ONTOLOGY OF MONEY: KNOWING WHAT YOU COUNT

–  Functionalized Nature of Money: philosophical assumptions of orthodox monetary economics

In the first book of the Treatise, Keynes offers a systematic account of the origin and nature of money. The primary importance of Keynes’ contribution lies in this: he presented a hierarchical account of the functions of money, with the unit of account as the top and most prominent one. Keynes makes it thus clear that “the age of money had succeeded the age of barter as soon as men had adopted a money of account” (Keynes, 1930). What’s more, Costas Lapvitsas asserts that “[money of account] is entirely abstract, an ideal construct of the mind, such as the legendary macoute. It establishes abstract accounting prices in the same way that other abstract magnitudes, such as meters and kilograms, establish abstract lengths and weights” (Lapvitsas, 2003). Therefore,

the primary function of a concept of money is to meausre value.

True, money of account is the instrumental measure of value, which preceded coinage, the latter being the direct monetary evolution of commodity money emerged from barter economics. With an undoubtable theoretical step forward in the explanation of the origins of money in general, and modern bank money more in particular, Keynes scientifically acknowledged the origin of money in the emergence of a money of account for measuring value of goods and services in Ancient Babylon. Geoffrey Ingham stresses in fact that “in Ancient Babylon the shekel [was] originally fixed at 1 gur (1.2 hectoliters of barley) and later at a more manageable 8.3 grams of silver. However, such Ancient societies were essentially non- monetized command economies with very small trade sectors. The overwhelming majority of payments were rents and taxes to religious and secular authorities” (Ingham 2000). Moreover, there is evidence dating back to such historical period of what Rutherford (2007) refers to as ‘record-keeping’, i.e. clay boards onto which there was recorded one’s owed debt.

The orthodox forms of Money

Money of account, namely that in which debts and prices and general purchasing power are expressed, is the fundamental concept in a pure theory of money. Indeed, Keynes stresses that “the age of money had succeeded the age of barter as soon as men had adopted a money of account”: it is ‘countability’ that transforms the ‘commodity’, i.e. the medium of exchange into ‘money’. Finally, features such as divisibility, ductiliy, homogeneity and durability are those responsible to give money the function to store value through time. In general, Western philosophical tradition asserts that

as long ago as Aristotle in book V of his Nicomachean Ethics, the threefold functions of money as a unit of account, medium of exchange and store of value were noticed.

Hence, the functionalized nature of money is the result of an ontology which identifies the instrumental implementations of money, i.e. the primary function of modern bank money to clear debts by virtue of its own nature as interest-bearing debt. Keynes systematically proceeded without questioning the most important issue for analysing the concept of money and get rid of the shortcomings that a superficial philosophical assessment of such a concept eventually impels. The reason is terminologically simple: to describe the nature of money through a definition of money’s functions embedded in the narrow tenets of neo-classical economics is not the same as defining what is the nature of money. In other words, if one answers to the question – What does money? – then s/he is not answering to the question

-What is money?