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The role of money in the society

A first definition of money is to define money as the mean of exchange between individuals. In a capitalist economy, this is a too simple definition. The fundamental  purpose of money is a way to distribute the ownership in the society. And, by a consequence, money is also used as a mean of exchange.

But, if you analyze the way that money works you will understand that as a tool to help  exchange that money is a very imperfect tool. Furthermore, it should be analyzed that money is also a social instrument which help to coordinate social relation between individuals.

A world without money

France is a country where money has a monopoly in term of exchange so people can' t imagine what would happen in a world without money.

It is interesting to have a look in society where money exists but exchange are just partly base of money. Other system are the solidarity system. People give with the expectation that the receiver will give them something back. This system has the advantage to be simple and so no accounting is needed. It is working with a society of people of common value and understanding. You should note that this system is based on trust and does not work in place where the population is moving (big city).

The solidarity relation is also disappearing when money (called prosperity) is commonly used by the middle class as when people are capable to sell their service against money they prefer the guarantee of money than the guarantee of trust.

Money: greediness or generosity ?

In the current culture of media in France, it is current thinking that people who are money mind  are greedy. This fact is the heritage of our long history about money as 

Money is considered to be the tool of greedy people. Good people are supposed to work (or sell) freely. If follow, this contest should lead to the suppression of money.

So, the question is "Why money has been created ?"

If you consider the money in the antic world, money was a way to take in account action of individual in order to guarantee an equivalent action.

It is then more generosity to give out of money than against money.


The attraction for giving

All psychologist will agree that people are bound to give to other people.

So, why not simply give. Why money should be used to take account giving ?

The reason is that people wants to choose what they are giving to others. And, others people wants to choose what they are receiving from you. And in most case, they are a strong discordance between what the receiver wants to receive and what you want to give.

If you try to live in society where the practice of solidarity is the main way of exchange. You will notice that giver are very happy but receiver are not so happy. In most case, receiver has to pretend to be happy by the generosity of the giver . But, in his inner being, he is thinking "I don' t need this".

In a money leaded society, receiver (called "consumer") are very happy while getting (called "buying"). But, the giver (called "worker" ) is very often thinking that he is forced by money to do think that he doesn't want to do. So, he will complain about money as money is the institution which create the gap between what he is giving (called "selling") and what he wants to give.

They will be happy if they are chosen what they are giving to others. If it is the receiver who choice what the person gives

In summary, money is a regulator between what people want to do and what other people want to receive.


Interest rate

In Europe at the end of the XIXth century, a practice in the past forbidden by the religious instance has been institutionalized "interest rate". Interest rate has completely revolutionized the institution of money.

Before money if based on gold was in an insufficient quantity or lead to inflation. Interest rate has bring price stability as money got value on itself. Before money has no value in itself so it was preferable to keep goods than money. But with interest rate, money creates money. So, it start to be interesting to keep it.

The fact that people are ready to keep money a long time as make possibly long time perspective investment and industrialization.

Interest rate has made industrialization possible. And, the main reason of not success in industrialization itself is due to the absence of practice of interest rate.

An industrialization should be planned on a term of more than 5 or 10 years. If you can' t wait so long to receive to receive back your  "right to buy", you are not going to accept that you can not use your money for you.

The difference between investing and buying is in investing that

bulletwith buying you are choosing what you are spending for,
bulletwith investing another person is choosing for you what he is spending for.
Before, interest rate, investing was not possible so as industrialization. With interest rate, the person who is spending promise you to give it back your "right to buy" (and to buy in a bigger amount). If the person only give you back the same right of buying back while giving up the right of buying back. So, interest rate appears with interest rate you can' t buy now but you will buy more in the future. So, you can accept the another person is taking your right to buy because he will give you back this right with increase.

Industrialization means making machine to do thing instead of directly doing thing. If you are directly making a shoes by hand, you will get your shoe fast. If you are making a machine to speed up the process of making shoes, it will take the time to make the machine and the time to make the shoe with the machine. So, it will take more time.

If you are making shoes with machine, you will make much more shoes per hour of work. You are giving more to the society so you can receive more from it (called " making more profit" ).

The person who had given to the investor the right to buy (called " lending money") has created the possibility for you to make the machine as however it might not have been possible for the investor to live or buy what is needing to create the machine. So, the person receives a part of this more profit made possible on the form of " interest rate" .

It is while the society does not succeed to be industrialize before interest rate has been institutionalized.

The freedom of not receiving

In a market economy, every body is free of not buying what he doesn't want. This freedom has created unemployment and social misery. A question commonly asks in France: Is it " the choice of  buying" socially acceptable ?

Suppose that you live in a society where half of the population are professional actors. There will have drama, movie and no public to look at them. But, in society where the freedom of not buying is guarantee, professional are working for money so no public means no money and a great number of actor will have to look for another job.

Money is the basis of a social organization in the capitalist society as there is a strong discordance between what individual wants to do to the society and what society needs from  individual. For example, most people wants to be artist, politician, business men and these people want to eat, buy houses, car, dress. People are trying to spend their time in what is the most interesting for them. And, unfortunately, goods that people want to buy don't lead to the job that people wants to do.

Money: A tool to select decision maker ?

