I am so pleased to have stumbled across a short excerpt from a talk by Alan Watts, forwarded by a Twitter follower. Watts makes a truly profound argument about what money really is. I’ll summarize it here and you can watch the full three-and-a-half minute video below if you like.
Watts notes that we like to talk about “laws of nature,” or “observed regularities” in the world. In order to observe these regularities, he points out, we have to invent something regular against which to compare nature. Clocks and rulers are these kinds of things.
All this is fine but, all too often, the clocks and the rulers come to seem more real than the nature that is being measured. For example, he says, we might think that the sun is rising because it’s 6AM when, of course, the sun will rise independently of our measures. It’s as if our clocks rule the universe instead of vice versa.
He uses these observations to make a comment about wealth and poverty. Money, he reminds us, isn’t real. It’s an invented measure. A dollar is no different than a minute or an inch. It is used to measure prosperity, but it doesn’t create prosperity any more than 6AM makes the sun rise or a ruler gives things inches.
When there is a crisis — an economic depression or a natural disaster, for example — we may want to fix it, but end up asking ourselves “Where’s the money going to come from?” This is exactly the same mistake that we make, Watts argues, when we think that the sun rises because it’s 6AM. He says:
They think money makes prosperity. It’s the other way around, it’s physical prosperity which has money as a way of measuring it. But people think money has to come from somewhere… and it doesn’t. Money is something we have to invent, like inches.
So, you remember the Great Depression when there was a slump? And what did we have a slump of? Money. There was no less wealth, no less energy, no less raw materials than there were before. But it’s like you came to work on building a house one day and they said, “Sorry, you can’t build this house today, no inches.”
“What do you mean no inches?”
“Just inches! We don’t mean that… we’ve got inches of lumber, yes, we’ve got inches of metal, we’ve even got tape measures, but there’s a slump in inches as such.”
And people are that crazy!
This is backward thinking, he says. It is allowing money to rule things when, in reality, it’s just a measure.
I encourage you to watch:
Lisa Wade, PhD is an Associate Professor at Tulane University. She is the author of American Hookup, a book about college sexual culture; a textbook about gender; and a forthcoming introductory text: Terrible Magnificent Sociology. You can follow her on Twitter and Instagram.
Comments 21
AG — June 2, 2014
Yes money is an invention, no it is not quite like inches or measurement of time. Something IS created. Markets. This is a simplified example.
Let’s look at how money came about and we can see that (a) something
was created as well as (b) something was measured.
Start with a barter economy. I (1) make tea, you (2) make
hides, another person (3) makes pancakes. If (1) has tea and wants pancakes then he has to be lucky enough that (3) wants tea and is willing to trade his pancakes. What if (2) wanted pancakes but (3) doesn’t want hides, then (2) is out of luck… barter economy.
Next step is using something like gold (people value it culturally and it is scarce, so it is a good measure of value and it can’t be easily faked; you can break it up and trade it easily without it falling apart) so that person (2) is not out of luck, b/c he can give gold for pancakes and (3) knows that (1) will accept gold for tea.
Now evil people come in and start pillaging, so it is best if we keep all our gold in one place and guard it. Then (1) can tell (3) , “hey, here is a IOU note, give it to the bank and they will say that my gold is your gold, so please give me pancakes” . (3) agrees to this and continues with his day. He runs into (2) and wants hides. All (3) has is this notes, he already gave away the pancakes, so he says hey (2), let me write on this note that you (2) get the gold from (1) so I can get your hides. (2) has banked before, likes the idea, wants the gold instead of the hides and does the trade. (2) then runs into a new person (4) and trades the note for onions. (4) runs into (1) and trades the notes from (1)’s tea…. After all that work (1) essentially traded (4) a note…..
A BIG MAIN POINT: Some thing was created here, a market. That one note did a lot of work that would not have been as easy without it. (4) didn’t even exist in the market until he walked into my example at the end and he was able to trade something with which (1) started off the example.
BIG MAIN POINT APPLIED TO THE DEPRESSION and banking
This gets more complicated when the bank realizes that no one comes and gets all their money at once. Let us say For every 10 bars of gold stored in the bank and 10 notes handed out, there is only 5 notes in circulation with people keeping the other 5 notes at home. The banks then start lending out notes not backed by gold and charges interest. People can now borrow on a promise to repay and use that gold to go start a business. If their business succeeds and they grow 20 acres of corn, that means the invention of a market helped grow that corn. The market allowed a person to turn their promise to work and their idea into tangable goods they bought so they could farm, the corn they made is a real increase in the wealth of their community. Real wealth created b/c the invention of the market/banks/money allowed them to turn an idea into gold borrowed that they used to buy plows, seed, food to eat for the labor and all that helped create corn.
In the depression , banking fell apart b/c the market fell apart. People took out all their money at once, banks had lent that money out b/c they run under the assumption that people will not all take their money out. People ran out of confidence that the economy would grow. They did not think that corn planters would sell corn and repay their debts so the people went to get their money back. Banks only work when they lend more than they hold. PEOPLE KILLED THE MARKET. This is not a mistake of measurement, this is removing an invention that facilitates growth. THERE WAS LESS WEALTH b/c we gave up on lending money to people who needed the money to create more wealth. The farmer couldn’t create more corn b/c we wouldn’t lend him the money to get started.
