Sunday, May 19, 2013

The Meaning of Money

[Note: edited “rent” to be “credit/debt contracts, collateral”, 24.05.2013]

I’ve decided to risk outlining the basic thesis of the book I have been working on these last four years or so. When I started writing it, I knew roughly that I wanted to take a systems theory approach to money and money’s effects on society, and knew too I did not know where my research would take me. Years later I feel like there’s something solid and clear to be expressed. The book – which is about two-thirds finished – currently runs at just shy of 100,000 words, so what follows here is the briefest of synopses. However, because I get good critical feedback from my generous readers, and because I believe the basic thesis is now solid enough to be expressed clearly and briefly, I’m testing the water here at Econosophy.
First up, systems theory. I use Fritjof Capra’s definition of a system: “an integrated whole whose essential properties arise from the relationships between its parts” (1997: 27). The key words are “arise” and “relationships”. Systems theory is an attempt to go beyond the causal linear chains of Newtonian physics and the binary dualism of the Cartesian paradigm. Instead of A-->B-->C-->D forever, systems theory sees loops, more exactly positive or negative feedback loops, consisting of relationships between ‘parts’ that form systems which give rise to new properties that cannot be predicted by looking at the ‘parts’ in isolation. A negative feedback loop is ‘good’ as it is self-correcting, a positive feedback loop is ‘bad’ as it self-destructs. So, in systems theory nothing makes sense in isolation in a universe composed exclusively of systems/networks, right down to the sub-atomic level: “An elementary particle is not an independently existing unanalyzable entity. It is, in essence, a set of relationships that reach outward to other things” (Henry Stapp, 1971). Thus there are no discreet things, no objects per se, only networks of relationships. In place of causal linear chains of discreet objects impacting each other like billiard balls on the baize of time, we have in systems theory A-->B-->C-->D-->A, a closed loop that creates a system, an “integrated whole” in which each ‘part’ is itself a system of further relationships, no matter how deeply down we drill. And we cannot really say where the system starts. I could equally well express this loop as C-->D-->A-->B-->C. That said, this does not imply pure randomness. There is progress; there is crawling before walking before running, etc.

Classical and neoclassical economics are Newtonian-Cartesian in their thinking. They posit a fundamental building block, termed homo economicus, hard-wired by nature to maximise profit via “truck and barter” trading in a universe characterised by irresolvable scarcity and “red in tooth and claw” competition. Homo economicus is infinitely greedy, too, so unless we want a Hobbesian “Warre of each against all”, we need things like money and markets to produce civilisation. Homo economicus is intelligent and inventive, so was able to solve the problems of inconvenient barter (the instinct to barter is in his DNA) by inventing money. Barter is mighty awkward. How many eggs for a course in cabinet making? How many pounds of pork for a new roof? Life was hard and primitive, then came money. Since then, albeit with bumps along the way, things have been getting better and better. In short, money makes civilisation possible. No money, no civilisation.

The conventional view is a fiction. The real story is far more complex..
The definitive anthropological work on barter, by Caroline Humphrey, of Cambridge, could not be more definitive in its conclusions: “No example of a barter economy, pure and simple, has ever been described, let alone the emergence from it of money; all available ethnology suggests that there never has been such a thing.” 
(Graeber, 2011: 29)
At root, [findings from ethnology and history] tell us that profit-seeking exchange does not exist [in pre-money societies], that such cannot therefore be a property of the human species. 
(Heinsohn and Steiger, 1996: 40)
Homo economicus is thus simply an unproven assertion, a purported foundational building block required by orthodox economic theory. Without this foundation, the entire structure built atop it crumbles. So, how did money emerge? It’s not easy answering this question, because the past is dead and gone, but it seems the systems money’s emergence requires as pre-conditions are: equivalence as established by numbers and counting, the state, private property and interest (usury). Graeber would add warfare and slavery, and he’s probably right, but for brevity I’m going to keep it simple. In this simple view, a systems theory take on the emergence of a money-based system (or property system, or state system) might be this:

Private property-->state-->usury-->money/markets/price-->private property (where numbers, counting, equivalence, slavery, justice and war/expansion/conquest are in the mix too)

