Abstract
Does the very existence of money depend in any sense on our “recognition” of it? According to certain functionalist views, no such attitudes are necessary. This paper argues to the contrary for recognition dependence, of a minimal sort. What’s needed in a population is (1) the functional know-how of money use, (2) an ideational structure founded upon people’s thinking about what others are thinking, and (3) wide enough acceptance of a payment or settlement obligation (as expressed, e.g., when someone asks a vendor “So what do I owe ya?”).
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Notes
Ingham (1996, pp. 507–508) offers context: “The standard answer to the question “what is money?” derives from the late nineteenth-century functionalist account: money is what money does.”
To be sure, how well an item serves a bundle of relevant functions may be indeterminate in many instances. Perhaps different functions should be weighted differently. And perhaps it’s useful to speak of “moneyness” to a high or low degree when an item serves a list of typical functions to a high or low approximation (e.g., US Treasuries high, mortgage backed-securities low). Even then, lower-scoring items can be very much like bona fide money in certain respects, and called “money-like” (e.g. crypto assets), even if they don’t rise to a “bona fide money” threshold (as nearly all government fiat moneys do).
von Mises ([1912] 2013, pp. 34–35) goes so far as to claim that, among the “half dozen further ‘functions’” of money often enumerated, “all of them can be deduced from the function of money as a common medium of exchange.” (Italics mine.) For other attempts to begin from the “means of exchange” function, see Menger (1892); Brunner and Meltzer (1971); Niehans (1969); and Samuelson (1973); Alchian (1977).
The functionalism of Smit et al., (2011, 2014) may not entail this stark formulation; those authors may well require some minimal awareness of money’s “exchange value.” But it’s important that their incentives-based analysis of money as a device for transaction cost minimization does not require this. The incentives “get stuff in the future” or “avoid jail” may be quite sufficient, causally, with no further awareness of the “common medium of exchange” dimension, per se, aside from factual, instrumental beliefs about what will get stuff in the future or keep one out of jail, under the circumstances.
Vooys and Dick suggest neutrality about what exact “mental contents” are required, in which case my point is only that they haven’t quite explained how attitudes are required for money.
As anthropologist Caroline Humphrey (1985, p. 48) explains, “No example of a barter economy, pure and simple, has ever been described, let alone the emergence from it of money; all available ethnography suggests that there never has been such a thing.” See also Chapman (1980); Heady (2005); Ingham (2004); Fayazmanesh (2006); Graeber (2011); Desan (2015). Indeed, people resort to bargaining and bartering to avoid the inconveniences of money, as, for instance, when a remote area can’t procure enough of the closest government’s currency. Humphrey (1985) offers a detailed account of the Lohmi people, who live near the contemporary Himalayas and prefer barter over money exchange given the inconvenience of money.
Politics, book 1, chapter 9, 1257a,b.
The Wealth of Nations ([1776] 1994, p. 24, Ch. IV, bk. 1).
Heidegger famously points to a general aspect of experience wherein a hammer, say, is “ready to hand” for use in hammering without any further awareness of it, until something goes amiss. Husserl’s “Lebenswelt” and Searle’s “Background” offer similar or related characterizations. Money use would be another example: we concentrate mainly on the use itself (buying things; paying off debts, etc.) without being constantly aware of whether and what money is—until our credit card is denied or our bank goes bankrupt or our money becomes worthless due to hyperinflation, etc.. My question is consistent with this but also keyed to the specific features of monetary practice I enumerate below. I also allow from the start that the explanation of those features may well require a distinctive social ontology.
Searle (1995) discusses we-intentions and later analyzes money and other institutional facts in terms of what “we accept” (p. 105), meaning what “we, collectively, accept, acknowledge, go along with, etc.” (p. 111). What “we intend” and what “we collectively accept” are not marked as distinct notions—at least not in regards to money, one of his go-to examples.
Searle merely illustrates with the passage quoted earlier about money being recognized as money at 2010, p. 58. On the other hand, Searle’s analysis of the form of a constitutive rule—“X counts as Y in C”—can be helpful, as I’ll suggest below.
Compare H.L.A Hart (1961): although a legal system depends on people taking an “internal point of view” toward social rules, which including a sense of obligation, it suffices that judges have the requisite attitudes. The unwashed masses may be moved simply by fear, under threat of sanction.
Humphrey (1985, p. 63).
In one analysis (Hockett and James 2020, p. ch. 1), fully-fledged “basic money” is nothing more, and nothing less, than a transferable promissory claim or IOU that a large portion of a community accepts as settling accounts in fulfillment of a large share of market obligations, debts, or other liabilities. A “community” could be a village, a modern society, or a mere assemblage of would-be money users, united by their use of promissory IOUs in settling accounts between them, for debts commercial or public, including fees, fines, taxes, and damage claims. What item they accept as settling a debt, for being fully discharged or merely offset with credits, will be (i) a promissory claim (an IOU); (ii) transferable (as with an endorsed bank check; a dollar or euro bill or other unit of currency; or what lawyers call a “negotiable promissory note”); and (iii) widely accepted by a community in settling accounts (wide domain) in (iv) the fulfillment of a large share of market obligations, debts, or other liabilities (wide fungibility). An item can be more or less money-like depending on how widely it is accepted among people (its domain) and what range of obligations it is accepted for (its degree of fungibility).
