What is money?

I was talking recently about the illusory reality of ideas, thoughts, beliefs… basically all non physical things. I was lying in bed this morning and it struck me that paper money is a good example of this idea.

For example, think of a bag filled with hundreds of 20 dollar bills. People would lust for such a bag, in some cases people might kill for it. But in terms of the materials of such a pile of cash, it’s just some paper and ink – not much different from a pile of Jehovah’s Witness pamphlets. Why does money have this perception of value?

Well, obviously that’s a complex question… too complex to really get into here. We humans have agreed on the concept of money and that it can be used to purchase things and people’s efforts. But there’s something a little disquieting about providing a good or service and only getting some pieces of paper in return. Of course, in civilized society we are fairly confident that the value of our paper will be respected by others; we have faith that its value will be enforced by law.

Money is real in a material sense (the paper exists), but the value is unreal – it’s dependent on people agreeing on it. You could call it a cultural construct. To use my example from before, if everyone on earth died, the value of money would disappear.

Art is also a good example. When Picasso painted his first painting at a professional skill level it probably wasn’t worth much—he was an unknown loser (I think; I don’t know much about his history.) But somehow, 60+ years later that same painting is worth millions. Why? The materials (paper and dried paint) certainly didn’t change, they didn’t become any rarer in the world (probably the opposite happened.) What happened is everyone decided that Picasso was a genius and cubist paintings became a desired style etc. That value of paintings is in the ideas, not the material.


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