In 1984 Madonna sang “[…] we are living in a material world and I am a material girl”. In 1890 Oscar Wilde published his (only) novel The picture of Dorian Gray, containing the sentence: “Nowadays people know the price of everything and the value of nothing”.
Do you recognise these quotations as being applicable to you? “Of course not”, I here you think, “there is more to life than money. Money is just a means to an end.” But if it is the means to many of our ends, how independent are we then from money and how does that influence us?
What is money?
When I received my first formal economics lesson at school at the age of 13 I was taught that ‘money is a medium of exchange, a unit of account and a store of value’. I’d like to examine how these different uses play out in life and which underlying assumptions are made about money that have consequences on how we assign meaning or value to our world.
Money as a medium of exchange
Isn’t it odd that we are willing to exchange something perfectly useful such as a loaf of bread for a piece of paper or coin or even a number on an electronic screen increasing? Clearly we are only prepared to do so because we appear to believe that we can exchange those ‘currencies’ for something else that is useful to us. Much has been written about this so-called fiduciary aspect of money (deriving from latin fides meaning ‘faith’).
Edna & Uriel Foa were leading academics in 1970s and 1980s promoting the so-called ‘resource theory of social exchange’. They distinguished various categories of resources that people exchange when interacting. The picture below depicts these categories.
Note how the horizontal axis distinguishes ‘abstract’ from ‘concrete’ resources. On the vertical axis a distinction is made between ‘universal’ resources and ‘particular’ resources, meaning resources are useful as a resource because they are particular to the people engaged in the exchange. It means that these resources are assigned a certain meaning, which gives them value.
Compare this to Hannah Arendt’s the aspects of human activity (vita activa) that she distinguished, namely: ‘labour’, ‘work’ and ‘action’. It is important to note that activities can and often do contain all three aspects concurrently, hence they are not mutually exclusive, but they are contained in every activity to varying degrees. ‘Labour’ here refers to the aspect of sustaining one’s livelihood, ‘work’ refers to creating or producing something and ‘action’ refers to the aspect of expressing ourselves in the activity. ‘Action’ is always directed at another person and includes speech. Action is the means by which we distinguish ourselves from others as unique and unexchangeable beings. And it is through action that we develop a sense of identity and hence meaning to others. So a journalist writing an article is as well a form of labour (earning wages to sustain livelihood), work (making an article) as action (expressing his values in the article even if these values are objectivity and neutrality). Speaking to a friend is usually ‘pure’ action.
Combining Foa & Foa’s framework with Arendt’s, one might argue that ‘particular’ resources must have meaning and exchange value because they originate from Arendt’s ‘action’ aspect. ‘Universal’ resources would then derive from activities in which the ‘labour’ or ‘work’ action is more pronounced. ‘Services’ are an interesting resource then as they can be both rather ‘particular’ to the receiver, but also simply reflect ‘work’ for the giver – think for example of a (health)care worker. The quality of the service is then dependent on the amount of ‘action’ the careworker puts into the activity, by making the service particular to the receiver.
How money affects the equation
I find Foa & Foa’s work fascinating, because they established that money, due to it being not particular to the individuals exchanging it (which is exactly the purpose of money) is unsuitable when an exchange of a more ‘particular’ resource (such as status, love or service) is desired. Why is this? I posit that this is because exchanging a more particular resource conveys with it a certain personal meaning between the people performing the exchange – it requires ‘action’. In other words, money cannot really convey particular personal meaning and is not very suitable to exchange for ‘love’ or (to a lesser degree) ‘status’, because exchanging for money is relatively low on ‘action’. To me this is yet another argument for why working for money alone is not fulfilling. Because if that were sufficient why do we also want recognition and appreciation (i.e. receiving ‘status’ or ‘love’ through ‘action’)?
But why then do we let so many of our life decisions be guided by money once we have fulfilled our basic needs to survive? And do we realise the impact on relationships (such as those with colleagues or neighbours), if our exchanges within these are conducted mainly with rather ‘universal’ resources, such as money, goods or information? It means we miss an opportunity to develop a more ‘meaningful’ relationship based on exchanging ‘particular’ resources.
