Money
I’ve been thinking about money. What makes it special? How should it be thought of?
I’ve come to the conclusion that we should just look at it as a commodity just like any other. The only thing special about it is its what we use to assign price to commodities to ease our interactions and to quantify relative values and utility.
I think this makes many things fall into place remarkably easily (in my layman’s thinking anyway). It eases thinking about prices from a methodological individualist view (that is recognising that decisions are made by individuals not by some collective entity - that is how liberalism thinks of society).
It also hints at the need for stable currency - inflation being the increase in prices, or decrease in the marginal value of money which can be caused by an increase in supply over demand (note: this does not in itself advocate a commodity or fiat money system)
I don’t know what economists think of this idea, but it seems a sensible way to think of things to me.
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January 3rd, 2008 at 11:17 am
We often do tend to think of money as being a commodity, don’t we? For example when talking about interest rates, it’s often useful to think of money as being cheap or as being expensive. And the analogy definitely works in forex, where currencies are traded as if they were units of a particular commodity, with supply and demand being the main mover behind currency prices.
January 3rd, 2008 at 3:23 pm
I’m not ignoring this and as you will imagine I have something to say about it! I’d just better wait till I’m home or I’ll not get any work done this afternoon!