A common tendency in an organize society is to select a single or a small number of individuals in order to decide for many others. As in a professional environment, a professional individual has a very high probability to decide the same way than any other professionals. The hierarchisation of the social organization appears to have one individual deciding with eventuality a veto of others individuals appear to be more functional than many individuals with an equal status in a perpetual negotiation to find a compromise. A negotiation generally consists to put everybody at a equal status in term of understanding of the situation and information and in a complex environment could be a very time consuming operation. Furthermore, when people are talking, they are not producing so reducing the talking time increase the productivity. The industrial phases has increased this tendency as the environment became so complex than it necessitates years of experience before becoming enough competent in taking a decision.

So, instead of putting everybody to an equal understanding, selecting a person (or a small group) with the best understanding and knowledge appear to be the most practical. (The ultra democrat could pretend the opposite).


Money is the tool who define the position of the individual in the society. Money has been the tool which create the social disparity between individuals.

So, many people consider that the use of money creates inequality between the distribution of wealth between individuals. In fact, it is the industrialization which necessitate the inequity between the distribution of wealth between individuals. In an industrialized society, all worker fell inequity face to manager whatever money is used or not (see collectivism model).

How does money create a hierarchical society ?

People who have no money, should work for other people. And between people who has no money some will have money to create small business as restaurant as other people will be in position to create a big factory. In society socially regulated by money, it is socially needed that some people have an huge amount of money otherwise there will never have industrial investment.

The role of money in the communism system

The Marxism is based on the refusal to use money as an instrument to socially organize the society.

In the communist USSR, money was as reduce a way to take in account what individual are doing for the society.

So, as communism society has to be industrialized, a system of individual hierarchization has to be created.

In the communist, social position has to be fixed according to exam success or the promotion through the party. Ambitious people was then involve in a political game which is opaque and more base on appearance than capability. Then, market economy has the advantage to be more pragmatic and more based on individual capability than individual appearance. In the market economy, a business manager acquiring power is acquiring money. A business manager who is acquiring money is selling with profit. Succeeding a sell is like a grant of satisfaction from the customer to the business manager. So, power concentrates to the business manager who creates the highest satisfaction to other individuals (called customer). Then, capitalist could be considered as a meritocratic system based on the capacity to satisfy the material claim of others.

Another advantage of a hierarchisation based on money ( capitalist system) to a hierarchisation based on relation (communism system). A business manager who analyzes a market and looks how to satisfy customer is involved in a more rational activity than a politician who will to have the power from others (his superior in totalitarism system or the majority in democracy). The bank account makes an history about how successful business people handles their business to succeed.

If money movement were on Internet so as every body in the world can understand how rich people succeed to get rich. The problem about how, why, who get rich could be analyzed and help individual to get the capability of succeeding with money simply in understanding how rich people manage to be rich. But, that is something which is today technically possible but whom the obstacle are used.

The Institute of Research about Entreprenorship is strongly interested about the possible change and the transparency of world exchange.

 Money: Is it the best social measurement system ?

Money is the most sophisticated social measurement system uses in our days. It has played a major role in the industrialization of our society and in the development of our economy. Its major success is that undeveloped countries which adopts a western style banking system has managed a strong development while others stay underdeveloped.

However, despite this success, money is still strongly contest everywhere in the world. Many of this contest came to see mainly money as a tool of exchange which is a half false view, money is before all tool of social development and hierarchisation which has made industrialization possible.

Another view is to consider that at the age of computerization. Money is may be too simple system to be optimum ?

And, the best way to develop this analysis to model another system much more optimize which can be called a collaborative system. Another alternative less innovative is to analyze the advantages and inconvenient of a multi-monetary economical system with money of various hardness (see rarity concept).


Quality of money in term of social measurement system

The current hard-currency monetary system offers to the society the following advantages:

Right of buying everything on sell: Money offers the possibility to acquire everything that people are ready to abandon there ownership right. This is the best quality of money  and the counterpart is that there is no guarantee that everything on sell can be sold (unemployment !).

Right of saving: Selling with profit increases the personal freedom toward the society. This is the consequence of the interest rate system. Each profit can be put on saving with interest rate. From saving, the individual has the guarantee of a regular revenue and escapes from the constraint of work. The reality between this is that most of the work is made by the working equipment (probably more than 90 % if you compare the productivity between an artisanal tribal society to a modern industrialized society ). Saving means buying "work equipment". So, the interest rate is in reality the revenue of the "work equipment". The current monetary system guarantees that the person which makes the investment and so is the cause the production of the "work equipment" receives the revenue of this work equipment. 

Pragmatic hierarchisation of the society: This last point is the less considered but it is one of the major role of money as it permits the person to acquire a position in the society according to their realization and not the talk. One the biggest cause of failure in social system is the concentration of responsibility and talent to the political world instead of  entrepreneurs world. This last point should be kept in consideration as it is easy to conceive better social measurement system than money.


Weakness of money in term of social measurement system

The analyze of the weakness in term of social measurement system should be made on the concept of lost of information (in the sense of the physician concept of entropy). So, money is a good system in the sense of keeping the debt between individuals. But, many information concerning the society are not kept and could be kept in the present capability of the computerized society. This lost of information could create the feeling of unfairness with individual who expect something they have never received.



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Copyright 2001

Author: Hector Archytas