Note that markets arise with money and property, that the fundamental State-Market (Left-Right) antipathy the status quo propagates is thus Kabuki theatre. State and market are joined at the hip, by money and property, are thus part of the same system. We do not have truck and barter (primitive markets) until after human societies have passed through all sorts of stages to arrive at some form of state, in which private property (as distinct from ownership, a critical distinction to do with credit/debt contracts, collateral and interest) has emerged and is used for increasing one’s own wealth and security. Probing into what comes first isn’t as helpful as understanding that these interrelationships are vital to sustaining each ‘part’ of the system. To quote Fransisco Varela, “World and mind arise together.” It’s not that world causes mind or vice verse. They co-create each other. 

There is something about the process of an intelligent animal with opposable thumbs experimenting with fire, planting seeds and taming animals that leads to home and hearth, which leads to tribes, then chieftaincy, which leads to state, property, interest, money and markets. Yes there is a certain progressive linearity to this process, but it is also true that not all human societies develop in this way. However, if there is money, there will be private property if that money is going to be helpful to the functioning of that society. For example, Heinsohn and Steiger (1996) argue, and cite research which clearly shows that state communism failed because it had money and banks, but no private property. An essential ingredient was missing and thus the system fell apart. There are of course other factors in the collapse of state communism, but this deep systemic incongruity was instrumental in that system’s demise.

To repeat, a systems theory look at money and economics, in conjunction with ethnography and history, shows that money is not an invented, discreet thing that possesses value and that makes previously awkward market trading (barter) efficient and profitable. It is an emergent property of societal development on the trajectory of increasing control. This trajectory is what Eisenstein calls Ascent, but that is the topic of other blog posts (and of course Eisenstein’s The Ascent of Humanity). Money’s continuing existence requires the continuing existence of private property, state and usury, and vice versa for each of them with equal weighting. Each ‘element’ sustains and require the others. They co-create each other, where each is a complex system too, with further interdependencies bleeding into and out of them, such as war, fear, scarcity and greed. Property-based societies are also, in my opinion, fear-based societies.

What we do not see is evidence that homo sapiens sapiens has a market-trade gene, so to speak. Pre-state, pre-tribal societies, or hunter-gatherer societies, are characterised by egalitarianism and sharing. This does not mean some hippy, airy-fairy Nirvana; there was fighting, murder, etc. Gorillas and rhinos are not predators, but will smack you up good if you threaten their safety. My point is that humans are not hard-wired for greed and profit maximisation via market trading. There’s no good evidence to support this assertion, and plenty pointing at the opposite conclusion. We adapt to the society we are born into. For most humans today, that means a nation state of one flavour or another, with money and markets and usury running the show, more or less.

In “The Early State” (eds. Claessen and Skalník, 1978), approx. 20 historians examine the birth of the state in various parts of the world to determine which properties are common to them all. Their combined work attempts to define the state, which exhibits many common qualities regardless of the form it takes: monarchic, fascist, democratic, etc. One is that it is necessarily hierarchical or class-based, with an elite ruling a non-elite. Another is that the state is expansive. States seek to expand their territory, probably because they are productive; humans bred into the security offered by future expectations of sufficient amounts of food and shelter (in the absence of women’s rights, education and other factors), and population growth requires more territory. The state is thus ‘wired’ to grow as a direct consequence of this biological tendency and the fact of the state’s hierarchical structure and productive capacity. Because it is hierarchical, it primarily benefits, in terms of distributing the wealth it produces, those at the top of its hierarchy, leading to tension, envy and repression, and thus there is a constant need for an external enemy, for dehumanising some convenient Alien Other as a way of redirecting the violent potential this tension gives rise to. This may seem like a Marxist analysis, but that doesn’t interest me too much, though this aspect is vital when debunking state propaganda. What matters to my thesis is the neat fit of usury, private property, money and state as co-contributors to a growth-based, acquisitional and rapacious system. Recall too that usury/interest is exponential growth by definition. On a finite planet, the state therefore has a sell-by date. We are, in my opinion, living through by that sell-by date today.

In this thesis, then, there can be no money without state, private property and usury. Logic then suggests that when growth has to stop for environmental reasons, state, property, money and interest may have to stop too. 

