Posted: Feb 08, 2017 3:05 pm
by lpetrich
I must say that I'm very skeptical that a large-scale, high-tech society can operate without some medium of exchange, some kind of money. But it would be great to be able to avoid the psychological, social, and economic pathologies often associated with money. I don't believe that money is the root of all good, which is something that one of Ayn Rand's Atlas Shrugged heroes argues -- Francisco d'Anconia's "money speech".

Let's now consider the various possibilities.

The simplest is barter. A has X and wants Y. B has Y and wants X. A and B then exchange X and Y. This has the problem of needing a coincidence of wants.

Next up is a gift economy. A gives X to B, and B remembers X's favor and gives Y to A. That can work in small-scale societies, but it has difficulty working in large-scale ones.

Many societies move on from there to some medium of exchange -- money. A exchanges X for M and M for Y, and B exchanges Y for M and M for X.

The simplest sort is commodity money, something traded at its non-monetary value. There have been numerous types of commodity money, like gold, silver, copper, salt, peppercorns, tea, large stones, decorated belts, shells, alcohol, cigarettes, cannabis, candy, cocoa beans, cowries and barley.

Such money is often not very portable, it must be conceded. That has led to the development of representative money, something traded at much more than its non-monetary value. Paper money is the best-known type of that sort of money, because the cost of printing it is much less than its stated value. It must be noted that coins can also be in that state. Electronic money, like numerical values in banks' databases, also often qualifies. Cryptography-based money like Bitcoin is somewhat ambiguous.

One type of it is commodity-backed money, IOU's for commodities like precious metals. Gold-standard enthusiasts want paper money to be that kind of money.

Another type is fiat money, money decreed into existence. The "fiat" is Latin for "let (it) be made", not the Italian car company. Money can be decreed into existence by central banks, typically by running the banks' paper-money printing presses, and also their coin and electronic counterparts.

Some people consider fiat money unreliable because a government can recklessly print it and cause massive inflation. Many gold-standard enthusiasts make that argument, noting that gold is much more difficult to mine than printing on paper is. But even there, a big influx of gold and silver can cause inflation, as had happened to Spain around 1600. Also, around 1200, King Henry IV of England outlawed the alchemical manufacture of gold and silver, presumably for this reason.

There are also forms of fiat money that are essentially monetary fraud, like debased coinage and counterfeit money. Given how fiat money originates, it is not surprising that some people consider even "legitimate" fiat money to also be monetary fraud.

Return to what I originally asked, I seriously suspect that a large-scale society will almost inevitably have some form of money, whether some official form, some unofficial forms, or both. One does not have to have a coincidence of wants, since money is, at least in principle, universally exchangeable. One also does not have to do the bookkeeping needed for a gift economy, and one can deal with complete strangers.