Money as a unit of account
Considering money as a unit of account, what does it account for? It accounts for the economic utility of one thing relative to another thing. Economic utility is defined as the total satisfaction received from consuming a good or service. If apples cost EUR 1 each and pears cost EUR 2 each, pears are considered to be twice as ‘useful’ or ‘satisfying’ as apples. But considered more satisfying by whom? Prices determined by markets based on free supply and demand will only reflect an average outcome of utility at which equilibrium between supply and demand will exist. So market prices neither necessarily reflect products’ subjective utility to me, nor are they really objective as there is no absolute utility for the market price of something, it’s always relative to other goods and services; it’s an average of the subjective utility of members of a given group.
Needless to say, following from Foa & Foa above, that the ‘utility’ or satisfaction derived from status or love cannot be expressed in monetary terms.
Money also accounts for the cost of my employment (an activity in Arendt’s terms) to my employer relative to my employer’s revenue or profit. But does my salary therefore also determine how my job is evaluated by others? If it would we’re making this valuation dependent on a transcendent entity, namely ‘the market’ – NOT on other people’s particular appreciation. We’d be deriving status from a display of (financial) power. Following Arendt we are usually only compensated for our ‘work’, but not for what our activity means to others in terms of ‘action’. That the value that people attach to certain jobs can differ greatly from their relative market price as an employee has become apparent recently when many of us expressed their appreciation of medical personnel caring for COVID-19 patients by publicly applauding them (an ‘action’ in Arendt’s terms, conveying ‘status’ as a particular resource in Foa & Foa’s terms), whilst their salaries remained the same. The reverse applied to bankers after the 2008 financial crisis.
The point here is that money ultimately does not determine the meaningfulness of a job. If you just need the money, this is not something you can afford to worry about. But if you make more money than you really need, you may start wondering about this.
Money as a store of value
From a young age I was encouraged to save money and it has stuck with me. Economists define savings as ‘delayed consumption’. In the meanwhile savings are ‘stored’ in a bank account as a store of value.
The recent negative interest rates express that the value of possessing money now is lower than possessing it in the future. Apart from the intent behind this, namely encouragement of consumption and investment as has usually been the purpose of lowering interest rates, the philosophical implications reach further.
Because what does it mean that you now have to pay money to possess money? Doesn’t it imply that money itself is losing its credibility (derived from latin credere – ‘to believe’) as a store of value and thereby its utility as a future means of exchange?
To be fair, this criticism is not levelled at money as a concept, but only at the currencies that we use as money at the moment. Yet it may forebode that we may be transitioning to alternative currencies or perhaps even alternative resources to facilitate exchange. Isn’t that what for example corporate social responsibility is ultimately about; that we don’t reduce an organisation’s utility to the money it produces?
Or returning the question to the individual level: what use is it to, in exchange for ‘work’, earn money beyond what we need on a day-to-day basis, if you could also spend your time on activities that convey more particular meaning, more status and love, that are truly fulfilling?
Rethinking the ‘value’ of money
Modern society needs money. There is nothing wrong with money in and of itself, because it is very useful, not to say a prerequisite to enable the exchange of goods and services in large productive networks (economies) where not all participants can know each other. Our comfortable life styles depend on the role money performs. However, as our societies have become less cohesive because many of our relationships have become more short-term and opportunistic with people spread across the globe, we are thereby forced to rely more on money as a universal currency to facilitate exchanges. We have accustomed ourselves to expressing many things in life in monetary terms.
I think that the reason that so many people nowadays are in search of meaning is because they have lost the resources to be engaged in ‘meaningful exchanges’ that create real value within stable, long-lasting, nearby relationships. We have lost these resources, perhaps because we have lost the ability and skill to give ‘status’ and ‘love’ to others we don’t know that well as we’re becoming increasingly distrustful, as we feel increasingly threatened by developments and systems that transcend us.
We cannot reverse the course of history and neither should we want to do so. But the road to living in a more meaningful society starts with realising how money is just one of many other resources in our social exchanges and that it is mostly inadequate to achieve meaning. It doesn’t mean that money is irrelevant. But it does mean that we need to learn to express and exchange what we truly value in life with meaningful others.