Money's Two Faces (an epilogue to the philosophy of money)

In my two previous posts on the philosophy of money, I mentioned at several points that money has dual consequences. I do not wish to rehearse all of these here. I would like to put forward two quotes, from different sections of Simmel's book, which set the dual character of money into sharp relief. I have no definite conclusion to draw or point to make from these two quotes, but I would suggest that they are worth thinking about, especially in regard to one's own attitude toward money. Please share your comments!

"We experience in the nature of money itself something of the essence of prostitution. The indifference as to its use, the lack of attachment to any individual because it is unrelated to any of them, the objectivity inherent in money as a mere means which excludes any emotional relationship--all this produces an ominous analogy between money and prostitution. Of all human relationships, prostitution is perhaps the most striking instance of mutual degradation to a mere means, and this may be the strongest and most fundamental factor that places prostitution in such a close historical relationship to the money economy, the economy of 'means' in the strictest sense." (377)

"It is the essence of economic transactions that one person gives up what another person desires, provided this other person acts in the same manner. The moral rule that one should do unto others as one would have done unto oneself finds the clearest example of its formal realization in the economy." (468)

The Philosophy of Money part 2

After several weeks I am finally ready to post my summary of the second half of Georg Simmel's Philosophy of Money. In the first half Simmel examines what makes the economy a unique mode of human activity, with money as its basic expression. Money embodies value and becomes a tool whose power grows with the expansion of economic exchange. In the second half of the book Simmel explores the effects of money on life, particularly in regard to individual freedom, personal value, and our modern style of living.

Money tends to increase individual freedom with regard to personal relationships and with regard to objects. In personal relationships, we pay bills, taxes and fines, and even make gifts, with specific amounts of money. This allows us to meet our obligations to others while deciding for ourselves how we shall spend our time and what kind of work we shall do. We would be much less free if, as in earlier times, we were obliged to give so much wheat, or so many years of military service, or even our whole laboring life (as in slavery) to others. The freedom to pay in money has two consequences, which may be considered good or bad depending on one's point of view, but which cannot be separated. On the one hand, money payment establishes a degree of equality in relationships. On the other hand, money payment makes relationships less personal. Just as money itself becomes less substantial and more purely functional over time (as we saw in part 1, chapter 2), so our relationships with the many people we depend on in the modern world--cashiers, plumbers, landlords--become more purely functional. We are happy to have anyone, even a computer, fulfill the cashier function for us, and we hardly notice the person's name. This means, however, that anyone can use that cashier, regardless of class, race, etc. These twin effects cannot be fully separated.

With regard to objects, money increases our individual freedom by making us independent of particular objects. This means that we can exchange anything for money and money for anything. Simmel writes, "Just as all roads lead to Rome--Rome being conceived as lying beyond every local interest and as standing in the background of every individual action--so all economic roads lead to money. Just as Irenaeus called Rome the compendium of the world, Spinoza called money the omnium rerum compendium [compendium of all things]." (307) Again there is a further consequence: our personalities are less dependent on our possessions. Artisans and farmers tend to be shaped by the material they work with, whereas the salesman is not shaped by the product he sells, nor the business manager by the process of production. Money thus creates another paradox, for while money brings all objects closer to us by making them more accessible, it also increases our distance from them, by making our personalities more independent. Psychologically, this can produce the most profound sense of freedom and power, or the darkest sense of alienation. Socially, it has produced such things as professionalization (through which non-economic criteria are used to evaluated a field of work); individualism; and associations for planned purposes, such as corporations, clubs, and charitable organizations.

The chapter on personal value deals with phenomena such as blood money, slavery, fines, religious atonement, payment as form of penance, dowries, marriage by purchase, marriage for money, and bribes. In these matters, cultures tend to develop first in the direction of measuring the worth of persons by money, and then away from this equivalence, toward seeing personal worth as absolute and priceless. These movements result from two contrasting movements that both stem from the development of society. (Simmel also observes that Christianity and the Bible have played a significant role in cultural recognition of the absolute worth of persons.) On the one hand, people become more differentiated as social roles and work become more refined and specialized. On the other hand, money becomes less differentiated in its uses as it becomes more important in a society. Equating personal value with an amount of money makes sense only within cultures where money is used to a limited extent and where people are not very different from their peers, at least economically.

