Name: Money and the mechanism of exchange
ISBN: 9781493693238

What Hacker News says

dredmorbiusSep 2017

I'd suggest William Stanley Jevons, Money and the Mechanism of Exchange for a clear foundational explanation of money, that still underlies much present discussion.

Chapter V in particular, on the qualities of the material of money, provides a vital set of properties which apply whether you're looking at specie, fiat, or other forms of currency: utility and value, portability, indestructability, homogeneity, divisibility, stability of value, and cognisability.

https://archive.org/details/cu31924013816172

What other concepts do you have in mind?

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dredmorbiusApr 2016

Having had some time to consider this, questions and observations.

(Some duplication of HN discussion -- it unfortunately pretty much dies after a day or so, G+ has the advantage of keeping those interested in a discussion looped in.)

1. How do you make money doing this?

2. Where does the investment for USD come from? How is this renewed? How are loans and/or investors paid back? What risks do they face?

3. What are the barriers to entry? Why doesn't _everyone_ start such a service? An "I'm creating my own money, care to join" venture is fine and dandy, but one thing a currency sovereign enjoys is, well, currency sovereignity. And in particular, legal tender status.

4. Who's left holding the bag? If this collapses, who loses out? Presumably, merchants. Is there any provision made for this possibility?

5. How do you plan to crack this market? The existing consumer revolving credit market is pretty resistant to entry. The two biggest players, Visa and MasterCard, both originated as large bank-based credit cards (BankAmericard => Visa and InterBank Master Charge => MasterCard). Other contenders include American Express (financial services, origins related to Wells Fargo in the 19th century), Discover (3rd largest card, though distantly, also acquired Diners Club which I was going to list separately), but they've failed to make major inroads against the two giants.

6. The "Gresham's Law" bit seems to apply to holders. The key being that people will spend the currency faster if they lose faith in it. But this assumes that the _sellers_ will accept the currency. A loss of _seller_ acceptance will in fact torpedo the currency. I strongly recommend William Stanley Jevons, _Money and the Mechanism of Exchange_, which still serves as the foundation of much thinking on money (~1880).

7. How is this not a Ponzi scheme? https://en.wikipedia.org/wiki/MMM_%28Ponzi_scheme_company%29

(Questions also posted to G+.)

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SunchoApr 2016

6. The "Gresham's Law" bit seems to apply to holders. The key being that people will spend the currency faster if they lose faith in it. But this assumes that the _sellers_ will accept the currency. A loss of _seller_ acceptance will in fact torpedo the currency. I strongly recommend William Stanley Jevons, _Money and the Mechanism of Exchange_, which still serves as the foundation of much thinking on money (~1880).

The plan is to maintain a growing number of contracted merchant partners. If our merchant partners spontaneously stopped accepting Gresham Dollar, they'd legally violate their contract.

As part of their contracts, the merchants must set the same price in USD and GD. Their reward is that their account balance is not subject to the Activation Cap, so all of their GD will convert to USD.

Thanks for the book suggestion. I've added it to my list.

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dredmorbiusSep 2023

Since definitions are social constructs, an absolutely unambiguous definition is impossible, but for practical purposes and argument here I'll posit that money is definitionally representative of value rather than value itself.

There are commodity monies, where some underlying commodity serves as money. However that relationship is often symbolic rather than strict. One classic instance is in the 1945 paper "The Economic Organisation of a P.O.W. Camp" by R.A. Radford, which describes the goods-and-services economy which emerged largely around the "currency" of cigarette packs amongst Allied prisoners within Axis prisoner of war camps during World War II. The paper illustrates both the capabilities and limitations of currencies in effecting trade (a surplus of cigarettes with a surfeit of actual goods ... means there's no effective economy), as well as the dual role of cigarettes as having utility (at least to some prisoners) in addition to their exchange value. Highly worthwhile reading:

<https://www.jstor.org/stable/2550133>

I've addressed the nature of money as a commodity grounded in trust in this earlier comment: <https://news.ycombinator.com/item?id=37389020>

More generally, I've found it useful to think of money as the commodity of most universal demand. That is, whatever else it is you have, a sufficient quantity of money is preferable. Where fiat or coined money isn't available, this often becomes some commodity: grain, hides, shells, raw gold (or silver or copper), nails, cattle, etc.

William Stanley Jevons identified a properties of money as utility and value, portability, indestructability, homogeneity, divisibility, stability of value, and cognisability. Of those, I differ with him on utility and value, as we have fiat currencies and accounts notations of no intrinsic value themselves, rather utility and value are the inverse of trust in the money-issuing authority. "Seignorage" in specie is then a measure of trust, and fiat currency effectively has infinite trust.

William Stanley Jevons, Money and the Mechanism of Exchange Chapter 5: <https://archive.org/details/cu31924013816172>

In your Apple example: what Apple produces is a future stream of profits, and systems which provide utility to purchasers of those systems. Apple is actually a poor choice to illustrate your argument as contrasted with a pure-play software or information provider (say: Microsoft, Google, Facebook, or Disney) in that Apple is fundamentally a hardware producer, and their business model is actually predicated on physical products (iPhone, iPad, MacBook, iMac, Mac Pro, etc., and increasingly the chips which power those devices: <https://www.apple.com/mac-pro/>).

