The Point of Money

Tuesday, December 22nd, 2015

Spandrell reminds us that the point of money is to be a cognitive aid for remembering favors:

I did something for you, if I am not to be a sucker I’ll want to get something back from you eventually. So grab me that shiny shell you use as a wristband, so I can remember. David Graeber made a similar point on his famous book about Debt, which is pretty good if you get the fact that Graeber is a lame communist and adjust your skimming accordingly.

The problem is that this tech we use to remember favors leads us to spent huge amount of valuable labor in manufacturing shell accessories, beads, mining metal and wasting it in making coins. Whole empires were built, entire nations killed and enslaved in the process of looking for mines where perfectly good metal could be extracted to waste in making little coins with the face of a king to distribute so people can remember who made a favor to whom. That’s how it works though.

I am endlessly fascinated by this kind of evolutionary process where everybody runs around doing completely pointless stuff which nobody benefits from.


  1. Graham says:

    Is that really true or pointless, though?

    Having a currency of fixed value [in the sense that everyone recognizes it as having the same value at any point in time] allows for a much larger network than any other barter or favour system, eliminates arbitrary comparison of the comparative value of any two given favours. Indeed, by attaching cash value to goods and services it eliminates the need for recording a transaction as though it were a favour to which return is owed.

    If an agreed sum is handed over in return for goods and services, then no favour has been done by either party and no debt created that has not been paid already. One might argue that ‘debt’ takes the idea of money back in the direction of a favour system, but even then there is agreed value attached to the goods or services provided, and payment has begun even if it has been turned into a process rather than a single payment.

    It would certainly have been better to have reached the level at which money was just data in a ledger, or at least printed paper, rather than go through all the rigmarole with precious metals. But we had to start somewhere, and we didn’t have the technology, social and political stability, and social trust levels to go so far. Everybody believed gold and silver had value and didn’t believe paper money did, and we didn’t have the tools to make the ledgers universal, so what to do? Coins it was.

    I am open to seeing how the next generation barter/favour/sharing economies really can be scaled up and or spread around, but I am reminded of Star Trek writers forever having their characters say their society had no money. And then sooner or later alluding to credits in some database somewhere. Money.

  2. David Foster says:

    “Data in a ledger, or at least printed paper”

    Yet (oddly enough!) in our age when money largely is data in a ledger (and almost all the rest is printed paper), the amount of human effort involved in the financial system is probably close to that that supported the metal-based systems…

  3. Graham says:

    Well, there’s a reasonable chance I’m misunderstanding what was meant by effort in the original piece. I’m mainly getting at the idea that, once you move from metal money to paper to data, you’ve reduced the enormous amount of manual labour involved in mining and processing precious metals, minting coins [other than as a sideline- we could now eliminate them all if we wanted to], storing and transporting coins, etc. But you have to have gone through the centuries of social and technological development that make all that technically possible and create the relatively high trust society in which physical cash is marginal.

    That eliminates quite a lot of large-scale manual, machinery, industrial and logistical work or, at least diverts the mining and other related industries into other uses for some of the metal. While the precious metal fetish survives we have not eliminated it, but we certainly don’t make metal money now to the scale our economy would demand if it were actually based on it.

    There’s a case to be made that as many people now are involved in the financial sector as ever were, but the material effort, damage to the environment, physical resources consumed are at least much less.

    Similarly, as to the point of it all. Presumably the point of it all was to get rich, as it ever was. Some will succeed, some won’t.

    The only way I can see us actually getting away from that point would not be a sharing/barter/favour economy, which would just be an inefficient way of moving effort around and keeping account of it, but rather an economy of such abundance that any desirable possession can be had instantly for nothing, anywhere. One with free replicators handed out at birth or maturity by the state to every citizen perhaps, and with no necessary secondary market in repair or upgrades.

    Money, in whatever form, just seems to me infinitely more portable and fungible, and as a unit of account far easier to keep track of, even with modern data technology, than any system of accounting that tries to keep accurate track of trading of ‘favours’ of inconsistent value.

  4. Coyote says:

    Money today is debt. It says so right on it: note, a promise to repay the Federal Reserve, which loaned it into existence. The paper chits we exchange with one another soon find their way back into the hands of the usurers, and someone somewhere is left without enough chits to pay them back — because of usury. The American founders made it plain they knew all about paper fiat when they specifically ordained physical metal as the only money to be issued. All paper (or electronic) fiat eventually fails when governments cannot stop issuing more debt to pay for their wars. Folding paper cash still allows a degree of unmonitored transactions: thus the taxman’s interest in doing away with it.

Leave a Reply