Saturday, May 26, 2012

Money and barter

In response to my earlier post Money and control systems, a reader comments:
I've always thought "money" is simply a way to avoid the inefficiencies of barter. It could be pieces of paper (or digits in a computer), but in theory it could just as easily be shells, twigs or anything else. The real value is from the goods and services produced by human beings, and money is simply a kind of oil that smoothes the exchange and trade of these goods.

The problem with this comment is "simply". The commenter is correct: real value does indeed consist of the actual goods and services produced by people. But saying that "'money' is simply a way to avoid the inefficiencies of barter" is like saying that a political system is simply a way to avoid the inefficiencies of anarchy, or a 747 is simply a way of avoiding the inefficiencies of walking to Cleveland. The present capitalist system, with money in such a central role, is so clearly not simply a smoother barter system that this comment can be seen only as an item of dogma propagated by the capitalist ruling intent on cloaking its power and influence.

I don't intend to be rude to the commenter: As years of discussing atheism and religion have taught me, the hardest step is losing one's attachment to the dogmas that are shouted at us continually from the moment we're capable of speech.

Money is indeed a way to smooth the exchange of goods and services. But it's so much more.


  1. You're being insufficiently definite. Money not only more than just a way to smooth transactions, it cannot be only that. Money automatically carries with it a whole host of rules.

    Even if you used twigs or shells, there's still a set of implications. (Who decides which shells are pretty enough to be money? How big does a twig have to be for trading, and what happens if a twig snaps? What guarantee do we have from Jim's Oyster Farm or Joan's Christmas Tree Lot that they won't make further money "from nothing"?) And money will only work so long as a sufficiently large range of people accept it. If you can't get food or shelter with your currency, it's basically worthless -- and it is worth less if it stops working entirely 50 miles down the road, which is another detail any monetary scheme will contain somewhere.

  2. You're being insufficiently definite.

    By "you" here, are you referring to the commenter or myself?

  3. Ooops, sorry, I see that my pronouns drifted a bit. Sorry about that.

    The "you" in the first paragraph is you, Larry, the blog owner, replying to the other commenter. Not only is your reply absolutely correct, it is far too restrained.

    The "you" in the second paragraph is "a hypothetical person attempting to set up a currency which would only be a means of smoothing transactions and nothing more".

    The conflation of you-qua-Larry and you-qua-naive-economist was unintentional.

  4. Not only is your reply absolutely correct, it is far too restrained.

    I tend to be more restrained when I think people are unwitting victims of dogma.

    A more complete disquisition on money will have to wait until future posts.

  5. If money's a control system like you said in your earlier post, then I must say it's a pretty poor one in practice.

    Control systems are the purview of cybernetics, which is interesting in itself, because of attempts to transcend the limits of capitalism using cybernetics. I'm referring specifically to Project Cybersyn in Chile under the presidency of Salvador Allende, which was inspired by the work of British cybernetician Stafford Beer, who was also the scientific director of that project. However, it's difficult to assess its usefulness as a model for contemporary socialists and communists since the Sept. 11 coup overthrew the government before it could be fully implemented. I can't find anything that wrong with it on the theoretical end, though.

    Beer himself gives a reasonably full account of the science behind the project in the second edition of his book "Brain of the Firm".

  6. Looks like an interesting book; it's at my library, so I'll check it out and read it. The book looks like it's about management science, however, and management science is typically held as distinct from economics

  7. Very interesting article with a lot of nice concepts.

    I noticed that in this period of crisis the bartering and in general the favor exchanging is more and more spread. People in my area take advantage of the time banks to share favors at the local level, but I found this website extremely interesting to exchange favors with people all over the world:


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