WATTS is wrong b/c he is attacking money as if it is only a measure. It is not. It is also how we invented markets. This invention is not a door stop, it is an invention of humans as a community deciding that they are willing to place bets on the future output of other humans. If we give up on that belief like we did in the depression, you lose a lot.
Mr. S — June 3, 2014
I'm not sure what point Watts is trying to make here. Despite not being a true resource, Money has value in that it can grant you access to resources.
A society dealing in the aftermath of a catastrophe doesn't need pocket-sized portraits of dead statesmen, but it does need resources to rebuild. And money provides an efficient way of acquiring the appropriate resources needed. I'm not sure why focusing on currency's lack of intrinsic value matters; its capacity for acquiring intrinsically valuable goods and services is why it has value.
Harry shell — July 13, 2014
I like Watts a lot, but this is just wrong in my view. I wish it wasn't because I really love his discussions of Zen, etc. and have most of his books (from a time when books could be had for $1.95 in yesterday's - wait for it - money.
Money isn't a measure of wealth per say. It is rather an agreement to engage in commerce. He's right that during the Depression, there was a slump. But it wasn't a slump in paper. It was a slump in the agreements to engage in commerce. It was backed by the vicious cycle of beliefs that if I performed in my part of the transaction, you would not perform on your end - either because you couldn't (because other people wouldn't engage in enough commerce for you to do it) or because you didn't want to. Either way, I'd lose out, and so, seeing other people get burned, I become much more cautious. In this cautiousness I make you jump through hoops to prove you're going to come through on your end of the business. This slows things way down. As a result the speed of commerce drops. People become scared and that slows it down even more.
The only solution is for trust in each other to build back up. Whether by government intervention or by people simply being willing to engage in more simple transactions for awhile and rebuild the system from the ground up.
Money isn't a measure of wealth. It is a measure of trust. When you see a downturn in the economy, you are seeing people massively starting to distrust each other. The distrust is like dirt in the gears. And anyone who foments that distrust, whether in the private sector or in the government, is intentionally throwing dirt on the gears. I leave it to you to decide whether to follow such people into hell (small h) or not.
Some food for thought, and some long reads | maxweylandt — July 27, 2014
[…] “Sorry, you can’t build this house today, no inches.” Money is a measurement, not a resource. […]
herpnerp — August 10, 2014
I think everyone agrees that modern (i.e., non-commodity, non-commodity-backed) money has no "intrinsic" value. And, especially with fiat money, it is obviously something that is invented, created by the issuing agency--socially constructed, if you will.
However, the implication that the Great Depression was in some way fake is totally false. I presume, though I don't know, that real wealth did actually decrease during the Depression. And more generally, depressions may have real (as opposed to nominal/monetary) causes.
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Omdat het kan. – Age of absurdity — September 29, 2016
[…] Alan Watts zei in de jaren ’70 al over de crisis in de jaren ’30 hoe absurd het systeem is. De dag na de crash was er enkel minder geld. Niet rijkdom, grondstoffen, energie, mankracht. Neen. Enkel geld. En de allesverlammende reactie van toen is te vergelijken met een bouwwerf waar men na een crisis niet zou voortdoen omdat er niet genoeg centimeters zijn. De materialen zijn er nog. De werkers ook. Maar de “baas” zegt dat de centimeters zijn op zijn en dat je helemaal niets snapt van hoe het systeem werkt als je toch aan de slag wil. Dat is de maatstaf iets op zich laten bepalen ipv die te gebruiken om iets te meten. […]
paul beard — October 9, 2016
To understand the origin of money and finance as a part of how civilizations are organized, you could watch http://www.dailymotion.com/playlist/x4l1up_the_ultrafem_connections-by-james-burke/1#video=x4e30ki at about 30:00 in. By all means, watch the whole thing and the rest of the series.
Εθελοντισμός σε όλο τον κόσμο – Πολιτισμός Τύπου 1 — July 1, 2017
[…] Φαίνεται πως υπάρχουν οι πόροι ώστε να παρέχουμε τροφή, ένδυση και ανέσεις σε όλους τους ανθρώπους. Επίσης φαίνεται πως υπάρχει το κίνητρο για να γίνει κάτι τέτοιο, αλλά δεν υπάρχει το χρήμα. Όπως είπε ο Alan Watts: «Είναι σαν να προσπαθείς να χτίσεις ένα σπίτι και ξαφνικά αντιλαμβάνεσαι πως δεν έχεις ίντσες… Έχεις το τσιμέντο, το ξύλο, τα καρφιά… Έχεις την ανθρώπινη θέληση για να χτίσεις το σπίτι, αλλά δεν έχεις τις ίντσες. Τόσο γελοίος είναι αυτός ο κόσμος.» (Σημείωση: εδώ ο Watts εννοεί πως η ίντσα, όπως και το χρήμα, είναι ανθρώπινες ανακαλύψεις, οπότε μπορούμε να τις χρησιμοποιούμε όποτε εμείς τις χρειαζόμαστε και όχι να περιοριζόμαστε από αυτές. Περισσότερα εδώ) […]
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AMP3083 — September 16, 2020
Money is a means by which cooperation becomes competition, and generosity becomes selfishness.