View source for Thread:Talk:Money/What is good about money?/reply (9)

It doesn't matter what you did to get the money; if you have a lot of it, you can make things happen.

(There's a small amount of accountability around what you do with it, but enough money makes it possible to hide from that as well.)

...and let's not forget that it's often easier to use money to make bad things happen than to make good things happen.

In fact, you tend to get more of it when you use it for bad things.

Remind me why this is a good system, again?

(originally posted here and here on 2020-06-12)

Steve Foerster wrote:

Because when people have tried out systems without the ability to acquire money, there's still unaccountable power, but also mass poverty, starvation, and death.

Morbius wrote:

And those don't exist in money-based societies?

Wikipedia: Great Famine (Ireland)

Morbius wrote:

So, going back to your initial premise: "Money is a form of unaccountable power", and considering it in light of what I've outlined [in this discussion]:

1. Are my contributions / definitions relevant?

2. Is a form of commonly-agreed-on exchange medium itself inherently a form of unaccountable power?

3. What would accountability in a monetary system look like? (Ignoring the obvious: that money is an accounting system, or at least, a major component of one.)

I'm ... generally ... of the view that the complaints you have actually focus far less on money than they do on accountability, and that you might want to put some thought into what the elements of an accountable system of power might be.

Components which might be included being:

• Economic externalities.
• Legal constructs -- rights and obligations.
• Equitable distribution.
• Addressing and redressing of grievances.

Morbius has posed these questions:

• What good things does money make possible?
• What becomes exceeding difficult without it?
• Why are there no large, complex, highly-capable nonmonetary societies?

(On that last: you might well argue that LCHC societies are not a Good Thing. But you still have to contend with the absence of any nonmonetary examples.)

Branch: What good things does money make possible?

There are lots of ways to take that question... mainly combinations of the following attributes, I think:

(1) - (a) things that wouldn't work without money, or (b) things that money makes easier but which might be done other ways?

(2) - (a) specific projects, or (b) general areas of social good?

My answers for each possible combination:

1a2a: really can't think of anything, suspect there isn't anything

1b2a: I can only think of classes of project -- basically any project where one person grasps the value of something, would find it very difficult to persuade anyone else of its value, and has the necessary money to pursue it themself.

1a2b: I'll concede that there might be some things in this category, but have not been able to think of anything.

1b2b: initiatives along the general lines of "block grants", where such projects actually do provide benefit; research grants, possibly? I could probably list more, but I'm skeptical that money (at least in its present form) actually makes these things easier than possible alternatives.

re 1(a)(b), Morbius writes (private):

It's less that there are things which cannot work without money, but that there are exchanges which are vastly more facilitated by a money-based exchange. It's an efficiency argument. There's also the fact that money gives a uniform pricing (exchange) basis.

Examples:

• Trading of disparate goods. Apples for oranges. Bread for labour. Rent for fine art. Interest for capital. Taxes for public goods. This presupposes and enters into a few other elements. Common pricing supposes markets (multiple buyers and/or sellers), and there seem to be a number of different types of exchanges: goods or commodities, labour, rents, assets, interest, taxes, public goods. Smith's discussion of prices covers many of these, and there seems to me an underlying logic supporting much of his classification.
• Multi-party exchanges. Much trade isn't end-user consumption but intermediate exchange. A sourcer (farmer, miner, forester, fisher, etc) acquires raw materials, sells them to an intermediate trader or transporter (there's a whole literature of "jobbers" in 19th century business here), transport shippers (teamsters, ship captains), manufacturers, wholesalers, and retailers. We tend to see the retail trade but ignore much the rest. Labour is also generally not sold to end-use consumers but to intermediate service or transport interests.
• Money itself is highly fungible and exchangable. I'd argue, much as I do with Weber's definition of argument, that money is simply the most exchangable good, that is, the good which is in highest common demand by all. Which means that whatever good has that property is by definition money.

(By extension, money need not be some government-issued or sanctified commodity, though it of course very often is. It is always, at least within the exchange community, the currency of social convention.)

re 1b2a, Morbius writes (private):

where one person grasps the value of something, would find it very difficult to persuade anyone else of its value

Money itself does not establish value, or in the terminology of economists, does not engage in price discovery. Rather, it serves as a common unit of value once that price is established, usually through market operations.

(I'm leaving entirely untouched the question of whether or not markets are effective, efficient, or accurate in price discovery, though there's a large literature on market failures which touches on this, among others.)

(I'm linking Investopedia not so much as an endorsement or agreement, but because it does reasonably represent the orthodox agreement and definition of terms.)

Basically, 1b2a is not an inherent function of money, but of markets, or other forms of price discovery / value discovery.

Branch: What becomes exceeding difficult without it?

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?

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.

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.

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

https://archive.org/stream/moneyandmechani01jevogoog#page/n55/mode/2up

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.

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.

Branch: Why are there no large, complex, highly-capable nonmonetary societies?

Because money aids with the centralization of power, which has enabled money-using societies to dominate non-money-using societies.