The notion that immaterial production is economic is far older than the modern Internet economy. Any service, starting with unskilled labour, is immaterial in a similar sense.

And the value of more abstract economic activity is actually grounded in primary productivity, a distinction that goes back to at least the Physiocrats and Quesnay's Tableau Économique. More recent variants include Clark & Kennessey's multi-sectoral classification:

- Primary Activities: Agriculture, forestry and fishing; Mining

- Secondary Activities: Construction; Manufacturing

- Tertiary Activities: Transportation, electric, gas and sanitary services; Wholesale trade; Retail trade

- Quatenary Activities: Finance, insurance, and real estate; Services; Public administration

Zoltan Kenessey "The Primary, Secondary, Tertiary and Quaternary Sectors of the Economy" (1987) DOI: 10.1111/j.1475-4991.1987.tb00680.x. <http://onlinelibrary.wiley.com/doi/10.1111/j.1475-4991.1987....>

Every activity beyond primary is based on the consumer surplus value and energetic potential of the primary activities. Absent ag, forestry, fishing, and mining, you'll have no Apples.

More: <https://web.archive.org/web/20230612141005/https://old.reddi...>

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dredmorbiusSep 2023

Apparently a fact you like repeating ;-) <https://hn.algolia.com/?dateRange=all&page=0&prefix=true&que...>

Would you happen to know where Bruno said this, as it doesn't seem any of your earlier comments gives this vital detail, and I'm not finding any likely references elsewhere?

A definition I find useful (though not entirely accurate) is from William Stanley Jevons who identified a properties of money as:

1. utility and value

2. portability

3. indestructability

4. homogeneity

5. divisibility

6. stability of value, and

7. cognisability

William Stanley Jevons, Money and the Mechanism of Exchange Chapter 5: <https://archive.org/details/cu31924013816172>

Points 1, 2, & 3 afford low cost of storage.

Of those, I differ with him on utility and value, as we have fiat currencies and accounts notations of no intrinsic value themselves, rather utility and value are the inverse of trust in the money-issuing authority. "Seignorage" in specie is then a measure of trust, and fiat currency effectively has infinite trust.

My own view is that money is that commodity which has the most universal appeal, that is, it's what is wanted more than any other commodity. That might be a domestic government-issued coin or currency, but often has been something else: currency of some other government (as in Ecuador, El Salvador, Zimbabwe, British Virgin Islands, and Bonaire, the last being a Dutch territory), or physical commodity such as cigarettes, cowhide, beaver pelt, grain, shells, silk, etc.

In high-trust societies, debt and credit substitute for physical tokens.

Thanks.

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dredmorbiusMar 2023

The value of money is a human construct, much as the meaning of words is.

There's a widespread misperception that money is some physical entity. It is not.

A description I've come to use is that money is the medium of greatest acceptance within a given market or region. Note that money need not be paper notes, coins, or even any sort of government issue. There's an excellent 1945 paper on the economic organisation of a POW camp which describes how an economy based largely on cigarettes and various Red Cross ration items emerged amongst Allied prisoners of Germany during WWII:

<https://www.jstor.org/stable/2550133>

In particular, it looks at what problems money can solve (and what happens when there's an insufficient money supply --- in this case, cigarettes), as well as those it cannot (an insufficiency of goods generally to transact).

At various points in time, clams, beaver pelts, cowhides, knives, massive multi-tonne stones (<https://www.npr.org/sections/money/2011/02/15/131934618/the-...>), letters of credit, and cryptographic hashes have served as money. In mediaeval Europe, Roman coins were long used in trade, well after the Roman empire itself had fallen. In parts of the world, US dollars are a preferred currency even outside the 50 states and US territories, with several countries officially adopting the US dollar as their own national currency: <https://www.investopedia.com/articles/forex/040915/countries...>.

William Stanley Jevons defined what to him were the vital set of properties required of money in Money and the Mechanism of Exchange (1877): utility/value, portability, indestructibility, homogeneity, divisibility, stability, cognixability.

<https://archive.org/details/moneyexchange00jevorich/page/30/...>

I disagree with him on the first property. Money may have an intrinsic value (as with gold or specie), but need not. In particular, the intrinsic value of money is inverse to the trust in the monetary authority itself. That is, in a low trust financial system, money typically consists of or is backed by some physical store of value. In a high trust financial system, currency tokens need have no fundamental utility (as with paper banknotes or digital accounts), but rather there is a trust in the system as a whole to function predictably and reliably.

The value represented by money is one that is socially, legally, and economically recognised. It's ultimately a tokenisation of credit and wealth. It is not directly tied to any physical characteristics (though as a medium of exchange it can be traded for any given physical commodity or service). That's not "imaginary" in the same sense that other social conventions such as which side of the road to drive on are not imaginary. Which side to drive on is entirely arbitrary as an initial social choice, but once that side has been chosen there are very real consequences to flouting the convention.

Social construct != imaginary.

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