And there’s the rub. We are the state. The state is made of us; without humans, there can be no state. Our entrained habits of thought mean we can barely imagine anything different to today’s system. Nevertheless,  transitioning from property-based social organisation to resource-based social organisation requires a new paradigm, new thought patterns, new perceptions, new consciousness. And on top of this inexorable pressure towards fundamental change we have technological unemployment, which slowly renders humans less and less relevant in money terms; our labour becomes less and less ‘valuable’ over time. Exacerbating this piece of the puzzle is our stubborn cultural sense of value. Because of money, we have money-based ideas about what is valuable and what is not. Money is, in part, a nothing that happens to commoditise everything, including human work and itself. This inescapable commodity effect has helped induce us to conflate money with wealth. Society today is about making more and more money in the belief that doing so produces the best of all possible worlds. Money ‘decides’ what gets done and what doesn’t, even though society, on the whole, does not even understand what money is.

Money and price are of course inseparable. Prices appear to tell us the values of things, but value is far more complex than a number adjacent to a symbol (e.g. $) can possibly convey. And yet we grow up and live in a system which prices/values our contributions (labour) using money. We believe, typically speaking, that we are as ‘valued’ as our money-worth suggests we are. This unfortunate correlation means that people Just Know e.g., no one would do any work if there were no money offered in exchange, that work must therefore be unpleasant. We seem to viscerally believe that money makes the world go around. It certainly helps make this system go around. Can we imagine a system without money and price? That daunting task is the beginning of surviving the demise of the property-money-state-usury system.

The system we are is in the depths of a fundamental and final breakdown. The deep change required of us by the end of growth is, I suspect, the most profound humanity has ever faced. We must upend and rethink almost everything we think we know, to have a chance of dealing with this new set of circumstances. Let me repeat; we must change the way we think about and perceive reality to survive. That is a very tall order. Sadly, our education systems produce bickering children. Our politicians and other ‘leaders’ are either ignorant or psychopathic or too busy/afraid/locked-in to push for change. We children, we emotionally immature physical grown-ups are tasked with redefining our very way of being. People say Occupy failed. Occupy is the merest beginning of what we have to accomplish as a species, globally, if we are to survive. The Zeitgeist Movement and The Venus Project represent an analysis (and perhaps a plan in the case of the latter) that could offer a basic methodology around which real change can be put in motion. There are other efforts out there pushing for change too, but little agreement among them, and more importantly, little opportunity to work together.

It can be no other way. We’re not ready for this. But then, I was not ready to become a father. How can you be ready for something you’ve never done before, let alone something so new no one even knows how to start? Franz Hörmann’s “information money” is one proposal among many. Strictly speaking, “information money” would not really be money as I have laid out here. I see it more as an idea-crutch to help us transition towards the new. Something like it is needed. Whatever it is we contemplate and propose, my hope is that we properly understand the ramifications of what is afoot. If we underestimate the enormity of the challenge, our chances of success, currently slim at best, become vanishingly small.


Игры рынка said...

"My point is that humans are not hard-wired for greed and profit maximisation via market trading"

Hm. Not that I disagree with your motivation/vision. I'd love to agree and be on your side. But let me remain cynical. You say we are not hard-wired. I do not believe it. I'd say we are hard-wired down to our DNA and all instincts that we have. Why/how? You can start with the alpha-male stuff. Can you change that? Do you believe we can collectively change that?

Игры рынка said...

I'd say we need a pretty damn serious scientific breakthrough to realize that our view of the world is damn wrong or poor. What kind of breakthrough? Definitely not of the nano style

Toby said...

Hi Sergei. That you'd love to be on my side says a lot, don't you think?

I don't see how alpha males need be a problem. But as to "selfish gene" type thinking, i.e. that our genes determine our behaviour, there's this:

with the following quote to whet your appetite:

"The “selfish gene” concept as presented by reductionists of all stripes is arrant nonsense."

As to alphas specifically, there is this event recorded by Robert Sapolsky who was studying a baboon troupe in Africa (9 min. video):

In short, the alphas got wiped out, and the troupe quickly went from hierarchical to egalitarian. The troupe trains any alphas that come along to be egalitarian too, decades after the initiating event. Evolutionarily speaking, there's a good case to be made that alpha-types are inferior in terms of enjoying a healthy and pleasant life. The twits screw it up for everyone else!