Marx’s analysis of the money form in Ch. 1 of Capital can be read as placing money’s use in settling debts before its commercial uses. To this reader, this is one possible rational reconstruction, but Marx’s account itself is unclear.
Though Knapp ([1924] 1973) (1905 original German) is often cited as the definitive state money “chartalist,” Immanuel Kant formulated a version of the view over a century before ([1797] 2017, pp. 6, 288). For discussion see James, forthcoming (b). Others influenced by Knapp include Lerner (1947); Wray (2004, 2014); Bell and Nell (2003); Forstater (2005); Tcherneva (2016).
Keynes, citing Knapp, called money “anything which the State undertakes to accept at its pay-offices, whether or not it is declared legal-tender between citizens.” See Keynes 1930, p. 6, note 1 (Ch. 1, sec. iv). See also Keynes (1914) on Innes’s credit theory (1913). As explained in Keynes (1933), his prior view of money was the basis for his masterwork, the General Theory (1936).
Mises, responding to Knapp and others, rejects even this modest sufficiency claim, assuming a state can only arrange a substitute for what is already money ([1912] 2013: 78; see also p. 74). But even if common recognition in practice from within an economy (what Mises calls “catallaxy”) is necessary, taxes can still “drive” money: at least normally, the legal apparatus of the state can reliably secure the conditions needed for wide recognition in the marketplace (perhaps in parallel with other currencies). The fear of prison is a powerful thing. People may on occasion be so bold as to refuse a weak, seemingly illegitimate government’s money in protest. But that may mean only that the foreign or local money they do use runs in parallel to the sovereign’s issuance. In special cases, of course, the refusal might help upend the regime.
Keynes (1930, p. 4), for his part, speaks ambivalently of “Law or Custom,” “the State or the Community,” repeatedly—suggesting that a full-fledged contemporary state is not necessary, because “custom” or “community” would suffice.
Ingham (2004, p. 25) is skeptical about the cigarette argument, but in the context of posing a problem for commodity theories, which have trouble explaining how a “unit of account” could emerge simply from bartered exchange and subjective preferences. I agree with that line of criticism, but also see no reason why the single, full standard cigarette couldn’t be presumed as the unit of account for purposes of payment and debt-settlement by tacit agreement. Even bent or halved cigarettes (perhaps discounted accordingly) can then operate as the physical representation of promissory IOUs and count as basic money.
The ongoing credibility of a money is closely related to its “store of value” function, since an IOU won’t serve very well as a means of settling debts over time if it cannot be accumulated or if its value is too unstable.
Aristotle was right that “even if we happen to want nothing at the moment, money is a sort of guarantee that we shall be able to make an exchange at any future time when we happen to be in need” (1895, 5' I4, p. 157, italics mine). He might have added that the “guarantee” is not simply probabilistic, but also promissory.
This is a stronger claim that the “mimetic hypothesis” in Orléan (2014), whereby users may abandon a currency based on their perception of its unfairness, inconvenience or untrustworthiness to others. Orléan does not seem to mean that a mere appearance of certain attitudes of acceptance –perhaps a false appearance—explains why a money remains in currency or is abandoned. The suggestion being considered in the text is that money coordination need only be ideational.
For thoughts Rousseau should have had in this connection but apparently didn’t, see Robert Hockett (2018), “Rousseuvian Money.” And as for why Rawls neglected money, see James, forthcoming(c).
As defined in James, forthcoming(d), ideational structure can replace or interpret a standard “common knowledge” requirement, which is usually seen as necessary but not sufficient for cooperation.
What H.L. A. Hart (1961) calls the “internal point of view” toward the law is the first-person perspective one takes given the attitude of what I’m calling “acceptance”—in this case, of a norm we express in the belief or statement that “I owe you”. Note that this is compatible with David Gauthier’s view (1986) that enlightened self-interest might induce the firm acceptance of moral rules for reputational reasons, even if this has no further rational justification.
In this way the present view is akin to Hart’s positivism, which sees law generally as a sociological reality, regardless of what moral truths apply to it. Hart (1961) still requires that enough participants—or at least enough judges—adopt an “internal point of view.” But much as on the present account, that can be understood simply as “acceptance” of an obligation. See Scott Schapiro (2006) for this emphasis on the psychological state of “acceptance,” and Gilbert (1999) for a commitment-based reconstruction of Hart’s picture that does not require moral obligation.
Anscombe (1958) makes the point that payment practices cannot be adequately described in non-normative vocabulary. But perhaps due to her Wittgensteinian proclivities, she has little to say about psychological attitudes. The present suggestion begins to characterize psychological dimensions of the norms of payment.
I thank Arash Abizadeh, Margaret Gilbert, Jeff Helmriech, Graham Hubbs, Karl Schafer, and anonymous reviewers for comments or discussion.
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James, A. Money, recognition, and the outer limits of obliviousness. Synthese 202, 43 (2023). https://doi.org/10.1007/s11229-023-04252-w
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DOI: https://doi.org/10.1007/s11229-023-04252-w