The Philosophy of Money
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''The Philosophy of Money'' (1900; )Simmel, Georg. 2004
900 __NOTOC__ Year 900 ( CM) was a leap year starting on Tuesday (link will display the full calendar) of the Julian calendar. Events By place Abbasid Caliphate * Spring – Forces under the Transoxianian emir Isma'il ibn Ahmad are ...
br>''The Philosophy of Money'' (3rd enlarged ed.)
edited by D. Frisby, translated by D. Frisby and T. Bottomore. London: Routledge. – via Eddie Jackson.
is a book on
economic sociology Economic sociology is the study of the social cause and effect of various economic phenomena. The field can be broadly divided into a classical period and a contemporary one, known as "new economic sociology". The classical period was concerned ...
by German sociologist and
social philosopher Social philosophy examines questions about the foundations of social institutions, social behavior, and interpretations of society in terms of ethical values rather than empirical relations. Social philosophers emphasize understanding the social c ...
Georg Simmel."Georg Simmel." Pp. 158–88 in ''Sociological Theory'' (7th ed.). New York:
McGraw-Hill McGraw Hill is an American educational publishing company and one of the "big three" educational publishers that publishes educational content, software, and services for pre-K through postgraduate education. The company also publishes refere ...
(2008). Print.
Considered to be the theorist's greatest work, Simmel's book views
money Money is any item or verifiable record that is generally accepted as payment for goods and services and repayment of debts, such as taxes, in a particular country or socio-economic context. The primary functions which distinguish money are as ...
as a '' structuring agent'' that helps people understand the totality of life.


Money and value

Simmel believed people created
value Value or values may refer to: Ethics and social * Value (ethics) wherein said concept may be construed as treating actions themselves as abstract objects, associating value to them ** Values (Western philosophy) expands the notion of value beyo ...
by making objects, then separating themselves from those objects and then trying to overcome that distance. He found that objects that were too close were not considered valuable and objects that were too far away for people to obtain were also not considered valuable. What was also considered in determining value was the
scarcity In economics, scarcity "refers to the basic fact of life that there exists only a finite amount of human and nonhuman resources which the best technical knowledge is capable of using to produce only limited maximum amounts of each economic good. ...
, time, sacrifice, and difficulties involved in getting objects. In the pre-modern era, beginning with
bartering In trade, barter (derived from ''baretor'') is a system of exchange in which participants in a transaction directly exchange goods or services for other goods or services without using a medium of exchange, such as money. Economists disti ...
, different systems of exchange for
goods In economics, goods are items that satisfy human wants and provide utility, for example, to a consumer making a purchase of a satisfying product. A common distinction is made between goods which are transferable, and services, which are not t ...
and services allowed for the existence of incomparable systems of value (land, food, honor, love, etc.). With the advent of a universal
currency A currency, "in circulation", from la, currens, -entis, literally meaning "running" or "traversing" is a standardization of money in any form, in use or circulation as a medium of exchange, for example banknotes and coins. A more general ...
as an intermediary, these systems became reconcilable, as everything tended to become expressible in a single quantifiable metric: its monetary cost.


