Money as a process, not a thing

Nigel Dodd’s [amazon_link id=”0691141428″ target=”_blank” ]The Social Life of Money[/amazon_link] is fascinating. I’ve never understood money and don’t think I do yet. One of the signs of its abstraction as a concept is the way people bring their own interpretations to it, perfectly plausibly.

[amazon_image id=”0691141428″ link=”true” target=”_blank” size=”medium” ]The Social Life of Money[/amazon_image]

In my first ever job, in the Treasury in the mid-1980s, I had the task of looking at the properties of different linear combinations of deposits, all corresponding to different definitions of money – not that I over-thought it at the time. Economics textbooks over the years have blithely carried a completely fictional, institution-free account of the money multiplier, and give us probably the least plausible explanation, typically – and unhistorically – claiming money emerged from barter trade.

Information scientist Jaron Lanier’s book [amazon_link id=”0241957214″ target=”_blank” ]Who Owns The Future[/amazon_link], which I’m currently reading, says, “Money is simply another information system.” Digital identity and currency guru Dave Birch tells us [amazon_link id=”1907994122″ target=”_blank” ]Identity is the New Money[/amazon_link]. This echoes Keith Hart in his classic [amazon_link id=”1861972083″ target=”_blank” ]The Memory Bank[/amazon_link]: “The two great memory banks are language and money. Exchange of meanings through language and of objects through money are now converging in a single network of communication, the internet.” Another anthropologist David Graeber in his tome [amazon_link id=”1612191290″ target=”_blank” ]Debt: The First 5000 Years[/amazon_link] rooted money in group cultures. Nigel Dodd is a sociologist so he gives us the sociological perspective.

[amazon_image id=”1861972083″ link=”true” target=”_blank” size=”medium” ]The Memory Bank: Money in an Unequal World[/amazon_image]  [amazon_image id=”1612191290″ link=”true” target=”_blank” size=”medium” ]Debt: The First 5,000 Years[/amazon_image]  [amazon_image id=”1907994122″ link=”true” target=”_blank” size=”medium” ]Identity Is the New Money (Perspectives)[/amazon_image]  [amazon_image id=”0241957214″ link=”true” target=”_blank” size=”medium” ]Who Owns The Future?[/amazon_image]

Dodd’s book starts by looking at the various origin myths and links each to current (sociological) monetary theories. It then takes money by theme: capital, debt, guilt, waste, territory, culture and utopia. The chapter covering the terrain most familiar to economists is that on debt, but it takes an entirely different perspective, with Keynes and Minsky the principal economists named here. The chapter’s conclusion gives its flavour: “A monetary system that i defined by an over-arching orientation toward the interest of creditors is inimical to democracy. …. Democracy, or society, now appears to be in open conflict with the needs of finance. Debt is no longer facilitating capitalism, it is driving it.”

In a way, I found this book very heavy going because it is written in the language of sociology, and with lots of references unfamiliar to me. But it’s good for any of us to look through the lens of a different discipline. I find Dodd’s conclusion persuasive – that money is not a thing but a social process. This tallies with Dave Birch’s argument that the combination of ubiquitous mobiles and their record of a dense social graph means digital identity is fast becoming the latest manifestation of money.

Dodd also presents the paradox that money is both outside the realm of values it describes, as the means of measurement, and inside it as a particular commodity with a value – he quotes [amazon_link id=”0415610117″ target=”_blank” ]Georg Simmel[/amazon_link] as saying money is both the measure and measured. And he links this self-referential character to the capacity for financial bubbles and crises to inflate themselves. True value lies in the social life of money, in the activities of human societies.

[amazon_image id=”B0092JLXJW” link=”true” target=”_blank” size=”medium” ]ThePhilosophy of Money by Simmel, Georg ( Author ) ON Apr-01-2011, Paperback[/amazon_image]

What this means for monetary policy is another matter entirely, and Nigel Dodd’s forays into economics are far less persuasive – not that there seems to be a more compelling approach to money on offer from the macroeconomists either at the moment. Sticking a bit of ‘institutional’ friction into DSGE models to represent the banking and shadow banking sectors can only be a sticking plaster until monetary economists start to take seriously the insights to be drawn from sociologists and others.

Virtual serendipity

Serendipitously, the day after writing about [amazon_link id=”0262027259″ target=”_blank” ]Virtual Economies[/amazon_link] by Vili Lehdonvirta and Edward Castronova, another new book by Edward Castronova arrived in the post, [amazon_link id=”B00KMUWRXG” target=”_blank” ]Wildcat Currency: How the Virtual Money Revolution is Transforming the Economy[/amazon_link]. It’s about the convergence of the ‘real’ and the virtual in the domain of money, although of course as money is already largely virtual, this is more about the crowding out of the previously public domain of money by private currencies: “Today anybody can be a central bank.” On a quick glance through, [amazon_link id=”B00KMUWRXG” target=”_blank” ]Wildcat Currency[/amazon_link] looks like an accessible overview of the territory.

