What’s Money?

by Robert Gressis

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David Dick (of the University of Calgary) and Robert Gressis talk about the differences between American and Canadian universities (as usual, the Canadians use funny words); what it’s like to teach in a business school (David often has to sprinkle ethics on papers); David’s research in the philosophy of money (does the nature of money constrain what we can use for money? Or is it the effects of a currency that determine what we should use for money?); David’s thoughts on cryptocurrency (it’s not ideal, but the horse is out of the barn); and David’s thoughts on tipping (he comes not to praise it, but to bury it).

4:45 – What’s the difference between American and Canadian universities? 12:56 – What’s it like to teach in a business school? (And David is stoked about the philosophy of accounting) 33:29 – David’s current research: the philosophy of money, in particular the ethics and ontology of currency. 46:27 – Cryptocurrency, OF COURSE. 1:01:30 – David’s stance on tipping: tipping bad. 1:17:37 – Interest in the philosophy of money is compounding!

8 comments

  1. I liked this conversation a lot.

    So it sounds like theories of money use an origin story that works in much the same was as state of nature stories do in political philosophy. As people come to recognize the dubious “just so” nature of this approach, has anybody tried to develop an account of what money should be that is built something along the lines of a Rawlsian veil of ignorance?

    People in general–if they ever think about it–tend to find money to be mysterious and find the processes by which it comes to be or disappears perplexing (or fraudulent). And then they keep doubling back to asking “but what is money really?” which is probably a rather poor question. Listening to David, it strikes me that a much better thing to do is to think of money as a social technology that is akin to and deeply intertwined with other social technologies like laws and regulations. Ontological questions aren’t very interesting or productive because the significant stuff is all in how they function. Of course these capacities do depend on and change with physical technologies. So the shift to an electronic world probably has changed the role of money in profound ways and will continue to do so.

    Cryptocurrency has long struck me as a social malware as deserving of aggressive harassment as computer malware. It’s use for ransom and money laundering as well as it’s prodigious waste of resources swamp any supposed benefits. People have spent a long arguing about if it is really a currency or not. I wish they would step back and instead just ask do we want to tolerate a technology with such nasty effects?

    But, yeah, great talk.

    1. Thanks for your comment!

      I’m no expert.

      But: from what I know, you can’t really get rid of crypto at this point. Doing so would be more costly than the costs it allegedly incurs.

      I also suspect that in some circumstances—e.g., Venezuela; maybe China—crypto is a positive good, useful for avoiding government seizures.

      As for its role in crime, there’s no doubt that’s true. But I think the $100 bill is still more involved.

      Finally, the environmental effects: also very real, but I was under the impression that some crypto (Etherium) was more environmentally friendly than others (Bitcoin)?

      1. No, we won’t get rid of it any more than we get rid of other forms of crime. But I think we should, as they say, “persecute it to the full extent of the law”. (It will take changing some laws.)

        To stop Bitcoin from wasting all that energy will require driving the price down to where all those anti-social “miners” pull the plug and start selling their millions of GPU cards back to the people that want to do socially useful things (like play “Call of Duty” I suppose). But since crypto has no intrinsic value, if you pop the bubble, the market should crash. If the regulatory environment is hostile, the price won’t bounce back. Crypto will be also-rans like penny stocks and junk bonds.

        And in a cost/benefit analysis, small benefits don’t beat large costs. Venezuela seems weak tea compared to the growing global criminality this is fueling. (You might also find it interesting to look into the “pump and dump” scams that people are running with the small crypto. It’s really clever, they advertise for you to become an “insider” so you can join their scheme to defraud those lame “outsiders” who are too dumb to know they are being scammed.)

  2. It’s great to hear that someone is stoked about the philosophy of accounting! The people who set financial accounting standards (FASB & IASB) are indeed very much like philosophers. Here’s a fun question: If you give a customer a discount coupon, how do you report this on the your books? You could argue it’s an liability, because you are obligated to give your customer a discount. You could also argue it’s an asset, because the coupon makes it more likely your customer will want to buy from you and generate a profit (even though a smaller one).

