The Money of Money Supply – Part 1

In a previous post after admonishing any reader foolish enough to waste time here to go and read Zippy, I summarized my understanding of Zippy.

The main question that comes to mind as I think about this more is: What is money? There are two distinct questions that need to be answered: What do modern economists call “money”? What is money really? To the second, I want to look into Aristotle in Book 5 Chapter 5 of the Ethics. A brief look seems to imply that Aristotle saw money as a measure of value in exchange and a store of value. For a bit more insight, I want to read Aquinas’ commentary on that same passage in Lecture 9 on Book 5 of the Ethics.

As for now, I went and read the explanation offered by Joe Carter at the Acton Institute. Money is anything that meets the three functions of money: 1) a measure of accounting or value, 2) a store of value and 3) a medium of exchange. From this alone, it seems that 1 is the formal aspect of money, 2 is the material aspect and 3 is the purposive aspect. We could add the efficient aspect which is a (dependent) rational animal to fill out the causal explanation.

Anything that is valuable is a store of value in virtue of being valuable. Therefore, anything valuable could be used as money and this is what is means for money to be materially a store of value. Now what distinguishes money from other sorts of valuable things is that it is used as a measure against which valuable things are judged. This is what it means that money is formally a measure of exchange. Finally, that money is a medium of exchange is simply what money is used for. It is used to facilitate exchange, that is its purpose or final cause.

Strictly speaking these are not three functions of money, for the purpose or function of money is to facilitate exchange. In order to facilitate exchange, it needs to be a measure that is something against which incommensurate things can be judged. In order to be a measure, it must in some way possess what it measures and so it must be valuable. Now, we may also note that in order to be facilitate exchange well, a measure should be consistent over time. A body of water is useless as a measure of distance because it does not easily maintain its shape by itself.

Also, practically exchanges do not take place within the same day or week or even month. So, good money much be something durable that can facilitate exchanges over long periods of time. Note, that this is not about what money is or for, but what is good as money. That is what achieves the function or purpose of money well.

To be continued…

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One Response to The Money of Money Supply – Part 1

  1. Pingback: The Money of the Money Supply – Part 2 | Infinite Semiosis

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