Tuesday, 14 March 2017

What is money?

I don't think people really understand money, or a lot of them don't. They think it is both a true measure of value and that it has some intrinsic worth (both things can't be true, which is the first problem. A measure of value isn't value in itself)

But the more important thing is that money is a medium of exchange. It is not a true measure of value, and it does not have intrinsic value (it used to have intrinsic value when it was gold and silver, which are - no matter how rational or irrational the reasons - prized in their own right. But it isn't gold and silver any more).

So let's imagine you and I are farmers. We both grow enough fruit and vegetables to live on (we're vegetarian farmers! Yay!) and we grow other plants for fuel, clothes, medicine, etc - plus we have mud, rocks and stones for building and so on. But gradually, my apples flourish, while your potatoes have bumper crops. So we start trading, four apples for five potatoes (seems fair - apples are yummy, but potatoes need cooking)

But one day, I have to be away when you come to trade. So I write you a note, saying I'll give you the apples when I get back, so please just leave the potatoes and come over later so I can give you the apples.

So it goes on for a while, but gradually it gets more complicated - people start trading promises. So they decide they don't actually want apples right now, but they know the farmer across the hill does, and she actually has carrots, which they want. So rather than swapping the potatoes for the apples, and then going over the hill to swap the apples for carrots, they start using the notes instead. That's money. (Of course that's not the whole story because I left out all the gold and silver stuff, but it's the short version)

But all this time, they've still been eating most of the stuff they grew, and using the other stuff, and so on. It wasn't any less valuable just because they didn't pay money for it. So how did we end up in the situation where people believe that money is the measure of value and also has intrinsic value?

Well, long story, but - women tended to stay closer to home and do the local subsistence (and some small trading stuff), men tended to go out and do the big trading stuff. Also slaves stayed home, similarly. So we ended up believing that only the big trading stuff mattered, because patriarchy.

...

I'll publish this and then look at it again later and see if it still makes sense. It was inspired immediately by comments on the Guardian article today by Greg Jericho on 'stay at home' mothers and the OECD, and longer term by the ideas I've been working on in my thesis.

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