[amazon_image id=”B00KMUWRXG” link=”true” target=”_blank” size=”medium” ]Wildcat Currency[/amazon_image]

This is a hot subject of course. In which context , it would be remiss of me not to highlight another excellent recent book about the future of money, Dave Birch’s [amazon_link id=”1907994122″ target=”_blank” ]Identity is the New Money[/amazon_link].

[amazon_image id=”1907994122″ link=”true” target=”_blank” size=”medium” ]Identity is the New Money (Perspectives)[/amazon_image]

Technology, identity and money

It would be bad form to review Dave Birch’s excellent new book [amazon_link id=”1907994122″ target=”_blank” ]Identity is the New Money[/amazon_link] here, given that I commissioned him to write it. To entice readers, however, here is his argument in a nutshell: “This book argues that not only is identity changing profoundly but that money is changing equally profoundly, because of technological change; and that the two trends are converging so that all we will need for transacting will be our identities.” It’s thought-provoking, informative and entertaining. Anyone interested in any of money, social networks and/or mobiles should read it – after all, there are few experts who know as much as Dave about the overlap between digital technology and money.

[amazon_image id=”1907994122″ link=”true” target=”_blank” size=”medium” ]Identity is the New Money (Perspectives)[/amazon_image]

Trail over, I was interested to read this article by Paul Laity about Penguin’s revival of the Pelican imprint, its series of accessible, reasonably short non-fiction books on a wide range of subjects of contemporary interest. Sound familiar? Our Perspectives series got there a year ago, albeit sadly without Penguin’s marketing budget. Still, I agree with their sense that the ‘thirsty public’ is back – even though non-fiction book sales have apparently been declining. Surely [amazon_link id=”067443000X” target=”_blank” ]the Piketty phenomenon[/amazon_link], if nothing else, will reverse that in 2014’s figures?

One of the first Pelican titles will be Ha Joon Chang’s [amazon_link id=”0718197038″ target=”_blank” ]Economics: A User’s Guide[/amazon_link]. I found the style of his [amazon_link id=”0141047976″ target=”_blank” ]23 Things They Don’t Tell You About Capitalism[/amazon_link] irritating but it was nevertheless well worth reading. I’m sure the new one will be equally valuable.

[amazon_image id=”0718197038″ link=”true” target=”_blank” size=”medium” ]Economics: The User’s Guide: A Pelican Introduction (Pelican Books)[/amazon_image]

Money and me – and you

It’s an exciting moment – the advance copies of Dave Birch’s book, [amazon_link id=”1907994122″ target=”_blank” ]Identity is the New Money[/amazon_link], have arrived here at Enlightenment Economics Towers.

OK, as series editor, I’m biased, but this is an exciting book. Dave’s one-man expertise on the technological issues involved in both identity security and digital money have converged in an absolutely illuminating and highly entertaining read. He argues that there is no trade-off between our financial/data security and our privacy; the marriage of mobiles and social networks means we can have both. As the infrastructure is put in place, cash use will evaporate – and a good thing too, in his view.

[amazon_link id=”1907994122″ target=”_blank” ]It’s available for pre-order on Amazon[/amazon_link] and will be shipping soon!

Shopping your way to the good life?

In Bristol at the end of last week for the Festival of Economics (#economicsfest), I picked up a little book in the Arnolfini bookshop for some light reading. It’s John Armstrong’s [amazon_link id=”1447202295″ target=”_blank” ]How to Worry Less About Money[/amazon_link] from The School of Life. It filled a train journey back from Cambridge yesterday evening (after my talk to the Cambridge Society for Economic Pluralism).

[amazon_image id=”1447202295″ link=”true” target=”_blank” size=”medium” ]How to Worry Less About Money: The School of Life[/amazon_image]

It’s a self-help book and is actually full of perfectly sensible advice – for people who are not poor but not rich either. If you’re genuinely worrying about not having enough for housing, food and heat, there is not much anybody can say to help you worry less. However, for the rest of us, I think this book offers a useful reminder (a) that money carries all kinds of emotional baggage and (b) that what you do with money matters as much as having it. As I have enough money these days, I’m not very interested in personal finance, but some of the observations in the book struck a chord nevertheless. When I have some moments of respite from a whirlwind of activity at the end of this week, I might even try some of the exercises, before plunging into Christmas shopping.

However, I did look at The School of Life website in writing this, and note that it appears to be a shopping site. The Utopia candles looked particularly appealing.

Hmmm. I’m a fan of enterprise and profit-making, but what’s your relationship with money if you want to acquire £35 candles named after literary idylls ([amazon_link id=”0486284956″ target=”_blank” ]Walden[/amazon_link], [amazon_link id=”0140455116″ target=”_blank” ]The Republic[/amazon_link], [amazon_link id=”0141442328″ target=”_blank” ]Utopia[/amazon_link]).

[amazon_image id=”0141442328″ link=”true” target=”_blank” size=”medium” ]Utopia (Penguin Classics)[/amazon_image]