—“Money is the root of all evils.”
—“Money makes the world go ’round.”
—Money: What is it? Why is it so important? Why is it so bad?
—We might be tempted to think of money as the fuel or the blood in our economy. We would be dead wrong, though. Money is symbolic, but there is nothing symbolic about the energy released by the combustion of jet fuel. There is nothing symbolic about the function of distributing oxygen and other nutrients that blood performs for the body. In our economy, people are the blood. Trucks and trains and airplanes are the blood. The fuel is food, potatoes, wheat, Doritos, and chocolate cupcakes and caramel macchiatos. Jet fuel is also where we get the energy to run the economy and so is plutonium and coal. The “nutrients” are varied, but money does not really fall into this classification.
—A better analogy would be to look at money as the hormones of our economy, but truthfully, the analogy is a failure. Our bodies and automobiles are not symbolic systems. Even the economy is not purely symbolic, not even mostly symbolic. In fact, money itself isn’t entirely symbolic. Paper money and coins have physical, literal value, but we tend to disregard this in most circumstances, these days.
—From an economics standpoint, money symbolizes value. A dollar is a unit of worth, of value, of cost, of owingness, and ultimately, of mutability. A penny, a yuan, a bitcoin are all units of change, of difference. A house that costs $100,000 is different from a $150,000 house by 50,000 units. An apple that costs 50¢ is 25 units different from an apple that costs 75¢. Two pairs of shoes that cost 2000 yuan are of equal value; they are “the same” and can be exchanged without any need to “make up the difference”.
—Money is a device to relate the worth of two things, two things which may at first seem otherwise unrelated. However, any two things that have a monetary value, that are related by monetary worth, must have a more fundamental economic relation. They have two relationships, actually. The first is effort, human effort required to produce them. The second is human want. Unfortunately, a dollar cannot symbolize both at the same time. Sometimes the seller gets the price they want. Sometimes, the buyer does. Sometimes there is overlap and compromise, elasticity. Sometimes not, and wants go unfulfilled because prices are too high or effort goes unrewarded because prices are too low.
—Another fundamental flaw in our implementation of “money” is that it doesn’t not account for the continually changing relationship between different things. one day an apple might be worth an orange. The next day, or the next month, or just one customer later and that relationship might be significantly different.
—A third issue with our money is that it often becomes uncoupled from the things it is intended to track/symbolize. This can be divided into two parts. There is money, but no value behind it. There is value with no money to symbolize it. Each of these can further be dissected to illuminate a lot of the inefficiency in our economic system. There is money that does not represent any human effort. There is money that does not represent any human want. There is human effort that does not result in the instantiation or exchange of money. There is human want that doesn’t result in the instantiation or exchange of money.
—A final problem might be that money is never destroyed. An apple will rot. A car will break down. Even a pair of shoes can go out of fashion or be eaten by insects or mold. But, a dollar is always a dollar. It isn’t so much that the dollar doesn’t have a mechanism to gain or lose buying power systematically. It is that the system cannot uncreate a dollar that has been created. When a coin or paper bill is damaged, it is taken out of circulation, but that is not a response to the loss of value of the decoupling of value from its symbol. If I have a foot of rope and cut off an inch, I don’t just lose rope. I lose an inch. If “the economy” loses a dollar (or a trillion dollars) in value, it doesn’t lose any dollars.