Money and freedom

A fundamental point of ''The Philosophy of Money'' is that money brings about
personal freedom Civil liberties are guarantees and freedoms that governments commit not to abridge, either by constitution, legislation, or judicial interpretation, without due process. Though the scope of the term differs between countries, civil liberties ma ...
. The effect of freedom can be appreciated by considering the evolution of economic
obligation An obligation is a course of action that someone is required to take, whether legal or moral. Obligations are constraints; they limit freedom. People who are under obligations may choose to freely act under obligations. Obligation exists when the ...
s. When someone is a slave, their whole person is subject to the master. The
peasant A peasant is a pre-industrial agricultural laborer or a farmer with limited land-ownership, especially one living in the Middle Ages under feudalism and paying rent, tax, fees, or services to a landlord. In Europe, three classes of peasant ...
has more freedom, but if they are to provide the lord with payments in kind, such as wheat or cattle, they must produce exactly the item required, or
barter In trade, barter (derived from ''baretor'') is a system of exchange in which participants in a transaction directly exchange goods or services for other goods or services without using a medium of exchange, such as money. Economists disti ...
it at a great loss or inconvenience. But when the obligation takes a monetary form, the peasant is free as to whether to grow wheat, or keep cattle, or engage in other activities, as long as they pay the required tax. Freedom also arises because money enables an economic system of increasing complexity in which any single relation becomes less important and thus more impersonal. As a result, the individual experiences a sense of
independence Independence is a condition of a person, nation, country, or state in which residents and population, or some portion thereof, exercise self-government, and usually sovereignty, over its territory. The opposite of independence is the statu ...
and self-sufficiency. There is another sense in which money is conducive to freedom, and it originates from the observation that the owner is truly entitled to its possessions only if he takes care of its upkeep and of making it bear fruits. Money is more flexible than land or other assets, and thus it frees the owner from those activities that are specific to real entities. Since monetary possessions no longer ties the owner to a specific type of work, money leads to increased freedom. Consequently, monetary ownership enables the position of a purely intellectual worker and, by the same line of reasoning, it also implies that a wealthy man can lead a modest life. As for workers and managers, they only contribute work for wages and only deal with an impersonal market, and thus their personality is separated from specific work activities. In the case of civil servants, they are paid a fixed salary that is largely independent of any specific work performance, and see their personality freed from work activities. The same hold for artists, such as a musician who is paid the same fee regardless of how well he plays. Although the monetary system enhances individual freedom, it can also lead to consequences that are questionable. An employee does not necessarily have better living conditions than a slave does, as a precise amount of money corresponds imprecisely to its effective purchasing power. In a money economy, individuals will tend to put their financial interests above the goals of society or of the state. If a peasant sells his land even for a fair price, monetary freedom differs from the personal activity afforded by possession of the land. More generally, freedom from something does not necessarily equate with the freedom to do something else because money is "empty" and flexible, and does not direct the owner toward any specific activity. Although monetary payments can free from the obligations of specific in-kind contributions, it has also the effect of removing the involvement of the individual from a broader context. For example, when the Athenian vassal states had to contribute with ships and troops, the tributaries were directly involved in
Athens Athens ( ; el, Αθήνα, Athína ; grc, Ἀθῆναι, Athênai (pl.) ) is both the capital and largest city of Greece. With a population close to four million, it is also the seventh largest city in the European Union. Athens dominates ...
's foreign and military policy, at least to the extent that drafted soldiers could not effectively be deployed against their home states. Once the military contribution was replaced by a monetary tribute, no such constraint could be placed on Athens's policy. The natural evolution of this state of affairs is that despotic regimes tend to favor a monetary economy.


Personal values

Personal values can be quantified in terms of equivalent money amounts. An example is the
weregild Weregild (also spelled wergild, wergeld (in archaic/historical usage of English), weregeld, etc.), also known as man price (blood money), was a precept in some archaic legal codes whereby a monetary value was established for a person's life, to b ...
, the monetary value that must be paid to a family if one of his members is killed. The weregild was truly a reflection of personal values, in this case of a lost life, rather than the compensation for the income stream that the deceased would have provided to the family. Similarly, personal values are also quantified by the practice of
marriage Marriage, also called matrimony or wedlock, is a culturally and often legally recognized union between people called spouses. It establishes rights and obligations between them, as well as between them and their children, and between ...
by purchase and of prostitution. However, the historical trend has been toward an increased awareness of individual distinctions whereas money is intrinsically
fungible In economics, fungibility is the property of a good or a commodity whose individual units are essentially interchangeable, and each of whose parts is indistinguishable from any other part. Fungible tokens can be exchanged or replaced; for exam ...
. As a result, money has been progressively considered as an inappropriate equivalent to personal values, and most of these practices have fallen into disuse. When these practices survive, the amount of money is so large that it introduces an affective element in the transaction. A wife purchased for an exorbitant amount is especially dear to the heart. Money is fungible and, as such, it stands in sharp contrast with the idea of ''distinction'', according to which an entity is set apart from and incomparable with a majority. Distinction is a property of
nobility Nobility is a social class found in many societies that have an aristocracy. It is normally ranked immediately below royalty. Nobility has often been an estate of the realm with many exclusive functions and characteristics. The character ...
, or of some works of art, for example. Simmel takes as a case in point the
House of Lords The House of Lords, also known as the House of Peers, is the upper house of the Parliament of the United Kingdom. Membership is by appointment, heredity or official function. Like the House of Commons, it meets in the Palace of Westminste ...
, which functions as the sole judge of its members and at the same time refuses to sit in judgment of any other individual. In this sense, the Lords value distinction to the extent that even the exercise of authority on other people would be seen as a degradation. The quantitative aspects of money has the potential to threaten and debase the qualitative notion of distinction.