Simmel concludes his book by examining how the money economy influences how we live. Although he wrote 100 years ago, his observations are just as accurate today. First of all, the money economy elevates the importance of intellect, especially calculating thought, over emotion. Through money we quantify values and calculate our decisions. This aspect of money leads on the one hand to equality, because quantifying value makes it equally measurable and valid for all people, but on the other hand it leads to inequality, because the possessor of money can do almost anything with it. The money economy also contributes to such features of modern life as material or technological progress at the expense of social and spiritual refinement; division of labor; distance in genuine relationships and proximity in external relationships (e.g. living 1500 miles from family while not knowing my neighbors, or making a local phone call to order Chinese food); the domination of life by technology and the urgent at the expense of the important; general restlessness; interruption and leveling of the natural rhythms of life in favor of increasing regularity and symmetry; the tension between classical liberalism and socialism; an increase in the pace of life; and greater mobility of property and people. These effects stem from features of money already indicated, including its universal validity, its relative insubstantiality, its nature as a tool, and its dual character as both a measure of value and an object of value.

One final word. Throughout the book, Simmel mostly refrains from making moral judgments. He shows that many of the effects I have tried to summarize can either be seen in a good light or in a bad light, or that they are balanced by contrasting effects. His philosophy of money does not conclude that money is good or bad. Rather, it helps us to understand money and its relationship to a wide range of social and psychological phenomena. We should at least learn that whether these are good or bad can be complex question, and that our judgment should be prepared to accept its implications.

The Philosophy of Money part 1

I took a course this spring on Georg Simmel's Philosophy of Money. Several of my friends have been interested to hear what it was all about, so I have decided to write up a synopsis here.
Simmel explains the philosophy of money as that which surrounds the science of economics. On the one end, philosophy examines the pre-conditions of economics. These are psychological, social and logical facts that make economic activity a distinct phenomenon with a given nature. On the other end, philosophy examines the relation of economics to life as a whole. Money has psychological and cultural effects, and economic development parallels changes in society and the way individuals experience life. In accordance with this two-fold division, Simmel divides The Philosophy of Money into two parts. Each of these parts has three chapters.

In the first chapter we learn that money quite literally embodies the relativity of value. Value is something assigned to things by people, it is a judgment we make. The value we place on something is based on our desire for it and its "distance" from us (the difficulty of acquiring it). Values become economic when we establish (fix) such distances by comparing them through exchange. Exchange involves a reciprocal determination of value between two objects. For example, if your orange is worth as much to me as my apple is to you, then in our economy, one orange is worth one apple. Economic value, therefore, objectifies our subjective valuations by filtering them through the process of exchange. The value of an object remains relative to human desire, but that desire is expressed only through another object exchanged for the desired object. This means that the relative values of things to each other in an economy become objective facts. Money is the concrete and objective means for expressing these relative values. "Money is the reification of exchange among people," Simmel writes.

The second chapter deals with the substantiality of money. Money has a definite function as a common denominator of value, but the question can be raised whether this function must be rooted in a substance with intrinsic material value. Historically, all kinds of substances have been used as money, for example, cows, shells, hoes, furs, even cigarettes. Things begin to be used as money because they are intrinsically valuable, i.e. they have a material use. Usually this material use is something highly valued in the particular society (e.g. furs for coats in northern Russia). For the object to function as money, however, its material use must be renounced so that it can be held for exchange. With the renunciation of its material use, the monetary substance tends to become increasingly symbolic over time (e.g. furs come to be replaced by stamped strips of leather). There is a development of money from substance toward pure function. Simmel argues, however, that money can never become a pure function, represented only by worthless symbol. In order for money to function as measure of value, it must itself be an object of value, and for this it must be materially scarce. Without material scarcity we would have runaway inflation and a loss of confidence in the equity of exchange. Simmel thought that paper money must be backed by gold, the only metal that remained sufficiently scarce in his time. Gold is also incorruptible and easily divisible, qualities that enhance the usefulness of a money substance.

The third chapter examines money's role as a means by which we reach ends. Money, says Simmel, is "the purest example of the tool," because it is always a means to acquiring something else. Further, there are unlimited possibilities for the use of money. There are several consequences of these features of money. Money is a source of power and status. It is especially attractive to people and social groups who lack other forms of social standing. (This is one reason why rap music glorifies money.) The significance of money also increases exponentially in relation to its quantity. There is an "unearned increment" of honor and privilege that comes with greater wealth. There is also a "threshold of economic awareness," a level of value beneath which people take no notice. (E.g. we don't bother to pick up pennies.) Since money is a pure and universal tool, it also exhibits in an extreme form the problem of means becoming ends. Greed makes having money an end in itself, extravagance makes spending money an end in itself. More subtly, the predominance of money in the life of an individual or society tends to reduce all other values to economic value. This leads to the attitudes of cynicism (expressed in slogans like "everyone has his price," or "the almighty dollar") or what Simmel calls "the blasé attitude," a numbness and indifference toward non-economic values (such as virtue, honor, beauty, contentment, etc.).

We can see that already in the third chapter Simmel begins to touch on the relation of money to life as a whole. I shall reserve the second part of his book for my next blog.