Please read the article and watch the vid. Genes do not control behaviour, or better, biology does not determine behaviour down to the last detail. Humans were egalitarian for hundreds of thousands of years before hierarchies emerged. We adapt to the environment.

As to scientific breakthroughs, they are happening all the time. We just don't have the socioeconomic or cultural equipment to take them on board, to incorporate them into our thinking. As your challenges suggest, most people still think in Newtonian-Cartesian ways. Objective material reality 'out there' that our weak physicality is subject to, and life is merciless and hard. I don't subscribe to that view.

Like I said, that you want to agree with me says a lot, don't you think? Where does that yearning come from?

Игры рынка said...

Hi Toby. Thanks for the links. I did not mean to imply that genes determine behaviour. Unconscious influence is all that is needed. The baboon story is nice and I watched Robert Sapolsky's Stanford lectures before (if you did not I can only recommend) but I also think that it does not really prove anything. Here is the way I look at it.

Altruism and egoism are like a predator/prey bio-system in which populations of predators and preys cyclically go up and down around a certain stable position which they obviously never reach. When the population of predators increases too much they starve and die. After that the population of preys increases which gives predators an easier access to food. The standard bio-system process.

Are humans different? The alphas in the baboon story is like ... our world wars. The golden era of capitalism in the 50-60ies was not so much due to extraordinary management skills, economic policies or whatever but due to a simple reality that alpha-males became extinct some 10-15 years ago. But did we get rid of alpha-males all together? And if we did, why then do we have now an era of ultra-egoism (neoliberalism) which started in the late 70-80ies?

Alphas is just an example. Even if you believe that humans can control and understand their own individual behaviour what force would you use to control the collective altruism/egoism macro-cycle I describe above? How do we control it if it clearly takes several generations to go through the whole cycle and it also suffers from positive feedback loops?

Toby said...

"The alphas in the baboon story is like ... our world wars."

I don't see that at all. The baboon story is relevant in a very different way. ALL the alpha males were killed, none of the non-alphas. In world wars the cannon-fodder (non-alphas) dies in the millions. The opposite of what happened to tbe baboons. What war does is create an opportunity for economic growth via destruction (among other things).

"Did we get rid of the alpha-males all together?" For a time in the baboon troupe, yes, then in that cultural space the troupe adopted an egalitarian system which is now robust enough to train new alphas away from being alphas. This is how it worked to humans for hundreds of thousands of years. See e.g. "Hierarchy in the Forest" by Christopher Boehm.

"I'd say we are hard-wired down to our DNA and all instincts that we have."

"I did not mean to imply that genes determine behaviour."

You say unconcious motivation is enough. Enough for what? Determing behaviour? To prove there's no free will? From my point of view nothing you are saying has much to do with my analysis, which is that the state system has a sell-by date, and that this means we are going to have to adapt. Indeed, everything you say is in agreement with my thesis. The very different social forms humanity has lived within is ample proof that neither biology nor psychology (to assume they are somehow separate for a moment) compels us into one and only one social arrangement. The variety we are capable of is mind-boggling.

So we agree. There are cycles. Birth and death. We might not make it. All true. My position is that we can (not will) create a new system appropriate to the new circumstances, and that the great variety of past human social forms is 'proof' that this is possible. What the new system will not be is Nirvana. There will be birth and death, struggle, fighting, tragedy, alpha-males, and all sorts of interesting stuff. Only capitalism and private property will wither away and something like anarchic resource-based economics will take over, and sharing and abundance will be the base operating condition at the material level. My position is not that this is 'better', but that it is wiser. There's a difference.

In terms of humans controlling their own behaviour, what I posit and argue does not require me to believe that, though obviously there is some self-control evident in human existence. But again, this is not really relevant. We either adapt to new realities as we have done throughout our time on earth, or we don't. That urge to survive you reference is the force you want me to indicate. Our cultural acumen and capital are the stuff with which we work out how to survive. If we stay stay stuck in the 'old' way of thinking and 'refuse' to adapt, we'll likely wipe ourselves out. Time will tell what we actually accomplish.