Style of life

As values can be quantified in monetary terms, our relationship with objects has lost most of its emotional character and has become more intellectual. On the one hand, our
rational Rationality is the quality of being guided by or based on reasons. In this regard, a person acts rationally if they have a good reason for what they do or a belief is rational if it is based on strong evidence. This quality can apply to an abi ...
attitude can lead us to become
individualistic Individualism is the moral stance, political philosophy, ideology and social outlook that emphasizes the intrinsic worth of the individual. Individualists promote the exercise of one's goals and desires and to value independence and self-relianc ...
, to an atomization of society, and even to disregard respect and kindness. On the other hand, there are often clear advantages in relying on intellect rather than on emotions. At any rate, Simmel maintains that intellect is a tool and, as such, it lacks an intrinsic sense of direction and can be put to use for different purposes. Rationality originates from the objective, purely arithmetic nature of money, and is mirrored by the tenet that law is equal for everyone and that in a
democracy Democracy (From grc, δημοκρατία, dēmokratía, ''dēmos'' 'people' and ''kratos'' 'rule') is a form of government in which people, the people have the authority to deliberate and decide legislation ("direct democracy"), or to choo ...
all votes are equal. The ability of fitting in an increasingly intellectual environment is reinforced by education, which in turn is mostly accessible to those who can afford it. As a result, money can lead to the creation of a de facto aristocracy of the affluent. The converse is that
egalitarian Egalitarianism (), or equalitarianism, is a school of thought within political philosophy that builds from the concept of social equality, prioritizing it for all people. Egalitarian doctrines are generally characterized by the idea that all hu ...
tendencies typically reject the money system. The objective nature of money ultimately arises from the division of labor, in which the product is divorced from the worker's personality and work is treated as a commodity. Similarly, products are no longer tailored to the specific customer and do not reflect his personality, production tools are specialized to the point that the worker has little leeway in the way he operates the machines, and fashion changes so rapidly that nobody gets personally or socially attached to it. This state of affairs stands in contrast with the arts, which reflects the individuality of the author. Money can increase the distance between individuals to the point that it allows them to fit in crowded cities and to liberate individuals from the yoke of working on a family business. (Incidentally, financial activities are concentrated in major cities, and the concentration of money increases the pace and variety of life.) Humankind has become progressively more independent of the rhythms of nature and more dependent on the business cycle. "Objects and people have become separated from one another" declares Simmel, and was to compare this phenomenon with
Marx's theory of alienation Karl Marx's theory of alienation describes the estrangement (German: ''Entfremdung'') of people from aspects of their human nature (''Gattungswesen'', 'species-essence') as a consequence of the division of labor and living in a society of strati ...
. Money rises above individual conflicts while being an essential participant of the conflict. It has transcended its characteristics of a tool when it has become the center around which the economic system rotates, at which point it also takes the role of an all-encompassing teleological circle. Simmel was to compare this phenomenon with Marx's
commodity fetishism In Marxist philosophy, the term commodity fetishism describes the economic relationships of production and exchange as being social relationships that exist among things (money and merchandise) and not as relationships that exist among people ...
. Yet, division of labor makes it possible to construct intellectual and scientific contents that surpass the ability of the individual mind. Even in these cases, though, it may be essential that a synthesis be accomplished by a single mind. Similarly, as material concerns become impersonal, what is left can become more personal. For example, as the typewriter has relieved the writer from the cumbersome mechanics of writing, he can devote more attention to the original contents of his work. It really depends on humankind whether money will lead to increase distinctiveness and refinement or not.


Social effects of money

Simmel's outlook, while gloomy, is not wholly negative. As money and transactions increase, the independence of an individual decreases as he is drawn into a holistic network of exchange governed by quantifiable monetary value. Paradoxically, this results in greater potential freedom of choice for the individual, as money can be deployed toward any possible goal, even if most people's sheer lack of money renders that potential quite low much of the time. Money's homogenizing nature encourages greater
liberty Liberty is the ability to do as one pleases, or a right or immunity enjoyed by prescription or by grant (i.e. privilege). It is a synonym for the word freedom. In modern politics, liberty is understood as the state of being free within society fr ...
and equality and melts away forms of
feudalism Feudalism, also known as the feudal system, was the combination of the legal, economic, military, cultural and political customs that flourished in medieval Europe between the 9th and 15th centuries. Broadly defined, it was a way of structur ...
and patronage, even as it minimizes exceptional, incommensurable achievements in art and love.


References

{{DEFAULTSORT:Philosophy of Money, The 1900 non-fiction books German non-fiction books Economic sociology Finance books Social philosophy literature