    There are also questions that are more explicitly mereological debates about “parts and wholes” than the one you mention, and are discussed using a the term “unit of account”, which you also use, but in a very different context–the unit of account refers to the thing you are accounting for, the part or the whole.

    For example, there’s a “lower of cost or market” standard that you have to report inventory at what it cost you to buy it, unless its market price falls below that, in which case you have to write it down. But should the standard require firms to apply this at the individual or aggregate level. If a firm has 2000 different inventory items, should they write each one down to the lower of cost or market (and thus account separately for each one, and then aggregate), or should they first aggregate the 2000 items into a single unit with single total cost and total market price, and then account for that unit?

    Even more complicated, what if you have a “forward contract” which requires a firm to deliver a bunch of wheat in a year, in exchange for a bunch of money. Do you account for the obligation to deliver as a liability, and then separately account for the right to enforce payment as an asset? Or do you collapse them into a single unit of account, netting the obligation against the asset—which often

    Standard setters will argue about these from first principles, posing and answering questions like “what is the definition of an asset and a liability?”, “what is the purpose of keeping and reporting books?” and “what makes a financial report a good one?” These basic questions have been debated for decades, the consensus answer is added to the official Conceptual Framework, and then the standard setters use that Framework to set standards. Fun stuff—for the very small intersection of people who like both accounting and philosophy.

  3. Semiotically, money constitutes a kind of language (the reference of which is entirely matters of material value). That should solve the problem, but of course, it actually opens a Pandora’s box of problems, most of which we would rather not confront or even think about. As a language its sign is always arbitrary. No money vouchsafes any value assigned to it. That is why the most stable and trustworthy money is government founded and determined. There have been independent currencies before cryptocurrency (think of company towns where the company distributed script exchangeable at the company store), but without the clout of law, they risk various destabilizations, and even government determined currency is not safe from all of these. So there is definitely issues worthy of exploration here.

    The one problem I have with this conversation, is that barter does not deploy any money at all, the exchange of value is entirely concrete and agreed by the parties. Money exists to abstract value from any material commodity, and enforce agreement on value through acceptance of the sign (without which exchange cannot occur).

  4. One function of tipping is signaling conformity/non-conformity amongst restaurant-goers. Most people just go with the flow and tip 20% or whatever, but then sometimes there’s that one person making the Steve Buscemi argument from the start of Reservoir Dogs, and in doing so they let their companions know they’re a weirdo and give them the opportunity to continue to associate or not.

    More generally, I’m skeptical of reductionist arguments that take a widespread phenomenon and argue that because of aspects x,y,z, the phenomenon is good/bad, without really intense study of x,y,z, and consideration of other aspects that may be missed.

    I wonder whether David would attach a confidence estimate to his claim that tipping is bad. If it’s in the 60-80% range, then presumably he’d favor more experimentation with restaurants getting rid of tips, but if it’s in the 95%+ range, he’d probably favor an outright ban of tipping. The prior seems much more reasonable.

  5. Robert,

    “Finally, the environmental effects: also very real, but I was under the impression that some crypto (Etherium) was more environmentally friendly than others (Bitcoin)?”

    Some cryptocurrencies like ADA (third biggest market cap of all cryptocurrencies) started up on a proof of stake blockchain (Cardano).

    Etherium, the second biggest crypto is currently in the long process of transferring from proof of work to proof of stake:

    “The main impediment for faster adoption of proof-of-stake has certainly been the difficulty of migrating the largest smart contract network Ethereum from proof-of-work to proof-of-stake,” … “The challenge of changing the consensus mechanism on Ethereum has been compared to ‘fixing a plane while flying it.’ This is because with thousands of existing smart contracts on the Ethereum chain along with billions of dollars in assets at stake, the migration challenge is significant.”

    Apart from energy waste, another big problem with proof of work currencies is surprisingly high transaction fees and the relatively long time it takes to complete a validation (which depends partly on available computing power).

    https://money.usnews.com/investing/cryptocurrency/articles/what-is-proof-of-stake-and-why-is-ethereum-adopting-it

    https://en.wikipedia.org/wiki/Cardano_(blockchain_platform)

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