Unfortunately, we know what money is the same way the fabled Blind Men of Hindustan know what an elephant is: the one who grabbed the trunk knows it is “like a tree”...
Wait a minute! I thought the leg was like a tree...
In What Is Money And How Is It Created?, Steve Keen writes:
... they haven’t worked out what money really is. Only one person ever really ever did—and no, it wasn’t Ayn Rand. It was Augusto Graziani, an Italian Professor of Economics, who died early last year. He understood what money is because he posed and correctly answered a simple question: how does a monetary economy differ from one in which trade occurs by barter?
This ruled out gold being money, since gold is a commodity that anyone can produce for themselves with a bit of mining (and a lot of luck). So even though gold is really special and incredibly rare, it is in the end, a commodity: an economy using gold for trade is really a barter economy, not a monetary one.
This ruled out gold being money, since gold is a commodity that anyone can produce for themselves with a bit of mining (and a lot of luck). So even though gold is really special and incredibly rare, it is in the end, a commodity: an economy using gold for trade is really a barter economy, not a monetary one.
First time I read that, I thought it was great: If we're trading gold for other things, it's a barter economy. But I changed my mind. The notion that gold is the same as money is an oversimplification, a gross oversimplification. One could as well argue that if we're trading green paper for other things it's a barter economy. Or for that matter, if we're trading electronic ones and zeroes for other things, it's a barter economy. It's an oversimplification that ignores the concept of value.
Money captures value.
11 comments:
Alright, now Im going to be a real pedant.
I would say money doesn't capture value it denotes "price"....... which we then say has A relationship to value, but I don't know anyone who thinks price and value are equivalent.
I do think we all are concerned with value and since we don't know any other way other than price to really inform us we acquiesce to using price as a fair proxy for value in many circumstances.
To take this one step further, I'd say that our word value and what we call "values" are related but only loosely. Values are more in the moral sphere while value is in the business/money/econ sphere but one cant help but have overlap.
> I don't know anyone who thinks price and value are equivalent.
In the context that comes to mind, I think "price" is an expression of supply, and "value" is an expression of demand. And transactions occur exactly when "price and value are equivalent."
It's the same supply-and-demand people show on graphs, except yours is in words. And you reject it.
I might reject it too, I don't know. Or, it doesn't work when the economy gets as screwed up as our economy is.
Thats an interesting take. And I think it has some merit so I don't reject it completely
I would add though that in many of the most important transactions that are made, those that end up consuming the bulk of most peoples income, there is really only one side expressing and the other side having to accept.
I think one reason it might stop working is when there is too much credit use. The third party credit assessor/extender ends up adding cost to many transactions which moves the supply demand curves and slows sales.
The key distinction here is that the green piece of paper is not a dollar. The "dollar" as a financial asset is a legal construct, an abstraction recorded on that piece of paper.
The concept of "dollar" at the abstract level remains the same regardless of whether it is recorded in a ledger book, printed on green paper, stamped on a metal disc, 1s and 0s in a digital ledger, or in a possible future implemented as an encrypted/trusted/negotiable digital package (ie: bitcoin as green paper).
So we don't actually trade green pieces of paper for things, the paper is simply the medium upon which the financial asset is recorded. The extent to which that abstraction captures value derives from the authority of the issuer.
Following from this, gold isn't money and neither is paper. The money is the promise recorded, everything else is the "paper" it's written on.
too abstract, gee. and you are too enamored of things "financial". The concept of "value" should suffice.
sorry
you are too enamored of things "financial" to suit me.
Yes, I'm enamored of things financial when talking about money because "value" is woefully insufficient to distinguish between monetary and non-monetary activity. Money is financial. If it's not financial, it's real and if you're exchanging real for real you're not engaging in a monetary transaction you are engaging in barter.
1. All economic activity is measured as monetary activity. That's why it's economic.
2. Graziani and Keen omit the concept of value.
All economic activity is measured as monetary activity. That's why it's economic.
You lost me there. Not as in disagree, I mean I don't follow your meaning.
> > All economic activity is measured as monetary activity. That's why it's economic.
> You lost me there. Not as in disagree, I mean I don't follow your meaning.
If a thing cannot be measured in dollars (or other media of exchange) then that thing is cultural or political or social maybe, but not economic. If a thing can be measured in dollars (ditto) then it is economic.
Anything that is done *for* money or *with* money is an economic thing.
Where I differ from apparently everyone else on the planet is, they think it's the things that are done (for money or with money) that are important. I think it is the accumulation of monetary balances that levels or tilts the playing field, causing 'the things that are done' to move in a different direction: sometimes toward a dark age, sometimes toward an age of reason.
Happy Easter Art!
"Anything that is done *for* money or *with* money is an economic thing.
Where I differ from apparently everyone else on the planet is, they think it's the things that are done (for money or with money) that are important. I think it is the accumulation of monetary balances that levels or tilts the playing field, causing 'the things that are done' to move in a different direction: sometimes toward a dark age, sometimes toward an age of reason."
More pedant stuff first! Anything done *with* money is done *for* money by at least one side of the transaction. I think that may be an unnecessary distinction.
I agree with you in your second paragraph. It is the monetary imbalances which move things.
Yes the underlying real transactions are what people are after and money is the tool for acquiring but money is certainly more than that. It becomes something to acquire in and of itself and we have invented a myriad of ways to achieve this reproduction, if you will, of money.... all by itself.
Ultimately though, what matters is the real stuff (goods and services) people can produce and consume that makes a difference in peoples lives.
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