What is good about money?

Fragment of a discussion from Talk:Money
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Edited by author.
Last edit: 23:54, 18 July 2020
Branch: What becomes exceeding difficult without it?
Woozle (talk)23:46, 18 July 2020

Do you mean without actual money, either cash or in an externally-recognized bank account, or do you mean "what if we didn't have any way of assigning quantitative value to anything we might wish to trade", even as a system of IOUs or a general resource-usage heuristic?

Woozle (talk)23:50, 18 July 2020

Morbius writes (private):

That's conflating numerous elements, and there may be others. I'm just going to riff on my response.

  • "Without actual money" -- keep in mind that there's some vagueness about what "actual money" is. There are coins and banknotes, there are accounts and balances (strictly notional, without any physical embodiment), there are credit systems (a risk-scoped extension of accounts/balances), there are IOUs and contracts (which add concepts of legal obligations beyond just the value aspect of an exchange). "Money" is potentially a lot of things.

To narrow the scope of my question: a tokenized medium of exchange with a value that's reasonable stable or predictable in at least the medium term, and widely interchangable and acceptable / accepted.

Woozle (talk)00:14, 19 July 2020

Morbius continues (private):

Flipping this around, what happens if you start removing properties of money from the notion of exchange:

  • Remove the concept of a commonly-defined value (market value) of goods or services. What's the basis of exchange? How does efficiency of commerce -- the time to transact a given exchange -- respond? Note that fixed "price tag" retail was an invention of 19th century New York department stores which offered "no-haggle" sales, for efficiency, effectively. I'll note that this is a market and not a strictly monetary function, but it's one you've highlighted above.
  • Remove the concept of a universally (or widely) accepted medium. Now any transaction must begin with (or include) a step in which the medium of exchange must be agreed upon. Including its notional value.
  • Remove the notion of fungibility. If given coin or banknote is not equal in value to any other, then each token must be individually (or collectively) assessed.
  • Remove the notion of money as having any commonly-agreed-on or stable-in-time value. Now any exchange must include an assessment of "what is this worth to me vs. you", or "what will this be worth next week/month/year", especially for recurring services.
Woozle (talk)00:15, 19 July 2020

Morbius continues (private):

Calling on Wm. Stanley Jevons's properties of money:

  1. Inherent utility and value (an error IMO)
  2. Portability
  3. Indestructibility
  4. Homogeneity (addressed above)
  5. Divisibility
  6. Stability of value (addressed above)
  7. Cognizability


Jevons sees money as requiring an inherent value or utility. He was used to thinking of coin and bullion, though banknotes were starting to be widely established. My view is that this is actually a manifestation of trust in the exchange medium. Underlying value helps create a trust-value floor, though institutional trust (as in the Federal Reserve or European Central Bank) can do likewise. A false lead, but still a useful one.

Portability means that you can carry (or exchange) money with yourself or between others. Non-portable assets, say, real estate or your own inalienable characteristics (those which cannot be separated from you), are either fixed in place or cannot be transferred to another. Money most be at least notionally transferable, and often physically transferable. Conveniently if at all possible.

Indestructibility means that money is durable. Roses or morning dew make a poor choice of currency -- they decay or vanish too quickly. You want something that will endure.

Homogeneity is the property of all units having equivalent worth. Fine art or wines have value but that varies greatly from item to item. Grains of wheat, heads of cattle, or 1€ coins all have equal value (at least within a given grading regime).

Divisibility means that you can divide (or aggregate) units conveniently without affecting the overall value. Half a cow is less valuable than a whole one, half a teapot is less valuable than a whole one. See Solomon and the child....

Stability of value means that prices remain reasonably constant (in aggregate, relative to currency) over time.

Cognizability means that money is inherently recognizable and provable as money. You don't have to go through some complex set of tests or trials to determine worth, type, etc. Numerous digital currency proposals fail markedly under this requirement.

Woozle (talk)00:19, 19 July 2020

Morbius continues (private):

Of Jevons's list, my the principle changes I'd make are:

1. "Utility" is really a proxy for trust, and the greater the trust in the institution of money, the lower the requirement for utility of monetary tokens (coins, banknotes, credit systems, etc.) themselves.
2. The combination of other factors result in the universality of acceptance of money. And again, whatever is most universally acceptable is extraordinarily likely to be found serving as money. Cigarettes, cattle hides, beaver pelts, tobacco leaves, grain, etc.
3. Some sort of social or legal endorsement of exchange is strongly likely. Money need not be government-issued or backed, but within a region with a functional, effective, and trusted government, whatever does have official backing is likely to be most widely accepted and used in trade.
4. There's almost always some form of contract law surrounding exchange. This may be formal or informal, legislative or common law (that is, based on court precedent). But it regularises the obligations and rights in exchange and payment. Again, if you have functional institutions, the all the more so.
Woozle (talk)00:23, 19 July 2020