), and because they have less ability to enforce tax law than nations like America which are themselves underwater on this issue.

    NFTs divert spending away from more productive uses

    Even when NFT transactions are fully above-board, there can still be negative indirect consequences, based on the opportunity costs of what that money could be going towards. When a wealthy person buys a new sports car, that money reverberates throughout the global economy: more demand means more car parts supplied and more cars assembled and sold, with jobs dispersed throughout every point of the supply chain. The economy benefits again when the sales tax generates tax revenue, which can be spent later on public goods.

    In contrast, the sale of NFTs does not lead to tangible (shall we say “real”?) economic expansion, when measured in terms of growth in outputs, rather than number of financial transactions. It’s hard to argue, for example, that firms are hiring workers based on increased demand for original ownership of Internet memes. And again, unlike the sports car sale, there are currently almost no tax benefits for NFTs, given the challenges with enforcement. Thus, purchasing NFTs can be seen as a form of hoarding wealth, and keeping that wealth disconnected from the kind of money flows which can tangibly improve the lives of others.

    NFTs hurt financial markets and the environment

    Third, the cryptocurrency typically used in NFT transactions is itself problematic. Take everything you hate about the speculation and hidden risk that led to the financial crash in 2008 and then amplify it. Given its disconnection from any fiat system of finance (where monetary value is tied to governmental decree) combined with the inherent speculative nature of investment in bitcoin and other forms, cryptocurrency has the potential to embed even greater risk in financial markets, while obscuring that risk in more systemic ways. Those are exactly the kinds of conditions which could lead to another financial crash that reverberates first through the “nominal” economy (numbers on a spreadsheet showing stock prices) and then the “real” one (your employer going out of business).

    As if all of this were not bad enough, cryptocurrency also consumes an astronomical amount of electricity and contributes drastically to greenhouse gas emissions. So even if it doesn’t trigger financial crises, it is still actively destroying the world.

    My critique of NFTs – and by extension many other expressions of finance-based capital – is double-sided like a coin. On one side, the critique is that nominal capital actively causes direct and indirect harm and exploitation, and on the reverse side, that it precludes the more productive uses for that same money. While NFTs are a particularly egregious example, once you start employing this logic of productive versus nonproductive financial capital, it becomes easier to critique a fuller range of financial practices by individuals, businesses, and even entire nations.

    In light of all the above, you might suppose that I am opposed to nominalism in all its forms (the Platonists will forgive me for that joke, I hope.) But that is not the case. I just think that our finance-driven market needs to be properly subordinated to broader economic goods and goals. Allow me to explain.

    So is there any justification for nominalism?

    To begin with, note that the dollar bill in a system of fiat currency (“render unto Caesar”) already functions as a rather arbitrary signifier of value. Fiat currency has value because the government says it does; it is not tethered to some tangible good as a guarantee of value, as was the case in the era of the gold standard, wherein at any time I could have exchanged a bill for its equivalent in gold. What this means theoretically is that we’re already using a system of finance predicated on nominalism. This is good inasmuch it means we are not in a zero-sum fight over resources, and there is no limit to the amount of new wealth that can be generated from preexisting wealth.

    This framing can help us glean insight from Christ’s allusive Parable of the Talents (Matt. 25:14–30). This text is often used to promote a prosperity gospel that conveniently sanctifies the base desire to accumulate wealth through usury. But a better reading of the text is as a condemnation of slothfulness that precludes benefit to one’s neighbor. This is how St. John Chrysostom invites us to understand the text, asking “do you see how not only the spoiler, and the covetous, nor only the doer of evil things, but also he that does not good things, is punished with extreme punishment?” This interpretation thereby affirms that the parable is indeed about stewarding wealth so that it increases. But that stewardship is for the sake of others, and not ourselves. Thus, Chrysostom admonishes us to “contribute alike wealth, and diligence, and protection, and all things for our neighbor's advantage. … For nothing is so pleasing to God, as to live for the common advantage.”

    My analysis of nominalism assumes that the growth in nominal wealth through wise stewardship is not tightly concentrated in the hands of the wealthy at the expense of the poor, and further that nominalist finance is subordinate to those real goods on which human flourishing depends. And sadly neither of these premises are a given in today’s economy. Instead, we find the inverse: wealth is increasingly concentrated in a smaller number of hands, and that wealth is less tied to the productive economy through tangible investments that grow the economic pie and is instead more tied to secondary financial instruments, especially bundled debt (existing nominally as numbers on a spreadsheet) which merely changes the ratio of who owns existing wealth.

    These two issues go hand in hand. As a recent article published by the University of Chicago Booth School of Business makes clear, as wealth disparities increase alongside economic instability, the poor are forced to borrow, while the rich get richer by investing in that borrowing – in the form of student debt, credit card debt, and the like. This gets us closer to what I posit is the real sin of usury: not simply that wealth is leveraged to create more wealth, but that the foundation for this expansion is the direct exploitation of those forced to borrow in order to make ends meet.

    So what does all this have to do with nominalism? As with the sale of NFTs, most investment in packaged debt is not productive spending because it does not reverberate in the real economy. And as with NFTs, packaged debt is a way for the rich to steward their wealth without reference to or in direct violation of their obligations to the poor. Again, the issue is not the growth in wealth per se, but in the mechanisms enabling that growth and in how that wealth is used. Fundamentally, the financial behavior I’m critiquing with both buying NFTs and investing in debt is no different than the rich man in Christ’s parable who is morally condemned for building bigger storehouses in which to contain his growing wealth, rather than sharing that wealth with his neighbors.


    Finance-based capitalism rooted in nominalism can help to make the world a better place by generating new wealth for the sake of the common good. But when finance-driven growth is disconnected from tangible human needs and made to serve itself, financial markets become an idol whose worship encourages exploitation of the vulnerable.

    The parsing of ethical issues related to money is a seemingly endless task. But in seeking to discern the ethical dimensions of finance, we are driven back to political economy and the questions of purpose that undergird and direct it. And ultimately if we can bring these questions to the foreground, we will have an opportunity to steward our wealth both personally and collectively in a way that is truly right and just.

    Contributed By portrait of Anthony M Barr Anthony M. Barr

    Anthony M. Barr is a senior research assistant at The Brookings Institution. He has an MPP from Pepperdine University and a BA from Eastern University. He has written for a variety of publications including Fare Forward, Strong Towns, and the University Bookman.

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