Tao Jonesing said...


Nice to have a name to apply to the characters.

I think I am between you and Toby. We are not hardwired for greed and profit maximization. We ARE hardwired to force the world around us to meet our expectations, which are dominated by the expectations of society. So, we can change the "programming" of the individual in society by conveying different societal values. In other words, we are more programmed than hard-wired.

Of course, this is a distinction without a difference unless there is a concerted effort to change societal values to reflect a more holistic approach to our world that is not so egocentric.

Tao Jonesing said...


Another interesting, thought-provoking post that will require time to digest and comment upon properly.

From a purely systems perspective, what about hysteresis, which in electronic circuits such as the Schmitt trigger is accomplished through a careful balancing of both positive and negative feedback loops? I think hysteresis is a feature of human systems that demonstrates that human beings are inherently in a metastable state suspended between mania and depression.

I am both more cynical and hopeful than you seem to be. More cynical because those truly in power have planned for the obsolescence of most human beings. More hopeful because those who don't have power are in a position where they have to declare soon or consign themselves to Fate.

As a pure critique of the treatment, if you want to reach a wider audience, you need to find a way to simplify your language and concepts to make them more accessible. You have kind of locked yourself into speaking the code of academics, which is designed to obscure the message to the masses, not make it plain.

I hope to have more meaningful comments later, but there is a lot to think about in this preview.

Toby said...

Hi Tao,

actually, I see it precisely as you express in your comment to Sergei. The distinction is almost redundant because change is so damned difficult at this scale, programmed or wired.

Regarding my academic style, my wife makes the same comment. I'm beginning to fear a total rewrite is needed (for other reasons too), but that might not be a bad thing, since all the work, currently expressed in complex language, is simplifying in my own head now. Will look into hysteresis.

What do you mean by: "declare soon or consign themselves to Fate". Sounds quite dramatic. I'm intrigued. And what plans are there for the obsolescence of most of humanity?

Debra said...

Hi Toby,
Very interesting post, and I am grateful that you have put forward a summary of your ideas about money.
A few critiques... about the language, I definitely disagree. I do not find your language academic. And I do not think that your style is dry and dusty. Your concepts, and your analysis are complicated, but then.. do you really want to write for... the masses ??
Remember that "the masses" have no face, and no body. They are... a linguistic abstraction. There IS a difference between "the people" and "the masses". In one case... you posit that your reader is a thinking, reflecting man or woman, in the other... you posit that he is an idiot with a three hundred word vocabulary, incapable of thinking an intelligent thought for more than two seconds. And.. IF you posit that he is an idiot with a three hundred word vocabulary, make no mistake about it, you are... looking down on him, and you are.. an elitist. This is an old, and subtle debate.
If you want to reduce your thought to sound bite form, well.. only you can decide if what will be lost in the reduction is irreplaceable.
Personally, I believe, and think that there are as many Internet sites with sound bite thought as stars in the sky, but the sites like yours, well... they are very few, and very far between. Be wary of wanting to hard sell yourself like an advertiser, not to the highest bidder but... to the largest number.
And... if you get accused of that infamous "elitism", because your thought is complicated, well... what then ? Choices, choices, hein ?
Some food for thought : while I love Freud's desire to universalize, I sometimes find that as a result of this Babelian desire for.. unity ? he neglects the HISTORICAL particulars.
As I have said before, the Internet gives us the illusion that because we all (well, many of us...) share the same technology with the same (identical) Facebook accounts, we are all living the same lives.
This is not true at all. The physical places where we are living contribute to our leading very different lives. And our MODERN states are very different, while we believe the contrary. Our languages are different too.
I would like you to develop more your ideas about "property", and what distinguises it from ownership (but maybe I have not been reading carefully enough).
While the idea of property (private property) is.. what it is, I think it is relationship to physical barriers/fences, which give it... form, at a basic level. What is property (private or not, moreover) without fences vs. with fences ?
You know that we do not agree about money...
While I think that a society that idolizes money as a refuge value, because it lacks faith elsewhere is in dire straits, I believe that throwing out money, or trying to do so, is throwing out the baby with the bath water. Because money itself is not the problem. Lack of faith is. And lack of trust in one's... neighbor. (But just WHO is my neighbor these days ??)
And, in the comparison with barter, I think that it is as difficult to determine the amount of money that translates the collective idea of "value" of an object, or service, as it would be to count out the number of eggs. How does value come to things/services ? It is not solely an expression of how much MONEY something is "worth". There are other nebulous considerations. Still. Not many people I know want to become garbage collectors, even though the work continues to be relatively well paid. This is an example of the fact that money still does not buy everything.
Ironically enough... IF money were the measure of ALL things, then the garbage collector would be as esteemed, and honorable as anybody else making the same pay. A form of egalitarianism, right ? What we want, no ??

