WHAT IS MONEY? Claire Ingram
PhD Student and Researcher,Stockholm School of Economics
The Classic Narrative
• Before there was money, there was barter
Alternative theory
• State and Credit theories of money (Mitchell-Innes)
• Money as the promise to pay something of equivalent value
• Relies on trust – trust that the person will pay the IOU
Calculated in ”money”
• But paid in whatever was handy
• In Sumeria, denominated in silver shekels (by temple bureaucrats)
• Based on trust – community knew each other
Goods as money
TobaccoVirginia Colony, USA, 1600s Cowry Shells
China, from 2000 BCAfrica, up to ca. 1850
Interest-bearing loans
• Sumerian Temples (2700 BC) collected local produce (grain livestock etc)
• Lent to merchants who travelled and sold these goods to obtain wood, metal and silver
• Charged interest as a way of sharing in profits
Amnesty and Kings
• In the face of bad harvests, system breaks down
• Amnesties granted by Sumerian and, later, Babylonian Kings
• Enforcement also increasingly done by centralised authorities
Nat
iona
l Por
trai
t Gal
lery
, Lon
don:
NP
G 4
980(
2)
Armies, trade and taxes
• Taxes on exports and imports (called portoria under the Roman Empire)
• Taxes on inheritances
• Taxes imposed on local populations who were conquered
• Taxes also imposed on own populations to finance wars
Chi
nese
arm
y in
Indi
a-B
urm
a ca
mpa
ign
pict
oria
l - h
ttp://
cbi-t
heat
er-1
.hom
e.co
mca
st.n
et/~
cbi-t
heat
er-1
/cai
/cai
.htm
l
Characteristics of Money
Money = Fiat CurrencyFiat Currency• Derives value from
government
• Fiat money as country’s main currency
Centralisationhtt
p://
stud
ents
.bro
wn.
edu/
ai/a
bout
us.h
tm
• Interest-bearing loans• Laws and authorities• Various Taxes• Fiat currency
Decentralised, local solutions
From Ricajomarie on Flicka https://www.flickr.com/photos/junipermarie/4422514124/
A New Wave
From “How Bitcoin Works, Under the Hood” by CuriousInventor https://www.youtube.com/watch?v=Lx9zgZCMqXE
Benefits of Cryptocurrencies• Improved transaction security• Trust in cryptography rather than institution(s)• Transparency (for those who understand)• Lower transaction costs• Cross-border, faster transactions• No outside intervention • No inflation (although market volatility)
Drawbacks
• Tax concerns• Security issues• Consumer uncertainty• Market volatility (commodity or currency?)• Potential for illicit use• High electricity consumption to “mine”/verify• No ”chargebacks”
Decentralisation and Innovation
Increasing pressure due to variety of new financial instruments
The status quo
Forces for stability
• Governments• Central banks• Multinational
financial actors• Legal system• Mindset
Forces for change
• Cryptocurrencies• Community
currencies• Crowdfunding• Microfinance• P2P lending• Sharing
What does it mean?
Will there be a tipping point?
http://coinmap.org/
Depends on….- Switching costs- Network effects
Bitcoin accepted here
http://mercatus.org/sites/default/files/Luther_CryptocurrenciesNetworkEffects_v1.pdf
Easier to crowdfund
Accumulation of small investments in individual projects by large number of individuals (the “crowd”) via or with help of Internet and
social networks (De Buysere et al., 2012)
Distributed problem-solving
Valuecreation
People• “Net generation”• 24x7 “mobile” workforce• Social entrepreneurship
Technology • Broadband access• 3D printing• Robotics
Open Source
• Software • Hardware• Physibles
Convergence
Finance• Microlending/microfinance • Crowdfunding/equity• Digital, non-fiat currencies
Top Related