Beyond Twin Deficits: Emotions of the Future in the Organizations of Money

American Journal of Economics and Sociology, The, Oct, 1999 by J. F. Pixley

Money has at least four, frequently contradictory (Burns 1998) functions. It is a medium of exchange, a store of value, a unit of account, and/or a standard of deferred payment. Compared with the mainstream economic view, money is less about reducing the inefficiencies of barter in a static exchange (Smithin 1994 pp 10-12; 18), since as Keynes said 'if this is all, we have scarcely emerged from the stage of barter' (cited Ingham, 1998 p. 9). Similarly, in sociological accounts influenced by Talcott Parsons, money is too often reduced to a medium of communication, a mere symbol (rather than a 'thing' for barter) -- a harmless social device (Ganssmann 1988 pp. 287; 293-4). Yet, transactions are mainly 'exchanges of debts', the trust and confidence in the value and final, 'ultimate' payment are paramount, according to Smithin (1994 p. 24). Burns suggests that the stability of money as a means of exchange rests on social consensus but such stability is constantly contradicted by the use of monetary signs for sou rces of funds for investment, development and more accumulation (Burns 1998). So, Post Keynesians and these sociologists agree that money cannot be divorced from issues of credit, speculation, and uncertainty. This is because the nature of money is about trustworthy credit relations occurring in a 'market economy in which both production for sale...and most exchange relations have a temporal dimension' (Smithin 1994 p 18).

The essential sociological idea is that the social relations of money are not reducible to the social relations of production [10] which is similar to Keynesian and Post Keynesian views (e.g. Minsky 1996 p 79). Simmel's classic treatment is found in his Philosophy of Money, particularly in the first section -- an undeservedly neglected section, Ingham notes (1998 p. 8). Simmel holds that medieval views on money adopted the inflexible, Aristotelian doctrine that it was 'unnatural for money to engender money' and that use and spending were identical. In contrast, Simmel suggests money must be seen as a 'productive power' linked to the 'fluctuations of life' (1978 p. 169). As he says, money was formerly acquired by 'unproductive methods' such as war and tribute (e.g. ancient Rome). It was also lent for consumption not production, so that interest was not seen as 'a natural product of capital' (Simmel 1978 p. 182). [11]

Simmel's major point is to stress the profit from the use of money, not from mere ownership of money but rather 'the money yielded by money' (1978 p. 182) or, as the tax system calls it, the capital gains. The loaning of money divides its 'activity' into two parts, and thus greatly expands its 'economic energy'. However, such a process rests on an 'intellectual abstraction' that can only take place in 'a firmly established and civilized social order'. Thus, Simmel argues, 'the inner nature of money is only loosely tied to its material basis; since money is entirely a sociological phenomenon, a form of human interaction', it has a 'clearer character' when social relations are 'concentrated, dependable and agreeable' (Simmel 1978, pp. 169; 172).