Debra said...

I lost my comment through my own stupidity, because it was too long for blogger...
Tough shit, as we say. I may or may not continue. Later.
Gotta go... live my life...

Dave said...

You might want to consider the use of 'monetary-marketopithecus' rather than homo economicus to reflect on the innately backward mentality at play today! Also, I'd suggest going through all the material in the TZM Orientation guide, as this is pretty comprehensive, and a real goldmine of information.

Tao Jonesing said...


I have some friends who have published books, and their advice on this issue is to finish the book and then distill a simpler presentation of its main arguments for broader consumption.

On hysteresis, I have attempted to apply the concept to human decision-making in the past. See the first post here:

Related to that post and possibly of interest:

Regarding my "dramatic" turn of phrase, we are getting to a point where we have to decide what we are going to do, or events will decide for us. If we don't fundamentally change how we view and interact with the world, we are consigning ourselves to a bleak future most of us won't survive.

On the "planned obsolescence", that's a feature of capitalism (and all -isms designed to extract "wealth" from the many for the benefit of a very few). When real growth slows, capitalism requires cannibalizing members of our society to create the appearance of financial growth. I believe the neoliberal rewrite of classical liberalism, which was well-funded and entirely out in the open, demonstrates that this feature of capitalism was no accident.

Toby said...

Hi Dave, thanks for commenting. I'll bear "monetary-marketopithecus" in mind, but will probably stay tame there and stick with the well-known alternative. As to the Zeitgeist material, I read all that a few years back, but don't recall details on the history and meaning of money at the depth I go into.

Toby said...

Thanks Debbie, shame about the rest of your comment! About the style I ought to adopt in the book; there's a big area between obtuse and sound-bite simple. I don't need to pitch it at some imagined 'stupid idiot' to make the writing clear and simple. But where there's complexity, there has to be complexity. I suspect we are agreed on this point.

As to money, you misunderstand me. I do not advocate throwing it away, apologies if I gave that impression. Money is, as everything is, an emergent property of certain enabling systems, which include but are not limited to the state, private property contracts and interest, but primarily the first two. More deeply, money is an outgrowth of our very old and well-established perception of economic scarcity ‘out there’, scarcity which is fundamental and inescapable in the orthodox view. But, my view is that money is very different to how our culture perceives it. It is not wealth, even if it strongly appears to be and often functions as if it were. If I were to teleport you with all of the planet’s money, including gold, platinum, diamonds, etc., to the moon, how wealthy would you be? Money’s meaning and utility arise directly from and are sustained by particular conditions. But those conditions are changing, profoundly. Money is becoming an unnecessary, even destructive 'tool'. And yet we cannot just throw it away. We can only adapt to changing conditions wisely. If we do so, globally, it is likely that systems will emerge that do not give rise to money as we have known it, but in another form (e.g. Information Money). It is even possible that one day we will live in a society which does not need money at all. There's no throwing away, only out-growing.

As to property, the distincion drawn in property-theory relates to credit-debt contracts and interest. Fences are part of ownership too, as you point out. Yes, this is a big part of the book, because ownership, as it gives rise to private property and state/market, arises from the self-other split so necessary for civilisational development. As we transcend that, we will generate new ideas about and relationships with the idea of property/ownership. It's all interconnected.

Toby said...

Tao, thanks for the links. I'm getting a better idea of where you are coming from. I think our thinking is very close, only the angle of approach differs, and perhaps some of the conclusions.